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Audit (A-04-08-04020)

Review of Medicare Payments for Selected Durable Medical Equipment Claims With the KX Modifier for Calendar Year 2006

Executive Summary

The KX modifier was not effective in ensuring that suppliers of durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS) that submitted claims to Palmetto GBA during 2006 had the required supporting documentation on file. Of the 100 items in our sample, suppliers did not have the required documentation on file for 54. As a result, Palmetto GBA made unallowable payments totaling $4,600 for the 100 sampled items. Based on our sample, we estimated that Palmetto GBA paid approximately $127 million to suppliers who did not have the required documentation on file to support the DMEPOS items with calendar year 2006 dates of service.

These errors occurred because Palmetto GBA’s electronic edits in place were not effective for determining whether suppliers had the required documentation on file when they used the KX modifier on claims. The edits could only determine whether the required KX modifier was on the claim.

We recommended that CIGNA Government Services (CGS), as the current durable medical equipment Medicare administrative contractor: (1) recover the $4,400 ($150 was repaid during fieldwork) in payments for specific DMEPOS items claimed for which the suppliers did not have the required documentation; (2) review other payments for DMEPOS related to our unallowable sample items and recover any additional unallowable payments; (3) notify the Centers for Medicare & Medicaid Services of the 23 suppliers that did not meet the supplier standard for maintaining proof of delivery so CMS can take appropriate action; and (4) develop a corrective action plan to improve the effectiveness of the KX modifier and potentially save an estimated $127 million. In written comments on our draft report, CGS acknowledged the facts presented in the report and listed actions that it intended to take in response to our recommendations.

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