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Audit (A-04-10-04004)

Claim Modifier Did Not Prevent Medicare From Paying Millions in Unallowable Claims for Selected Durable Medical Equipment

Executive Summary

Medicare Part B provides for the coverage of durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS). For certain DMEPOS, suppliers must use the KX modifier on filed claims. The KX modifier indicates that the claim meets Medicare coverage criteria and the supplier has the required documentation on file. This report summarizes the results of individual reviews of the 4 contractors that processed the DMEPOS claims for Jurisdictions A through D (which included all 50 States, 5 territories, and the District of Columbia).

The KX modifier was not effective in ensuring that suppliers of DMEPOS that submitted Medicare claims had the required supporting documentation on file. Based on our sample, we estimated that the contractors paid approximately $316.4 million to suppliers that did not have the required documentation on file to support the DMEPOS items with 2007 dates of service. These errors occurred because the contractors' electronic edits could not determine whether suppliers had the required documentation on file when they used the KX modifier on claims.

We recommended that CMS (1) ensure that contractors recover the payments identified in our individual reports to contractors for specific DMEPOS items claimed for which the suppliers did not have the required documentation, (2) develop a corrective action plan to improve the effectiveness of the KX modifier, (3) take appropriate action for suppliers that did not meet the supplier standard for maintaining proof of delivery, and (4) issue a special alert emphasizing the documentation that suppliers must have in their files to support the use of the KX modifier before billing Medicare. CMS concurred with our recommendations and listed actions it intends to take in response to them, consistent with its policies and procedures.

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