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Audit (A-09-09-00111)

Review of Jurisdiction D Medicare Payments for Selected Durable Medical Equipment Claims With the KX Modifier for Calendar Year 2007

Executive Summary

For certain durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS), suppliers must use the KX modifier on their Medicare claims to indicate that the claims meet Medicare coverage criteria and that the suppliers have the required documentation on file. Our review found that the KX modifier was not effective in ensuring that suppliers of DMEPOS that submitted claims to Noridian Administrative Services, LLC (Noridian), the durable medical equipment contractor for Jurisdiction D, had the required supporting documentation on file. Based on our sample results, we estimated that Noridian paid approximately $70 million to suppliers that did not have the required documentation on file to support DMEPOS items with dates of service in 2007. The missing documentation included physicians' orders, use or compliant use followup documentation, proof of delivery, and physicians' statements.

We recommended that Noridian (1) recover $6,000 in payments for sampled 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 CMS of the suppliers who did not meet the supplier standard for maintaining proof of delivery so that 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 $70 million. Noridian concurred with our recommendations.

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