Medicare Improperly Paid Suppliers for Durable Medical Equipment, Prosthetics, Orthotics, and Supplies Provided to Beneficiaries During Inpatient Stays

For our audit period (January 1, 2015, through December 31, 2017), Medicare should not have paid suppliers for any of the $34 million for durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS) that were provided during inpatient stays. In addition, beneficiaries were held responsible for unnecessary deductibles and coinsurance of $8.7 million paid to the suppliers for the DMEPOS items. Generally, Medicare should not pay a supplier for these items provided to a beneficiary during an inpatient stay. Instead, all items must be provided directly by the inpatient facility or under arrangements between the facility and the supplier. Medicare should pay the inpatient facility, through its inpatient claim, for all items provided to a beneficiary.

Medicare overpaid the suppliers because the system edits that should have prevented or detected the overpayments were not adequate. If the system edits had been designed properly since 2008, Medicare could have saved $223.1 million, and beneficiaries could have saved $56.3 million in deductibles and coinsurance that may have been incorrectly collected from them or from someone on their behalf.

We recommended that the Centers for Medicare & Medicaid Services (CMS) direct the Medicare contractors to (1) recover the $34 million in identified improper payments to suppliers in accordance with CMS's policies and procedures, (2) recommend that the suppliers refund to beneficiaries up to $8.7 million in deductible and coinsurance amounts that may have been incorrectly collected from them or from someone on their behalf, and (3) identify and recover any improper payments to suppliers after our audit period. We also recommended that CMS (1) take all necessary actions, including seeking legislative authority, to require suppliers to refund to beneficiaries incorrectly collected Medicare Part B deductible and coinsurance amounts and (2) correct the system edits to fully prevent or detect overpayments to suppliers for DMEPOS items provided during inpatient stays.

CMS concurred with all but one of our recommendations and provided information on actions that it planned to take to address our recommendations. Regarding our recommendation that it seek legislative authority to require suppliers to refund to beneficiaries incorrectly collected deductibles and coinsurance, CMS stated that it will consider whether to recommend this proposal for inclusion in the President's next budget.