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

For certain durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS), suppliers must use the KX modifier on filed 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 either Palmetto Government Benefits Administrators, LLC (Palmetto GBA), or CIGNA Government Services (CGS), the durable medical equipment Medicare contractors for Jurisdiction C, had the required supporting documentation on file. Based on our sample, we estimated that Palmetto GBA and CGS paid approximately $137 million to suppliers that did not have the required documentation on file to support the DMEPOS items with 2007 dates of service.

We recommended that CGS, as the current durable medical equipment Medicare contractor, (1) recover approximately $4,500 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 14 suppliers that 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 $137 million. CGS acknowledged the unallowable payments and listed the corrective actions that it intended to take.