News: OIG audit finds overpayments for durable medical equipment, prosthetics, orthotics, supplies

A recent Office of Inspector General (OIG) audit found that Medicare improperly paid $22.7 million to suppliers for durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS) during inpatient stays from January 2018 to December 2024. In addition, suppliers may have also improperly collected up to $5.9 million in deductible and coinsurance amounts from enrollees or from someone on their behalf, JustCoding reported.

Under Medicare policy, suppliers should not be paid separately under Medicare Part B for DMEPOS provided during inpatient stays. Instead, the items must be furnished by the facility or under formal arrangements between the facility and supplier, which should be covered under Part A. According to the Medicare Claims Processing Manual, DEMPOS is comprised of:

• Durable medical equipment (DME): Items that can withstand repeated use, serve primarily a medical purpose, are not generally useful to a person in the absence of an illness or injury, and are appropriate for use in an enrollee’s home. Examples include oxygen supplies, wheelchairs, and walkers.
• Prosthetics: Devices that replace all or part of an internal body organ or the function of a permanently inoperative or malfunctioning internal body organ. Examples include artificial limbs, parenteral and enteral nutrition supply kits, and breast prostheses for postmastectomy patients.
• Orthotics: Rigid and semirigid devices, often called braces, which are used to support a weak or deformed body member or to restrict or eliminate motion in a diseased or injured part of the body.
• Supplies and related drugs: Supplies include those items that are necessary for the effective use of DME such as wound-care supplies or fillers (e.g., adhesive tape, roll gauze, bandages). Related drugs may be drugs and biologicals that can be put directly into the DME to achieve the therapeutic benefit of the DME or to assure the proper functioning of the equipment or prescribed to be taken orally or through injections. Examples include inhalation drugs and tumor chemotherapy agents used with an infusion pump.

This audit is a follow up to a prior 2018 audit that found $34 million in similar overpayments for 2015-2017 inpatient stays. Prior to January 2020, system edits made following the audit were not working properly, primarily those that should have prevented or detected the overpayments. After CMS implemented system edits to improve the processing of DMEPOS claims, only $4.5 out of the $22.7 million was improperly paid between January 2020 and December 2024, a substantial decrease in improper payments from years past (i.e., $18.2 million was improperly paid between January 2018 and January 2020 alone). However, since overpayments continue, further improvements to system edits may be required.

In the report, the OIG provided five recommendations for CMS to address the overpayments:

• Recover payments up to the $22.7 million improperly paid
• Refund enrollees up to the $5.9 million in deductible and coinsurance amounts
• Notify suppliers that received overpayments to consider conducting internal audits to identify any similar overpayments they have received
• Identify DMEPOS claims after the audit period to recover additional improper payments made
• Refine system edits to prevent future errors

CMS agreed with four of the recommendations and planned to take action to address them, but they did not concur with the recommendation to refine system edits, primarily because the edits made in January 2020 already significantly reduced improper payments and they found systemic cause for the continuing errors. More details on the audit can be found in the published report.

Editor’s note: This article originally appeared in JustCoding. To read the full report from the OIG, click here.