Medicare claims for L0631 back orthoses more than doubled from 2008 to 2011, increasing Medicare allowances from $36 million to more than $96 million. The Office of Inspector General recommends that CMS use supplier acquisition cost information to lower the fee schedule amount for L0631 back orthoses by including it in the Competitive Bidding Program or by using CMS’s inherent reasonableness authority.
Medicare claims for L0631 back orthoses were extracted from CMS’s National Claims History file with dates of service between July 2010 and June 2011. One claim was selected from each of a random sample of 350 suppliers, who were requested to provide the acquisition costs of the L0631 orthoses they purchased for the claims, including discounts, rebates, fees or charges. The Office of Inspector General (OIG) also requested that suppliers describe the services they provided to beneficiaries, including fitting and adjustment services and instructions for using the orthoses.
Study results from the period showed that Medicare payment amounts were more than four times greater than supplier acquisition costs for L0631 back orthoses. The average Medicare-allowed amount for L0631 back orthoses was $919 and the average supplier acquisition cost was $191. This means Medicare and its beneficiaries paid approximately $37 million more for L0631 back orthoses than suppliers paid to acquire them and that beneficiary copayments alone would have almost covered suppliers’ L0631 acquisition costs, according to the OIG. Although the description for L0631 back orthosis code includes the orthosis as well as the fitting and adjustment services, suppliers did not report providing adjustment services for one-third of claims. Suppliers also did not report providing any additional services regarding the L0631 back orthoses other than general instructions for 93% of claims.