Dive Brief:

• HHS' Office of Inspector General (OIG) has ruled Pacific Medical failed to consistently comply with Medicare requirements, resulting in the provider of orthotic braces receiving improper payments.

• OIG found around 10% of the claims it sampled were noncompliant with Medicare rules, prompting it to recommend that Pacific Medical refund almost $250,000.

• Pacific Medical has rejected the refund recommendation, arguing that it is unreasonable to base an overpayment estimate on a sample of 100 Medicare claims.

Dive Insight:

OIG is continuing to keep a close eye on the market for durable medical equipment, prosthetics, orthotics and supplies (DMEPOS). Last month, the oversight body found Medicare unnecessarily paid $34 million to suppliers of DMEPOS products because CMS' systems were unable to detect when the devices were used at acute-care hospitals and other types of inpatient facilities.

As part of the DMEPOS probe, OIG took a closer look at Pacific Medical, a California-based supplier of durable medical equipment and braces that support the function of human joints. Pacific Medical received $6.2 million in Medicare Part B payments over the sampled 27-month period.

OIG thinks some of that money came from unallowable Medicare payments. In a sample of 100 claims, OIG found 11 reimbursement requests totaling $4,777 that failed to comply with Medicare rules. OIG ruled nine claims to be improper because they covered medically unnecessary uses of orthotic braces. Pacific Medical was unable to provide medical records for another two claims.

Based on the sample, OIG extrapolated that Pacific Medical had billed for an estimated $247,493 in unallowable Medicare payments. OIG wants Pacific Medical to refund the durable medical equipment Medicare administrative contractors (MACs) affected by the alleged overpayments.

While Pacific Medical concurred with OIG recommendations about its billing practices, the supplier pushed back against the request that it refund the $247,493. Pacific Medical argued that OIG's use of extrapolation to calculate the refund amount was unreasonable, and that the oversight body failed to reference its authority to make such estimates in its report.

The pushback from Pacific Medical led OIG to point to cases when "federal courts have consistently upheld extrapolation as a valid means to determine overpayment amounts in Medicare" to argue that the approach is legitimate.

OIG's report ends with the standoff between the two organizations unresolved but the oversight body warned that "action officials at CMS, acting through a MAC or other contractor, will determine whether a potential overpayment exists and will recoup any overpayments consistent with CMS’ policies and procedures."

Correction: In a previous version of this article, Pacific Medical's ownership was misidentified. Pacific Medical Group is not the subject of the OIG report.