Mass. Orthopedic Industry Members to Foot Bill to State Medicaid Program to Settle Allegations

February 8, 2005

Fifteen members of the Massachusetts orthopedic footwear industry have agreed to pay $526,000 to the Massachusetts Medicaid program to settle allegations that they were overpaid as a result of incorrect billing and documentation deficiencies that violated Medicaid regulations, Attorney General Tom Reilly announced.

The settlement follows an April 2000 report by the state Inspector General (IG) on the Commonwealth’s top 15 orthopedic footwear providers that concluded there was widespread waste and abuse between 1995 and 1999 in the Medicaid Orthopedic Footwear Program. As a result, AG Reilly’s Medicaid Fraud Control Unit (MFCU) commenced an industry-wide investigation and Medicaid revised its orthopedic regulations.

“It is imperative that the citizens of the Commonwealth get the full benefit of every dollar spent on healthcare services,” Reilly said. “As a result of this investigation, Medicaid, working together with my Office, has revised its orthotics regulations in an effort to prevent future abuses.”

In the April 2000 report entitled: “Department of Medical Assistance: Orthopedic Footwear Benefits, Policies and Procedures,” the IG found that between July 1, 1995 and Jan. 18, 1999, approximately 65 percent of all Medicaid orthopedic shoe transactions had resulted in overpayments.

The overpayments occurred as a result of providers reportedly billing twice for services provided only once, billing excessive amounts, improperly increasing reimbursements by utilizing erroneous service codes, and improperly billing for separate components of off-the-shelf and custom orthopedic shoes and inserts. The report also cited pervasive record-keeping deficiencies among the orthopedic footwear providers.

In response to the IG’s investigation and report, Reilly’s MFCU opened an investigation of the orthopedic footwear industry’s billing, coding and record-keeping practices. Using the Massachusetts False Claims Act, originally proposed by Reilly and passed by the Legislature in 2000, MFCU investigators issued written demands for information from the orthopedic footwear providers and interviewed numerous witnesses and business owners. All of the providers cooperated with the AG’s investigation.

The investigation found that the majority of orthopedic footwear providers had submitted incorrect claims for orthopedic shoes and inserts which had resulted in payments in excess of the maximum amount properly payable for such products. These incorrect billing practices often took the form of billing Medicaid for two pairs of orthopedic shoes, but providing only one pair of shoes to the patient, or billing custom-molded shoes using an incorrect and higher paying code.

In addition, Reilly alleges that many of the orthopedic shoe providers that were investigated failed to comply with the Medicaid record-keeping requirements by failing to maintain manufacturer invoices or other proof of the identity and cost of the products at issue, failing to have their patients sign and date required Delivery Receipts, and failing to pass along written manufacturer or retailer warranties for the orthopedic shoes and inserts.

The alleged violations of Medicaid rules and regulations resulted in overpayments to numerous orthopedic shoe providers between January 1996 and December 2002. The orthopedic footwear providers included in the settlement are: Advanced Orthopedic Services Inc.; Atlantic Prosthetics & Orthotics Company Inc.; Bill Chancey’s Pedorthics; Boston Brace InternationaI Inc.; Cornell Orthotics & Prosthetics Inc.; Hanger Prosthetics & Orthotics East Inc.; Joel P. Dwyer C.P.O. Prosthetics & Orthotics; Ocean Orthopedic Services Inc.; Orthotic Consultants Inc.; Orthotics & Prosthetics Laboratories Inc.; Orthotics West Inc.; Pioneer Valley Orthotics & Prosthetics Inc.; Prosthetic & Orthotic Labs of Worcester Inc.; Therapeutic Shoe Corporation; and The William A. Allen Co. Inc.

In addition to paying the total settlement amount of $526,000 to the Commonwealth, all of the orthopedic shoe providers who continue to participate in the Medicaid program have agreed to institute comprehensive compliance programs to ensure full compliance with all Medicaid regulations in the future.

As a result of the April 2000 IG investigation and report, and as a result of Reilly’s recommendations, Medicaid revised its orthotics regulations to add several definitions, include more specific coverage and service limitations, and require additional documentation and individual consideration for reimbursement of all orthopedic shoes, except for children under 21 and members with severe diabetic foot disease.

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