NJ Office of the State Comptroller - Medicaid Report

Final Audit Report - Surgical Sock Shop, Inc.

Table of Contents

  • Posted on - 03/8/2021
  1. Executive Summary
  2. Background
  3. Audit Methodology
  4. Audit Findings
  5. Summary of Overpayments
  6. Recommendations
  7. Surgical Sock’s Response to the Audit Report Findings and MFD’s Comments

BY ELECTRONIC MAIL

Ms. Devorah Schwartz, Owner
Surgical Sock Shop, Inc.
27 Orchard Street, Suite 207
Monsey, NY 10952

Re: Final Audit Report — Surgical Sock Shop, Inc.

Dear Ms. Schwartz:

As part of its oversight of the Medicaid and New Jersey FamilyCare program (Medicaid), the New Jersey Office of the State Comptroller, Medicaid Fraud Division (MFD) audited Surgical Sock Shop, Inc. (Surgical Sock) claims submitted under National Provider Identification Number 1518007913 for the period from January 1, 2014 through December 31, 2018 (audit period). MFD hereby provides you with this Final Audit Report (FAR).

Executive Summary

Surgical Sock is a durable medical equipment (DME) and medical supplies provider operating in four locations: Monsey, New York (headquarters); Brooklyn, New York; Monroe, New York; and Lakewood, New Jersey. This audit reviewed certain claims and billings for Surgical Sock’s Lakewood location.

MFD reviewed Medicaid claims paid to Surgical Sock during the audit period to determine whether Surgical Sock billed for DME and supplies in accordance with applicable state and federal laws and regulations and Managed Care Organization (MCO) policies. Specifically, the audit sought to determine whether Surgical Sock correctly billed for compression stockings and other items, such as breast pumps, walking boots, supportive devices, blood pressure monitors, enuresis (incontinence of urine) alarms, respiratory devices, and orthotics management and training. 

During the audit period, Surgical Sock received $1,371,640 in Medicaid payments from 7,901 claims. From this universe, MFD statistically selected a sample of 135 claims totaling $27,136 paid to Surgical Sock. MFD determined that in 52 of the 135 sample claims, totaling $4,607 in reimbursement, Surgical Sock failed to comply with state and federal regulations or MCO policy. Specifically, MFD found that Surgical Sock violated N.J.A.C. 10:49-9.8 by failing to disclose fully the services provided, and/or by inaccurately billing Healthcare Common Procedure Coding System (HCPCS)/Current Procedural Terminology (CPT) codes. The identified overpayments include claims that were not supported adequately by prescribing practitioner (physician) orders or customer invoices, as well as claims that were upcoded and inappropriately billed.[1]  These issues extended across every category of DME and related medical supplies reviewed.

For purposes of ascertaining a final recovery amount, MFD extrapolated the error rate for claims that failed to comply with state and federal regulations or MCO policy to the total population of claims from which the sample claims were drawn, which in this case was 7,901 claims with a total payment of $1,371,640. By extrapolating the dollars in error over the entire universe, MFD calculated that Surgical Sock improperly received an overpayment of $242,873 that it must repay to the Medicaid program.

Background

The New Jersey Department of Human Services, Division of Medical Assistance and Health Services (DMAHS) contracts with five MCOs to administer the provision of health care services to Medicaid recipients in New Jersey. That contract requires MCOs and their network providers to adhere to applicable state and federal laws and regulations. UnitedHealthcare (UHC) is one of five MCOs under contract with the state and the MCO through which Surgical Sock submitted the vast majority of its Medicaid claims for the audit period (97 percent). Surgical Sock, as a provider within the UHC MCO network, must comply with state and federal laws and regulations, including the provider certification and recordkeeping requirements set forth in N.J.A.C. 10:49-1.1 et seq. and 10:49-9.8, as well as guidelines established by any MCO with which it contracts (in this case UHC). According to N.J.A.C. 10:49-9.8, providers must “keep such records as are necessary to disclose fully the extent of services provided.” DME providers, at a minimum, must maintain a legible, dated prescription for a DME item that is signed by the prescribing practitioner and references the item prescribed. See N.J.A.C. 10:59-1.5 and UHC Coverage Determination Guideline for durable medical equipment, orthotics, ostomy supplies, medical supplies and repairs/replacements (UHC Policy). 

DME is defined by N.J.A.C. 10:59-1.2 as “an item or apparatus, other than hearing aids and certain prosthetic and orthotic devices . . . which . . . is primarily and customarily prescribed to serve a medical purpose and is medically necessary . . . is generally not useful to a beneficiary in the absence of a disease, illness, injury or disability and is capable of withstanding repeated use . . . .”

According to N.J.A.C. 10:59-1.5(a), DME requires a legible, dated prescription or a Certificate of Medical Necessity personally signed by the prescribing practitioner. Similarly, pursuant to UHC policy, DME and orthotics are deemed medically necessary when (i) ordered by a physician, (ii) the item meets UHC’s medical necessity definition, (iii) the item is consistent with the state definition of DME or orthotics, and (iv) the item meets the criteria for DME Medicare Administrative Contracts established by the Centers for Medicare and Medicaid Services (CMS).

During the audit period, Surgical Sock received $1,371,640 in Medicaid payments from 7,901 claims. Surgical Sock’s claims were broken down into two categories, compression stockings and other items/services such as breast pumps, walking boots, supportive devices, blood pressure monitors, enuresis alarms, respiratory devices, and orthotics management and training (collectively referred to as “Miscellaneous”). See Table I for a breakdown of Surgical Sock’s claims by category description, dollar amount, number of claims, and percentage of dollars associated with each category of claims.

Table I

Total Billings and Claims Paid

for DME/Medical Supplies

 

Category  Description

Dollar Amount

Number of claims

Percent of Total

Compression Stockings

711,251

3,910

52

Miscellaneous

660,389

        3,991

48

Total

$1,371,640

     7,901

100%

 

See Graph I below for a representation of the sample error rate for each claim category and the total dollar amount of Medicaid program funds paid to Surgical Sock for each category. 

Prescription compression stockings are pressure gradient support stockings that help reduce edema and control vascular disorders. Compression stockings are available in different pressure gradients (18-30 mmHg, 30-40 mmHg, and 40-50 mmHg) and come in a variety of lengths, including knee-length, thigh-length, and waist-length. The HCPCS codes billed by Surgical Sock are dependent on the pressure gradient and length. For example, HCPCS codes A6539 and A6540 are both waist-length but have a pressure gradient of 18-30mmHg and 30-40mmHg, respectively. Exhibit A lists the HCPCS/CPT codes billed by Surgical Sock. 

Objective

The objective of the audit was to evaluate whether claims submitted by and paid to Surgical Sock complied with Medicaid requirements under applicable state and federal laws and regulations as well as MCO policies.

Audit Scope

The audit period was January 1, 2014 through December 31, 2018. MFD conducted this audit pursuant to the authority of the Office of the State Comptroller as set forth in N.J.S.A. 52:15C-23 and the Medicaid Program Integrity and Protection Act, N.J.S.A. 30:4D-53 et seq.

Audit Methodology

To achieve the audit objective, MFD’s methodology consisted of the following:

  • Selecting a statistically valid sample of 112 Medicaid recipients’ dates of service and the 135 paid claims associated with these recipients’ dates of service for a total payment of $27,136, out of a total population of 7,901 paid claims, for which Medicaid paid Surgical Sock a total of $1,371,640.
  • Reviewing records to determine whether Surgical Sock possessed documentation that complied with the requirements of N.J.A.C. 10:49-1.1 et seq., N.J.A.C. 10:49-9.8 and N.J.A.C. 10:49-5.5. See also N.J.A.C. 10:59-1.2, -1.5 and UHC policies.

Audit Findings

MFD reviewed 135 Medicaid claims submitted by Surgical Sock between January 1, 2014 and December 31, 2018. The 135 paid claims covered DME and medical supplies, including compression stockings and other miscellaneous items and services, such as breast pumps, walking boots, supportive devices, blood pressure monitors, enuresis alarms, respiratory devices, and orthotics management and training. MFD determined that for 52 of the 135 paid claims, totaling $4,607 out of $27,136 paid claims sampled, Surgical Sock violated N.J.A.C. 10:49-9.8 by not fully disclosing the services provided, and/or by inaccurately billing HCPCS/CPT codes. See Table II for a breakdown of exceptions (claims that failed to meet the audit criteria) by claim category and Attachment I for an individual sample claim breakdown by exception.

 

Table II
Exceptions by Claim Category 

 

Claim Category

Number of Sampled

Claims

Sampled

Claim Dollar Amount

Number of Claims with Exceptions

Claim Exception Dollar Amount

Compression Stockings

57

12,734

41

4,340

Miscellaneous

78

14,402

11

267

Total

135

$27,136

52

$4,607

 

A. Compression Stockings

MFD reviewed 57 claims for compression stockings. These claims include HCPCS codes A6530, A6531, A6537, A6539 and A6540. The different HCPCS codes denote various compression grades (or levels) and stocking lengths (i.e., waist, thigh, or knee length). The vast majority (95 percent) of the claims in the sample were for A6539 and A6540, waist-length compression stockings. MFD found that 41 of 57 such claims reviewed violated N.J.A.C. 10:49-9.8, which requires that claims must be true, accurate, and complete and that the records supporting such claims must disclose fully the extent of services provided. These compression stockings exceptions total $4,340 out of $12,734 paid claims sampled, which is a 34 percent error rate in terms of the sample dollars paid. See Table III for a breakdown of compression stocking exceptions by reason, number of claims, and associated dollar values. 

Table III
Compression Stockings Exceptions 

 

Exception

Number of Claims

Claim Dollar Amount

Upcoding

29

2,093

Deficient Physician Order

7

1,469

No Prescription

2

465

No Invoice

1

330

Underbilling

2

(17)

Total

41

$4,340

 

MFD identified 29 claims where Surgical Sock’s documentation showed that Surgical Sock billed for A6531, A6539, and A6540 compression stockings without proper support. In 22 instances, Surgical Sock dispensed a stocking but there was no record of the length prescribed. In two instances, Surgical Sock dispensed a stocking but there was no record of the compression prescribed. In five other instances, Surgical Sock dispensed a stocking but there was no record of either the stocking length or compression grade prescribed. In instances in which the prescription lacked only the stocking length, MFD downcoded those A6539 and A6540 claims to a compression stocking with the lowest stocking length. For example, A6539 (gradient compression stockings, waist-length, 18-30 mmHg) was downcoded to A6530 (gradient compression stockings, below knee, 18-30 mmHg). In addition, MFD downcoded A6540 (gradient compression stockings, waist-length, 30-40 mmHg) to A6534 (gradient compression stocking, thigh-length, 30-40 mmHg). MFD downcoded A6540 to A6534 and not A6531 (gradient compression stockings, below knee, 30-40 mmHg) because in order for A6531 to be covered, it has to be for the treatment of an open venous stasis ulcer and there was no evidence of such condition in Surgical Sock’s records. In instances in which the prescription lacked only the stocking compression grade, MFD downcoded those A6531 claims to the lowest compression stocking in the below the knee stocking category, A6530. If the prescription lacked both the compression grade and length, MFD downcoded the claim to the procedure code with the lowest length and compression grade (HCPCS code A6530). MFD used the fee schedule obtained from UHC to calculate the overpayment amount for those downcoded claims.

The following are examples of Surgical Sock’s claims using A6539 and A6540 procedure codes that MFD downcoded. The first prescription, dated February 24, 2015, lacked both the grade and length of the stockings. Surgical Sock filled this prescription on March 10, 2015 (claim service date), submitted a claim for gradient compression stockings, waist-length, 18-30 mmHg (HCPCS code A6539) and received payment as billed. See Attachment II. Because Surgical Sock’s documentation lacked the length and compression grade for the stockings, MFD downcoded that A6539 claim to the lower paid compression stocking, A6530. At the time of this claim, a unit of A6530 compression stockings paid at a rate of $26, and a unit of A6539 at $83, a $57 difference per unit.   

The second prescription, dated March 24, 2015, called for 30-40 mmHg compression stockings but did not indicate the compression stocking length. Although the prescription did not contain the stocking length, Surgical Sock submitted a claim and received payment for waist-length compression stockings. In addition to the lack of information in the prescription, Surgical Sock’s other documentation further undercut this claim. The customer invoice stated that Surgical Sock billed for waist-length compression stockings with a grade of 30-40 mmHg, but the customer agreement/acknowledgment form stated that Surgical Sock dispensed knee-length compression stockings with a grade of 40-50 mmHg. Given that these two Surgical Sock documents contradict one another, MFD defaulted to the physician’s prescription and downcoded this claim to a lower paid 30-40 mmHg procedure code, A6534. See Attachment III. At the time this claim was paid, the difference in the payment amount per unit between the two procedure codes was $54, with UHC paying $40 for the A6534 compression stockings and $94 for the A6540.

In addition, MFD found that Surgical Sock improperly billed seven claims because the ordering physician could not be identified or the prescriptions lacked a date, diagnosis, recipient name, physician signature, or a description of the item prescribed. At a minimum, these elements must be included to ensure that each physician’s order is legitimate, meets the medical needs of the recipient, corresponds to the claim billed, and meets the record keeping requirement set forth in N.J.A.C. 10:49-9.8.

As an example of one of the seven invalid prescriptions, Surgical Sock provided a prescription to support billing procedure code A6539. The prescription, dated April 28, 2014, noted four compression stockings without a specified length or compression grade. While the prescription included a signature, MFD could not ascertain the identity of the individual who signed it because the prescription form did not include a physician’s name, National Provider Identification number or license number, any of which could have been used to determine who prescribed the products. See Attachment IV. Because MFD could not ascertain who prescribed the stockings and whether the prescriber had authority to prescribe the stockings, MFD found this claim deficient.   

Furthermore, MFD determined that two claims for compression stockings were deficient because Surgical Sock lacked any evidence of a physician order for the compression stockings. Pursuant to the relevant UHC policy, which mimics N.J.A.C. 10:59-1.5(a), DME, related supplies, and orthotics are eligible for reimbursement only when ordered by a prescribing practitioner.

MFD also identified one instance in which a claim had a valid prescription, but Surgical Sock lacked a customer invoice indicating that the customer actually received the prescribed item. MFD found this claim deficient because MFD could not verify that the beneficiary received the product.

MFD identified two claims where Surgical Sock billed procedure code A6537 for four units of full-length/chap-style, 30-40 mmHg gradient compression stockings for which Surgical Sock was paid $150 for each claim. Despite submitting a claim for full-length/chap-style compression stockings, Surgical Sock dispensed 30-40 mmHg, thigh-high compression stockings for which it should have billed HCPCS code A6534 (Gradient compression stocking, thigh-length, 30-40 mmHg). MFD downcoded these two claims to A6534. According to UHC’s reimbursement per unit rate for procedure code A6534 at the time of the claim, Surgical Sock would have received a reimbursement of $158 for each claim, which would have resulted in an $8 underbilling for this item. Accordingly, MFD gave Surgical Sock a credit of $8 for each claim and included each credit in its extrapolation analysis. See Graph II below for the error rates for each exception type for the compression stockings category.

 

B. Miscellaneous Billings

In addition to the compression stocking category, MFD reviewed 78 claims for miscellaneous items and services, comprised of breast pumps, walking boots, supportive devices, blood pressure monitors, enuresis alarms, respiratory devices, and orthotics management and training. MFD found that 11 of these 78 sampled claims violated N.J.A.C. 10:49-9.8. These claims total $267 out of $14,402 in total sample claim dollars for these items. See Table IV for a breakdown by exception.

 

Table IV
Miscellaneous Items Exceptions  

 

Exception

Number of Claims

Claim Dollar Amount

Deficient Physician Order

3

186

Inappropriate Billing of Orthotics Management and Training

8

81

Total

11

$267

 

In eight instances, Surgical Sock billed CPT code 97760 in conjunction with compression stocking procedure codes. CPT code 97760 is defined as “Orthotic(s) management and training (including assessment and fitting when not otherwise reported), upper extremity(ies), lower extremity(ies) and/or trunk, initial orthotic(s) encounter, each 15 minutes.” There was no documentation in Surgical Sock’s records, however, to support that it provided such management and training. Moreover, Surgical Sock billed CPT code 97760 as a fitting fee for off–the-shelf compression stockings when procedure code 97760 can only be billed in specific circumstances for management and training related to orthotics, not fittings for compression stockings. See Attachment II. Therefore, Surgical Sock’s submission of these claims under CPT code 97760 constituted an improper use of this procedure code.

Finally, for the remaining three exceptions, MFD determined that these claims lacked adequate prescriptions. See Graph III below for the error rates for each exception type for the miscellaneous category.

Summary of Overpayments

MFD determined that for the period January 1, 2014 through December 31, 2018, Surgical Sock improperly billed and received payment for 52 of the 135 sampled claims totaling $4,607. For purposes of ascertaining a recovery amount, MFD extrapolated the error rate for claims that failed to comply with state and federal regulations or MCO policy to the total population of claims from which the sample claims were drawn, which in this case was 7,901 claims with a total amount of payment of $1,371,640. By extrapolating the dollars in error over the entire universe, MFD calculated that Surgical Sock received an overpayment of $242,873 that it must repay to the Medicaid program. 

Recommendations

  1. Surgical Sock shall reimburse the Medicaid program $242,873.
  2. Surgical Sock must ensure that it adequately documents the Medicaid services and durable medical equipment and/or medical supplies provided in a comprehensive manner in a patient’s record in accordance with J.A.C. 10:49-9.8 and N.J.A.C. 10:49-5.5(a)13 before submitting a claim for payment.
  3. All claims billed by Surgical Sock must adhere to the relevant AMA, CPT, and HCPCS guidelines.
  4. Surgical Sock must provide OSC with a Corrective Action Plan (CAP) indicating the steps it will take to implement procedures to correct the deficiencies identified in this report.

Surgical Sock’s Response to the Audit Report Findings and MFD’s Comments

After receipt of MFD’s Draft Audit Report, Surgical Sock, through counsel, submitted a written response and Corrective Action Plan (See Appendix A). In this response, Surgical Sock objected to MFD’s audit findings and stated that it reserved the right to challenge MFD’s sampling and extrapolation methodologies. MFD addressed each argument raised by Surgical Sock in a document entitled “Surgical Sock’s Comments and MFD’s Response” (See Appendix B).

After carefully reviewing each of Surgical Sock’s arguments and its supplemental documentation, MFD gave credit in those circumstances where Surgical Sock provided contemporaneous and reliable supporting documentation for deficient claims. For the majority of the claims at issue, however, MFD did not modify its findings. Surgical Sock’s Corrective Action Plan addresses all of MFD’s recommendations, other than MFD’s recommendation that Surgical Sock reimburse the Medicaid program $242,873.  Accordingly, Surgical Sock must reimburse the Medicaid program $242,873.

Thank you for your attention to this matter.

Sincerely,

KEVIN D. WALSH
ACTING STATE COMPTROLLER

By:     /s/Josh Lichtblau                                                               

Josh Lichtblau
Director, Medicaid Fraud Division

Enclosures can be found in the PDF version at the top of this page:

Exhibit A - AMA HCPCS and CPT Code Descriptions
Attachment I – Testing Results Summary
Attachment II – Compression Stockings – Example 1
Attachment III– Compression Stockings – Example 2
Attachment IV – Compression Stockings – Example 3
Appendix A – Surgical Sock’s Response to the Draft Audit Report
Appendix B – Surgical Sock’s Comments and MFD’s Response  

Cc: Karen Mandelbaum, Esq., Senior Counsel (Epstein Becker & Green, P.C.)
Jack Wenik, Esq, Member of the Firm (Epstein Becker & Green, P.C.)
Michael Morgese, Audit Supervisor (OSC – Medicaid Fraud Division)
Kay Ehrenkrantz, Deputy Director (OSC – Medicaid Fraud Division)
Don Catinello, Supervising Regulatory Officer (OSC – Medicaid Fraud Division)
Glenn Geib, Recovery Supervisor (OSC – Medicaid Fraud Division)

[1] “Upcoding” occurs when a healthcare provider improperly bills a higher code than the code that should have been billed for the good provided or procedure performed.

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