Moving the HME Industry Forward


Non-Invasive Ventilators – Audit Issues

Jeffrey S. Baird, JD • December 9, 2017

AMARILLO, TX – The DME industry is young and grew up relatively unregulated. As concerns over overutilization, fraud, and the rising costs of health care have increased, so has scrutiny from the federal government. One of the biggest challenges facing DME suppliers today is preparing for and responding to post-payment audits and prepayment reviews. This article will discuss audits in general … and non-invasive ventilator audits specifically.

Audits in General

Audits and reviews are money generators for the government. Although this article focuses on federal government audits, many state governments are ramping up audits as well. Post-payment audits and prepayment reviews are challenging for the following reasons:

  • Increase and change in the types of reviewers that are contracted by the government.
  • Evolving standards for compliance.
  • An increase in the frequency of audits and reviews.

CMS contracts with different companies to process and review Medicare claims. Medicare Administrative Contractors (MACs) – process claims and submit payment to providers in accordance with Medicare rules. Zone Program Integrity Contractors (ZPICs) – specifically investigate providers when there is a suspicion of fraud and take appropriate corrective action. Recovery Audit Contractors (RACs) – review fee-for-service (FFS) claims data for potential recoupment. Comprehensive Error Rate Testing (CERT) Contractors – collect documentation and perform reviews on statistically valid samples of claims to produce an annual improper payment rate.

Contractor changes are in the works:

  • Unified Program Integrity Contractors (UPIC) are a new type of contractor that began audits and reviews in January of 2017.
  • UPICs conduct reviews of Medicare and Medicaid claims in an effort to detect and deter fraud, waste, and abuse in both programs.
  • The goal of UPICs is also to prevent duplication of work between Medicare’s ZPICs and Medicaid Integrity Contractors (MICs) and streamline the process of reviewing and auditing claims for both programs.
  • ZPIC contracts will phase out as UPIC contracts become fully implemented.

Medicare Audit and Appeals Process

When a supplier receives an audit request letter, it needs to:

  • identify the type of contractor requesting the audit (e.g., MAC, RAC, CERT, UPIC); and
  • identify the information that is being requested and the timeline in which the supplier has to respond.

A supplier is permitted to appoint a representative to represent it in the appeals process. The supplier should complete the Appointment of Representative Form (Form CMS-1696). Without an appropriate Appointment of Representative, only an authorized official (AO) or other representative listed on the supplier’s Medicare enrollment information will be permitted to respond on behalf of the supplier.

In responding to the audit, (i) the supplier should respond in writing and address specific reasons to support the argument that the claims were properly paid; (ii) the supplier should provide copies of documentation that support the argument; and (iii) the supplier should keep a copy of the response for the supplier’s records. Further, the supplier should only address the issues that are raised and be clear and concise with all arguments. Lastly, the supplier should use Medicare coverage criteria, when possible, to support the argument that the claims were properly paid, and cite the National/Local Coverage Determination (NCD/LCD), where applicable.

Appeal Level 1: Redetermination. Once the supplier receives an initial determination on the audit, the supplier can submit a request for redetermination if the supplier does not agree with the results of the audit. This appeal must be submitted in writing, within 120 days from the date of the initial determination. The supplier should include any additional documentation that supports the basis of the appeal (e.g., additional medical records or other documentation to support the payment of the claims at issue). Decisions are generally issued within 60 days of the receipt of the request. The supplier should keep a copy of the documentation that is submitted to the reviewer.

Appeal Level 2: Reconsideration. Once the redetermination decision is rendered, a supplier is permitted to submit a request for reconsideration if the supplier is unhappy with the result of the redetermination. A request for reconsideration must be submitted in writing, within 180 days of receipt of the redetermination decision. The supplier needs to clearly explain the reason that it disagrees with the redetermination decision. Evidence that is not submitted at reconsideration will not be considered in subsequent levels of appeal, unless the supplier is able to show good cause. Decisions are generally issued within 60 days of the receipt of the request.

Appeal Level 3: Administrative Law Judge (ALJ) Hearing. If the supplier is unhappy with the reconsideration decision, the supplier may submit a request for an ALJ hearing in writing, and within 60 days of receipt of the reconsideration decision. A copy of the request must be submitted to the ALJ and all parties to the reconsideration decision. There is a minimum amount in controversy that must be met in order to request an ALJ hearing. For 2017 and 2018, the minimum amount in controversy is $160. The wait time to be assigned to an ALJ is ridiculously long.

In 2016, a U.S. District Court ordered the Department of Health and Human Services (HHS) to clear all pending Medicare appeals by January 1, 2021 to settle a longstanding suit against HHS by the American Hospital Association (AHA).  On August 11, 2017, the D.C. Circuit Court of Appeals ruled that the District Court had to consider an argument from HHS that the mandated deadline to clear the backlog was impossible to meet. HHS reported to the District Court that the number of appeals is estimated to be 687,382 by the end of 2017.  By the end of 2021, the number is expected to be just over 1 million claims.  HHS reports that it currently has the capacity to review 92,000 claims annually. The case is back with the District Court, which will consider the argument by HHS to determine whether compliance with the mandated timeline is possible. In the meantime, ALJ reviews are still chugging along.

Appeal Level 4: Medicare Appeals Council (MAC). If a supplier receives an unfavorable ALJ decision, the supplier may file a request for MAC review in writing, within 60 days of receipt of the ALJ’s decision. The MAC usually issues a decision within 90 days from receipt of the request for review.

Appeal Level 5: U.S. District Court Judicial Review. If a supplier is unhappy with the MAC decision, the supplier may submit a request for judicial review within 60 days of receipt of the decision. This claims is filed in U.S. District Court. The minimum amount in controversy required to request U.S. District Court Judicial Review for 2017 is $1,560.  For 2018, the amount rises to $1,600.

Non-Invasive Ventilation

Medicare Rules Applicable to Non-Invasive Ventilators

Medicare categorizes home ventilators that assist with or replace a patient’s breathing, into two groups based on the interface: (i) ventilators that use an invasive interface such as tracheostomy tubes, and (ii) non-invasive ventilators (NIV) that use a mask. In the past, NIVs were assigned one of three HCPCS codes E0460, E0461, and E0464; however, as of January 1, 2016, all NIVs are assigned HCPCS code E0466.

Ventilators will only be covered by Medicare if they satisfy the applicable reasonable and necessary criteria for the diagnosis or treatment of illness. The Medicare National Coverage Determinations Manual states that ventilators are covered for the treatment of “neuromuscular diseases, thoracic restrictive diseases, and chronic respiratory failure consequent to chronic obstructive pulmonary disease.” This language has been consistent since the NCD for the DME Reference List was initially issued in April 1, 2003.

The information in the NCD is not the only guidance provided by CMS for ventilators even though an LCD has not been issued for NIV. The LCD for lower-level Respiratory Assist Devices also provides guidance regarding when NIV or a RAD is more appropriate for a patient.

Respiratory Assist Devices (RADs)

Medicare categorizes RADs into two categories:

  • E0470 – RADs without a backup rate that deliver air pressure to assist spontaneous respiratory efforts and increase the volume of inspired air into the lungs, and
  • E0471 – RADs with a backup rate that not only assist spontaneous respiratory efforts, but also have a “timed backup feature to deliver this air pressure whenever sufficient spontaneous inspiratory efforts fail to occur.”

Medicare Rules Applicable to NIV and RADs

The first LCD for RADs was originally issued on October 1, 1999; however, the discussion on ventilators did not appear in the LCD until the revisions that became effective December 1, 2014. The two LCDs applicable during the time period of 12/1/14 through 12/31/15 explain that the ventilator-related disease groups that appear in the NCD “may appear to overlap” with the conditions described in the RAD LCD used to determine coverage for bi-level PAP devices, “but they are not overlapping.” The determination of whether NIV or a bi-level PAP device is more appropriate for a patient is based on the severity of the patient’s medical condition.

These LCDs further state:

The conditions described in the Respiratory Assistance Devices (RAD) local coverage determination are not life-threatening conditions where interruption of respiratory support would quickly lead to serious harm or death.  These policies describe clinical conditions that require intermittent and relatively short durations of respiratory support.  Thus, any type ventilator would not be eligible for reimbursement for any of the conditions described in the RAD LCD even though the ventilator equipment may have the capability of operating in a bi-level PAP (E0470, E0471) mode.  Bi-level PAP devices (E0470, E0471) are considered as reasonable and necessary in those clinical scenarios.

The LCDs effective for dates of service between 12/1/14 – 12/31/15 state, “Claims for ventilators (E0450, E0460-E0464) used for the treatment of conditions described in the RAD LCD will be denied as not reasonable and necessary.” The language in the RAD LCDs is based on the aforementioned NCD for DME Reference List (280.1) and the original April 3, 2014 version of the DME MACs’ article entitled, “Correct Coding and Coverage of Ventilators” (Article). However, in May 2016, the Article was updated to acknowledge that ventilator-disease groups and clinical disorders for which RADs are generally prescribed do overlap.

Seven months later, CMS revised its discussion on ventilators in the RAD LCD effective 1/1/17 reiterating “ventilator-related disease groups overlap conditions described in this Respiratory Assist Devices LCD used to determine coverage for bi-level PAP devices.”

Further the current (1/1/17) RAD LCD states:

Each of these disease categories are conditions where the specific presentation of the disease can vary from patient to patient.  For conditions such as these, the specific treatment plan for any individual patient will vary as well.  Choice of an appropriate treatment plan, including the determination to use a ventilator vs. a bi-level PAP device, is made based upon the specifics of each individual beneficiary’s medical condition.  In the event of a claim review, there must be sufficient detailed information in the medical record to justify the treatment selected.

Medicare Rules Applicable to NIV Accessories

The Article explains that claims submitted for ventilator accessories such as masks or tubing will be denied because ventilators fall under the “Frequent and Substantial Servicing” (FSS) payment category. The monthly rental payment for items in the FSS category must include any options, accessories or supplies used with the ventilator, as well as all service, repairs, and replacements. Therefore, any claims submitted to Medicare for payment of options, accessories, supplies, service, repairs, or replacements related to ventilators will be denied.

Medicare Rules Applicable to NIV – Second Device

The Article also provides guidance regarding when Medicare will cover a second device for a beneficiary. Medicare will not pay for a backup ventilator unless it will serve a different medical need or purpose for the beneficiary. For example, Medicare will pay for two ventilators if “[a] beneficiary requires one type of ventilator (e.g. a negative pressure ventilator with a chest shell) for part of the day and needs a different type of ventilator (e.g. positive pressure ventilator with a nasal mask) during the rest of the day.”

CMS’s position regarding the coverage of a second device has been consistent throughout the Article’s revisions, and it remains its policy today.


Reviewing the criteria necessary to qualify for a lower-level RAD helps to illustrate requirements that must be surpassed to qualify for a higher-level device such as NIV.

Minimum Criteria for Respiratory Assist Devices

The minimum criteria a patient must meet to qualify for reimbursement from Medicare for a RAD varies depending on the physician’s underlying diagnosis (e.g., severe COPD, restrictive thoracic disorder, hypoventilation syndrome).


Jeff Baird and Brad Howard will be presenting the following webinar:


What Business Practices Will Get the Department of Justice’s Attention?

Presented by:Jeffrey S. Baird, Esq., Brown & Fortunato, P.C. & Bradley W. Howard, Esq., Brown & Fortunato, P.C.

Monday, December 18, 2017

2:30-4:00 p.m. EASTERN TIME

Health care fraud continues to be a top priority for the Department of Justice.  Brown & Fortunato defends DME suppliers that have criminal and civil cases brought against them by the DOJ.  As such, B&F works closely with federal investigators and prosecutors.  This program will share observations regarding how the DOJ is attacking the problem, and what the DME supplier can do if it is the target of an investigation.  Nationwide, there are nine Medicare Fraud Strike Forces using data analysis techniques to uncover fraud.  This program will discuss the types of activities by DME suppliers, that the DOJ is focusing on.  The program will set out “nuts and bolts” steps that the DME supplier can take to reduce the risk of being targeted by the DOJ.  Lastly, the program will discuss the steps that a supplier should take in the event that it finds that is the target of a DOJ investigation.

Register for What Business Practices Will Get the Department of Justice’s Attention? on Monday, December 18, 2017, 2:30-4:00 pm ET, with Jeffrey S. Baird, Esq., and Bradley W. Howard, Esq., Brown & Fortunato, P.C.

Please contact Ika Sukh at if you experience any difficulties registering.

FEES:  Member: $99.00; Non-Member: $129.00

 Jeffrey S. Baird, JD, is chairman of the Health Care Group at Brown & Fortunato, PC, a law firm based in Amarillo, Tex. He represents pharmacies, infusion companies, HME companies and other health care providers throughout the United States. Baird is Board Certified in Health Law by the Texas Board of Legal Specialization, and can be reached at (806) 345-6320 or