Study: Medicare Scandal Continues With Significant Percentage of Payments for Orthotic & Prosthetic Devices Going Illegally to Unlicensed Providers


CMS Payments to Unlicensed Providers Violates 2000 and 2005 Laws; Regulatory “Overkill” by Agency Adds Insult to Injury by Tying Up Legitimate Industry in Red Tape.

WASHINGTON, D.C. September 17, 2013 – Despite laws passed by Congress in 2000 and 2005 and a 2009 “60 Minutes” expose, the Centers for Medicare & Medicaid Services (CMS) has failed to stop the illegal practice of paying unlicensed providers for orthotic and prosthetic services provided to Medicare beneficiaries, according to a new study by Allen Dobson, PhD, Dobson DaVanzo & Associates, LLC, and former director of research of the Health Care Financing Agency (currently CMS). Furthermore, CMS has incorrectly told Congress that such illegal payments have ceased and is now engaged in an overkill regulatory assault on legitimate licensed industry providers.

According to the report, a significant percent of the $3.62 billion CMS paid between 2007-2011 for orthotic and prosthetic services for Medicare beneficiaries went to unlicensed providers, as well as those who fail to meet the accreditation requirement legislated by Congress in 2000.   This means that billions of dollars in payments were made to providers who Congress specifically intended to exclude from eligibility for payments under the requirements of the 2000 and 2005 laws.

Thomas F. Kirk, PhD, president, American Orthotic and Prosthetic Association (AOPA), said:   “Taxpayers are seeing billions of dollars go to unlicensed providers in direct violation of what Congress has mandated.  The legitimate industry is being subjected to a misdirected and entirely arbitrary crackdown via government-sanctioned bounty hunters playing by their own set of rules.  And even as unlicensed firms continue to have federal funds lavished on them in violation of the law, the reputable, licensed and legal operators in the industry are being subjected to a regulatory crackdown that is so severe that AOPA has been forced to go to court to challenge it in order to avoid seeing the orthotic and prosthetic industry so enmeshed in pointless government challenges, audits, and other costly and time-consuming red tape that it is unable to meet the urgent needs of patients.

Report author Allen Dobson, PhD, said:  “The data from 2001 to 2006, and from 2007 to 2011, show that there has not been any significant change by CMS to eliminate payments to unlicensed providers in orthotic and prosthetic (O&P) licensure states. Specifically, only a small reduction in the proportion of payments to non-certified O&P personnel has been evidenced since 2009. Our analytic results are consistent with the results of a third party independent survey that confirmed that non-certified providers are continuing to provide O&P services to Medicare beneficiaries as recently as in 2013.”

The American Orthotic and Prosthetic Association supports efforts by Rep. Glenn Thompson (R-PA) and Rep. Mike Thompson (D-CA) to introduce legislation that would go a long ways towards addressing this problem.

Thomas A. Scully, Esquire, Alston & Bird, former administrator, Centers for Medicare and Medicaid Services, said:   “It’s significant when an entire sector of the health care industry comes to CMS and asks them to regulate them more strongly and protect patients better.  The bill will greatly reduce fraud, protect patients and save money in Medicare’s treatment of a very important and sensitive group of patients.  Keeping out fraudulent providers in the first place is a better way to fight Medicare fraud and abuse instead of ongoing pay and chase methods.”

Cost savings for Medicare could result from adherence to the law.  As the report notes:  “If CMS was to actively enforce that unlicensed providers cannot receive payment for providing O&P services to Medicare beneficiaries within a licensure state, Medicare savings could be realized. Under such enforcement of limiting payments to providers with proven licensure and standards of training and experience, payments to unqualified providers would be eliminated. As the ’60 Minute’ special suggested, allowing non-certified personnel to provide these services, especially in states with licensure, could lead to fraud and abuse in O&P services, as well as expose patients who received these services to inappropriate or substandard care. Therefore, shifting payments to only certified providers could result in better care for beneficiaries and lower Medicare payments.”


Congress passed the Benefits Improvement and Protection Act of 2000 (BIPA Section 427) and mandated that within one year of enactment custom fabricated orthotics and all prosthetics must be provided by “qualified practitioners” and “qualified suppliers.” Transmittal 656, effective October 1, 2005, further mandated that CMS should only pay for O&P services for Medicare beneficiaries from practitioners and suppliers that meet state O&P licensure laws. However, no steps were taken to enforce either of these provisions. A total of 14 states have enacted an O&P licensure statute; therefore, despite current practice, only certified personnel are authorized to provide O&P services to Medicare beneficiaries in those states.

The American Orthotic and Prosthetic Association commissioned Dobson | DaVanzo to analyze Medicare claims data from 2007 through 2011 to determine the extent to which Medicare is reimbursing non-certified O&P personnel in states with a licensure statute for selected O&P services. The analyses conducted by Dobson | DaVanzo was then compared to prior analyses of claims data conducted on behalf of AOPA from 2001 through 2006. The new report summarizes the findings and trends of the data analyses from 2007 to 2011 and compares them to the trends from 2001 to 2006.


The American Orthotic & Prosthetic Association is a national trade association committed to providing high quality, unprecedented business services and products to orthotic & prosthetic (O&P) professionals.   Founded in 1917, AOPA membership consists of more than 2,000 O&P patient care facilities and suppliers that manufacture, distribute, design, fabricate, fit, and supervise the use of orthoses (orthopedic braces) and prostheses (artificial limbs).  For more information, visit

MEDIA CONTACTS:  Patrick Mitchell, (703) 276-3266, or .

EDITOR’S NOTE:  A streaming audio replay of this news event will be available on the AOPA Web site by 5 p.m. EDT on September 17, 2013 at