&. 
,..v"r 
DEPARTMENT OF HEALTH  HUMAN SERVICES  Office of Inspector General 
..."4iG  4 19  Memorandum 
JAN 
Q.\L
Date

From
 Richard P. Kusserow 
Inspector General 
Subject  Management Advisory Report: "Intraocular Lenses Purchased by Indian Health 
Servce Hospitals " OAI-07-89-01662 
Louis B. Hays 
Acting Admistrator 
Health Cae Financing Admistration 
The Offce of Inspector General (OIG) is currently examig prices for prosthetic 
devices paid by other organtions and in other countries' markets. Due to intense 
interest in Medicare reimbursement for intraocular lenses (IOLs), we are now 
releasing the study s fidings on IOLS purchased by Indian Health Servce (IHS) 
hospitals. 
BACKGROUND 
An IOL is used exclusively to replace the natural lens removed from the eye durig
cataract surgery. Over 90 percent of all cataract surgery patients receive an IOL 
implant. 
The number of Medicare-funded cataract extractions with IOL implants increased 
from 819 788 in 1986 to 954 794 in 1987, a 16 percent increase. Data released by 
the Public Health Servce indicates this surgery has continued to increase into 1989 
with some moderation. Alowed charges for IOLs in ambulatory surgical centers 
average $350. Prices vary in other settings. 
Two previous OIG studies recommended that the Health Care Financing 
Adminstration (HCF A) establish a $200 reimbursement cap for IOLs. More 
recently, the OIG issued a Management Advisory Report (MA) focusing on IOLs 
purchased by the Veterans Administration and miltary hospitals on the open market 
and IOLs purchased through the Federal Supply 
Schedule (FSS). The 
recommended that the HCF A use the information presented in adjusting rates on 
July 1, 1990.
 Page 2 - Lois B. Hays 
Manufactuers awarded FSS contracts, are required to provide Federal agencies with 
the best avaiable prices. Four manufacturers have negotiated contracts to offer 
several diferent tyes and styles of IOLs on the FSS. In addition to the many multi-
piece posterior chamber lenses offered, one-piece posterior chamber and anterior 
chamber lenses are also available. The FSS prices negotiated for these lenses are all 
under $200, rangig from $95 to $198. The FSS allows for the purchase of lenses in 
tie. 
bulk or one at a  Agencies using the FSS contact suppliers directly. 
Procurement using the FSS is mandatory for most Government agencies (including 
the IHS), unless a waiver is granted. 
METODOLOGY 
Inormation regarding the purchase of IOLs by IHS hospitals was gathered from the 
only four IHS hospitals where cataract surgery is performed. These hospitals were 
identifed by the IHS Senior Surgeon for Ophthalmology. Telephone intervews were 
conducted with an ophthalmologist in each of the four hospitals. It was also 
necessary to contact a procurement 
specialst in three of the four hospitals for 
information the ophthalmologists were unable to provide. 
FINDINGS 
ms 
hols J1hae IOLs for an averge of $155. 
Th 
In Fiscal Year 1989, the IHS hospitas paid an average of $155 for a total of 466 
IOLs purchased from two well-known manufacturers. Neither manufacturer is 
currently listed on the FSS. The average price of an IOL in each of the IHS 
hospitals is listed below. 
Hospital #1  $134. 
Hospital #2  $166. 
Hospital #3  $168.31 
Hospital #4  $186. 
The IRS hospitals negotiated prices for IOLs ranging from $125 to $278 per lens. 
Only one hospital pays more than $200 for an IOL (see attachment). Overall 
average prices ranged from $150 for multi-piece posterior chamber lenses to $196 for 
anterior chamber lenses. Multi-piece posterior chamber lenses account for 416 (89 
percent) of the lenses purchased in these hospitals. Even though one IHS hospital 
has negotiated to purchase one-piece posterior lenses for $175, none were purchased 
in 1989.  Page 3 - Louis B. Hay 
The IHS hospitals purchased 457 of their 466 (98 percent) IOLs for $200 or less. As 
shown in the followig chart, IHS hospitals purchased 47 percent of their IOLs for 
under $150, and 51 percent for prices rangig from $151 to $200. 
IOLs Purchased

by 
I HS Hasp i ta Is 
300 
Under $150 (47%) 
250  238 
$150 - $200 (51%) 
Over $200 (2%) 
200 
150 
100 
IOL Price Categories

IOL maactuer are competie. 
Th 
Ophthalmologists intervewed in all four IHS hospitals indicated that IOL 
wig 
manufacturers are competitive and  to lower prices to acquire more business. 
Ophthalologists in two of the four facilties indicated price was a deciding factor in 
the decisions to purchase IOLs outside the FSS. Comments by ophthalmologists 
included: 
We start with contract bid on the FSS, and ask other IOL companies to 
beat those prices. 
Lens companies will offer to meet or beat another company s price. 
We approached the IOL company and asked for lower prices or we would 
take our business elsewhere. The IOL company reduced their prices.  Page 4 - Lois B. Hays 
er 
On ms hopitl receies  it wi IOL J1haes. 
One IHS hospital has recently negotiated with a lens manufacturer to receive a 
complete surgical package with the purchase of each IOL. The surgical package was 
designed by hospital staff, and provided many essential items needed for cataract 
surgery. The package includes the IOL; a gown; towels; towel clips; eye, head and 
body drapes; chai cover; basin; eye dropper; syrnges; eye pads; medicine 
glass;
gauze; instrument wipes; drugs used in cataract surgery; and a 
fiter needle. 
Even though the purchase price for the IOL with the surgical package increases by 
$60--from $125 to $185--the hospital pays less than $200 per lens. Hospital staff 
indicated that individually purchasing the IOL and the items included in the surgical 
package would cost the hospital in excess of $300 per patient. 
When a hospital buys an IOL with the surgical package, $10 of the amount paid is 
kne 
applied toward the purchase of a diamond  used in cataract surgery. 
RECOMMENDATIONS 
The HCF A should consider the prices paid by IHS hospitals for IOLs in adjustig 
Medicare IOL reimbursement rates on July 1
, 1990. 
We would appreciate your comments on this report withi 30 days. If you have any 
Fqures tions please contact me or have your staf contact Barr Steeley at
646-3138. 
Attachment  ATTACHMENT A

IOL Pres Negotite 
ms Hospitls 
Tota 
1989  1989 
Manufctrer  Lens Stle  Volume  Prices 
Hospit #1 
Company A  Posterior Multi-piec  177  $125 
Company A  Posterior Multi-piec  $185 
Company A  Posterior Multi-piec  $170 
Company A  Anterior  $170 
Hospit #2 
Company B  Posterior Multi-piec  $169 
Company B  Posterior Multi-piec  $158 
piec 
Company B  Posterior Multi- $143 
Company B  Anterior  $200 
Hospital #3 
Company B  Posterior Multi-piec  $143 
Company B  Anterior  $278 
Hospit #4 
Company A  Posterior Multi-piece  $186 
Company A  Anterior  $186