Department  of  Health  and  Human  Services 
OFFICE  OF 
INSPECTOR  GENERAL 
Portable  Imaging  Services: 
A  Costly  Option 
JUNE  GIBBS BROWN 
Inspector  General 
NOVEMBER  1997 
OEI-09-95-00090  OFFICE  OF INSPECTOR  GENERAL 
The mission  of the Office  of Inspector  General  (OIG),  as mandated  by Public  Law 
95-452,  is to protect  the integrity  of the Department  of Health  and Human  Services 
programs  as well as the health  and welfare  of beneficiaries  served by them.  This  statutory 
mission  is carried  out through  a nationwide  program  of audits,  investigations,  inspections, 
sanctions,  and fraud alerts.  The Inspector  General  informs  the Secretary  of program  and 
management  problems  and recommends  legislative,  regulatory,  and operational  approaches 
to correct  them. 
Office  of Evaluation  and Inspections 
The Office  of Evaluation  and Inspections  (OEI) is one of several  components  of the Office 

of Inspector  General.  It conducts  short-term  management  and program  evaluations  (called 

inspections)  that focus on issues of concern  to the Department,  the Congress,  and the 

public.  The inspection  reports provide  findings  and recommendations  on the efficiency, 

vulnerability,  and effectiveness  of departmental  programs. 

OEIs San Francisco  Regional  Office prepared  this report  under the direction  of 

Kaye D.  Kidwell,  Regional  Inspector  General,  and Paul A.  Gottlober,  Deputy  Regional 

Inspector  General.  Principal  OEI staff included: 

REGION  IX  HEADOUARTERS 
Brad Rollin,  Project  Leader 
 Stuart Wright,  Program  Specialist 
Robert  Gibbons,  Project  Leader 

Kathy  Dezotte 

Don Loeb 

Thomas  Purvis 

Joseph  Corso,  Consultant 

To obtain  a copy of this report, 
 call the San Francisco  Regional  Office  at 415-437-7900.  I  I 
Department  of  Health  and  Human  Services 
OFFICE  OF 
INSPECTOR  GENERAL 
Portable  Imaging  Services: 
A  Costly  Option 
JUNE  GIBBS BROWN 
Inspector  General 
NOVEMBER  1997 
OEI-09-95-00090  EXECUTIVE  SUMMARY 
PURPOSE 
This inspection  determined  how different  billing  practices,  financial  arrangements,  and 
clinical  settings  affect the cost of imaging  services for the Medicare  program  and its 
beneficiaries. 
BACKGROUND 
Nursing  homes* arrange  for ancillary  services--such  as x-rays--for  patients  who require 
them.  In some instances,  firms known  as portable  x-ray  suppliers  provide  the x-ray  and 
electrocardiogram  (EKG) services  in nursing  homes.**  Imaging  services  consist  of 
several  components--technical,  professional,  transportation,  and setup--depending  on 
(a) the type of service  and (b) where and by whom it is rendered. 
Portable  x-ray  and EKG services provided  to nursing  home patients  may be billed  either 
by a skilled  nursing  facility  to the Part A fiscal intermediary  or by the portable  supplier  to 
the Part B carrier.  Direct  billing  occurs when the portable  supplier  bills the carrier. 
Billing  under  arrangement  occurs when,  based on a contractual  agreement,  a skilled 
nursing  facility  bills  the fiscal  intermediary  and pays the portable  supplier  for services 
rendered.  Skilled  nursing  facilities  may bill under  arrangement  even for patients  who are 
not in Part A-covered  stays. 
We examined  a stratified  random  sample of 729 imaging  services that were provided 
while  the beneficiaries  were nursing  home residents  in 1994. 
FINDINGS 
Overall,  we found that Medicare  pays too much for portable  imaging  services.  Medicare 
could  save as much as $66 million  in  1 year  and $361 million  over 5 years,  based on the 
following  findings  and recommendations: 
Portable  chest  x-rays  cost far  more  than  non-portable  chest  x-rays 
Portable  chest x-rays may cost up to nine times more than non-portable  chest x-rays. 
Portable  x-ray  suppliers  performed  more than 60 percent  of chest x-rays rendered  to 
* For purposes  of this inspection,  nursing homes refers to skilled nursing,  Medicaid nursing,  board and 
care, assisted living,  and retirement  facilities collectively.  Where appropriate,  we distinguish between 
skilled nursing  facilities  and these other facilities. 
** Other options  for nursing homes include providing  the service with their own equipment  or 
transporting  patients to hospital outpatient  departments,  imaging centers,  physician  offices,  or other facilities 
for x-rays or EKGs. 
i  nursing  home  residents  in  1994.  In general,  portable  chest x-rays cost more because 
Medicare  allows  a transportation  charge,  which comprises  most of the cost of the service. 
Medicare  pays  more  than  twice  as much for  imaging  services  when  they  are  billed  under 
arrangement  rather  than  when payment  is limited  to the fee  schedule 
In  1994, Medicare  paid $14.7 million  more for portable  chest x-rays and EKGs provided 
under  arrangement  than  it would have if payment  were limited  to the carrier  fee 
schedules.  This occurs because  (1) portable  x-ray suppliers  negotiate  contracts  with 
skilled  nursing  facilities  to ensure that they receive  as much as six times more than  fee 
schedules  would allow  and (2) skilled  nursing  facilities  mark up these already  inflated 
charges  as much as 250 percent  for overhead  and expenses.  In addition,  we estimate  that 
Medicare  spent $9 million  more  in 1994 on other radiological  services billed  under 
arrangement  than  it would have if payments  for those  services had been limited  by the fee 
schedules. 
On  average,  portable  suppliers  who  bill  under  arrangement  receive  double  what  the fee 
schedule  would  allow 
Portable  x-ray  suppliers  negotiate  contracts  with skilled  nursing  facilities  to receive  more 
(as much as six times more)  than the Medicare  fee schedule would allow.  Portable  x-ray 
suppliers  charge  radically  different  amounts to neighboring  skilled  nursing  facilities. 
Skilled  nursing  facilities  receive  millions  of dollars  that  they  would  not  receive  if they  did 
not  bill  under  arrangement 
Skilled  nursing  facilities  mark up portable  chest x-ray costs as much as 250 percent  above 
what portable  x-ray  suppliers bill them.  This totaled  $8.1 million  in 1994. 
Medicare  pays  for  services  under  arrangement  that  it would  not  cover  if billed  directly 
Services billed  under  arrangement  are not subjected to the same routine  screens and edits 
as directly  billed  services  are.  As a result,  skilled  nursing  facilities  are reimbursed  for 
charges  that would be denied  if the portable  supplier billed  directly.  These 
reimbursements  include  (1) setup charges for portable  EKG equipment,  (2) after-hours  or 
emergency  charges,  (3) transportation  charges not prorated  when multiple  patients  are 
seen,  (4) medically  unnecessary  or duplicate  services,  and (5) portable  equipment 
transportation  and setup charges when only  a portable  technician  is provided. 
Beneficiaries  copayments  for  services  billed  under  arrangement  are  almost  three  times 
more  than  they  would  be if the  services  had  been  billed  directly 
The combination  of three  factors--inflated  supplier  charges to skilled  nursing  facilities, 
excessive  markups  by these facilities,  and the Medicare  policy  that beneficiary  copayments 
are 20 percent  of billed amounts  for ancillary  services--results  in vastly  higher  costs to 
beneficiaries  and secondary  payers. 
ii  The  amounts  that  Medicare  carriers  allow for  transportation  of portable  x-ray  equipment 
vary  widely,  and  some  are  excessive 
In  1994, carrier  allowances  for portable  x-ray transportation  when one patient  was seen 
ranged  from  $10.00  to $186.39.  Although  Medicare  requires  carriers  to prorate 
transportation  charges when multiple  patients  are seen at one nursing  home,  not all 
carriers  do this correctly.  There  is no statutory  authority  for the Health  Care Financing 
Administration  (HCFA)  to allow  setup charges.  The HCFA  recently  used the lack of 
statutory  authority  as a rationale  for eliminating  reimbursement  for EKG transportation. 
RECOMMENDATION 
In the draft  of this report,  we recommended  that HCFA: 
b 	 instruct fiscal  intermediaries to never pay more than the fee  schedule  amount for 
portable  imaging services billed under arrangement; 
b 	 require$scal  intermediary edits and Common Procedure  Coding System codes on 
all claims to discontinue payments for  non-covered  services; 
b 	 require fiscal  intermediaries to disallow any skilled nursing facility overhead 
associated with portable  imaging services;  and 
b 	 convert transportation reimbursement rates to a national fee  schedule,  rebundle 
equipment setup with transportation, and remind carriers  that they must prorate 
transportation charges  when multiple patients are seen at the same facility. 
We projected  5-year  Medicare  savings of $360.9 million  for these recommendations,  as 
indicated  in the following  table: 
Projected Medicare savings from implemented recommendations 
Option  I l-year savings  I 5-year savings 
Limit payment for services billed under  $ 28.3 million  $160.4 million 
arrangement to fee schedule 
Limit transportation to $70 per beneficiary-service  $ 21.8 million  $126.6 million 

day (the national median), $35 if 2 beneficiaries 

are seen during the same trip, etc. 

Stop paying for setup  $ 15.7 million  $ 73.9 million 

TOTALS  $65.8  million  $360.9 million 
.. . 
111  The HCFA  concurred  with the majority  of the recommendations  in our draft report  but 
did not concur  with our recommendations  that it (1) disallow  any skilled  nursing  facility 
overhead  associated  with portable  imaging  services and (2) rebundle  the equipment  setup 
charge  with transportation. 
After  we released  our draft report,  President  Clinton  signed into law the Balanced  Budget 
Act of  1997.  Among  the provisions  in this law,  it (1) establishes  a prospective  payment 
system for beneficiaries  in Part A-covered  stays in skilled  nursing  facilities,  to be phased 
in over  several  years;  (2) requires  that all Part B items and services  furnished  to residents 
of nursing  homes  (not covered  under  Part A) be billed  by the nursing  homes as part of a 
consolidated  billing  system;  (3) limits  reimbursement  for services paid under  consolidated 
billing  to the Part B fee schedule;  and (4) requires  HCFA  Common  Procedure  Coding 
System  codes for services provided  to skilled  nursing  facility  patients  that are billed  to 
fiscal  intermediaries. 
We believe  that implementation  of the Balance Budget Act will address our findings  and 
the intent  of our recommendations.  We are concerned,  however,  that the cost of ancillary 
services  has been inflated  by the practices  described  in this report.  Therefore,  we 
recommend  that HCFA: 
b 	 take into account the inflated payments that have been made for portable imaging 
services when it implements the prospective payment and Part B provisions  of the 
Balanced Budget Act, seeking legisla&e  authority if necessary. 
The HCFA  should take into account the inflated  charges  for (1) services billed 
under  arrangement  (including  payments  for services that were non-covered)  and 
(2) transportation  charges that were excessive or prorated  incorrectly. 
Operation  Restore  Trust 
In May  1995, President  Clinton  and Health  and Human  Services  Secretary  Donna  Shalala 
announced  the kickoff  of Operation  Restore Trust (ORT),  a crackdown  on Medicare  and 
Medicaid  fraud,  waste,  and abuse in home health  agencies,  nursing  homes,  and durable 
medical  equipment  suppliers.  The ORT focused on the five States--California,  New York, 
Florida,  Texas,  and Illinois--that  account  for 40 percent  of the nations  Medicare 
beneficiaries  and program  expenditures.  This was an ORT inspection.  A companion 
report,  Portable  Imaging  Services:  Nursing  Home Perspectives  (OEI-09-9500091) 
describes  when,  how,  and why nursing  homes use portable  imaging  services.  Another 
companion  report,  Imaging  Services for Nursing  Home Patients:  Medical  Necessity 
(OEI-09-95-00092),  assesses the medical  necessity  and quality  of care. 
iv  TABLE  OF  CONTENTS 
PAGE 
EXECUTIVE  SUMMARY 
INTRODUCTION  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 

FINDINGS  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 

Portable  services  cost far more than non-portables  .......................  8 

Arrangements  cost Medicare  millions  ................................  9 

Portable  suppliers  profit  from arrangements  ..........................  10 

Nursing  homes take in millions  in overhead  from arrangements  .............  11 

Medicare  pays for services that should be denied  .......................  11 

Beneficiary  copayments  soar when services are billed  under  arrangement  .......  13 

Transportation  fee schedules  are excessive  ............................ 
 13 
RECOMMENDATION 
 ...........................................  15 
APPENDICES 
A:  Agency  Comments  ..........................................  A-l 
B:  Confidence  Intervals  .........................................  B-l 
C:  Estimated  Savings  ..........................................  C-l  INTRODUCTION 
PURPOSE 
This inspection  determined  how different  billing  practices,  financial  arrangements,  and 
clinical  settings  affect the cost of imaging  services for the Medicare  program  and its 
beneficiaries. 
BACKGROUND 
Medicare (Parts A and B) 
Congress  enacted  Medicare  in  1965 to provide  health  services to the elderly  and disabled. 
The program  consists  of two distinct  parts.  The first part is hospital  insurance  or Part A. 
Part A covers  services  furnished  by providers,  i.e.,  hospitals,  home health  agencies,  and 
skilled  nursing  facilities.  The second part,  supplementary  medical  insurance  or Part B, 
covers  a wide range  of medical  services and supplies.  These include  physician  services, 
outpatient  hospital  services,  diagnostic  laboratory  tests,  x-rays,  ambulance  services,  and 
durable  medical  equipment. 
The Health  Care Financing  Administration  (HCFA)  administers  Medicare  and contracts 
with private  insurance  companies  to process and pay claims.  Contractors  that process  Part 
A claims  are referred  to as fiscal  intermediaries.  Contractors  that process  Part B claims 
are called  carriers.  Some companies  have both fiscal  intermediary  and carrier  contracts. 
The HCFA  provides  substantial  guidance  to fiscal intermediaries  and carriers  on 
applicable  laws,  regulations,  national  polices,  fee schedules,  and other  requirements.  In 
some areas,  Federal  law and HCFA  allow the fiscal intermediaries  and carriers 
considerable  latitude  in determining  both coverage  and reimbursement. 
Skilled nursing facilities  and other extended care facilities 
Medicare  beneficiaries  recuperating  from an acute episode may be eligible  for post-acute 
skilled  nursing  services.  The Medicare  program  provides  coverage  under  Part A for 
skilled  nursing  services but not for custodial  care.  The skilled  nursing  benefit  includes: 
b  nursing  care, 

b  bed and board, 

b  physical,  occupational,  or speech therapy, 

b  medical  social  services,  and 

b  drugs,  biologicals,  supplies,  appliances,  and equipment  for use in the facility. 

 An exception  to this general rule is that fiscal intermediaries  process Part B claims submitted by 
hospitals  (for inpatient and outpatient  services), home health agencies, and skilled nursing facilities. 
1  Medicare  law stipulates  that beneficiaries  are eligible  for skilled  nursing  benefits  if they 
are transferred  to the skilled  nursing  facility  after a minimum  3-day covered  stay in an 
acute hospital.  The patient  must require  skilled  nursing  care,  and a physician  must order 
the services.  Part A covers  skilled  nursing  services for up to  100 days per  spell of 
illness.  
In addition  to skilled  nursing  facilities,  other  facilities  offer  varying  levels  of care for 
Medicare  beneficiaries.  These include  Medicaid  nursing,  board and care,  assisted living, 
and retirement  facilities.  We have included all of these facilities  in the scope of this 
study and refer to them collectively as  nursing homes. I We do, however, refer to 
skilled nursing facilities  specifically where findings pertain solely to these entities. 
Portable x-ray and EKG services 
Nursing  homes provide  directly  or arrange  for ancillary  services--such  as x-rays--for  their 
patients  who require  them.  In some instances,  firms known  as portable x-ray suppliers 
provide  portable  x-ray  and electrocardiogram  (EKG) services  in nursing  homes.2 
Medicares  portable  x-ray benefit  covers  skeletal  films of the arms,  legs,  pelvis,  vertebral 
column,  and skull as well as chest and abdominal  films that do not use contrast  media. 
Medicare  also covers  EKG services under the portable  benefit,  if they  are medically 
necessary  and are performed  by certified  portable  x-ray  suppliers.  All of these services 
must be diagnostic  rather  than therapeutic.  Portable  x-ray  suppliers  must meet HCFAs 
conditions  of participation  to receive  reimbursement  for these services.  These conditions 
of participation  require,  among other things,  that suppliers comply  with State and local 
laws,  which  may provide  for the licensing  and regulation  of portable  suppliers.  The 
HCFA,  however,  eliminated  reimbursement  for portable  EKG transportation  in November 
1996. 
According  to Medicare  regulations,  all portable  x-ray  services must be ordered  by a 
physician.  The physicians  signed order must specify  the reason why the x-ray  is being 
taken,  the area of the body  to be exposed,  the number  of x-rays to be taken,  and the views 
needed.  The physician  also must justify  the need for portable  services. 
Portable  x-ray  suppliers  must maintain  records  for each patient.  These records  should 
include  the examination  date,  a description  of the x-rays that were taken,  the name of the 
referring  physician,  the equipment  operator,  the physician  to whom the x-rays  were sent 
for interpretation,  and the date the x-rays were sent to that physician. 
2 Other options  for nursing facilities include transporting  patients to hospital outpatient  departments, 
imaging centers,  physician  offices,  or other facilities  for x-rays or EKGs.  Billing for portable x-ray and EKG services 
Billing  comnonents 
Imaging  services  consist  of several components,  depending  on the type of service  and 
where  and by whom  it was rendered: 
b 	 Technical:  All of the activities  that are necessary  in the actual taking  of the x-ray, 
e.g.,  developing  and delivering  the x-ray as well as overhead  expenses and 
supplies. 
b  Professional:  Interpretation  by a certified  radiologist. 
b 	 Transportation:  Moving  portable  x-ray equipment  to a nursing  home.  In 
general,  HCFA  allows a single transportation  charge  for each trip that a portable 
x-ray  supplier  makes to a particular  location.  When more than one patient  is 
x-rayed  at a single location,  the single allowable  charge  is prorated  among  all 
patients  receiving  these services. 
b 	 Setup:  Preparing  x-ray equipment  for use at a patients  bedside.  A separate  setup 
charge  is allowed  for each body part x-rayed. 
Billing  methods 
Portable  x-ray  and EKG services provided  to nursing  home patients  may be billed  by a 
skilled  nursing  facility  to the Part A fiscal intermediary  or by the portable  supplier  to the 
Part B carrier.  When the services are provided  to a skilled  nursing  facility,  the facility 
and the portable  supplier  decide who will bill  for the services.  When the portable  supplier 
bills the Part B carrier,  this is called  direct billing.   When  a skilled  nursing  facility 
bills  the Part A fiscal  intermediary  and pays the portable  supplier  for services  rendered, 
this is called  billing under arrangement.   Skilled  nursing  facilities  may bill under 
arrangement  even for patients  who are not in Part A-covered  stays.  In these cases,  the 
skilled  nursing  facility  includes  a code on the claim that denotes that the beneficiary  is not 
covered  under  Part A. 
When  the claim  is processed  by the fiscal  intermediary,  reimbursement  is based on the 
annual  cost report  submitted  by the skilled  nursing  facility  to its fiscal  intermediary. 
When  the claim  is processed  by the carrier,  reimbursement  is based on a combination  of a 
reasonable  charge  determination  and the national  fee schedule. 
These different  billing  methods  can result in vastly  different  costs to the Medicare 
program  and its beneficiaries,  particularly  when one compares  reimbursement  made by the 
fiscal  intermediary  to that made by the carrier.  The table on the following  page illustrates 
the differences  between  these two billing  methods: 
3 
 Comparison  of different billing methods for portable x-ray services 
Portable supplier bills  Skilled nursingfacility bills under arrangement to 
carrier directly  fiscal intermediary 
Medicare payment  National fee  Reasonable cost.  Intermediary  may refer to fee 
mechanism  schedule/reasonable  schedule to determine  what is reasonable but is not 
charge blended rate.  required to use it. 
Portable x-ray  80 percent of allowed  100 percent of suppliers charge,  based on contract 
supplier is  amount (paid by  with skilled nursing facility  (paid by skilled nursing 
reimbursed  carrier).  facility). 
Nursing home/skilled  Nothing. 
 Suppliers charge plus skilled nursing facilitys 
nursingfaciliry is 
 overhead  charges. 
reimbursed 

Benejiciary  20 percent  of allowed  Patients in Part A-covered  stays pay coinsurance  for 
copayment  amount.  day 20 through day 100.  Patients covered  solely by 
Part B pay 20 percent  of the m  amount 
regardless of when the service is provided. 
Adjustmentsto  No routine post- The skilled nursing facility  submits an annuaI cost 
payment  payment  adjustments.  report.  Through  audits, the intermediary  determines 
whether the costs are reasonable  and reconciles  any 
difference  between interim payments  and final 
allowable cost. 
Previous work on costs of imaging services 
In  1991, the Office  of Inspector  General  (OIG) issued a report  entitled  Study of Costs 
and Payments  for Portable  X-Ray Services  (A-01-90-00517).  This report  found  that 
(1) payment  levels  for portable  x-ray  services remained  consistent  when converted  from  a 
reasonable  charge  system to a fee schedule and (2) two carriers  allowed  payments  for 
portable  x-ray  transportation  that were significantly  more than the amount  allowed  before 
the fee schedule  was implemented.  The report  also discussed the pros and cons of 
adopting  a separate  fee schedule  for portable  x-ray  services. 
In  1992, HCFAs  Seattle regional  office  wrote a memorandum  to headquarters  detailing 
excessive  skilled  nursing  benefit  payments  made for portable  x-ray  services provided 
under  arrangement.  The memorandum  analyzed  reimbursement  policies,  complaints  from 
beneficiaries  and other portable  x-ray  suppliers,  and claims from three  skilled  nursing 
facilities. 
4 
 Operation  Restore  Trust 
In May  1995, President  Clinton  and Health  and Human  Services  Secretary  Donna  Shalala 
announced  the kickoff  of Operation  Restore Trust (ORT),  a new health  care anti-fraud 
initiative.  The ORT began as a 2-year  crackdown  on Medicare  and Medicaid  fraud, 
waste,  and abuse in home  health  agencies,  nursing  homes,  and durable  medical  equipment 
suppliers.  It focused on the five States--California,  New York,  Florida,  Texas,  and 
Illinois--that  account  for 40 percent  of the nations  Medicare  beneficiaries  and program 
expenditures. 
The ORT included  Federal  and State agencies  in collaboration  with private  sector entities 
and beneficiaries.  The Federal  agencies  involved  in this effort  include  the OIG,  HCFA, 
and the Administration  on Aging.  The OIG undertook  a number  of national  program 
inspections  aimed at identifying  and eliminating  systemic  weaknesses  that allow  fraud, 
waste,  and abuse to occur  in the areas of home health,  nursing  homes,  and durable 
medical  equipment.  This inspection  was conducted  as part of ORT. 
A companion  report,  Portable  Imaging  Services:  Nursing  Home Perspectives 
(OEI-09-9500091))  describes  when,  how,  and why nursing  homes use portable  imaging 
services.  Another  companion  report,  Imaging  Services  for Nursing  Home  Patients: 
Medical  Necessity  (OEI-09-95-00092),  assesses the medical  necessity  and quality  of care. 
METHODOLOGY 
From  a 1 percent  simple random  sample of the Common  Working  File  (CWF),  we 
extracted  data on all beneficiaries  who were in a nursing  home  or who received  a portable 
imaging  service  at any time during  calendar  year  (CY) 1994.  We then extracted  claims 
data on all imaging  services provided  to these beneficiaries  during  CY 1994. 
We identified  these nursing  home residents  through  several  indicators  in the claims  data. 
These indicators  included  place of service,  hospital  discharge  destination,  skilled  nursing 
claims,  and HCFA  Common  Procedure  Coding  System (HCPCS)  codes that are likely  to 
correspond  to a nursing  home resident  (such as transportation  of portable  x-ray 
equipment).  Based on a pre-test  of this approach,  we estimate that our database  included 
approximately  93 percent  of all imaging  services provided  to nursing  home  residents. 
From  this newly  created  database,  we selected a stratified  random  sample of 729 imaging 
services  that were provided  while the beneficiary  was a nursing  home resident.  The strata 
are illustrated  in the table on the following  page: 
5 
 Stratified sample of selected imaging  services 
Stratum  Sample  size 
I  I 
Chest  x-rays  (HCPCS  = 
71010  through  71035) 
arrangements 
Non-ORT  States  60 
ORT  States  143 
EKGs  (numerous  HCPCS  codes) 
Non-ORT  States  65 
ORT  States  167 
Computerized  axial  tomography  and magnetic 
resonance  imaging  (numerous  HCPCS  codes) 
Non-ORT  States  75 
When there  was no skilled  nursing  facility  claim overlapping  the date of the imaging 
service  in our sample,  we attempted to verify  that the beneficiary  was a nursing  home 
resident  by contacting  providers  and nursing  homes.  We excluded beneficiaries  from  our 
calculations  if they  did not reside in skilled  nursing,  Medicaid  nursing,  board  and care, 
assisted living,  or retirement  facilities  when they received  the imaging  service  in our 
sample.  This  included  patients  who were hospital  inpatients.  We also found  several 
billing  errors  that incorrectly  stated that an imaging  service had been provided,  and we 
removed  these beneficiaries  from the sample.  We undertook  a number  of steps to 
determine  how much was billed  and paid for services provided  under  arrangement: 
b 	 Breaking  down cost components of claims submitted to jiscal  intermediaries:  For 
each beneficiary  with a fiscal intermediary  claim covering  the date of the service  in 
our sample,  we requested  information  from the skilled  nursing  facilities  about the 
cost components  of each claim.  For example,  for contracted  portable  x-ray 
services,  we requested  the amount  that the skilled  nursing  facility  paid the portable 
supplier  for the services and other costs that were included  in the claim. 
b  Determining  whether Part B claims submitted to fiscal  intermediaries were actually 
for portable  services billed under arrangement:  These claims do not indicate 
whether  the service  was provided  in a hospital  outpatient  department  or whether  it 
was portable,  provided  in a skilled  nursing  facility,  and billed  under  arrangement 
for a beneficiary  covered  only  under Part B.  To make this distinction,  we obtained 
medical  records  from the facilities  that submitted  these claims  and the physicians 
who submitted  Part B claims for the professional  component.  These records 
showed whether  a portable  supplier provided  the service. 
F 	 Determining  allowed amounts for  skilled nursing facilities that bill under 
arrangement:  We subsequently  obtained  cost-to-charge  ratios  for each skilled 
nursing  facility  that submitted  a claim to the fiscal  intermediary  for radiology 
6  and/or  EKG services  in order to estimate how much Medicare  allowed  for 
individual  services  in our sample. 
F 	 Applying fee  schedules to services billed under arrangement:  Using our sample of 
patients  for whom an  under arrangement  claim was submitted,  we obtained  from 
carriers  the amount that Medicare  would have allowed  for the claim  if the service 
had been billed  directly. 
F 	 Determining  allowed amounts for  services provided  by outpatient departments and 
skilled nursing facilities that provide  services directly using their own equipment: 
We obtained  radiology  and/or  EKG cost-to-charge  ratios  for these facilities. 
F 	 Determining  beneficiary  copayments:  We obtained  copies of the Explanation  of 
Medicare  Benefits  for all beneficiaries  for whom a claim had been submitted  to the 
fiscal  intermediary.  Because beneficiaries  are not required  to pay a copayment  for 
the first 20 days of a Part A stay and then are required  to pay a daily  bundled 
coinsurance  for subsequent days,  we assumed that their  coinsurance  for a single 
imaging  procedure  would be $0.  We assumed that Part B coinsurance  would be 
20 percent  of the charge. 
We conducted  interviews  with the 93 nursing  homes that we verified  had provided  a 
portable  chest x-ray  for the patients  in our sample.  We asked the nursing  homes how they 
provide  services,  how they bill  for them,  and their rationale  for these decisions.  For 
skilled  nursing  facilities  that bill under  arrangement,  we obtained  copies of their  contracts 
with portable  suppliers. 
To gather  additional  information  on imaging  services provided  to nursing  home patients, 
we conducted  interviews  with carriers  and fiscal intermediaries.  Among  other  issues,  we 
asked questions  about (1) their  coverage,  payment,  and audit guidelines,  (2) the safeguards 
they have  in place to detect and prevent  inappropriate  services  and billing,  (3) how they 
developed  their  reimbursement  schedules  for portable  x-ray transportation,  and (4) if they 
had conducted  any studies concerning  imaging  services  for nursing  home patients. 
For all claims,  we requested  medical  records  and original  x-rays,  EKGs, magnetic 
resonance  images  (MRIs),  and computerized  axial tomography  (CAT)  scans.  These 
records  were evaluated  by a medical  review  contractor  for medical  necessity  and are the 
subject of our report,  Imaging Services  for Nursing  Home Patients:  Medical  Necessity.  
Based on our findings  from the sample,  we projected  Medicare  costs and savings to all 
radiological  services  referenced  in the report.  For  further  information  about our 
calculations,  see appendices  B and C. 
Because  this report focuses  on portable  imaging services,  the findings  and 
recommendations pertain  to chest x-rays and EKGs only.  While MRIs and CAT scans 
might be provided  by portable  suppliers in the future,  no patients in our sample received 
portable  MRIs or CAT scans. 
7  FINDINGS 
Portable  chest  x-rays  cost  far  more  than  non-portable  chest  x-rays 
Portable  chest x-rays may cost up to nine times more  than non-portable  chest x-rays.  If a 
physician  or nursing  home  owns and uses its own x-ray equipment,  the cost to Medicare  is 
always  substantially  less than when a portable  supplier  is used.  The following  graphics 
illustrate  the stark differences  in costs of nursing  home resident  chest x-rays taken  in 
1994: 
Portable chest x-rays billed under arrangement are the most costly 
 Average  allowed  amount  per chest x-ray 
1 
Portable  in  Portable  in Skilled 
Physicians  Nming  Home  Hospital  Outpatient  Nursing  Home-- Nursing  Facility--
OffiCe  Using  Own Equipment  Department  Billed Directly  Under  Arrangement 
Most chest x-rays provided  to nursing  home patients  are taken by portable  x-ray  suppliers. 
They performed  more than 60 percent  of chest x-rays rendered  to nursing  home  patients  in 
1994.  The chart on the following  page shows the different  options  for providing  x-ray 
services  to nursing  home residents  and how they were utilized  in 1994: 
8 
 Most chest x-rays for nursing home residents 
are performed in nursing homes 
Options  Percent  of chest  x-rays 
Nursing  home,  portable,  billed  directly  55.3 
Skilled  nursing  facility,  portable,  billed  6.3 
under  arrangement 
Nursing  home,  using  own  equipment  13.8 
Hospital  outpatient  department  20.9 
Physicians  office  3.7 
Portable  chest x-rays cost more because  (1) Medicare  allows  a transportation  charge  which 

frequently  is the most expensive  cost component;  (2) for each body part x-rayed, 

Medicare  allows  a separate setup charge;  and (3) Medicare  allows portable  services  to be 

billed  under  arrangement.  When  services are billed  under arrangement,  fiscal 

intermediaries  generally  do not limit  how much suppliers  can charge to skilled  nursing 

facilities  or how much these facilities  can inflate  these charges. 

Chest x-rays performed  in physician  offices,  using the physicians  own equipment,  cost 

less than those provided  in other  settings because physicians  can bill  only  for technical  and 

professional  components.  Carriers  pay both of these components  under the fee schedule. 

In  1994, however,  less than 4 percent  of chest x-rays for nursing  home residents  were 

provided  in physicians  offices. 

Many  nursing  home  residents  receive  chest x-rays in hospital  outpatient  departments  or in 

nursing  homes--primarily  skilled  nursing  facilities--that  own their  equipment.  In these 

cases,  either  the outpatient  department  or skilled  nursing  facility  submits claims  to the 

fiscal  intermediary  for the technical  component.  Although  no transportation  or setup 

charges  are billed,  the facility  bills  for overhead.  In  1994, approximately  13.8 percent  of 

chest x-rays  performed  on nursing  home residents  were provided  using nursing  home 

equipment.  In  1994, hospital  outpatient  departments  performed  20.9 percent  of chest 

x-rays  for nursing  home  residents. 

Medicare  pays  more  than  twice  as much  for  imaging  services  when  they  are 
billed  under  arrangement  rather  than  when  payment  is limited  to the  fee 
schedule 
In  1994, Medicare  paid $14.7 million  more for portable  chest x-rays  and EKGs provided 
under  arrangement  than  it would  have  if payment  were  limited  to the carrier  fee schedules 
(i.e.,  $24.4  million  versus $9.7 million).  Every portable  chest x-ray  and EKG billed 
under  arrangement  costs Medicare  more than if the same service had been billed  directly 
and limited  to the fee schedules.  This occurs because (1) portable  x-ray  suppliers 
negotiate  contracts  with skilled  nursing  facilities  to ensure that they  receive  more--
9  sometimes  as much as six times more--than  fee schedules  would allow  and (2) skilled 
nursing  facilities  mark up these already  inflated  charges as much as 250 percent  for,  what 
they  claim  constitutes,  overhead  and expenses.  Overall,  approximately  10.2 percent  of 
portable  chest x-rays  and EKGs provided  to nursing  home residents  in  1994 were billed  by 
skilled  nursing  facilities  under  arrangement.  Some policy  makers have  suggested, 
however,  that all ancillary  services  should be billed  by nursing  homes. 
Other radiological  services billed  under  arrangement  also cost Medicare  more  than they 
would  if they  were limited  to fee schedules.  In reviewing  the contracts  negotiated 
between  portable  suppliers  and skilled  nursing  facilities,  we found that these facilities  pay 
considerably  more than the fee schedule would allow  for all portable  imaging  services. 
Using the  1 percent  sample and our data on chest x-rays and EKGs,  we estimate  that 
Medicare  spent $9 million  more  in 1994 on other radiological  services billed  under 
arrangement  than  it would have if payments  for those services had been limited  by the fee 
schedules.  For further  information  about how we estimated  this cost,  see appendix  C. 
On  average,  portable  suppliers  who  bill  under  arrangement  receive  double 
what  the  fee  schedule  would  allow 
Portable  x-ray  suppliers  negotiate  contracts  with skilled  nursing  facilities  that ensure 
higher  reimbursement  than the Medicare  fee schedule would allow.  At the same time, 
they  actually  reduce their  administrative  expenses because the skilled  nursing  facilities  bill 
Medicare,  other payors,  and beneficiaries.  In  1994, portable  x-ray  suppliers  received 
$10.7  million  from  Medicare  and its beneficiaries  for chest x-rays and EKGs that they 
would  not have received  if they had billed  directly. 
Portable  suppliers  always  receive  more when services  are billed  under  arrangement  than 
they  would  if they billed  directly.  Some portable  suppliers  receive  almost  six times the 
fee schedule  amount  for specific  components,  as the following  table illustrates. 
Billing under arrangement allows portable suppliers to skirt fee schedules 
HCPCS  Description  Fee Schedule  Under Arrangement 
Two-view chest x-ray--
71020TC 	 $15.05  $87.50
technical component 
Portable x-ray transportation--
RO075 	 $19.12  $95.00
2 uatients seen 
Skilled  nursing  facilities  that bill under arrangement  rarely  are prudent  buyers.  Portable 
x-ray  suppliers  charge radically  different  amounts to neighboring  skilled  nursing  facilities. 
We obtained  contracts  showing  several  instances  where skilled  nursing  facilities  in the 
same city paid widely  varying  amounts  for the same services.  The following  table 
illustrates  these differences. 
10 
 Some skilled nursing facilities pay significantly  higher prices 
for imaging services than neighboring  facilities 
Skilled Nursing  Skilled Nursing
HCPCS  Description 
Facility A  Facility B 
71010  Chest x-ray, l-view  $18  $55 
71020  Chest x-ray, 2-view  $18  $65 
ROO70 and RO075  Transportation--per patient  $20  $90 
Portable x-ray setup charge--per
40092  $0  $25 
procedure 
* Setup charge is included as part of the transportationcharge 
During  interviews  with the administrators  of these skilled  nursing  facilities,  we determined 

that skilled  nursing  facility  A routinely  solicits bids for portable  imaging  service 

contracts,  thus ensuring  competitive  charges.  Skilled  nursing  facility  B was more 

typical  of facilities  that bill under  arrangement  in that it had an on-going  arrangement  with 

one supplier  for several years.  In these cases, we found that it was rare for the facilities 

to solicit  bids,  negotiate,  or periodically  shop the market  to find out what other 

suppliers  would  charge. 

Skilled  nursing  facilities  receive  millions  of dollars  that  they  would  not  receive 
if they  did  not  bill  under  arrangement 
Skilled  nursing  facilities  mark up portable  chest x-ray costs as much as 250 percent  above 
what portable  x-ray  suppliers bill them.  Although  the amount paid by Medicare  is 
adjusted  through  cost reports,  both Medicare  and its beneficiaries  paid skilled  nursing 
facilities  $8.1 million  in 1994 to bill  for portable  chest x-rays and EKGs--$8.1  million  that 
they would  not have paid if the services had been billed  directly  by portable  x-ray 
suppliers. 
For the most part,  skilled  nursing  facility  administrators  could not explain  why their 
facilities  billed  under  arrangement.  The most common  response  was simply  that the 
facility  had billed  under  arrangement  prior  to their  arrival  and they maintained  the status 
quo.  For a more  complete  discussion  of the responses  we received  from administrators, 
see our companion  report,  Portable Imaging  Services:  Nursing  Home  Perspectives.  
Medicare  pays  for  services  under  arrangement  that  it would  not  cover  if billed 
directly 
Fiscal  intermediaries  do not apply the same routine  screens and edits to services billed 
under  arrangement  that carriers  apply to services billed  directly.  As a result,  skilled 
11  nursing  facilities  are reimbursed  for charges that would have been denied  if the portable 
supplier  had billed  a Medicare  carrier  directly.  Some examples  include: 
F 	 Setup charges for portable  EKG equipment.  Medicare  policy  excludes  payment 
for setting up portable  EKG equipment.  Nevertheless,  we found that skilled 
nursing  facilities  routinely  pay portable  suppliers  for EKG setup.  They 
subsequently  bill  and receive  payment  from  intermediaries  for these charges. 
F 	 After-hours  or emergency charges.  While  carriers  indicated  that they would  not 
allow these charges,  portable  suppliers who bill under  arrangement  received  as 
much  as $66 extra for providing  services on an emergency,  nighttime,  or weekend 
basis.  In one instance,  a supplier  received  both an emergency  and after-hour 
payment  for a single  service,  totaling  $90. 
b 	 Transpotiation  charges not prorated  when multiple patients  are seen.  Under 
direct  billing,  when a portable  supplier provides  services to more than one patient 
at a nursing  home,  Medicare  requires  that the transportation  charge be allocated  to 
each patient  so that the total amount  allowed  for transportation  is always the same. 
However,  suppliers  contracts  with skilled  nursing  facilities  almost  never prorate. 
For  example,  one portable  supplier  received  $99 per patient,  regardless  of how 
many  patients  he saw in one visit.  In addition,  there  is no way under  the present 
system that an intermediary  or other oversight  agency  can determine  how many 
patients  were seen at a particular  skilled  nursing  facility  during  the same visit 
unless  it conducts  an extensive  and expensive  audit of patient  records. 
b 	 Medically  unnecessary or duplicate  services.  Because Part A claims  do not list 
individual  services that a patient  received,  it is difficult  to determine  whether  a 
specific  service  is medically  necessary  or whether  the charge  for an individual 
service  is excessive.  In addition,  fiscal intermediaries  do not perform  routine  edits 
to determine  if a beneficiary  is receiving  multiple  or duplicate  services,  such as a 
daily  chest x-ray,  on a routine  basis. 
b 	 Portable  equipment transportation  and setup charges when only a portable 
technician  is provided.  In at least one case, we determined  that a skilled  nursing 
facility  had x-ray  equipment  on-site but required  a technician  to operate  the 
equipment.  According  to Medicare  regulations,  this is not a portable  service  and 
the facility  should have paid only  a technical  component  charge and billed 
Medicare  accordingly.  Instead,  they paid the supplier  for setup and transportation 
charges  in addition  to the technical  component,  marked up the charges,  and billed 
the full amount,  including  mark-up,  to Medicare. 
Contracts  that bundle  individual  components  make it difficult  to review  and compare 
costs.  Even  if intermediaries  attempted  to apply prudent  buyer principles  to specific 
services,  the contracts  sometimes  are difficult  to interpret.  For example,  some supplier 
contracts  bundle  the transportation  and technical  components,  making  it difficult  to 
12 
 determine  which  component  might be overpriced.  Other bundling  combinations  include 
(1) the transportation  and setup components  and (2) the technical  and setup components. 
Beneficiary  copayments  for  services  billed  under  arrangement  are  almost  three 
times  more  than  they  would  be if the  services  had  been  billed  directly 
The combination  of three  factors--inflated  supplier charges,  excessive  markups  by skilled 
nursing  facilities,  and the Medicare  policy  that beneficiary  copayments  are 20 percent  of 
billed amounts  for ancillary  services--results  in vastly  higher  costs to beneficiaries  and 
secondary  payors  when services  are billed  under  arrangement.  This is particularly  true 
when a beneficiary  is in a non-covered  stay.  Beneficiaries  whose stays are covered  by 
Part A pay less because they pay no coinsurance  during  the first 20 days of their  stay.  In 
1994, beneficiaries  paid $6.5 million  in copayments  for services billed  under  arrangement 
for which  they  would have paid $2.4 million  if the services had been billed  directly. 
When  a beneficiary  has Part B coverage  only  and the skilled  nursing  facility  bills  under 
arrangement,  the beneficiarys  copayment  skyrockets.  The following  table illustrates  how 
one beneficiary  in our sample incurred  a higher  copayment  because his skilled  nursing 
facility  billed  under  arrangement: 
Billing under arrangement costs beneficiaries  more 
kk 
Total  charge  billed  to Medicare  $250.21  N/A 
Total  allowed  amount  $101.74 
71020--chest  x-ray,  2 views, 
$27.53 
technical  component 
Q0092--setup  $13.31 
R0070--transportation,  1 patient  seen  $60.90 
Beneficiary  copayment--technical 
The  amounts  that  Medicare  carriers  allow  for  transportation  of portable  x-ray 
equipment  vary  widely,  and  some  are  excessive 
Even when portable  imaging  services are billed  directly,  portable  x-ray transportation 
charges  and allowed  amounts  can vary considerably.  In  1994, carrier  allowances  for 
portable  x-ray transportation  when one patient  was seen ranged  from  $10.00  to $186.39. 
13  The table below  shows the five lowest and five highest  transportation  allowed  amounts  in 
our sample when a single patient  was seen at a nursing  home: 
Lowest  Transportation  Highest  Transportation 
Allowed  Amounts--R0070  Allowed  Amounts--R0070 
Illinois:  $10.00  Michigan:  $186.39 
New York:  $33.20  New Jersey:  $154.00 
Florida:  $45.44  New York:  $154.00 
Ohio:  $50.00  Connecticut:  $126.77 
California:  $55.43  Washington:  $113.42 
Although  Medicare  requires  carriers  to prorate  transportation  charges when multiple 
patients  are seen at one nursing  home,  not all carriers  do this correctly.  For example,  two 
portable  suppliers  in one State received  $123.11  per patient  when seeing multiple  patients 
during  the same visit. 
There  is no statutory  authority  for HCFA  to allow  setup charges.  Prior  to  1992, 
equipment  setup was considered  part of the transportation  component.  In  1992, 
HCFA  instructed  carriers  to start allowing  a separate and additional  charge  for portable 
x-ray  equipment  setup.  In doing  so, HCFA  made a distinction  between  transporting  the 
equipment  and setting  it up at the patients  bedside. 
In contrast  to this policy,  in November  1996, HCFA  eliminated  reimbursement  for the 
transportation  of portable  EKG equipment.  In doing  so, HCFA  stated,  in our judgment, 
statutory  authority  existed  for separate payments  for only  the transportation  of x-ray 
equipment.   While  HCFA  states that it believes  that Congress  intended  for it to pay 
separately  for portable  x-ray transportation,  there  is no indication  that this also applies  to 
setup charges. 
14 
 RECOMMENDATION 
Legi&z.ti~e Update 
A$er  we released  our drufi report,  President Clinton signed into law the Balanced 
Budget Act of i997,  Among the provisions in this law, it; 
w 	 establishes a prospective payment systemfor  beneficiaries  in Part A-covered 
stays in skilled nursing facilities,  to be phased  in over several years; 
* 	 reqdres  that all Part 3  items and services fikrnished to residents of nursing 
homes  (not covered  under Part A/ be billed by the nursing homes as part  of a 
consolidated billing system; 
b 	 limits reimbursement for  services paid  under consolidated billing to the Part 
Bfee schedule;  and 
b  requires HCPCS  codes for  services provided  to skilled nursing facility 
patients that are btlledto$scal  intermediaries. 
The Balanced  Budget Act legislated  most of the recommendations  in the draft  of this 
report.  In the draft report,  we recommended  that HCFA: 
b 	 instruct fiscal  intermediaries to never pay more than the fee  schedule  amount for 
portable  imaging services billed under arrangement; 
b 	 require fiscal  intermediary edits and Common Procedure  Coding System codes on 
all claims to discontinue payments for  non-covered  services; 
b 	 require fiscal  intermediaries to disallow any skilled nursing facility overhead 
associated with portable  imaging services;  and 
b 	 convert transportation reimbursement rates to a national fee  schedule,  rebundle 
equipment setup with transportation, and remind carriers  that they must prorate 
transportation charges  when multiple patients are seen at the same facility. 
15 
 II 
Projected Medicare savings from implemented  recommendations 
II
Option  I 1-year savings  I 5-year savings 
(I 
Limit payment for services billed under  $ 28.3 million  $160.4 million 
arrangement to fee schedule
Limit transportation to $70 per beneficiary-service  $ 21.8 million  $126.6 million 

day (the national median), $35 if 2 beneficiaries 

are seen during the same trip, etc. 

Stop paying for setup  $ 15.7 million  $ 73.9 million 

TOTALS  $ 65.8 million  $360.9 million 
AGENCY  COMMENTS  AND REVISED  RECOMMENDATION 
The HCFA  concurred  with the majority  of the recommendations  in our draft report  but 
did not concur  with our recommendations  that it (1) disallow  any skilled  nursing  facility 
overhead  associated  with portable  imaging  services and (2) rebundle  the equipment  setup 
charge  with transportation.  The full text of HCFAs  comments  appears in appendix  A. 
We believe  that implementation  of the Balance Budget Act will address these issues.  We 
are concerned,  however,  that the cost of ancillary  services has been inflated  by the 
practices  described  in this report.  Therefore,  we recommend  that HCFA: 
b 	 take into account the inflated payments  that have been made for portable  imaging 
services when it implements the prospective payment  and Part B provisions  of the 
Balanced  Budget Act,  seeking legislative  authority if necessary 
The HCFA  should take into account  the inflated  charges  for (1) services billed 
under  arrangement  (including  payments  for services that were non-covered)  and 
(2) transportation  charges that were excessive  or prorated  incorrectly.  This 
recommendation  should be considered  in tandem  with our recommendation  in the 
report  Portable  Imaging  Services:  Nursing  Home Perspectives.   That report 
recommends  that,  in implementing  the Balanced Budget Act,  HCFA  should take 
into account  the unnecessary  payments  that have been made because HCFA  has not 
enforced  the requirement  that physicians  justify  the need for portable  services. 
16 
 APPENDIX  A 
AGENCY  COMMENTS 
Health  Care Financing Administration 
DEPARTMENT  OF HEALTH  & HUMAN  SERVICES  Health Care Financing Administration 
The Administrator 
WashiMtM.  D.C.  2ow1 
AUG4  .'I 
JUl24W 
DATE: 
TO: 	 June Gibbs Brown 
Inspector General 
FROM: 
SUBJECT: 	 Oflice of Inspector General (OIG) Draft Reports:Portable Imaging 
Services: A Costly Option (OEI-O9-95-00090)a,nd Portable Imaging 
Services:Nursing Facility Perspectives,(OEI-O9-95-00091) 
We reviewed the above-referencedreportaidentifying a number of problems with how 
nursing facilities provide and bill for imaging servicesfor their patients. 
Our detailed comments on the recommendationsare attachedfor your consideration. 
Thank you for the opporhmityto review and comment on thesereports. 
Attachment 
-- 
A-l  Comments of the Health Care Finaucina Administration (HCFA) 

on Offtce of Inspector General (OIG1 Drafl Renorts: 

Portable Imaeiun Services: A Costlv Ontion fOEI-09-9500090L  and 

Portable Imagine Services: Nursine Facilitv Perspectives. (OEI-09-9500091> 

The Inspector General should be aware of legislation proposed by the president in his 
fiscal year (FY) 1998 budget that would mitigate problems with ancillary billing that are 
experienced under current law. 
First, the President proposed to implement a prospective payment system (PPS) for 
skilled nursing facilities (SNFs) effective July 1, 1998. Prospective payments would 
cover all SNF service costs, including routine service costs, ancillary costs (whether 
provided under Part A or Part B of Medicare), and capital-related costs. A PPS would 
eliminate cost-based discrepancies between direct billing and under arrangement 
billing. 
Second, the Presidents consolidated billing proposal is designed to address the current 
laws lack of restraints on ancilhuy billing.  Under the proposal, SNFs would be required 
to bill Medicare for all services (except the services of physicians, certified nurse 
midwives, psychologists, hospice care, and nurse anesthetists). This proposal would 
prohibit payment to any entity other than the SNF for services or supplies furnished to 
Medicare-covered SNF patients. 
Finally, as recommended by OIG, the Presidents FY 1998 budget legislation would 
require SNFs to include HCFA common procedure coding system (HCPCS) codes on 
their bills.  -- 
OIG Draft Report -GEL09-95-00090 -Portable Imaeinp: Services: A Costlv Gntioa 
OIG Recommendation 
HCFA should instruct fiscal intermediaries @Is) to never pay more than the fee schedule 
amount for portable imaging services billed under arrangement. 
A-2 
 HCFA Response 
We concur.  However, we note it will take a considerable amount of administrative work 
to implement this policy.  (For example, it is currently impossible to impose this 
requirement because SNPs use revenue codes rather than HCPCS codes when billiag for 
these services. It is impossible to compare services using these codes. It will take time to 
make the chsages necessary to require SNPs to use HCPCS codes.) HCFA already 
instructed the FIs, that in applying the prudent buyer principle, they should compare the 
price paid by SNFs for portable x-my services with the aatomt paid when portable x-ray 
services are billed by the supplier to the carrier. 
OIG Recomamadation 
HCFA should require FI edits aad HCPCS codes on all claims to discontinue paymeats 
for non-covered services. 
HCFA Resuoase 
We concur with the intent of the recommendation.  HCFA is currently pursuiag 
legislation that will change SNP payment methodology and make this action unnecessary. 
We believe implementation of coasolidated billing aad aa amendment to the current 
statute is a broader approach to resolving issues sm~oundiag non-covered services aad 
excessive costs associated with SNPs billiag for portable iamgiag services. Ia the 
interim, HCFA explored use of HCPCS codes. However, this would require a major 
change to the Medicare Uniforat Iastitutioaal Provider Billing Form (LIB-92) aad costly 
claims processing systems changes. Therefore, it is not cost effective over the longer 
term.  -__ 
OIG Recommendation 
HCFA should require FIs to disallow say nursing facility overhead associated with 
portable mragiag services. 
HCFA Resuoase 
We do not concur. Portable x-ray costs incurred by the SNF under arrangement are 
subject to the test of reasonableaess as required by regulatioas at 42 CPR 413.9, Costs 
Related to Patient Care, and Chapter 21, Costs Related to Patient Care, of the Provider 
m  (PRM). As pointed out ia PRM section 2103B, Prudent Buyer-
Application of Prudent Buyer principle, intermediaries aray employ various means for 
A-3 
 detecting and investigating situations where costs appear to be excessive.  Included may 
be such techniques as comparing the prices paid by providers to the price paid by others. 
HCFA instructed the FIs, that in applying the prudent buyer principle, they should 
compare the price paid by SNFs for portable x-ray  services  with  the  amount paid when 
portable x-ray services are billed by the supplier to the carrier. After allowing any 
reasonable amount of actual overhead that may be applied to the cost incurred by the SNF 
for the technical component and transportation component of the portable x-ray charge 
made by the.carrier to the SNF, that amount should be compared with the amount paid 
when portable x-ray services are billed by the supplier to the carrier (excluding the 
professional fee portion). 
OIG Recommendation 
HCFA should immediately convert transportation reimbursement rates to a national fee 
schedule, rebundle equipment setup with transportation, and remind carriers that they 
must prorate transportation charges when multiple patients are seen at the same facility. 
HCFA Resnonse 
We partially concur. We will soon publish a proposed rule for the 1998 Medicare 
physician fee schedule. Among the proposals will be one addressing an adjustment of 
practice expense relative values assigned to codes payable under the physician fee 
schedule. As a part of that proposal, we plan to include a national payment rate for the 
portable x-ray tmnsportation codes ROO70-one patient and RO075-multiple patients, 
effective with the 1998 physician fee schedule. 
We made a p&y  decision that it was appropriate to pay a setup fee with every portable 
x-ray procedure furnished because there was no question that Medicare had historically 
paid higher amounts for the technical component of x-ray services furnished by portable 
suppliers vis-a-vis procedures performed by stationary entities.  The setup fee reflects the 
historic aatioaal average difference between carrier payments for x-rays furnished by 
portable suppliers vis-a-vis payments made for the procedures furnished by other 
facilities.  We continue to believe these payments are appropriate. Further, it would be 
inappropriate to bundle setup fees with transportation payments since carriers pay a 
single transportation payment per trip, but would pay multiple setup fees when an 
individual beaeficiaty receives several x-ray procedures during a session. 
A-4 
 Separate codes, describing situations in which one patient is seen and those in which 

multiple patients are seen, clearly indicate that carriers should have. different payment 

amounts.  Further, a discussion of the required proration when multipIe patients are seen 

was included in a Medicare Carriers Manual revision published in June 1996, transmittal 

number 1546, citation section 15022.G.3. 

OIG Draft Reoort OEI-09-95-00091- Portable Imauine; Services: Nursing Facilitv 

Persaectives 

OIG Recommendation 

HCFA should eliminate the requirement that physicians justify the use of portable 

x-ray services for nursing facility patients. 

HCFA Resuonse 

We do not concur. We believe the current requirement in 42 CFR 486.106(a) should be 

maintained, even though it may not be enforced effectively at this time.  We recently 

proposed and adopted a new rule requiring that the physician who orders a diagnostic test 

must be a physician who is responsible for some aspect of the beneficiarys care. One of 

the primary reasons we took this action was to give the carriers an additional tool to use 

in determining whether diagnostic tests performed in aursing facilities are medically 

necessary.  We believe any action taken the following year to relax the ordering 

requirements for a category of diagnostic tests that is usually done in nursing facilities 

would be poorly timed. Further, we believe, since x-ray procedures furnished oa a 

portable basis are more expensive, more extensive justification of the necessity for the 

procedure is wonable.  Finally, since relaxing the ordering criteria could not possibly 

save the program any money, we can not see any benefit arising &om making such a 

change. 

Furthermore, section 483.75(k) of g 

requires a SNF to provide or obtain radiology and other diagnostic services to meet the 

needs of its residents.  In so doing, the facility must assist the resident in making 

transportation arraugemeats to and thorn the source of services, if the resident needs 

assistance.  As stated in your report, 88 percent of the facibties in your sample note that 

beneficiaries routinely travel to medical appointments outside the facility by taking 

wheelchair vans, and 38 percent of the facilities note that family members sometimes 

A-5 
 5 
take patients to medical appointments outside the facility.  This would indicate the use of 
more costly portable x-ray services performed in the SNF may not always be reasonable 
and necessary in those instances where the use of available outside resources is feasible. 
There is no requirement that an aide be sent with a resident when obtaining services 
outside the facility.  We recognize in some instauces an aide may be necessary to ensure 
the safety of the resident. Iu those cases, the SNF may charge the resident for this service. 
Furthermore, under Title 3, Part B, section 321(a) of the Older Americans Act, grants are 
provided to state units on aging to provide supportive services, includiug trausportation 
(i.e., wheelchair vans), that are utilized by all long-term care (LTC) facility residents in 
order to attend medical appoiutments outside the facility. These services are provided at 
no cost to the facility.  Also, under the Medicaid program, nursing facilities @IFS)are 
reimbursed for transportation charges as part of the daily rate. 
OIG Recommendation 
HCFA should remind NFs that suppliers should not have access to patient records. 
HCFA Resoonse 
We concur.  HCFA is preparing to release a program memorandum that addresses 
medical necessity and con6dentiaIity of medical records for all services provided in LTC 
facilities. 
Technical Comments 
Tbe term musing facility utilized throughout this report is misleading.  Current Federal 
regulatioas &tlnguish  between two types of LTC facilities: an NF under the Medicaid 
program, and a SNF undtr the Medicare program. We suggest that the term long-term 
care facility replace the words musing facility throughout this report when referring to 
a genetic nursing home. If a policy or coacem specifically relates to Medicare SNFs or 
Medicaid NPs, it should be so noted. 
The definition of SNF coverage under Part A that appears in the Background is too 
general. We suggest it be more specitk.  Section 1861(h) of the Social Security Act 
provides for coverage of extended care services furnished to an inpatient of a SNF. Such 
coverage includes: (1) nursing care provided by, or under the supervision of a registered   
professional nurse; (2) bed and board in connection with the furnishing of such musing 
A-6 
 6 
care; (3) physical or occupational therapy or speech-language pathology services 
famished by the SNF or others under arrangements with them made by the facility; (4) 
medical social services; (5) such drugs, biologic&,  supplies, appliances, and equipment 
fomished for use in the SNP, as are ordinarily tirmished by such facility for care and 
treatment of inpatients; (6) medical services provided by an intern or resident-in-training 
of a hospital with which the facility has in effect a transfer agreement, under an approved 
teaching program of such hospital, and other diagnostic, or therapeutic services provided 
by a hospital with which the facility has such an agreement in effect; and (7) such other 
services necessary to the health of the patients as sre generally provided by SNFs. 
Additionally, the deSnition of the SNF benefit that appears in the Background is too 
general. We suggest it be more specific. The SNF benefit is referred to as post-hospital 
extended care services. It is designed to assist persons who have had a 3-day qualifying 
hospital stay, and require skilled services on a daily basis to recuperate from an acute 
episode. Coverage, if approved, is limited to a total of 100 days per benefit period.  On 
the 2 1st day the beneficiary becomes responsible for a daily coinsurance amount equal to 
one-eighth of the inpatient hospital deductible, as prescribed by law. 
A statement is made on page 3 of the Introduction that Nursing facilities may bill 
under arrangement even for patients who are not in Part A-covered stays. In these cases, 
the musing facility submits an outpatient claim to the fiscal intermediary.  Although the 
first sentence is technically correct, the second sentence is incorrect and needs 
clarifkation.  We suggest the following language: Payment may be made for a limited 
range of services under Part B when fomished by a participating SNF to an inpatient of 
the SNF, if payment cannot be made under Part A, e.g., the beneficiary exhausted his 
allowed days of inpatient SNF coverage under Part A in his current spell of illness.  In 
these cases, the SNF submits a claim to the FIs for those inpatient services rendered. 
___ 
A-7 
 APPENDIX  B 
CONFIDENCE  INTERVALS  FOR  SELECTED  STATISTICS 
The following  tables  show the point  estimates and 95 percent  confidence  intervals  for 
selected  statistics  in the order they appear in the report. 
Statistic 
Point estimate  95 percent 
confidence  interval 
Amount  that  Medicare  paid  during  1994  for  portable  chest  x-rays  and EKGs  billed  under 
arrangement 
$24.4  million  $6.2  million  - $42.6  million 
Amount  that  Medicare  would  have  paid  during  1994 for  portable  chest  x-rays  and  EKGs  billed 
under  arrangement  if these  services  had been  billed  directly  to the  Medicare  carrier 
$9.7  million  $3.0  million  - $16.4  million 
Percent  of portable  chest  x-rays  that  were  billed  under  arrangement  during  1994 
10.2 percent  3.8 percent  - 16.5 percent 
Difference  between  (1)  the  amount  that  portable  suppliers  were  paid  during  1994  for  portable 
chest  x-rays  and EKGs  billed  under  arrangement  and  (2) the  amount  that  suppliers  would  have 
received  if these  services  had  been  billed  directly  to the  Medicare  carrier 
$10.7  million  $2.9  million  - $18.5  million 
Difference  between  (1)  the  amount  that  skilled  nursing  facilities  were  allowed  during  1994  for 
portable  chest  x-rays  and  EKGs  billed  under  arrangement  and  (2) the  amount  that  skilled 
nursing  facilities  paid  suppliers  for  these  services 
$8.1  million  $0.5  million  - $15.7  million 
Beneficiaries  copayments  during  1994  for  chest  x-rays  and EKGs  billed  under  arrangement 
$6.5  million  $1.3  million  - $11.8  million 
Beneficiaries  copayments  during  1994  for  chest  x-rays  and EKGs  billed  under  arrangement  if 
these  services  had been  billed  directly  to the Medicare  carrier 
$2.4  million  $0.8  million  - $4.1  million 
B-l  Statistic 
Point  estimate  95 percent 
confidence  interval 
Amount  that  Medicare  would  have  saved  during  1994 if HCFA  had required  fiscal 
intermediaries  to apply  the  fee  schedule  to all portable  imaging  services  billed  under 
arrangement 
$23.6  million  Cannot  calculate  because  only 
chest  x-rays  and  EKGs  were 
part  of  our  sample 
Amount  that  Medicare  would  have  saved  during  1994 if HCFA  had  required  fiscal 
intermediaries  to apply  the  fee  schedule  to chest  x-rays  and  EKGs  billed  under  arrangement 
$14.7  million  $3.0  million  - $26.4  million 
Amount  that  Medicare  would  have  saved  during  1995  if HCFA  had  eliminated  payment  for 
setup  charge 
$16.6  million  $16.2  million  - $17.0  million 
Amount  that  Medicare  would  have  saved  during  1995  if HCFA  had  limited  the  amount  allowed 
for  portable  x-ray  transportation  to $70 per  beneficiary  per  service  day 
$18.9  million  $18.0  million  - $19.8  million 
B-2  APPENDIX  C 
CALCULATION  OF ESTIMATED  SAVINGS  TO  THE MEDICARE  PROGRAM 
The calculation  of estimated  savings involved  (1) estimating  the amount  that Medicare 
would have  saved during  1994 if HCFA had required  the fiscal  intermediaries  to apply the 
fee schedule  to all portable  imaging  services billed  under  arrangement,  and (2) projecting 
these savings,  and the other savings in our recommendations,  to a 5-year  period  from 
1997 through  2001. 
Portable  imaging  services  billed  under  arrangement 
We calculated  this estimate  through  a three-step  process,  as described  below.  We cannot 
calculate  a confidence  interval  for this estimate,  because only  chest x-rays  and EKGs were 
part of our sample. 
1. 	 Using  a 1 percent  sample of  1994 part B claims,  we calculated  the amounts  that 
Medicare  allowed  to suppliers  for portable  EKGs and x-rays that were billed 
directly  to the Medicare  carrier,  as shown in the table below. 
Service (billed  directly to carrier)  1994 allowed  amount 
Portable  EKGs  I  $15643,243  II 
I 
Portable  chest x-rays  $78,249,734  II 
SUB-TOTAL  EKGs and chest x-rays  $93,892,977 
Portable,  non-chest  x-rays  $56424,623 
TOTAL  $150,317,600 
As illustrated  below,  the ratio  of non-chest  x-rays to the combination  of chest x-rays  and 
EKGs is 0.601.  We assumed that this ratio  would be approximately  the same for services 
billed  under  arrangement  as for services billed  directly. 
Calculation:  Ratio of non-chest  x-rays to 
$56,424,623  +  $93,892,977  =  0.601
combination  of EKGs and chest x-rays 
2. 	 From  our sample of chest x-rays  and EKGs, we estimated  that portable  chest 
x-rays  and EKGs billed  under arrangement  during  1994 cost Medicare 
$14.7  million  more than these services would have cost if billed  directly.  (See the 
body  of this report,  page 9). 
C-l  3. 	 As illustrated  below,  we multiplied  the estimate  from step 2 by the ratio  from 
step  1. 
Calculation:  Non-chest  x-rays billed  under 
$14,731,933  * 0.601  =  $8.85 

arrangement  during  1994 cost Medicare 
million

$9 million  more than  if billed  directly 

4. 	 By adding the amounts  from steps 2 and 3, we estimated  that all portable  services 
that were billed  under arrangement  during  1994 cost Medicare  $23.6 more  than  if 
billed  directly. 
Estimated  savings  for  1997  through  2001:  transportation  and  setup 
We used a three-step  process to estimate how much Medicare  will  save from  1997 through 
2001 if HCFA  (1) eliminates  payment  for setup and (2) limits  the allowance  for portable 
x-ray  transportation  to $70 per beneficiary  per service day. 
1. 	 Using  1 percent  sample data for  1994, we calculated  that Medicare  allowed  a 
median  of $70 for HCPCS code ROO70(portable  x-ray transportation--one  patient). 
2. 	 Using  1 percent  sample data for each year  from  1992 through  1995, we calculated 
how much Medicare  would have saved if HCFA  had eliminated  payment  for setup 
and limited  the allowance  for transportation  to $70.  (We included  portable  x-ray 
transportation,  but not EKG transportation,  in this calculation.)  Next,  we 
calculated  the annual percent  changes  for each year.  We selected the smallest  of 
these annual  percent  changes (a 2.90 percent  decrease for setup and a 7.43 percent 
increase  for transportation)  to use in the step 3 calculations. 
3. 	 Starting  with the  1995 estimated  savings,  we calculated  the savings in each 
subsequent  year by changing  the previous  years  savings by a 2.90 percent 
decrease  (for setup) or a 7.43 percent  increase  (for transportation).  The results  of 
these calculations  are displayed  on the following  page. 
For example,  the table on the following  page illustrates  how we calculated  the 
1997 savings  for limiting  the transportation  allowance. 
c-2  Starting  point:  1995 transport  savings  $18,908,522 
Smallest  percent  increase  in transport 
7.43 percent
savings,  1992 through  1995 
1996 transport  savings  calculation  $18908,522  * 1.0743  =  $20.313.807 
II  I 
1997 transport  savings calculation  $20,313,807  * 1.0743  =  $21,823,533 
The precise  number  used for  these calculations was 1.0743201987. 
Statistics from 1 percent sample data 
Savings  for 
Percent  change  Savings for  Percent  change 
limiting 
Year  from previous  eliminating  setup  from previous 
transportation 
year  allowance  year 
allowance 
$14,446,335  Not applicable  $10,757,229  Not applicable 
$15,892,584  10.01%  $17,013,946  58.16% 
$17,073,724  7.43%  $17,118,274  0.61% 
$18,908,522  10.75 %  $16,621,992  -2.90% 
Data for  1996 were not available  at the time of this report 
5-year savings estimates 
~ 
1  22111009990099901879      $$$$$2222213795,,,,,840012457835917,,,,,549093600333644      $$$$$1111154543,,,,,236791477378262,,,,,821621373677522     
TOTAL]  $126,587,840  $73,947,123 
c-3  Estimated  savings  for  1997  through  2001:  services  billed  under  arrangement 
We used a three-step  process to estimate how much Medicare  will  save from  1997 through 
2001 if HCFA  requires  fiscal  intermediaries  to apply the fee schedule to all portable 
imaging  services  billed  under  arrangement. 
1. 	 Using  1 percent  sample data for each year from  1992 through  1995, we calculated 
the total  number  of portable  transportation  claims billed  directly  to Medicare 
carriers.  Next,  we calculated  the annual percent  changes  for each year.  We 
selected the smallest of these annual percent  changes  (a 6.27 percent  increase)  to 
use in the step 3 calculations. 
We indexed  the billed-under-arrangement  savings to directly  billed  transportation 
claims,  because  our sample only  included  1994 data for services billed  under 
arrangement.  In these estimates,  we are assuming that the number  of portable 
services billed  under  arrangement  will  increase  at the same rate as the number  of 
portable  services billed  directly. 
2. 	 We estimated  that Medicare  would have saved $23.6 million  during  1994 if HCFA 
had required  the fiscal  intermediaries  to apply the fee schedule to all portable 
imaging  services billed  under  arrangement.  (See pages C-l  and C-2 of this 
appendix  for this calculation.) 
3. 	 Starting  with the  1994 estimated  savings from  step 2, we calculated  the savings  in 
each subsequent year by increasing  the previous  years  savings by 6.27 percent. 
The results  of these calculations  are displayed  on the following  page. 
For example,  the table below illustrates  how we calculated  the  1997 savings  for applying 
the fee schedule to services billed  under arrangement. 
Starting  point:  1994 savings for services 
$23,585,03 1

billed  under  arrangement 

Smallest  percent  increase  in portable 

6.27 percent 

transportation  claims,  1992 through  1995 
1995 savings calculation  $23,585,031  * 1.0627  =  $25,063,260 

1996 savings calculation  $25,063,260  * 1.0627  =  $26,634,140 

1997 savings  calculation  $26,634,140  * 1.0627  =  $28,303,476 

The precise  number used for  these calculations was I. 06267658. 
c-4  Statistics from 1 percent sample data 
Number  of directly  billed  Percent  change  from 
Year 
portable  transportation  claims  previous  year 
1,345,OOo  Not applicable 
1,429,300  6.27% 
1,531,800  7.17% 
1,633,200  6.62% 
Data for  1996 were not available  at the time of this report 
5-year savings estimates 
Estimated  savings for applying  fee 
$28,303,476 
$30,077,441 
$3 1,962,593 
$33,965,899 
$36,094,765 
$160,404,174 
c-5