, \

Services 
Department of Health and Human 

OFFICE OF

INSPECTOR GENERAL

MEDICARE COVERAGE AND

REIMBURSEMENT FOR MONITORED

ANESTHESIA CARE

" StRVIC'S. 
Richard P. Kusserow 
INSPECTOR GENERAL 
'0  JANUARY 1991 
""d3a  ...
OFFICE OF INSPECTOR GENERAL

The mission of the Offce of Inspector Genera (OIG), as madated by Public Law 95-452 
as amended, is to protect the integrty of the Deparent of Health and Human Services 
(HHS) programs as well as the health and welfare of beneficiares served by those 
programs. This statutory mission is cared out through a nationwide network of audits 
investigations, and inspections conducted by three OIG operating components: the Office 
of Audit Services, the Office of Investigations, and the Office of Evaluation and 
Inspections. The OIG also informs the Secretary of HHS of program and management 
problems , and recommends courses to correct them. 
OFFICE OF AUDIT SERVICES 
The OIG' s Office of Audit Services (OAS) provides all auditing services for HHS, either by 
conducting audits with its own audit resources or by overseeing audit work done by others. 
Audits examine the performance of HHS programs and/or its grantees and contractors in 
caring out 
their respective responsibilities , and are intended to provide independent 
assessments of HHS programs and operations in order to reduce waste
, abuse and 
mismanagement and to promote economy and effciency throughout the Deparment. 
OFFICE OF INVESTIGATIONS 
The OIG' s Office of Investigations (01) conducts crimial, civil, and admistrative 
investigations of allegations of wrngdoing in"HHS programs or to HHS beneficiares and 
crinal 
of unjust enrchment by providers. The investigative effons of 01 lead to 
convictions, admnistrative sanctions, or civil money penalties. The 01 also oversees State 
Medicaid fraud control units which investigate and prosecute fraud and patient abuse in the 
Medicaid program. 
OFFICE OF EVALUATION AND INSPECTIONS 
The OIG' s Offce of Evaluation and Inspections (OEI) conducts short-term management 
and program evaluations (called inspections) that focus on issues of concern to the 
Department, the Congress, and the public. The findings and recommendations contained in 
the inspections repons generate rapid, accurate, and up-to-date information on the 
efficiency, vulnerability, and effectiveness of deparmenta programs. This repon was 
prepared in New York under the direction of Regional Inspector General Thomas F. Tully 
and Deputy Regional Inspector General Alan Meyer. Project staff included: 
New York  Headquarters 
Joseph M. Benkoski  Project Leader  W. Mark Krshat 
Willam J. Counihan  Wayne Powell 
Raul K. Marynek  . "
Deparment of Health and Human Services

OFFICE OF

INSPECTOR GENERAL

MEDICARE COVERAGE AND

REIMBURSEMENT FOR MONITORED

ANESTHESIA CARE

" StRVIC'S' 
Richard P. Kusserow 
INSPECTOR GENERAL 
'0  OEI -02-89-00050 
"Vd3a  ............................................................................................ ........................................................ ..................................................................... ........................................ ................... ................................................. ........... ............................................ ......................... .... ............
. .
TABLE  CONTENTS

EXECUTIVE SUMMARY 
INTRODUCTION.....................................................................................................

Purpose................................................................................................................ .

Background .... ...... .......... 

Scope and Methodology...................................... .............. ............ 

FINDINGS 
RECOMMENDATIONS 
A - I
APPENDIX  EXECUTIVE  SUMMARY

PURPOSE 
This repon reviews the adequacy and implementation of Medicare s coverage and 
reimbursement instrctions for monitored anesthesia care (MAC). 
BACKGROUND 
Modern medical technology has brought about vast improvements in surgical and other invasive 
techniques. This new technology allows more procedures to be done in hospital outpatient 
departments (OPDs), ambulatory surgical centers (ASCs) and doctors ' offces. 
This trend and advances in anesthesia techniques, have produced changes in the nature of 
anesthesia services. Traditionally, the most common form of surgical anesthesia involved the use 
of anesthetic drugs which rendered the patient unconscious. Curently, many patients receive 
local anesthesia during which they remain conscious. When an anesthetist takes par in the care 
of a patient under local anesthesia and renders cenan specified services, the service is referred to 
as "monitored anesthesia care" (MAC). 
The HCFA defines MAC as the introperative monitorig of the patient s vita physiological 
signs, in anticipation of the need for general anesthesia or of the development of adverse 
physiological patient reaction to the surgery. It also includes a pre-anesthetic evaluation 
administration of any necessar medications and provision of indicated post-operative anesthesia 
care. The HCFA stipulates that MAC is not automatically covered and "must be reasonable and 
medically necessar under the given circumstances. 
Medicare data for 1988 shows allowed charges for all anesthesia services of $1.1 billion. 
However, as claims for general or MAC  , the amount alowed for MAC is 
ar not differentiated
not known. There are, nevenheless, indications that MAC amounts are considerable. For 
example, alowed charges in 1988 for anesthesia associated with cataract surgery amounted to 
$144 million, about 90% of which was probably for MAC. 
SCOPE AND METHODOLOGY 
To assess implementation of HCFA' s coverage instrctions, Medicare caners ' documents were 
reviewed to determne the steps taen to adjudicate MAC clais. Also, Federal Employee 
Health Benefit plans and the private plans of Medicare caners wereprovided with HCFA' 
definition of MAC and we compared their coverage and reimbursement policies to Medicare. 
Finally, physicians under contract to the OIG reviewed a random sample of 1162 medical records 
to provide insights into operative events relating to the use of anesthesia services. The stratified  sample, selected for a different OIG study, consisted of an equal number of procedures 
performed in OPDs and ASCs in 10 states. 
FINDINGS 
HCFA' s MAC Instruction Is Not Being Implemented By Carriers 
Caners have not implemented HCFA's instrctions that MAC "must be reasonable and 
necessar under the given circumstances. " Most caners have not informed the medical 
community of coverage limitations and have no method to distinguish MAC claims from other 
anesthesia claims, a prerequisite to the coverage determnation process. 
Actual Services Rendered Do Not Meet Coverage Guidelines 
The results of the medical review of records do not suppon the coverage instruction premise for 
MAC. General anesthesia was rarely administered and the need for anesthetists ' medical 
intervention was minimal. 
Cataract Cases Based On Lack 
Reimbursement Was Inappropriate In Approximately I Of 

Of Documentation 
In 159 (25 percent) of 645 reviewed cataract procedures performed under MAC, payment was 
inappropriate because either pre-anesthesia evaluation and/or monitoring of vital signs were not 
documented as required for reimbursement. Projecting this error rate to the universe from which 
claims were sampled and assuming an equal distrbution in the error rate for the full year, an 
estimated $14.0 milion in inappropriate allowed charges was made in 1988 in ten States. 
Other Insurers Have More Restrictive MAC Coverage And Payment Standards 
A survey of other health insurers shows that ten (22 percent) Medicare caners ' private business 
health insurance plans and fIteen (68 percent) of 22 FEHB plans have more restrctive coverage 
and reimbursement policies than Medicar. 
A 1986 OIG study found that services provided during MAC diered substantially from those 
provided during general anesthesia. Based on this finding it was recommended that HCFA 
should reimburse MAC at a lower rate than general anesthesia. HCFA did not accept the OIG 
recommendation and currently pays for MAC and general anesthesia at the same amount.  ,', 
RECOMMENDATIONS 
HCFA should: 
require carriers to develop and implement a claims review process to apply 
existing MAC coverage instructions, 
strengthen MAC guidelines by adding procedures for case-by-case coverage, as 
currently required for anesthesia claims related to transvenous pacemaker 
surgery and/or by providing objective criteria for MAC coverage such as the 
physical status categories, and
use of ASA' 

study the appropriateness of paying the same amountfor MAC and general 
anesthesia in view of the fact that other insurers are more restrictive, 
The HCFA agrees with our recommendations regarding claims review and coverage but does not 
agree to study the appropriateness of the amount it pays for MAC. We continue to believe such 
a study is needed. The HCFA's comments and the OIG response appears as an appendix to the 
repon.  INTRODUCTION

PURPOSE 
This repon reviews the adequacy and implementation of Medicare s coverage and 
reimbursement instrctions for monitored anesthesia care (MAC). 
BACKGROUND 
Trends in Anesthesia Services 
Modern medical technology has brought about vast improvements in surgical and other invasive 
therapeutic and diagnostic techniques. These advances have produced shifts from traditional 
incisional surgery to procedures utilizing laser technology, electrc shockwave and fiberoptic 
endoscopic instruments. Arthroscopic surgery, lithotrpsy and coronar balloon angioplasty are a 
few examples. New technology has also made it possible for invasive procedures to be done 
more frequently on an ambulatory basis in outpatient deparments, ambulatory surgical centers 
and doctors ' offices. 
The wide range of available advanced operative techniques as well as advances in anesthesia 
techniques have been instrumenta in producing changes in the natue of anesthesia services. 
Traditionally, the most common form of surgical anesthesia involved the use of anesthetic drgs 
which rendered the patient unconscious and insensible to pai. Under general anesthesia, these 
drugs often suppress patients ' ability to maintain their own life functions , thus making the 
anesthetist responsible for keeping the patient alive by monitoring vital physiological signs and 
diagnosing and trating any deviations which may arse. Currently, many patients receive forms 
of anesthesia which do not involve loss of consciousness, thus allowing the patients to maintain 
their own life functions. (For ease in reading, the generic term anesthetist is used thoughout this 
repon except where distinctions are necessar for the sake of accuracy. In practice, anesthesia 
services are rendered by anesthesiologists, other qualifed physicians, cenified registered nurse 
anesthetists (CRNA's) and anesthesiologist assistants (AA's). 
The use of local anesthesia has become a prevalent choice of physicians in an increasing number 
of surgical procedures. Local anesthesia is frequently admnistered by physicians performng the 
procedure rather than by an anesthetist. Ophthalmologists, cardiologists, gastroenterologists and 
surgeons are a few examples of specialists who often inject local anesthetics or apply topical 
agents to render the ara insensible to pain. In some of these instances the local anesthesia may 
be supplemented with a drg such as valium, taken orally or intravenously, to sedate the patient. 
In these situations the patient is conscious and mayor may not be attended by an anesthetist. 
When an anesthetist takes par in the care of the patient and cenain specified services are 
rendered, the service is referred to as "monitored anesthesia care" (MAC). 
page 1
 . .. 
Medicare Coverage And Reimbursement For MAC 
In April 1986, the OIG issued a repon entitled "Medicare Reimbursement for Anesthesia 
Services" (OAI-02-0001O). The purpose of the study was to clarfy the nature and prevalence of 
local/standby anesthesia (currently referred to as MAC) and examine and evaluate related Health 
Care Financing Administration (HCFA) reimbursement policies and practices. Based on a 
review of medical records for over 1 000 beneficiares who underwent either cataact surgery, 
pacemaker implants or inguinal hernia repairs, the study found that the practice of substituting 
MAC for general or regional anesthesia was growing. Currently, reimbursement is the same 
amount for MAC and general anesthesia. 
That study s evaluation of anesthetists ' responsibilities in providing MAC , as compared to those 
responsibilities when general anesthesia is administered, led OIG to conclude that the nature of 
MAC services were suffciently different to warant a distinct definition of the service and that it 
should be reimbursed at a lower amount. In practice, eight Medicare caners were found to be 
reimbursing MAC at a lower amount and 41 caners were paying for MAC at the same level as 
general anesthesia. 
Differences in caner reimbursement policies, at that time , were attrbuted to a lack of national 
policy and to whether they adopted the American Society of Anesthesiologists' (ASA) guidelines 
for MAC (full general anesthesia value) or the California Relative Value Scale (CRVS) 
anesthesia ground rules" (charges based on extent of services rendered). 
In a final notice in the October 7, 1986 Federal Register, HCFA established special reasonable 
charge payment limits for all anesthesia services furnished during cataract surgery. But, it did 
not adopt the broader OIG recommendation to reduce payments for MAC irespective of the 
surgical procedure performed. Rather, HCFA indicated that it would funher study its overall 
policy regarding reduced reimbursement for MAC. 
The HCFA did respond favorably to the OIG recommendation regarding the need to better define 
the service by substituting the term "monitored anesthesia care" for local/standby anesthesia, 
not automatically covered. Section 
defining the nature of MAC, and stipulating that MAC is 

1E of the Medicare Caners Manual (June 1987) specifies that MAC "must be reasonable 
83 1O. 
and medically necessar under the given circumstances. " The instrction (underline emphasis 
added) states: 
Monitored anesthesia care involves the intraoperative monitoring by a physician, or by a 
qualified individual under the medical direction of a physician , of the patient s vital physio
in anticipation of the needfor administration of general anesthesia or of the 
logical signs, 

to the surgical procedure. It also in
development of adverse physiological patient reaction 

cludes the performance of a pre-anesthetic examination and evaluation, prescription of the 
anesthesia care required, administration of any necessar oral or parenteral medications 
(e.  , atropine, demerol, valium) and provision of indicated post-operative anesthesia care. 
The fact that the physician personally furnished or medically directed the monitored 
anesthesia care does not automatically mean the monitored anesthesia care is a covered 
page 2  Part B service.  The monitored anesthesia car service must be reasonable and medically 
necessar under the given circumstaces. 
In addition, HCFA instructed caners (Section 8312.1F) to reimburse MAC in the same manner 
and amount as they pay for admnistration of general anesthesia when MAC is performed in its 
entirety. 
To date, MAC coverage policy has been supplemented only by a July 1988 HCFA instrction 
(MCM Coverage Issue 35-79) to caners containing coverage guidelines for MAC and general 
anesthesia, associated with transvenous pacemaker surgery. It instrcts caners to provide 
coverage "only if documentation of medical necessity is provided on a case-by-case basis, 
Medicare Reimbursement 
Medicare data for 1988 shows allowed charges for all anesthesia services of $1.1 billon. 
However, as claims for genera anesthesia or MAC are not differentiated, the amount allowed for 
MAC is not known. There ar, nevenheless , indications that MAC amounts are considerable. 
For example, allowed charges in 1988 for anesthesia associated with catarct surgery amounted 
to $144 milion, about 90% of which was probably for MAC. 
SCOPE AND METHODOLOGY 
To assess implementation of HCFA's coverage instrctions, Medicare caners were requested to 
provide copies of: (1) provider information bulletis conveying anesthesia coverage limtations 
for MAC and trans venous pacemaker claims, (2) related biling instrctions to providers, and (3) 
claims processing procedures and instructions used in makng coverage determnations on MAC 
claims. These documents were reviewed to

clais 
determne whether carers had taen the necessar steps to properly process anesthesia 
subject to coverage restrctions. 
Federa Employee Health Benefit plans and the private plans of Medicare caners were requested 
to provide information on their coverage and reimbursement for MAC, as defined by HCFA. 
Documents were reviewed to determne similarties and differences when compared to 
Medicare s coverage and reimbursement policies. 
To gai insights into how HCFA's MAC instrction relates to actual operative events, a stratifed 
random sample of 1162 Medicare beneficiar records (803 cataract procedures, 201 upper GI 
procedures and 158 colonoscopies) were reviewed by board-cenified physicians under contract 
to the OIG. These patients were evenly split between ASC and OPD settngs. The contractor 
reviewed and reponed on such activities as pre-anesthesia examnation and evaluation, 
intraoperative events and post -anesthesia care. 
The sample records represented an equal number of patients from hospital outpatient 
deparents (OPDs) and ambulatory surgical centers (ASCs) during the fIrst three months of 
1988 in ten States (AZ, CA, FL, IL, LA , MD, NC, OH, PA, TX) with large numbers of ASCs. 
page 3
 The sample was designed for a another OIG study which had as its purpose the evaluation of the 
quality of care in ambulatory settings. The sample size was based on the number necessary to 
satisfy specific testing criteria (i.e., power confidence level and detectable difference) established 
for studies on medical outcome and necessity. 
page 4  FINDINGS

HCFA' s MAC AND PACEMAKER INSTRUCTIONS HAVE NOT BEEN 
IMPLEMENTED BY MOST CARRIERS 
A review of documents provided by 45 carers representing 56 payment jurisdictions, coverig 
the period June 1987 through April 1989, indicates that they have not implemented the 
instrctions in MCM Section 831O. 1E (June 1987) which specify that MAC "must be reasonable 
and necessar under the given circumstances" and is not automaticaly covered. 
Only 15 (33 percent) caners informed the medical community of these coverage 
provisions. 
Only seven (16 percent) caners established spycial billing instrctions requirg 
but 
identification on the claim form that the biled anesthesia service was for MAC; 

only two of these caners use this information in adjudicating MAC claims. Such 
identification is necessar in order to apply MAC coverage limitations. 
Caner implementation of pacemaker instruction (MCM Coverage Issue 35-79) has been 
somewhat better. 
Twenty-six (58 percent) of the caners have medical review procedures to determne 
coverage for pacemaker implant anesthesia claims. 
Caners with procedures to make coverage detennnations for transvenous pacemaker 
procedures var in their approaches. For example, one caner has detennned that 
anesthesia services associated with these procedures are medically necessary in all 
cases. In contrast, another requires claims for this procedure to contain the ASA 
physical status ranng which classifies patients into six levels based upon health 
condition. The physical status level is used to help make coverage detennnations. 
ACTUAL SERVICES RENDERED DO NOT MEET COVERAGE GUIDELINES 
The results of an OIG medical review do not suppon the coverage premise for MAC servces 
contained in MCM Section 831O.IE. In this section, HCFA describes MAC services as involving 
intraoperative monitoring of the patient's vital physiological signs in anticipation of the need for 
administration of general anesthesia or of the development of adverse physiological patient 
reaction to the surgical procedure. 
The medical review determations on 1162 patients ' medical records (803 cataract extractions 
and 359 upper and lower GI endoscopies) found, in those cases where MAC was biled, that the 
need for anesthetists ' medical intervention was minimal. 
page 5
 Only 3 of 760 medical records for planned MAC cataract procedures (43 began under 
general anesthesia) contained notes indicating an anticipated need for general 
procedure was actually convened from local to general 
anesthesia and  only one 

anesthesia. 
adverse physiologic reactions documented in any cataract procedure 
There were  no 
performed with MAC. Two planned procedures were cancelled preoperatively due to 
hemorrhaging caused by the injection of local anesthesia. 
Of the 359 endoscopy procedures, two colonoscopies were done under general 
anesthesia and 20 (11 upper GI and 9 colonoscopy) had associated claims for MAC. 
In its report, the medical review contractor noted that "patients undergoing 
endoscopies do not require monitored anesthesia care by anesthesiologists or CRNAs, 
although they do need monitoring by registered nurses or other personnel trained in 
monitoring and resuscitation techniques. 
Additionally, during the course of the inspection, it was leared that one carer conducted a 
special 1989 utilization review study of MAC services provided during cataract surgery, 
including an in-depth review of four anesthesiologists who frequently biled for MAC in 
cataract surgeries. Its anesthesia consultant determined medical necessity for MAC using such 
factors as age of patient, anticipated duration of the procedure, serious medical problems such as 
chronic obstrctive pulmonar disease, and other factors. The study found that 65 percent of the 
sample reviewed lacked documented medical necessity. 
REIMBURSEMENT WAS INAPPROPRIATE IN APPROXIMTELY 1 OF 4 
CATARACT CASES BASED ON LACK OF DOCUMENTATION 
The medical record review showed that 44 of the 803 cataract extractions were 
performed under general anesthesia and 759 under local anesthesia. Caner claims 
payment data shows that 645 (85 percent) of the 759 procedures had associated 
anesthesia bils (299 hospital outpatient deparent (OPDJ and 345 ambulatOry 
surgical center (ASe) bils) and among these: 
percent), there was no documentation that pre-anesthetic 
/n  /48  cases  (23 
examinations and evaluations were performed. 
percent), there was no documentation of monitoring of 
/n  /09  cases  (/7 
patients' vital physiological signs. 
percent), there was no postoperative anesthesia note. 
/n  /76  cases  (27 
page 6  In 159 cases (25 percent), because either pre-anesthesia evaluation and/or monitoring 
of vital signs (two key MAC services) were not documented as having been provided 
as required for reimbursement, payment was found to be inappropriate. This finding 
should not be interpreted to imply that services were not actually provided. Of these 
inappropriately paid claims, 67 (22 percent error rate) of the MAC cases were 
perfonned in OPDs and 92 (27 percent error rate) were performed in ASCs. 
Projecting these error rates to the universe from which claims were sampled, an 
estimated $3.5 millon was inappropriately reimbursed for the three month period in 
the ten states. Assuming an equal distrbution in the error rate for the full year, this 
annualizes to $14. 0 millon in 1988. 
Failure to document the provision of one expected service was frequently 
accompanied by failure to document others; 129 medical records lacked notes that 
of the three expected services were provided. 
showed  any 
OTHER INSURERS HAVE MORE RESTRICTIVE MAC COVERAGE AND PAYMENT 
STANDARDS 
A 1986 OIG study found that services provided during MAC difered substantially from those 
provided durng general anesthesia. Based on this finding it was recommended that HCFA 
should reimburse MAC at a lower rate than general anesthesia. HCFA did not accept the OIG 
recommendation and currently pays for MAC and general anesthesia at the same amount. 
However, other insurers were often found to be more restrctive than Medicare. 
Medicare Carriers' Private Business Plans 
Ten (22 percent) Medicar caners ' private business health insurance plans have more restrctive 
coverage and reimbursement policies than Medicare. 
Four do not provide coverage for MAC 
Four pay a lower amount for MAC than for general anesthesia 
One limits coverage to patients with a concurent "hazardous" medical condition. 
One limits coverage to five surgical procedures or any procedure requirg IV 
sedation. Coverage is also provided for patients with severe systemic diseases which 
are a constant threat to life (ASA physical status P-4). 
A caner private business plan, which also is an FEHB insurance plan, has identified over 700 
procedures for which the services of an anesthetist are not customarly required. Claims for 
these procedures are denied unless documentation is provided to suppon the medical necessity 
for an anesthetist. 
page 7  Federal Employee Health Benefit Plans 
Fifteen (68 percent) of 22 FEHB plans ar more strngent. 
Six do not cover MAC. 
Six cover only if IV medication is administered by an anesthesiologist. 
Three pay for distinct identified services rather than global anesthesia services. 
page 8
 RECOMMENDATIONS

HCFA SHOULD REQUIRE CARRIERS TO IMPLEMENT EXISTING MAC 
INSTRUCTIONS INCLUDING:

Informing the medical community as to what is required to qualify as MAC, and that 
coverage is not automatic but must be reasonable and necessar under the given 
circumstances. 
Requirng that MAC is specifically identified on the claim form as the anesthesia 
service rendered. 
Establishing medical review procedures and policies for MAC claims. 
HCFA SHOULD STRENGTHEN EXISTING MAC GUIDELINES BY: 
adding procedures, upon consultation with medical specialty societies, for 
case-by-case coverage, as currently required for anesthesia claims related to 
transvenous pacemaker surgery; 
and/or 
providing objective criteria for MAC coverage such as the use of ASA' s physical 
status categories. 
HCFA SHOULD STUDY THE APPROPRIATENESS OF PAYING THE SAME AMOUNT 
GENERAL ANESTHESIA IN VIEW OF THE FACT THAT OTHER 
FOR MAC  AND 
INSURERS ARE MORE RESTRICTIVE. 
page 9
 APPENDIX

Comments of the Health Care Financing Administration on the OIG Draft Report and the OIG 
Response to the HCFA' s Comments 
RECOMMENDATION I 
HCFA should require caners to implement existing MAC instructions including: 
required to qualify as MAC, and 
Informing the medical community as to what  is 
not automatic but must be reasonable and necessary under 
that coverage  is 
given circumstances. 
Requiring that MAC is specifically identifed on the claim form as the anesthesia 
service rendered. 
Establishing medical review procedures and policies for MAC claims. 
HCFA Comment 
We agree in par with this recommendation. HCFA wil bring the issue of MAC to the attention 
of the caner medical directors who formulate the medical review procedures and policies for all 
claims. We wil follow up on the development and implementation of more strngent review 
policies in this area. As the OIG study shows , some caners currently have specific medical 
review policies regarding standby anesthesia for pacemaker inserton. Such policies would 
provide a useful model for other procedures. 
However, we do not agree, at this tie, that MAC care should be identied on the clai form. 
HCFA wil consider such action only after the caner medical diectors have completed their 
proposed course of action. 
OIG Response 
We are pleased to note that HCFA wil follow up on development and implementation of more 
strngent review policies for MAC. -However, we do have concerns about the dificulty of im
plementing review policies without having clais for MAC services specifically identified. 
Therefore, we wil withhold funher judgment until we have been apprised of the results of 
HCFA' s consultation with its medical directors.  RECOMMENDATION II 
HCFA should strngthen existing MAC guidelines by: 
adding procedures, upon consultation with medical specialty societies,for 
co.se-by-case coverage, as currently required for anesthesia claims related to 
transvenous pacemaker surgery; and/or 
providing objective criteria for MAC coverage such as the use of American 
Society of Anesthesiologists' physical status categories. 
HCFA Comment

We agree with the intent of this recommendation and plan to explore ways to strengthen MAC 
guidelines. We wil consult our CoveragelPayment.Technical Advisory Group about requiring 
case-by-case determinations for cataact extractions and endoscopies, as well as for other 
procedures. It would be helpful if OIG would supply us with the list of 700 procedures that a 
private plan identified as not customarly requirng the services of an anesthetist, and for which 
claims were denied unless medical necessity was documented. 
OIG Response 
We are pleased to provide HCFA with a copy of the requested list of procedures identified by a 
private plan.

RECOMMENDATION il

HCFA should study the appropriateness of paying the same amount for MAC and general 
anesthesia in view of the fact that other insurers are more restrctive. 
HCFA Comment

We do nOt concur with this recommendation. We believe that it is not supported by the findings 
in this repon. The repon compars the MAC policies of Medcare to the policies of the Federal 
Employee Health Benefits Plans (FHBPs) and the Medicare Caners ' Prvate Business Plans 
(MCPBPs) and concludes that the other plans have more restrctive coverage and reimbursement 
policies. However, the comparson would only be vald if the FEHBPs and MCPBPs define 
MAC in the same way as Medicare. Although the presentation in the repon suggests that all 
FEHBPs and at least ten MCPBPs define MAC identically, there is no evidence in the repon to 
support this. In addition we have reservations about adoptig a recommendation that is based 
solely on the payment policies of Other plans. We believe it is more imponant to establish that 
MAC is, indeed, a less resource-intensive surgical procedure than general anesthesia.  It woul!i also have made comparsons more meaningful to know whether these other plans 
lowered catarct anesthesia base units as Medicare did in Januar 1987. If these other plans 
recognize tie units only, but have a higher conversion factor and a higher base unit for cataact 
anesthesia than Medicare, this would likely result in a higher payment allowance than Medicare 
even though it appears that these plans have a more restrctive policy. We suggest that OIG 
address these concerns and also provide additional detals on how these plans generally ensure 
lower or no payment for monitored anesthesia care. Specifically, the study should cover what 
special codes, modifiers or other administrative processes these plans use to allow them to pay at 
a lower level. 
Response
OIG 
The HCFA has voiced several concerns about adopting this recommendation. We believe, 
nevertheless, that there is sufficient evidence and information available to suppon it. The 
evidence and information includes, but is not limited to , our comparative analysis of other 
insurers policies, HCFA's previous position to differentiate payment for MAC; and , lastly, 
statutory provisions requiring HCFA to develop a physician fee schedule based on resource 
costs. 
The HCFA's first concern with accepting our finding is that the comparson of private plans with 
Medicare would only be valid if the private plans define MAC in the same way as Medicare. 

response, we wish to note that our methodology in soliciting responses from FEHBPs and 
gathering 
MCPBPs was designed to assure valid comparsons based on identical definitions.  In 
the information from FEHBPs we provided them with HCFA' s definition to assure common 
understanding of the definition of MAC. Similarly, we aranged for Medicare caner staff who 
are knowledgeable of HCFA's definition to obtain the related coverage and reimbursement 
those instances where responses were not 
information from their private business plans.  In 
definitive, we held discussions with respondents to assure that the identical definition was used. 
The HCFA also expressed reservations about accepting a recommendation based solely on the 
payment policies of other plans. We had only recommended conducting a study, not actually 
changing policy unless the study indicated the appropriateness of the need for a change. More 
imponantly, in this regard, we wish to point out that in HCFA's response to our 1986 inspection 
repon (OAI-85- 01O), HCFA concurred with our recommendations that general anesthesia and 
MAC would be reimbursed at different rates. The HCFA indicated that it was considering a 
proposed regulatory change that would accomplish the intent of the OIG recommendations. 
Additionally, HCFA had committed itself to studying this payment issue in the October 7, 1986 
issue of the Federal Register in response to our April 1986 OIG repon. 
The HCFA believes it is imponant to establish that MAC is , indeed, a less intensive-resource 
procedure than general anesthesia. We assume that this position is based on the provisions of 
OBRA 89 which require DHHS to develop a fee schedule for physician services based on 
resource costs. As we understand that HCFA has adopted the ASA Uniform Relative Value 
Guide which does not distinguish between resource costs for MAC and general anesthesia, we 
are uncertain of HCFA' s intent.  With respect to HCFA's comments regarding cataract anesthesia base units and how other plans 
administer their coverage and payment policies, we wil provide HCFA with our list of the 
MCPBPs and FEHBPs with more restrctive coverage and payment standards. 
HCFA' S General Comments 
Scope 
The stated purpose of this report was to review the adequacy and 
implementations of Medicare s coverage and reimbursement instructions for 
MAC. However, the report only covered MAC associated with cataract surgery 
and endoscopic procedures. Of the medical records reviewed  percent were 
69
percent were
associated with cataract anesthesia and the remaining  31 
associated with anesthesia related to endoscopic procedures. Further, only 6 
percent of the endoscopic procedures involved MAC. . We recommend that GIG 
a study of MAC
either retitle and rewrite the report to indicate that this report  is 
for cataract services or expand the report to cover all other procedures using 
MAC. 
Response
OIG 
As stated in the Scope And Methodology section of this report, our inclusion of 
procedures and
medical review findings of cataract procedures, Upper  GI 
colonoscopies was designed to gain insights into actual operative events in 
assessing the adequacy of HCF A' s coverage instruction for MAC. The choice 
of these procedures does not mean that our study of the adequacy and 
implementation of Medicare  coverage and reimbursement for MAC was 
limited to these procedures. 
HCF A correctly notes that only a small percentage of the endoscopic 
procedures performed involved MAC. We have revised the report to indicate 
endoscopy procedures had associated claims for anesthesia. 
that 20 of the  359 
Discussions with several gastroenterologists revealed that they provide, or 
direct the provision of, MAC for almost all these procedures. In these instances 
MAC services of the physician endoscopist, registered nurse or other personnel 
trained in monitoring and resuscitation techniques are not usually biled by 
physicians as a separate service. 
Documentation 
in 4 
The report indicates that the payment was inappropriate in approximately 
cataract cases based on lack of documentation. However, the report should 
make it clear that this finding does not necessarily imply that anesthesia 
providers did not furnish claimed MAC services. Rather, the absence of  documentation ma reflect afailure to docw:ent services actually provided or a 
failure to include this documentation with the medical record reviewed by the 
contractor. This lack of precision in distinguishing the reasonfor the 
O/G 
absence of documentation also calls into question the accuracy of O/G' 

milion in inappropriate payment for MAC, such payments 
projection of  $/4 
cannot be directly translated into projected future savings; a more stringent 
review process for MAC might rather improve the anesthesia documentation, 
Response 
O/G 
We have revised the report to assure that the finding does not imply that 
services were not actually rendered, However, lack of documentation is 
suffcient cause to examine the case further. 
Detail 
We would recommend that the report include more detail on such items as the 
number of outpatient departments (OPDs) and ambulatory surgical centers 
(ASCs) that were sampled and whether inadequate documentation was a 
problem for certain OPDs/ASCs, or was it representative across all 
OPDs/ASCs. It would also be helpful to include the method the medical record 
could be 
contractor used to identif anesthesia activities. These items 
incorporated into the appendix or incorporated into the body of the report itself 
Response
OIG 
We are happy to make our work papers containing information on OPDs, ASCs 
and contractor methodology available to HCFA. 
A- 5