@-- OFFICE  OF  INSPECTOR  GENERAL 
The mission of the Oftlce of Inspector General (OIG), as mandated by Public Law 95-452,  as amended,  is to 
protect the integrity of the Department of Health and Human Services (HHS) programs  as well as the health 
and welfare of beneficiaries  served by those programs.  This statutory mission is carried out through a 
nationwide network of audits,  investigations,  and inspections conducted by three OIG operating components: 
the Oftlce of Audit Services,  the OffIce of Investigations,  and the Oftlce 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 OIGS 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 carrying 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 efficiency throughout  the 
Department. 
OFFICE  OF  INVESTIGATIONS 
The OIGS Of%ce of Investigations  (01) conducts criminal,  civil, and administrative  investigations  of 
allegations of wrongdoing  in HHS programs  or to HHS beneficiaries  and of unjust enrichment  by providers. 
The investigative efforts of 01 lead.to criminal  convictions,  administrative  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 OIGS OffIce 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 these inspection reports generate rapid,  accurate, 
and up-to-date  information on the eftlciency,  vulnerability,  and effectiveness of departmental  programs.  This 
report was prepared  in the Dallas regional Officeunder the direction of Chester Slaughter,  Acting Regional 
Inspector General.  Project staff 
DALLAS  HEAM2UARTEW 
Kevin Golladay  Brian Ritchie 
Pamela A. Smith 
For additional copies of this report,  please contact Kevin Golladay at (214) 767-3310.  Department  of  Health  and  Human  Services 
OFFICE  OF 
INSPECTOR  GENERAL 
MEDICARE  PAYMENTS  FOR  NON-
PROFESSIONAL  SERVICES  IN  SKILLED 
NURSING  FACILITIES  EXECUTIVE  SUMMARY 
PURPOSE 
To  assess  the  Part  B payment  pattern  and  Medicare  policy  for  the provision  of non-
professional  services  covered  by the  skilled  nursing  facility  (SNF)  benefit. 
BACKGROUND 
The  Medicare  program  provides  coverage  under  Part  A for  stays,  of up to 100 days per 
benefit period,  in SNFS.  Section  1861h  of the Social Security  Act specifies the covered 
SNF services provided  to an individual  during a Part A skilled  nursing  stay.  Among these 
are services  which can be categorized  as non-professional  institutional  services(e.g., 
room,  board,  supplies and equipment). 
Many  services and supplies billed directly  to Part B are the same as non-professional 
institutional  services  covered  under Part A.  Thus,  if provided  by the SNF,  these  services 
and supplies would typically  be included  in the rate paid by Medicare  for beneficiaries  in 
a Part A covered  SNF stay.  However,  if provided  by a supplier directly  to the 
beneficiary,  billings  could be made to Part B rather than Part A.  In fact,  a recent  OIG 
report  substantiates  that billing Part  B for these items does occur  in Medicare  covered 
SNF stays. 
This report  examines  the extent of Part B billings  for nonprofessional  institutional  services 
such as enteral  nutrition  services,  incontinence  care  services,  and surgical  dressings 
provided  to beneficiaries  during Medicare  covered  SNF stays.  We did not review 
situations  where an individual  in a SNF was not covered  by Part A but receiving  a SNF 
level of care. 
To determine  how many payments  were made for Medicare  beneficiaries  during  SNF 
stays, we frost developed  a one percent  sample of Medicare  beneficiaries.  Within this 
sample,  we selected beneficiaries  with a Medicare  covered  SNF stay in 1991 and  1992, 
along with the dates of the stay.  We then obtained  Part B claims  submitted  and allowed 
on behalf  of these beneficiaries  with service dates coinciding  with the dates the beneficiary 
was in a SNF stay being paid for by Medicare. 
mlNGs 
Current  Medicare  Policies  May  Inappropriately  Allow  Billing  Of Non-Professional 
Services  To  Part  B During  Medicare  Covered  SNF  Stays. 
Overall,  non-professional  institutional  services provided  during  covered  Part  A SNF stays 
accounted  for approximately  $90 million  in 1991 and $102 million  in 1992 in allowed  Part 
B payments.  Section  1833(d) of the Medicare  law states that no payment  can be made by 
Part B for a service provided  under Part A.  However,  there  is no requirement  that SNF 
1  services  must be paid by Part  A.  Thus,  paying  for non-professional  services through  Part 
B rather  than part A is often legal.  Nevertheless,  allowing Part B payment  for services 
covered  in the SNF benefit  seems incongruent  with the intent of the benefit.  This action 
removes  responsibility  from the SNF to provide  for these services.  Part B allowance  also 
leads to greater  beneficiary  financial  responsibility.  The beneficiaries  may not even be 
aware that the facility provides  these  services  in such a way that their personal  costs for 
care increase. 
Over  $70 Million  Were  Allowed  By Part  B For  Three  Specific  Services  Provided  To 
SNF  Residents  In  1992. 
  $57 Million for  Enteral Nutrition  Services. 
  $6 Million for  Surgical Dressings. 
  $10 Million for  Incontinence  Care Items. 
Enteral  Nutrition 
Since enteral  nutrients  provide  all needed nutrition  for some patients,  it is obvious that

they are food.  Further,  they are considered  to be a food by the Food and Drug

Administration.  Given this acceptance,  to not consider  nutrients  a basic benefit  of a SNF

and allowing billing  outside of the per diem-seems illogical.,  However,  SNFS may either

include these  services  in their  routine costs and .bilI-Part A of Medicare,  or allow  suppliers ~~~

to provide  the services  and bill Part B.  Further,  SNFS can perform-as. the suppliers  and

thus,  bill both the SNF per  diem rate under Part A and  the food (enteral  nutrients)  costs

under Part B.

Incontinence  Care 
Prior  to 1972, incontinence  items were included  in routine  costs of a SNF and thus,  were 
payable  within the Part A payment.  Although they have since been deleted  from the 
routine  cost listing,  they are included  under  inpatient  ancillary  services,  also a component 
of the SNF payment.  Yet,  while 92 percent  of the nursing homes in 1992 provided 
services  to patients  with incontinence  needs,  Part B paid for some of these  services. 
Sur~cal Dressings 
Surgical  dressings  have also been removed  from the list of routine  services  provided  in a 
SNF and are now included  as an ancillary  service payable  by Part A.  While  dressings  are 
considered  items generally  provided  by SNFS, they are also listed in regulation  as items 
covered  by Part  A only if the individual  SNF generally  provides  the service.  This further 
complicates  the ability to determine  the correct  payment  source during  a SNF stay and 
may partially  explain  why Part B pays for some surgical  dressings  for SNF residents. 
ii  Paying  For  These  Services  And  Under  Part  A Could  Save Medicare  Money 
Supplies 
And Reduce  Improper  Incentives  For  Providers. 
Part B payment  clouds responsibility  for patient  care,  removes  incentives  for reasonable 
utilization -and cost control,  and makes it more difficult to compare  costs and to set 
reasonable  limits on per diem rates.  If SNFS acted as prudent  purchasers,  by buying in 
bulk and taking advantage  of negotiated  rates,  savings might result.  This activity  could 
lead to acquisition  costs lower than the Part B reimbursement  rates.  Including  non-
professional  services  in the Part A payment  would also reduce  facility  incentives  to avoid 
the SNF cost limit by allowing  suppliers  to provide  the services  and bill Part B.  Finally, 
including non-professional  services in the SNF payment  could prevent  marketing  abuses. 
Paying  For  These  Services  Under  Part  A Would  AlSO  Save  Beneficiaries  Money. 
By including  enteral  and incontinence  services and surgical  dressings  in the Part A SNF 
payment,  the beneficiary  would not bear the burden  of the deductible  and 20 percent 
copayment  involved in Part B.  This would have resulted  in beneficiary  savings of 
approximately  $17.6  million  in 1991 and $18.5  million in 1992.  While a signitlcant 
portion  of these  savings might shift as costs to Medicare,  Part A, these costs may be 
offset by the potential  savings described  in the previous  finding. 
Coding  problem  Exist  On  Claims  Submitted  For  These  Services. 
While all of the claims included  in this report  represent. care. provided  during a covered  ~ 
SNF stay, many claims indicated  a place of service other than a SNF.  While  coding 
practices  improved  between  1991 and  1992 for incontinence  services  and surgical 
dressings,  problems  increased  for enteral  nutrition  service claims. 
RECOMMENDATIONS 
The current  fragmented  manner  in which Medicare  payment  is made for SNF residents  is 
a result of statutory provisions  originally  intended to ensure  access to care.  This report 
demonstrates  that the ability of a SNF to make use of both Part A and Part B to 
underwrite  care to its residents  can result in increased  progmm  expenditures  and waste 
and may dissipate  the SNFS incentives  to oversee  the total package  of care the resident 
receives. 
In light of this,  we recommend  that: 
	 HCFA  develop  a legislative  recommendation  to prohibit  entities  other than the SNF 
from  seeking coverage  on behalf of persons  in Part A covered  SNF stays for 
enteral  nutrition,  incontinence  care,  and surgical dressings  and limit Medicare 
coverage  of these  services to Part A. 
	 HCFA  clarify  42 CFR 483.35  (Dietary  Services)  to speciilcally  include parenteral 
and enteral  nutrition. 
... 
111  COMMENTS 
Comments  were received  from the HCFA,  ASPE,  and PHS on the draft report.  The full 
text of the comments  is included  in Appendix  C. 
The HCFA  and ASPE made suggestions about refocusing  the recommendations  to more 
clearly  address the problems  discussed in the report,  which we adopted.  Both HCFA  and 
ASPE stated several concerns  about language in the draft report  raising  questions about 
quality of care and about tying the problems  discussed to residents  rights.  We agree  with 
HCFA  and ASPE and have eliminated  the language  on these points. 
Both HCFA  and ASPE also raised questions about how savings might accrue  to the 
Medicare  program  by implementation  of the recommendations.  We attempted  to clarify 
our discussion  of this point within the text of the report.  It is true that merely  shifting 
costs to Part A, without putting  in place proper  payment  policies,  accomplishes  little. 
Medicare  payment  poiicies  should both create  incentives  for prudent purchasing  arm 
reflect the economies  achieved  through prudent  purchasing.  As indicated  in the report, 
the OIG plans more work on this subject,  focusing fwst on payment  for enteral  nutrition. 
Lastly,  we adopted  a number  of suggested technical  improvements  made by the 
commenters. 
iv  TABLE  OF  CONTENTS 
PAGE

EXECUTIVE  SUMMARY  . . . . . . . . . . . . . . . . . . . . . . . . .  . .  . . . . . . . . ..i

INTRODUCTION  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  . . . ...1

FINDINGS  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...3


Inappropriateness  Of Part  Billings  .  . . . . . . . . .  . . . . . . . . . . . . . . . . . ..3

EnterdNutntion  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Incontinence  Care  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...6

Sur@calDressings  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...7

partJ3~lowances~atCou1d  Have&enB orneBypartA  . . . . . . . . . . . . . .  8

  program outlays  hdImproper  Bovider  Incentives  . . . . . . . . . . . . . . . . . . . 8

sav~gs,ForBeneficifies  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..9

  Coding  problems  . . . . . . . . . . . . . . . . . . , . . . . . . . . . . . . . . . . . . . . . .9

RECOWNDATIONS  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  11

.

ENDNOTES  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  12

APPENDIX 
A:  Confidence  Intervals  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..A-1

B:  Medicare  Expenditures  By Category  of  Service  . . . . . . . . . . . . . . . . . . . . .B-l

C:  Text OfAgencyComments.  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..C-l  INTRODUCTION 
PURPOSE 
To assess the Part B payment  pattern  and Medicare  policy for the provision  of non-
professional  services covered  by the skilled nursing facility  (SNF) benefit. 
BACKGROUND 
The Medicare  program  provides  coverage  under Part A for stays, ofupto  100 days per 
benefit period,  in SNFS.  A SNF stay is dependent  on a specific set of conditions 
necessary  for coverage  (e. g.,  need for skilled services on a daily basis following  a three-
day qualifying  hospital  stay). 
Section  1861h of the Social Security  Act spec~les  the covered  SNF services provided  to 
an individual  during  a Part A skilled nursing  stay.  Among these are services  which can 
be categorized  as non-professional  institutional services.;  These  services  are listed in 
Table  1. 
TABLE  1 
Non-professional  Institutional  Services. 
Covered  During  Part  A  SNF Stays 
  Bed and boati  in connection  with the jimnishing  of nursing  care. 
  Such drugs  biolo  cals, supplies,  pliances  and equi  ment  jhrnished
for-use  in the W F, as are ordinari ?y fimished  by suc%facikty  for  the 
care and trea#ment of inp~ents. 
	 Such other services  necessary  to the health of the p~ent  as are genemlly
provtied  by SNFS. 
Many  services  and supplies billed directly  to Part B are the same as non-professional 
institutional  services  covered  under Part A.  Thus,  if provided  by the SNF,  these  services 
and supplies would typically  be included  in the rate paid by Medicare  for beneficiaries  in 
a Part A covered  SNF stay.  However,  if provided  by a supplier directly  to the 
beneficiary,  billings  could be made to Part B rather  than Part A.  In fact,  a recent  OIG 
report  substantiates  that billing Part B for these items does occur  in Medicare  covered 
WWFstays.  
1
 SCOPE 
This report  examines  the extent of Part B billings  for non-professional  institutional 
services  such as enteral  nutrition  services,  incontinence  care services,  and surgical 
dressings  provided  to beneficiaries  during Medicare  covered  SNF stays.  We did not 
review  situations where an individual  in a SNF was not covered  by Part A but receiving  a 
SNF  level of care. 
Previous  OIG reports  have presented  an overview  of Medicare  SNF services and payment 
for durable  medical  equipment  (DME) billed during  skilled stays. 
METHODOLOGY 
To determine  how many payments  were made for Medicare  beneficiaries  during  SNF 
stays,  we first developed  a one percent  sample of Medicare  beneficiaries.  Within this 
sample,  we selected beneficiaries  with a Medicare  covered  SNF stay in 1991 and  1992, 
along with the dates of the stay.  We then obtained  Part B claims  submitted and allowed 
on behalf of these beneficiaries  with service dates coinciding  with the dates the beneficiary 
was in a SNF stay being paid for by Medicare. 
In addition to claims review,  we reviewed  the law, as well as Medicare  Carrier  and 
Durable  Medical  Equipment  Regional  Carrier  (DMERC)  manuals,  to identify established 
policy  in the areas examined. 
2
 FINDINGS

Current  Medicare  Policies  May  Inappropriately  Allow  Billing  Of  Non-Professional 
Services  To Part  B During  Medicare  Covered  SNF  Stays. 
Non-professional  institutional  services provided  to patients  and billed to Part B during 
covered  Part A SNF stays accounted  for $89.8 million in 1991 and $101.6  million  in 
1992.  Included  in this category  of services are incontinence  care services,  surgical 
dressings,  and dietary  services,  such as enteral  nutrient  services.  Such services  are 
billable  to Part A if provided  by the SNF during a Medicare  covered  SNF stay. 
However,  as noted above,  these items are also allowed as Part B services  during  Part A 
stays. 
Non-Professional  Institutional  Services 
Dollars  Spent  By  Category  of  Service 
1991 
1992 
Millions 
- Enteral  - Incontinent  - Dressing.  - Bra...  et. 
- casts  etc  M  Parenteral  - Trach  M  Other 
.. 
FIGURE 1 
SOURCE:  OIG  Projections  from  a one-percent  sample  of Medicare  beneficiaries. 
Section  1833(d) of the Medicare  law states that no payment  can be made by Part B for a 
service provided  under Part A.  However,  it does not-indicate that covered  institutional 
SNF services  must be paid by Part A.  Thus,  while it is obvious that the law intends for 
these  services  to be provided  during  a Part A covered  SNF stay, the law does not require 
that the services  be provided  by the SNF or paid by Part A.  The ability of a SNF to 
provide  services  under  arrangements  does not remove  responsibility  from the SNF for the 
overall  care provided  to a beneficiary.  However,  it does permit  the facility,  to the extent 
allowed by law,  to determine  what costs will be subject to the SNF routine  cost limit. 
Allowing  Part B payment  for covered  Part A services  not only seems incongruent  with the 
intent of the SNF benefit,  it also leads to greater  beneficiary  financial  responsibility.  This 
occurs  since the beneficiary  is responsible  for an annual deductible  and 20 percent  co
payment  for Part B services.  However,  the beneficiary  may not know that the facility 
does not provide  these  services,  thus incurring  unexpected  personal  costs for care.  For 
3  example,  in 1991 and  1992, co-payment  expenses  represented  $22 million and $25 
million,  respectively. 
The impact of Part B payment  for Part A covered  services  will be explored  through  three 
examples:  enteral  nutrition  services,  incontinence  care  services,  and surgical dressings. 
These  items accounted  for over 70 percent  of the Part B payments  allowed  in 1991 and 
1992 for non-professional  services provided  during Medicare  covered  SNF stays. 
ENTERAL  NUTRITION  POLICY 
Definition  of Enteral  Nutrition:  Enteral  nutrition  is a form of liquid nutrition  that is 
provided  to a patient  who, due to a chronic  illness or trauma,  is unable to eat in the 
normal  manner.  This diet is generally  required  to sustain life and provides  all of the 
patients  nutritional  and caloric  needs.  Patients  surviving on enteral  nutrition  require  a 
tube to be placed  either directly  into the stomach or small intestine through  the skin, or 
indiredly  via the nasal passage.  The receipt  of enteral  nutrition  services often requires 
skilled care,  although patients  can receive  this service at home. 
Enteral  nutrition  is considered  reasonable  and necessary  for a patient  with a functioning 
gastrointestinal  tract  in certain  circumstances.  Individuals  who are unable to ingest food, 
due to pathology  or non-functioning  of structures  that permit  food to reach the digestive  ~ 
tract,  require  enteral  nutrition  services.  Examples  of conditions  that would qualify for 
coverage  are head and neck cancer  with reconstructive  surgery,  central  nervous  system 
disease affecting  the ability to ingest food orally,  and severe difficulty  swallowing  after a  ~ 
stroke. 
Medicare  Covenzge Requirements for  Enteral  Z%erzz.pyA: s specified previously,  enteral 
nutrition  services  may be covered  by Part A or B during a covered  SNF stay.  Enteral 
nutrients  are classifki  as a food by the Food and Drug Administration  (FDA),  and thus, 
are considered  food for pu~oses  of Part A coverage.2  However,  for Part B coverage, 
enteral  nutrition  services  are considered  a prosthetic  device and must meet certain 
requirements.  First,  the beneficiary  must have a permanently  inoperative  internal  body 
organ,  or an impairment  lasting at least 90 days.  A second requirement  is patient 
dependence  on enteral  nutrients.  To show a dependence  on nutrients,  the patient  must 
require  20 to 35 calories  of enteral  nutrients,  per kilogram  of body weight per day. 
Although patients  may only require  supplements  to their daily protein  and caloric  intake, 
this is not covered  under Medicare  Part B services.  However,  supplements  are covered 
by Part A.  Finally,  if these Part B requirements  for therapy  are met,  related  supplies, 
equipment,  and nutrients  are also covered. 
Part  B Payment  For  Enteral  Nutrition  Provided  To  Beneficiaries  In  SNFS  Seems 
Inconsistent  With  The  Purpose  Of  The  SNF  Benefit. 
A recent  OIG review  determined  that Part  B payments  were made for enteral  nutrition  and 
related  equipment  and supplies in seven percent  of Medicare  covered  SNF stays in 1991, 
and in six percent  in 1992.  The Health  Care Financing  Administration  (HCFA)  has a 
4  longstanding  practice  of allowing Part B payment  for enteral  nutrition  services provided  to

residents  of SNFS.  This practice  continues  under the DMERCS,  which have issued

instructions  that enteral  nutrition  services may be covered  under either Part A or under

Part B for such beneficiaries,  depending  on who supplies the service.  However,  if the

individual -residesin a SNF under a Medicare  covered  stay, this policy  may effectively

relieve  the facility  of fundamental  responsibilities  inherent  in the SNF benefit.

The FDA has stated that enteral  nutrients  may be considered  as food or drugs,  dependent

on the stated purpose  of the claims.  Since most patients  receiving  enteml  nutrition

services  in SNFS depend  on them to sustain life,  it would appear  that these services  should

represent  their food consumption  and should be included  in the SNFs dietary  cost center.

Provision by a SNF 
Despite  the FDA classification  of enteral  nutrients  as a food,  the DMERC  manual 
indicates that a SNF may either provide  enteral  nutrition  services  and supplies tiirectly,  or 
through an outside  supplier.  A SNF is considered  to be providing  enteral  items when it 
purchases  them directly  from any source,  and then provides  them to a resident.  If an 
individual  is in a Part A SNF stay and the SNF furnishes  the nutrients  to the beneficiary, 
the DMERC  manual  notes that such services  are to be billed to Part A.  In this case,  the 
manual  states,  Enteral  nutrients  are classified  as food and are included  as a component  of 
the SNFs routine  costs. 3 Further,  the DMERC  suppliers  manuals  state that no 
payment  may be made by Part  B for enteral  nutrition  services provided  by the SNF during 
a Part A stay.  In addition,  the Social Security  Act (Section  1833d) and the Medicare 
coverage  policy  indicate that any item covered. under Part A cannot be billed to Part B. 
Provision by a Supplier 
As mentioned; -the DMERC  manual  also indicates  that nutrients  may be furnished  by an 
outside  supplier to a beneficiary  during the course of a covered  Part A stay.  In such a 
case,  the services  are covered  by Part B since the SNF does not buy the items from the 
supplier. 
It is unclear  how a resident  in a SNF could obtain enteral  nutrition  services  other than by 
having the facility provide  them,  since this is generally  his/her  total nutritional  intake.  To 
have a resident  responsible  for providing  his/her  own food is contradictory  to the SNF 
benefit to provide  for dietary  needs.  If an outside  supplier  assumes  the responsibility  for 
a residents  nutritional  needs,  this also appears  to abrogate  the providers  responsibility  to 
provide  for dietary  needs. 
The provision  of enteral  nutrition  services  by a supplier can become  even further 
complicated,  since a SNF can perform  as a supplier.  If a SNF provides  nutrients  to a 
patient  as a supplier  rather  than as a provider,  the services  may be billed to Part B. 
However,  in either  situation,  the SNF is providing  the services  to the individual. 
5
 Die~ary Services Requirement 
Failing  to include enteral  nutrition  services within the Medicare  payment  raises concerns 
about a facilitys  compliance  with 42 CFR 483.35  which states that  the facility  must 
provide  eimchresident  with a nourishing,  palatable,  well-balanced  diet that meets the daily 
nutritional  and special needs of each resident.  
INCONTINENCE  CARE  POLICY 
Definition  of Incontinence  Care: UroloDcal, Ostomy,  and Colostomy:  Some  patients

have an involuntary  loss of urine,  or permanent  urinary  incontinence,  due to a

permanently  inoperative  or malfimctioning  urinary  bladder  and/or  bladder  outlet.  The

bladder problem  may be due to a structural  impairment  of a body organ or result from a

nerve dysfimction  or obstruction.  A urinary  collection  system is required  for patients  with

urinary  incontinence.  Such a collection  system may require  an indwelling  catheter  or

intermittent  catheter~ation  in addition to drainage  bags or bottles and related  supplies.

Also,  some patients  may require  a surgically  created  opening to divert urine or feces

outside the body.  These individuals  require  a collection  system that attaches  directly  to

the body and will require  bags or pouches,  as well as related  supplies.

Medicare  Coverwge Requirements for  Incontinence  Items: Incontinence  care  supplies may

be covered  by Part A or B during a covered  SNF stay and are considered  a prosthetic

device,  since they replace  all or part of a body organ.  For the purposes  of Part A

coverage,  incontinence  services are included  as inpatient  ancillary  services  and included  in

the providers  allowable  costs.  These services  are included  as a, Part A payment during  a

Medicare  covered  SNF stay.  For coverage  by Part B, the condition  of urinary

incontinence  must meet a test of permanence.  Permanency  is present  if the device is

required  for a long and indeftite  period  of time of at least three  months.

. 
Incontinence  Care  Services  Can  Also Be Paid  By Part  B During  Covered  SNF Stays. 
As previously  mentioned,  incontinence  services  may be covered  under Part A or B, 
depending  upon who supplies the items.  Although  the coverage  policy  for incontinence 
care  items is not as clear  as that of coverage  for enteral  nutrition  services,  allowing Part B 
coverage  may continue  to relieve  the SNF of responsibilities  implied  in the benefit. 
Prior  to 1972, the HCFA  Providers  Reimbursement  manual  specitlcally  included 
incontinence  appliances  and supplies in the routine  costs of a SNF,  thus making  them 
payable  by Part A.  After  1972, this clear  listing was deleted  from the manual. 
Incontinence  items,  provided  by the SNF,  are now included  under inpatient  ancillary 
services,  which are included  as part of the Part A payment. 
The category  of ancillary  services  allows certain  services,  not generally  provided  to all 
patients,  to be considered  allowable  costs for Medicare  payment.  Thus,  while food and 
nursing  care are required  by all patients,  urological  and ostom y items are not.  Although 
these are individualized  items,  1994 nursing  home data indicate  that 92 percent  of all 
6  nursing homes provide  services to patients  with indwelling  catheters. 4 Incontinence  items 
represent  critical  services  for patients  requiring  them and,  if not carefully  provided,  can 
lead to negative  health consequences  such as decubitus  ulcers. 
Further  discussion  in various  manuals indicates that incontinence  care items are generally 
considered  services provided  by a SNF; thus,  they are extended  care  services.s 
However,  convention  has allowed coverage  of these items to be determined  at the 
individual  SNF level.  This determination  resulted  from the inclusion of incontinence 
items in the benefit category  (referenced  earlier)  stating that such items are covered  if they 
are  ordinarily  furnished  bv such facilitv for the care and treatment  of inpatients.  
Despite this categorization,  none of the regulations  or manuals  specitlcally  state that 
incontinence  items should be covered  in this manner.  Once again,  various  references  to 
urological  and ostomy items state that when these services  are provided  by the SNF 
payment  may only be made under Part B when Part A payment  is not available.b  Thus, 
if a facility  does not choose to furnish  incontinence  items to its patients,  it may allow a 
supplier tG provide  tiwm and bill Part B of Medicare  for the items. 
SURGICAL  DRESSINGS  POLICY 
Definition  of Surgical Dressings:  Patients  who have undergone  a surgical procedure 
requiring  an incision or sharp debridement  require  surgical  dressings  in order  to promote 
healing or to protect  the wound from infection.  Surgical dressings  are therapeutic  and 
protective  coverings  which are applied  directly to  wounds,  either  on the skin or opening to 
the skin.  These dressings  require  regular  changing  and may be primary;  applied -tmthe. 
wound,  or secondary,  used to secure the primary  dressing  (e.g.  tape,  elastic,  gauze).7 
Medicare  Coven.zge Requirements for  Surgical Dressings:  Surgical  dressings  may be 
covered  under  Part A or Part B during a Medicare  covered  SNF stay.  For purposes  of 
covered  Part A-stays, these items are considered  ancillary  services.  For Part B coverage, 
dressings  must be required  as a result of a surgical procedure.  Further,  they must be 
medically  necessary  to facilitate  the healing  of the wound or to protect  it from infection. 
Part  B Coverage  Of  Surgical  Dressings  During  SNF  Stays  Is Also  Inconsistent  From 
The  Perspective  Of  The  SNF  Benefit. 
Surgical dressings  can also be covered  by Part  A or B during a covered  SNF stay, 
depending  upon who provides  the service.  However,  this is a service that many would 
assume is included  in a covered  skilled stay, given the type of patients  generally  cared  for 
in SNFS. 
Surgical dressings,  like incontinence  items,  were also included  as routine  supplies and 
costs of a SNF before  1972, but are now included  as an inpatient  ancillary  service.  Thus, 
they continue  to be covered  by Part A.  In addition,  dressings  are included  within the 
category  of service,  other services  necessary  to the health of the patient  as are generally 
provided  by SNFS.  As previously  stated,  these items are genemlly  considered  services 
provided  by SNFS and would be considered  as included  within the Medicare  SNF benefit. 
7  However,  the regulations  applying to coverage  of services  in post-hospital  SNF stays give 
sterile dressings  as an example  of a service categorized  as supplies,  appliances,  and 
equipment.8  This category,  as previously  discussed,  states that these are items included 
as a covered  SNF benefit @  if they are ordinarily  furnished  by the facility to inpatients. 
Thus,  the decision  to provide  this item can be interpreted  as being made at the individual 
SNF level.  This fhrther  complicates  the ability to decide what is the most appropriate 
payment  source for surgical  dressings  during  a covered  SNF stay. 
Over  $70 Million  Were  Allowed  By  Part  B For  These  Three  Services  In  1991  And 
1992,  When  Much  Of  The  Costs  Could  Have  Been  Borne  By  Part  A. 
The total allowed  Part B payments  for enteral  nutrition  services,  incontinence  care and 
surgical  dressings  were  $70 million in 1991 and $74 million in 1992.  While the amounts 
allowed  for enteral  nutrition  services and surgical  dressings  remained  relatively  constant, 
allowed  amounts  for incontinence  care increased  substantially. 
An additional  concern  which arises in the discussion  of Medicare  covered  SNF care  is 
whether  these services  are provided  by the facility to some patients  but by a supplier to 
other patients.  The program  requires  that a facility use the same method  for providing 
services to all of the patients  requiring  those services.  This indicates  that either the SNF 
would bill for all services,  to Part A or B, or the supplier would bill for all services to 
Part B.  We have no information  on whether  services provided  to patients  in the same 
facility vary.  However,  the potential  to vary service delivery  may also be an issue to 
examine. 
Paying  For  These  Services  And  Supplies  Under  Part  A Could  Save  Medicare  Money 
And  Reduce  Improper  Incentives  For  Providers. 
Payment  for enteral  nutrition  services,  incontinence  items,  and surgical  dressings  under 
the Part A program  could result  in savings to the Medicare  program  if the SNF acted as 
the purchaser  and negotiated  favorable  pricing  (lower than Medicare  Part B allowed 
amounts). 
To illustrate  the implications  for savings,  we provide  the following  example.  Currently, 
Medicare  Part B reimburses  enteral  formulae  (procedure  code B4150) at the rate of 
approximately  61 cents per  unit (100 calories).  One large hospital buying group routinely 
obtains nutrients  classified  under procedure  code B4150 for as little as 20 cents.  Contacts 
with several nursing  homes  suggest that,  in addition  to hospitals,  nursing  homes may 
obtain nutrients  at prices  significantly  below the 61 cent reimbursement  level.  Fee 
schedules used for Part B reimbursement  may not represent  an efficient  delivery  of service 
when compared  to facility  acquisition  costs.  If facility acquisition  costs are indeed  lower, 
and Medicare  payment  policy  could reflect the lower costs,  the program  might  save 
significant  dollars.  We are currently  conducting  an inspection  to assess nutrient  pricing 
for nursing  homes. 
8
 Current  policies  allowing outside  suppliers  to provide  supplies to nursing home residents 
through  Part B can lead to excessive  utilization.  Previous  work by the OIG examining  the 
marketing  of incontinence  supplies found:  1) some suppliers engage in questionable 
marketing  practices,  2) beneficiaries  may be receiving  unnecessary  or non-covered 
supplies,  3) some suppliers present  the nursing  home with false or misleading  information 
in order  to get nursing  home business. 
Paying  For  These  Services  Under  Part  A Would  Also  Save  Beneficiaries  Money. 
Part B billing for enteral  and incontinence  services  and surgical dressings  increases 
patients  financial  liability  for their care.  Part B coverage  includes annual deductibles  and 
a co-payment  of 20 percent.  Unfortunately,  the patient  may not be aware that the 
provision  of his/her  enteral  nutrition  services  may result in a greater  financial 
responsibility  in some SNFS but not others.  The inclusion  of these services  would have 
resulted  in beneficiary  payment  savings of $17.6  million in 1991 and $18.5  million  in 
1992.9 
Beneficiary  Co-pay  Liability 
By  Service 
1991 
1992 
~.  \ .  x  I 
0.$  6$  10s  15.$ 
Millions 
Z%  Enteral  - Incontinence  - Dresainga 
FIGURE2 
SOURCE:  OIG  Projections  from  a one-percent  sample  of Medicare  beneficiaries. 
We recognize  that a considerable  portion  of the co-payment  savings discussed  might shift 
to Medicare  Part A, if Part B payment  were prohibited.  However,  the potential  savings 
described  in the previous  finding may offset these costs. 
Coding  Problems  Exist  On  Claims  Submitted  For  T&se  Services. 
Although  the claims  for enteral  nutrition  services,  incontinence  care,  and surgical 
dressings  reviewed  for this report  represented  care billed during  a Part A SNF stay,  many 
of the claims represented  the place of service as a location  other than a SNF.  While 
coding practices  improved  for both dressings  and incontinence  items,  coding accuracy 
declined  for claims  for enteral  nutrition  services.  However,  the problem  remained  the 
greatest  for incontinence  claims. 
9
 Pkzce of Service  Coding Problems  increased for  EnteraJ (Wires  during SNF Stays. 
Many of the enteral  nutrition  services provided  to beneficiaries  in a Part  A SNF stay were

indicated  as being for individuals  outside of the SFJF Setting.This may  indicate  continued

billing  by  individuals  who  were  previously  in other  locations,  as was  found  to be

occurring  for  other  services  billed  during a SNF stay. 10 The use of a place of service

code representing  a place other than a SNF may also indicate that double billing  is

occurring  for individuals  who received  services prior  to SNF admission  and continued

receiving  services,  with both facilities  billing.  A further  examination  of place  of service

coding  showed there  were  some patients  with two billings,  allowed for the same code and

the same period,  with the place of service coded SNF on one and NF on the other.

Place  Of  Service  Coding  On  Claims 
Incontinence  Care  Although  Place  of 
Service  coding for 
Incontinence  Chzims 
improved,  the Majority 
of Allowed  Claims 
indicated  a Place of 
o  400  800  i200  1600  2000  2400  Service other than a
Number  of  Claims 
SNF. 
- SNF  m-   NF  - Custodial 
- Home  Office  - Other 
FIGURE  3 
W%ilePlace  of Service 
Place  Of  Service  Coding  On  Claims 
Coding has improved  Surgical  Dressings 
on Surgical  Dressing 
claims, problems  still 
exist. 
While  correct  coding

\ 
-)  u  1 
on claims for surgical

0  25  50	 75  100  125  150  175  200  225 
dressings  have
 Number  of Claims 
increased  from  seven

percent  in 1991 to 65
 m  Office  - Other 
percent  in 1992,

problems  still exist.

FIGURE  4 
Additionally,  if the

claims  representing  office
 as place  of service  are correct,  this activity  would indicate 
additional  expenses  involved  for changing  dressings.  These expenses  may represent 
transportation  via ambulance  for the beneficiary. 
SOURCE: OIG Projectionsfrom a one-percentsample  of Medicare  beneficiaries. 
10
 RECOMMENDATIONS 
The current  fragmented  manner  in which Medicare  payment  is made for SNF residents  is 
a result  of statutory provisions  originally  intended to ensure  access to care.  This report 
demonstrates  that the ability of a SNF to make use of both Part A and Part B to 
underwrite  care to its residents  can result  in increased  program  expenditures  and waste 
and may dissipate  the SNFS incentives  to oversee  the total package  of care the resident 
receives. 
In light of this,  we recommend  that: 
	 HCFA  develop a legislative  recommendation  to prohibit  entities other than the SNF 
from  seeking coverage  on behalf of persons  in Part A covered  NW? stays for 
enteral  nutrition,  incontinence  care,  and surgical  dressings  and limit Medicare 
coverage  of these  services to Part A. 
  HCFA  clarify  42 CFR 483.35  (Dietary  Services)  to  specifically  include  parenteral 
and  enteral  nutrition. 
COMMENTS 
Comments  were received  from the HCFA,  ASPE,  and PHS on the draft report.  The full 
text  of  the comments  is included  in Appendix  C. 
The HCFA  and ASPE made suggestions  about refocusing  the recommendations  to more 
clearly  address the problems  discussed  in the report,  which we adopted.  Both HCFA  and 
ASPE  stated several  concerns  about language  in the draft report  raising  questions  about 
quality of care and about tying the problems  discussed to residents  rights.  We agree  with 
HCFA  and ASPE and have eliminated  the language  on these points. 
Both HCFA  and ASPE also raised questions about how savings might accrue  to the 
Medicare  program  by implementation  of the recommendations.  We attempted  to 
clarify  our discussion  of this point within the text of the report.  It is true 
that merely  shifting costs to Part A, without putting  in place proper  payment 
policies,  accomplishes  little.  Medicare  payment  policies  should both create 
incentives  for prudent  purchasing  and reflect the economies  achieved  through 
prudent  purchasing.  As indicated  in the report,  the OIG plans more work on 
this subject,  focusing  fwst on payment  for enteral  nutrition, 
Lastly,  we adopted  a number  of suggested technical  improvements  made by the 
commenters. 
11  EN  DNOTES

1.  The Office of Inspector  Geneml,  Office of Evaluation  and Inspections  has produceda 
report  entitled  Medicare  Services  Provided  to Residents  of Skilled Nursing  Facilities,  An 
Overview,  OEI-06-92-00863.  The report  presents  information  on all Part B payments 
made in 1991 and 1992 for services provided  to Medicare  beneficiaries  during  Part A 
SNFstays. 
2.  The FDA classifies products  that contain  nutrients.  Under current  FDA policy,  these 
products  may be considered  to be foods or drugs,  or both,  depending  on their  intended  use 
as determined  by the claims that are made for the product. 
3.  All four of the DMERC  manuals  have this and the following  statements  present.  In 
addition,  the Provider  Reimbursement  Manual,  section 2203.1  E, provides  the same 
information. 
4.  This  figure  comes  from the OnLine Survey and Certification  Annual Review  (OSCAR) 
database.  The percentage  represents  a combined  total of all SNFS and all nursing facilities 
that have patients  with indwelling  catheters. 
5.  A rather  disjointed  discussion  is provided  on the extended  care benefit and what is 
included  in the benefit  in both the law,  regulations  and manuals.  While  it appears  that 
convention  has included  many items within the category  drugs, -biological,  supplies, 
appliances,  and equipment,  this is not clearly  indicated  in either the regulations  or 
manuals.  Including  incontinence  items within this category  allows for the items to not be 
covered,  since this section indicates  these items are only covered  if the facility  generally 
provides  them to its inpatients. 
.. 
The Intermediary  Manual  refers the reader  to several additional  sections,  including  the 
section referring  to services  covered  under a Medicare  Hospital  stay and services  covered 
by Part B if no payment  by Part A is available.  At the end of the discussion,  it becomes 
clear that incontinence  services,  as prosthetic  devices,  are considered  an extended  care 
service  under the section of the benefit  such other  services  necessary  to the health of the 
patients.   A fimther discussion  within the Provider  Reimbursement  Manual,  2203.1  and 
2203.2,  discusses the  routine  and inpatient  ancillary  services  included  in the Part  A SNF 
payment.  Urological  and ostomy care items are included  within the ancillary  services 
area. 
The following  provides  more  specitics  on the references  made to incontinence  services  in 
several places. 
There  are regulations  addressing  coverage  of services  in post-hospital  SNF care at section 
409.20.  At 409.25 there  is a reference  to a category  called medical  supplies,  appliances 
and equipment.  Within this section there  is a reference  indicating  that these generic  items 
(medical  supplies,  appliances  and equipment)  are only covered  by Part A if they are 
12
 ordinarily  furnished  by the facility to inpatients.  However,  no mention is made of 
prosthetic  devices  within this section.  In fact, very few specific examples  are provided  in 
the entire  section of items covered  during a SNF stay.  A clear  interpretation  of the Part 
A and B benefit is further  complicated  when wording  is absent or is not consistent 
between  the law, the regulations  and manuals. 
The discussion  in the Medicare  Intermediary  manual,  section 3133.9,  indicates the SNF 
coverage  area mentioned previously,  such other  services  necessary  to the health of the 
patients,  are covered  if SNFS generally  provide  the service.  This area  is further  defined 
as those  medical  and other health  services  that are listed in section 3110-3110.5.  It is 
stated  that the services  listed in this section are generally  provided  by skilled nursing 
facilities  and thus they are considered  extended  care services.  Further  discussion  indicates 
that the SNF medical  and other health services  are basically  the same as those included  as 
inpatient  hospital  ancillary  services.  Within  the listing of inpatient  hospital  services  are 
prosthetic  devices  and more  specifically,  catheter,  ostomy and colostomy  equipment  and 
supplies.  The discussion  also indicates  that these items may be covered  by Pdi  only if 
LB 
Part A coverage  is not available.  The reasons for Part A being unavailable  are  1) 
benefits  have been exhausted,  2) the 3-day prior  stay requirement  is not met, or 3) the 
patient  is receiving  a non-covered  level of care.  No mention  is made that some of the 
items in this listing are not covered  if the facility  does not generally  provide  them to 
inpatients. 
Within the discussion  of the Part B coverage  of incontinence  care items contained  within 
the secondary  medical  insurance  regulations,  section 41.0.10, these items are  still referred 
to as medical and other health  services.   However,  when these items are covered  by 
Part B, the regulation  section 410.36(a)(2)  indicates that incontinence  items are included 
within an area  called  medical  supplies,  appliances  and devices,  equipment  is listed 
separately.  However,  there  is no reference  to such a category  elsewhere. 
.. 
6.  Medicare  Intermediary  Manual  A3 section 3137. 
7.  The information  presented  here and in the next section represents  the most recent 
changes to the SNF manual. 
8.  Medicare  Regulation  409.25. 
9.  For purposes  of this calculation,  a rate of 25  percent  was used to account  for 
deductibles  and co-payments  when assessing  the burden to the Medicare  beneficiary  for 
Part B co-payments.  This  number  is used  as  a conservative  approximation  of the 
deductible  and co-payment  portion  of the allowed  charges.  A recent  OIG report  on Part B 
DME payments  during  SNF stays indicates  that deductibles  and co-payments  accounted  for 
27 percent  of the allowed  charges. 
10.  The Office of Inspector  General,  OffIce of Evaluation  and Inspections  has produced  a 
report  entitled  Payment  For Durable  Medical  Equipment  Billed During  Skilled Nursing 
Facility  Stays OEI-06-92-00860.  one  of the problems  noted in this report  was the 
13
 incorrect  coding for the place of service.  Often the place of service was coded incorrectly 
due to what appears  to be the lack of knowledge  of the patients  location. 
14  APPENDIX  A 
CONFIDENCE  INTERVALS 
The following  presents  the 95 percent  confidence  intervals  of the point estimates  for the 
three  services discussed  in this report.  We  reported  our findings by multiplying  100 by 
the point estimates  in our samples.  The point estimates  represent  the total Medicare 
allowance  for each service as reported  in Appendix B.  The confidence  intervals  present 
the range of possible  findings at the 95 percent  level. 
Year  Allowances 
Projected  Total  95%  Confidence  Interval 
Enteral Nutrition  Services:  1991-1992 
1991  $57,138,058  $55,769,606-$58,506,510 
1992  $57,724,751  $56,346,521-$59,102,981 
Incontinence  Services:  1991-1992 
1991  $7,003,804  $6,529,793-$7,477,81  1 
1992  $10,357,533  $9,164,521-$11,550,545 
Surgical	 Dressing  Services:  1991-1992 
1991  $6,275,711  $4,697,988-$7,853,434 
1992  $5,962,657  $4,636,487-$7,288,827 
A-1  APPENDIX  B 
MEDICARE  EXPENDITURES  BY  CATEGORY  OF  SERVICE 
Expenditures  for  Enteral  Services 
Medicare  Allowed  By  Category  of  Service 
Approximately  $57 Million 
in Pati  B Charges in 1991  1991 
and 1992 for  Enteral 
Nutrition,  Equipment,  and  1992 
~:  7 
Supplies. 
0s  10s  20s  30s  40s  60S  60S 
Millions 
ZZZl Sumlies  ~  Formula  - PumD.9 
Expenditures  for  Incontinence  Services* 
By  Category  of  Serv[ce  Medicare  Allowed  $7 
Million  in 1991 and 
$10.3  in 1992 in Part 
B Payments for 
Urological,  Ostomy, 
. .  .
I .J  and Colostomy 
0s 
2s  4s  6s  2+s  10s  ~	 Services  during Part A 
M1111O. 
=  CMhete,.  =  Catheter  supply  ~  salk.  SNF Stays. 
~  08tomy  bags  =  0.twllY  SUDldY  ~  SLIPPIY,  Both 
-urological.  o.totny,  and  colostomy  owe 
. 
Expenditures  for  Surgical  Dressing 
SurgtcalDressings  By  Category  of  Service 
Accounted for  $6.2 
Million  in 1991 and $6.0  >907 
Millwn  in 1992 in Pad  B 
Payment for  Beneficiaries  19e2 
in Medicare  Covered Pait  1 s
0s  1s  26	 3s  4*  6s  es  7s 
A SNF Stays.  MlllloneJ 
=  S...nryry  Dr.ssMIG- EZZi  Prim.ry  Dr*.al.9 
. 
Idud..  ml. o.l.  n.cw.  .UPDII.. 
SOURCE:  OIG  Projections  from  a one-percent  sample  of Medicare  beneficiaries. 
B-1
 APPENDIX  C 
TEXT  OF  AGENCY  COMMENTS 
. 
c-1  COMMENTS  OF  THE  PUBLIC  HEALTH  SERVICE

DEPARTMENTOFHEALTH& HUMASNERVICES  Fublic&#Jlsm&?
Memorandum 
. 
FE~  2  /gg5
Director

Office  of Resource Management,  OM

Office  of  Inspector  General  (OIG) Draft Report  Medicare

Payments  for Nonprofessional  Services in Skilled Nursing

Facilities , 0EI-06-92-O0864

Deputy  Inspector  General  for hbaluations  and Inspections,  OS

The Public Health Service has reviewed the subject C)IGdraft

report.  We have no comments  on the re~rts  recommendations

which  are directed  to the Health Care Financing

Administration.  However,  we submit the attached  technical

comments  for your consideration.

We appreciate  the opportunity  to review the draft report.

Attachment

.

c-2  COMMENTS  OF THE PUBLIC HEALTH SERVICE ON THE

OFFICE OF INSPECTOR GENEIUL DXikFTREPORT

MEDICARE PAYMENTS FOR NONPROFES~IONAL  SERVICES

IN SKILLED NURSING FACILITIES, 

_(OEI-06-92-0086~

The Public Health Sewice  has reviewed the Office of Inspector

General  draft report and has the following comments.

TECHNICAL  CON.13mlTS 
1.	 The draft report indicates  that the Food and Drug 
Administration  (FDA) classifies products  intended for use 
in enteral  nutrition  as food and not drugs in three 
places:  page 4, third paragraph;  page 4, fifth 
paragraph;  and page 5, first paragraph.  There are two 
significant  points that we want to bring to your 
attention. 
o	 First, all three references  to FDA policy  use the 
terminology  enteral nutrients.   In reality, FDA 
does not classify  nutrients, but classifies  the 
products  that contain the nutrients.  It would be 
more accurate  to use a phrase such as Products that 
are intended  for use in enteral feeding. .. 
o	 Secondr  the  statements  that  FDA classifies  these 
products  as  foods are not completely accurate. 
Under current FDA policy, these products  may be 
considered  to be foods or drugs, or both, depending 
on their intended use as determined  by the claims 
that are made for the product. 
2.	 The draft report uses a variety of different  words and 
phrases  in its discussion  on the provision  of enteral 
nutrition  senrices  to patients.  To improve the clarity 
of the report, we suggest that more precise  terminology

be used to discuss enteral nutrition  services.  We

suggest  that the report be amended in the following

instances  as indicated:

Paqe iii, third ~arauraph,  line 4:  Replace  enteral

claims  with  claims for enteral nutrition  services. 

pacze 2.  first  DaraUXaPh,  line 3:  Replace  enteral 
nutrients  with  enteral nutrition  services, 
Paue 2, second DaracrraDh, line 2:  Replace  enteral

nutrients  with  enteral nutrition  services. 

paae  6, first full ~araqravh,  line 1:  Replace  enteral 
nutrients  with  enteral nutrition  services. 
c-3  -.P	acre 6.,  first full DaraqraDh,  line 5:  Replace  enteral 
services  with  enteral nutrition  services.  
Pacfe 6,  fourth paraqra~h,  line 3:  Replace  enteral 
policy  with  the policy for providing  coverage  for 
enteral  nutrition  services.  
Paqe 9,  paraqraph  at bottom of paqe, line 3:  Replace 
nutrients  with  enteral nutrition  services.  
Paae 10, first full ParaaraDh,  lines 4 and 7:  Replace

enteral nutrition  with  enteral nutrition  services. 

Paqe 10, last  oarama~h,  line 1:  Replace  enteral with 
enteral nutrition  services.  
Paae 101 last  DarauraDh,  line 4:  Replace  enteral 
services  with  enteral nutrition  services.  
Paue  11, second DaraqraPh.  line S:  Replace  enteral 
service  claim with  claims for enteral nutrition 
services. 
c-4 
.  _.  ..__    COMMENTS  OF  THE  HEALTH  CARE  F7NANC~G  ADiVHNrS~TION 
DEPARTMENTOF HEALTH& HUMANSERVICES 
Healtcha re
Ftnanc,  ng Admtn!strat!o. 
.  1 
The  Admm!q,ator 
was~wtonc  D.c.  20201 
DATE: 
FEB23~ 
TO: 
June  Gibbs  Bron 
bspector  General 
. 
FROM: 
BIuce  C. VladW  N 
& 
Administrator 
% 
~JE~:	 office  of hspectorGeneralDraftReport: MedicarePaymentsfor 
~onprof~ional Sem~ iIISki]]edNu~@  FaCi]itie$n  (OEI--O6-92-W8&) 
We reviewed  the subject  repoti  which e~in~  the approptiaten~  of allowing  Part B 
pqnmt  for nonprofmionalsam-w includedin theextendedcare or skillednursing
facilitybenefit  .Our co~ents  are atiched  for your considemti~. 
Thank YOUfor theoppo~ni~  to review and co~ent  on this report.  Please  advise  us 
if you would  like to discuss  our position  on the repotis  recommendations. 
At@chment 
I 
c-5  Commentsof theI-XealtbCareFinancingAdministration[HCFA) 
on C)ffice of Inspector  General  (OIG)  Draft Report: 
Medicare  Payments  for Nonrxofessional  Services  in Skilled 
Nursine  Facilities  [SNFS 
[OEI-06-92-00864) 
OIG  Recommendation  1 
HCFA  should  develop  a regulation  or ]egi.s]ative recommendation,  as appropriate,  to 
establish  an enforceable  requirement  for SNFS  to  provide cover~  %rvices within  the 
Part A payment  rate. 
HCFAResoonse 
We concur.  We  developed  a legislative  proposal  that includes  a SNF bundling 
requirement.  This  proposa]  would  require SNFs to provide  all nonprofessional  services 
or supplies  furnished  to their patients,  thus no paptent  wou]d be made  under Part B. 
This program  change  should  help to Contro] ovemti]~tion  of these  services  and result  in 
reduced  cost-shanng  for bene~ciariea  since they would  no longer  be required  to pay
deductiblesandcotisuranw.~is  Wou]dah  ~ist  HCFAintrackingthecostofcarein 
SNFSand developing  a SNF prospective  payment system. 
OIG  Recommendation  2 
HCFA  should  clarify  the Residents  Rights  regulations,  CFR 42483.10,  as to whether 
the care and seMces  defined  as included  in the Medi~re  and Medimid  rate are 
rquired  to be provided  by the facility. 
liCFAR emonse 
We do-not  concur.  ne  re~lation  is clear~  re~ted  to both Medicare  and Medicaid 
beneficiaries.  Requiring  the faciuty to tic]ude  ~~  WMeS  in  is  Part  A  bill  could  be 
accomplished  only through  legislation  to prohl%it outside  mppliem  from billing  for 
unbundled  SeMCeS  under  part  B.  we  do  be&re,  how~er,  that  it  would  be  prudent  to 
clarify 42 CFR  483.35  (Die@ry  Sefi~)  to include  parenteral  and enteral  nutrition. 
Additional  Comments 
Congrer=ciao&nar]s
We be[ieve  the report  wou]d  be more  helpfil  to its  if it began with 
a clear statement  along  the following  lines 
C-6
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Page 2 
Thecurrent fragmentedmwmerinwhichMedicarepaymentis made for SNF 
residents  is a result of stitutory  prcwisionosrigh~y timndedtoensureaccessto

carg.l%isr eportamp]ydemonstratetsh attheabilitoyf
aSNF tomake useof

both Part A and Part B to undenvrite  care to its residents  results in increased 
progmm expendituresandwasteandmaydissipatetheSNFSincentivesto oversee 
the totalpackageofcarethe residentreceives. 
Changesin MedicarepaymentrulestoensurethatMedicaresSNFpaymentsare 
appropriatewouldne~ tobemadeiIItie ]aw.Giventie ]Ongstindinngatureof 
thecurrentbusinesspracti~s of  SuppfiersS,titutorychange 
SNFS  and  de  PW  B 
is th: >alywaythat changecouldbe effectivelyimplemented. 
Background  Section: 
o	 fhe first sentence  is misl~tig.  part A SNF StqS  are  dependent  on a 
specfic  set of conditions  necessary for coverage  that may result in up to 
100 days of covered  care per benefit  period. 
o	 The foknving  statement  is made  %e  ktent  of this benefit  is to shorten 
hospital  stays while  still  prwding  Covemge for a patient  who requires 
regularnursingand professionailntervention.-It is incorrectto state that 
theintentofthebenefitistoprtide  Wenge  forregularnursingand 
professionalintervention.S-NFcoverageis dependentupon the need for 
skilled  aeMCCS on a daily br@  fo~owing  a prior 3-day quali~ng  hospital 
stay, which  as a practical  matter can be furnished  only in a SNF. 
.o.  Please define  nonprofessional  institutional  service. 
0	 The  sentence,  Thus, payments  should not be made  under Part B for these 
seMces  is a conclusion  and should not appar  k  tie  background  section. 
Section  1819(b)(4)(A)(iv)  of the S- Security Act currently  allows  for 
paymentofcertainservicesundereitherPartA or PartB. 
Introduction: 
o	 The  conclusion  that separate payments  for these  seMces  under  Part B 
would  seem  inappropriate  is the purpose  of the repo~  not the 
background. 
c-7  Page  3 
0  The reports reliability  and validity could  be enhanced  with a more detailed 
discussion  on the methodology  utihd  to select  claims,  how the data base 
of valid and reliable  claims was developed  !mw a statistically  valid sample 
size was determined,  what data elerncnts were utilized  in the analysis, 
which files within the common  working file were  utilized,  and how the 
matching  of Part A to Part B stays was performed. 
Findings: 
o  The  ability of SNFS to provide servkxs  under arrangements  does  not 
remove  responai%ifity from the SNF for tie  ove.ra]l care provided  to a 
beneficiary.  It does  allow the faci%ty,to the extent  allowed  by law, to 
determine  what cows will be subject to  tie  SNF  routine  cost limit. 
0  Please  state  the source  of the figures relating to pnyments  to SNFS for 
enteral  services,  surgical dressing% and incontinent  care items. 
0  To tie resident  rights and quality of care issues  to a loophole  in the law 
that specifically  aUows for payment of these servicxx (enteral  nutrition, 
incontinence  care, and surgical  dressings)  under the Part B benefit  is 
fallacious.  Further,  there has been no violation  of resident  rights if the 
facility has informed  the resident  of facility charges  as specified  under 
42 CFR  483.10@)(6).  Further, the report does  not demonstrate  that 
payment  of these  services  under Rut  B has causeda negative  outcome 
relating  to quality of care nor has it presented  a factual  basis to promote 
this finding. 
0  Similarly,  the statement  that the practice of billing  incontinence  care 
seMces  under  Part B may have the appearance  of compromising  the 
quality  of care provided  is not substantiated  and not supported  by factual 
analysis. 
0  FailuretoincludeincontinenceservicesunderPartAisnota failureto 
observeresidentrightsif the facilityhas informedthe residentof facility 
chargesasspecifiedunder42CFR483.10(b)(6). 
Discussion: 
o  These  semices  are considered  ancilla~  costs under  Part A and are paid in 
full and are not included  in the SNF ~outine cost  Iimit.  How will inclusion 
of these  expenditures  as ancillary costs under Part A reduce  Medicare 
costs?  SNFS are required  to act as prudent  purchases  for these  specific 
services. 
C-8  Page 4 
0	 Is the OIG  indicating  that these  services should  not be paid as ancillary 
cos~  but be subject  to the SNF routine  cmt limit?  If so, we believe  that it 
- is unlikely  that SNFS would act as pmdent  purchasers  without  increasing 
their costs over the limi~ when  they are able to apply for exceptions  to the 
SNF  routine  cost limits.  IIIview of this  it is unclear  where  the cost savings 
to the program are to come  from. 
o	 Did  the OIG  question  if tie  intermediari~  edi~  were  turned  on to check 
for incorrect  coding?  TO  speculatemat it is lackof knmIedge  by suppliers 
is not recognizing  the unive~  of potenti~  pr~lem  areas mat are directi 
program  related.  The  OIG may wish to consider  this issue  more  closely 
and make recommendations  for improvement, 
c-9  COMMENTS  OF  THE  ASSISTANT  SECRETARY 
FOR  PL_G  AND  EVALUATION 
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~
DEPARTMENTOFHEALTH& HUMAN  SERVICES  [G  ~tce  of the Secrela!y 
SAIG 
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:.5  PDIG  ~ash/ington.  D C  20201 
DIG-AS  .  ~ 
I 3  1995  c~~n  < 
MAR 
DIGO1  

To:  JuneGibbsBrown  AKXXAA  _

InspectoGre
 neral  AIG-MP  _

OGC/lG  ~ 
From:  Assistant  Secretary  for  EXSEC  / 
t
Planning  and Evaluation  DATESENT.-. 
Subject:	 OIG Draft  Reports  on Medicare  Payments  for Nonprofes
sional  Serviees  in Skilled  Nursing Facilities 
We have reviewed  the draft inspedon  report entitled,  Medicare Payments  fa 
Nonprofessional  Services  in Skilled  Nursing Facilities.  The report discusses  deumre 
coverage  of non-professional  services  in skilled nursing facilities  (SNFS)  and Iwzwnta 
concernswithcurrentcoveragepoliciesthatpermitcovemgeoftheseseM% m= 
eitherPartsAorBonbehalfofpersonstiding  inSNFS.Whilewegenerallyagree 
withthe findingsin thisreport,wehavethe followingcomments. 
A footnote  indicates  that the scope  of the report is limited .to persons  residing  in SNFS 
during a Part A covered  stay -(p. 14, footnote  2).  We believe  this information -to be. 
significant  and recommend -the scope  of this report be incorporated  in the text of the 
rqort  rather than only referenced  as a footnote. 
While  providing  no evidentiary  Wls,  the report suggests  that allowing  Part B coverage 
for servhx  may have a negative  impact  on the qudty  of care.  For example,  the report 
states ht  aIlowing suppliers  to provide  enteral  services  appears  to raise quality  of care 
eoncems  (p. 6).  Further, the report in sever-alinstancesimpliesthat allowingfor Part B 
coveragefor SNFresidentsrelievesSNFSof their responsibtities  (e.g., pp.i,4,6, etc.). 
These claims should  either  be substantiated  or elirnizkted  from the report. 
The  report  states  that @aying  for these  setices  and supplies  under Part A could  save 
Medicare  money  and reduce  improper  incentives  for providers (p. 9).  The  report  also 
indicates  that in 1992 beneficiary  liability  for these  services  under Part B was almost  $20 
million  and aelmowledges  that these  costs,  now paid by beneficiaries,  would  shift to the 
progmm  if they wem  shifted  to Part A.  The report fails to indicate  why or how  saving 
wmdd accrue  under the proposal,  but instead  identifies  the bask  for added  Medicare 
- The  rationale  that SNFS would  be prudent purchasers  is hardly compelling. 
Finally,  given  the absence  of Part A fee  seheduks  or cost limits for some  of these 
services,  Part A payments  may not be less than Part B payments.  In sum, the report 
ti  to clarify its claim  that Medkare  could  save money  if Part B payments  were 
prohibited  for persons  residing  in SNFS during a Part A covered  stay. 
One recommendation  advanced  in the reporl is that HCFA  develop  a regulation  or 
legislative  proposal  that would  require  SNFS to provide  covered  services  withii  the Part 
c-lo  .-
A payment  rate.WWhile  we generallayg reewiththethrusotf &s recommendation,we 
suggesti tbeclarifieAd.s  discussedin the report, SNFS may be considered suppliers of
non-prof~iond  serviees and, as such, may bill Part B.  Thus, a recommendation 
requiring.SNFSto provide covered  seMees  W  not be sufficient  to prohibit  Part B 
payments  for nonprofessional  services.  In addition,  given that the report is limited  to 
persons  residing  in SNFS during a Part A eoverti  stay, we recommend  the 
recommendation  be modified accordingly.  This reeommemiation could be rewritten  as 
follows: 
Prohibit entitiesother than the SNF from seeking eovemge on behalf of persons 
in Part A covered SNF stays for enteral nutrition, ineontjnenee care and surgical 
dressing and limit Me&are  eovesage of these services to Part A. 
T%e intent of the reeommm&tion  to ckrify that tihts  rights include the SNFS 
obligation to provide care and services is unckar.  Why this recommtition  is needed 
and its effect need to be explained.  Although current residents rights requirements  do 
not explicitly provide a right to receive needed care and services provided by the facility, 
elsewhere in the regulations  them is a requireww t  that facilities provide needed  services 
(e.g., 483.2S). l%e report providesno evidencethat t%ilitieshavet%iledto provide 
needed services. If the intent of this recommention  is to prohibit beneficiaryfinancial 
lhbility for enteral nutrition,  incontinence  am,  and surgical dressings, it should be 
modified to require  inclusion of these services in the facilitys Part A payment (and 
therefoxe not payable under Part B) and, by so doing, exempt K&&nts  from charges for 
these services, 
David T. Ellwood
_  by: SU~  ~wl  690-7862  and Jennie  Harvell  690-644s 
C-II