Department  of Health  and Human  Services 
OFFICE  OF 
INSPECTOR  GENERAL 
PAYMENTS  FOR  REFERRALS  OF

PARENTERAL  NUTRITON  PATIENTS

A MANAGEMENT  ADVISORY  REPORT 
JULY  1993  OFFICE OF INSPECTOR GENERAL 
The  mission of the  Office 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  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  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 Office 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 efficiency, vulnerability, 
and effectiveness  of departmental  programs.  This report  was prepared  in the  Health  Care 
Branch  under  the direction  of Penny  R. Thompson,  Chief-
Cathaleen  A  Ahern,  Project  Leader 
Lewis Morris,  Deputy  Chief  Counsel,  Office of General  Counsel,  Inspector  General  Division 
For  additional  copies  of this report,  please  contact  the  Health  Care  Branch  at (410)966-3138.  I
Department  of Health  and Human  Services 
OFFICE  OF 
INSPECTOR  GENERAL 
PAYMENTS  FOR  REFERRALS  OF

PARENTERAL  NUTRITION  PATIENTS

A MANAGEMENT  ADVISORY  REPORT 
JULY  1993  OEI-12-92-00461
 INTRODUCTION 
PURPOSE  To  alert  the  Health  Care  Financing  Administration  (HCFA)  to  payments

being  made  to  End-Stage  Renal  Disease  (ESRD)  facilities  for  referrals  of parenteral

nutrition  patients.

BACKGROUND  The  Office  of Evaluation  and  Inspections  recently  released  a report

on  inappropriate  payments  for  total  parenteral  nutrition  (TPN),  a high-tech  form  of

artificial  nutrition  used  by a small  number  of patients  who  lack  functioning  intestinal

tracts.  (See  OEI-12-92-00460.)  In the  course  of that  inspection,  we  discovered  that

parenteral  nutrition  is used  in  ESRD  facilities,  in  a way  that  does  not  comply  with

Medicares  coverage  policies  for  this  very  expensive  therapy.  (When  parenteral

nutrition  is infused  at  the  same  time  as  a patient  is being  dialyzed,  the  therapy  is

called  intra-dialytic  parenteral  nutrition  (IDPN).)

We recommended  that  HCFA  instruct  the  specialty  carriers  who  process  claims  for

TPN  to  adhere  to  a strict  interpretation  of the  coverage  guidelines,  and  that  HCFA

review  research  concerning  the  clinical  appropriateness  of  IDPN.  The  HCFA  agreed

with  these  recommendations.

While  we reported  on  the  use  of IDPN  in that  report,  we  limited  our  discussion  to

coverage  and  clinical  issues,  rather  than  payment.  In  this  management  advisory

report,  however,  we wish  to  alert  HCFA  to  a serious  kickback  vulnerability  identified

in our  research.

METHODS  We  examined  a one-percent  random  sample  of patients  on  whose  behalf

Medicare  paid  claims  for  parenteral  nutrients  or  supplies  in  1991.  When  we  found

that  half  the  sample  consisted  of ESRD  patients,  we  conducted  a telephone  survey  of

93 randomly-selected  ESRD  facilities,  inquiring  about  their  use  of  IDPN,  patient

selection  criteria,  their  choice  of  a supplier,  and  other  issues.  The  respondent  was

usually  a head  nurse  or  other  clinician,  rather  than  a business  officer.  This  survey

forms  the  basis  of what  we  are  reporting  here.  The  extent  of use  and  clinical  criteria

for  use  of  IDPN  were  discussed  in the  TPN  report  referred  to  above.

We  conducted  our  review  in accordance  with  the  Quality Standards for  Inspections

issued  by the  Presidents  Council  on Integrity  and  Efficiency.
 FINDINGS

Almost h@  the ESRD facilihkswe SLUVqVdwereusingIDPN 
The  table  below  displays  the  use of IDPN  in the  facilities  surveyed.  Forty-five  of the 
93 facilities  use  IDPN.  The  55 for-profit  facilities  (33 of which  use  IDPN)  had  2.9 
percent  of their  patients  on IDPN;  the  38 not-for-profit  facilities  (12 using IDPN)  had 
1.5 percent  on IDPN.  1  The  overall  rate  was 2.4 percent. 
Facility  Stations  Census  No use  Past  use  Current  use  Patients 
For-profit;  869  4126  12  9  33  109 
55 
Not  for- 534  2592  17  10  12  51 
profit;  38 
Total  93  1,403  6,718  29  19  45  160 
As discussed  in our  earlier  report,  patients  receiving  IDPN  account  for more  than  half 
the  number  of patients  with TPN  claims,  and  one-third  of the  payments. 
Some IDPN suppkimarepayingESRD facilitiesto admhzistertheirparenteralnutrients 
In most  cases,  facilities  arranged  for  IDPN  to be supplied  by an outside  source.  The

outside  supplier  billed  Medicare  for the  nutrients  and  supplies.  Four  hospital-based  or

-affiliated  facilities  procured  the  nutrients  from  the  hospitals  pharmacy.  One  large

chain  of dialysis facilities  also is a supplier  of IDPN.  It supplied  its own facilities,  and

was identified  as the  supplier  of 21 of the  facilities  currently  using IDPN  (including  7 it

owns).  Two  other  facilities  also reported  that  their  parent  company  supplied  their

nutrients.

We asked  the  45 facilities  currently  using  IDPN  whether  their  supplier  paid  the  facility

directly  or indirectly  for administering  IDPN  (usually  this was characterized  as

payment  for the  nurses  time or an administration  fee.)  The  table  on the  following

page  displays  the  answers  we received.  Of the  seven  respondents  who answered  yes,

only one  was aware  of the  amount  ($60 per  infusion,  or $180 per  week  per  patient.)

Of the  facilities  not  currently  using  IDPN,  one  said  it had  been  paid  $25 an  infusion

(or  $75 per  week  per  patient);  a second  facility was looking  for a supplier  and

expected  to be  paid  a per-bag  or per-infusion  fee.

4 
  The designation of two facilities as for-profit is a correction of the table in our  earlier 
report,  in which they were incorrectly  recorded  as being  not-for-profit. 
2  Response  to query  about  fee,  rebate  or payment  #  Responding 
I 
Dont  know  about  payments  21 
I 
Yes, facility  receives  payment  7 
Believe  facility is paid  2 
Payment  in kind  (refrigerator)  I  1II 
I 
No, facility  receives  no payment  1 II 
Hospital  supplies  nutrients  4 
Same  parent  company  9 
Total  45 
We  obtained  a copy of the  IDPN  Service  Agreement  used  by the  major  supplier 
referred  to above.  The  suppliers  cover  letter  to the  agreement  says the  service 
agreement  is used  to allow us to reimburse  your  unit  (on  a fee  for service  basis)  for 
the  staff  time  required  to administer  IDPN  and  monitor  the  patient.  The  agreement 
itself shows $30.00 as the  fee  per  parenteral  therapy  treatment.  The  fee  is noted  to be 
negotiable  should  Medicare  increase  or decrease  its reimbursement  rates  for the 
therapy  in question  by more  than  15 percent. 
l%esepaywumsappearto be illegalas weUas unreasonablyhigh 
We believe  that  these  fees  may represent  inducements  intended  to influence  the 
selection  of an  IDPN  supplier  and  to encourage  the  placement  of additional  patients 
on  IDPN.  As such, the  payment  would  be in violation  of the  Medicare  and  Medicaid 
Anti-kickback  statute,  which prohibits  the  offer  or receipt  of remuneration  to induce 
the  referral  of Medicare-reimbursed  items  or services.  Our  concern  is heightened  by 
the  amount  of these  administration  fees  -- $75 to $180 per  patient  per  week  for the  5 
to 7 months  we found  the  average  IDPN  patient  to be  receiving  nutrients. 
The  fees  raise  questions  about  the  reasonableness  of Medicares  reimbursement  for 
IDPN,  if over  $9,000 a year  can be paid  for administrative  costs when  Medicares 
reimbursement  for  IDPN  is $30,000 to $40,000 per  patient  year.  Dialysis facilities  are 
paid  a composite  rate  per  treatment  for dialysis, including  supplies,  laboratory  tests, 
and  certain  drugs.  The  prospectively-set  base  rate  ranges  from  $126 in a free-standing 
facility  to $130 dollars  in a hospital  facility and  is adjusted  for  area  wage  levels.  Thus 
a $25-per-infusion  administration  fee would  represent  an additional  20 percent  of 
HCFAS  base  payment.  The  IDPN  nutrients  and  supplies  themselves  would  account 
for another  $230 paid  on average  per  infusion.  This payment  is made  to the  IDPN 
supplier,  not  the  facility.  Our  earlier  report  discusses  why IDPN  should  cost  less 
(rather  than  more,  as it currently  does)  to administer  than  TPN,  due  to bulk 
purchasing,  streamlined  administration,  and  other  economies. 
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 CONCLUSION

We  are  concerned  that  the  illegality  of offering  or  receiving  payments  for  referrals  is 
not  well  understood  by some  ESRD  facilities.  We  intend  to  alert  the  provider  and 
supplier  communities  to  the  prohibition  on  payments  for  referrals  through  this  MAR 
and  other  communication.  The  HCFA  may  wish  to  issue  clari&ing  instructions  as well. 
4