I 
I 
I 
Depafiment  of  Health  and Human  Services 
OFFICE  OF 
INSPECTOR  GENERAL 
MEDICARE  HOME  INFUSION  THERAPY 
OEI-02-92-00420 
SEPTEWER  1993 
I  EXECUTIVE  SUMMARY

PURPOSE 
The  purpose  of this inspection  is to describe  the  Medicare  home  infusion  industry 
including  reimbursement  trends,  coverage,  company  characteristics  and  physician 
financial  arrangements. 
BACKGROUND 
Home  infusion  therapy,  one  of the  fastest  growing  segments  of home  health  care,  has 
made  it possible  for increasingly  sophisticated  treatments  to be given in the  home. 
These  include  enteral  and  parenteral  nutrition  and  other  therapies  such as intravenous 
antibiotics  and  chemotherapy. 
According  to a May  1992 Office  of Technology  Assessment  (OTA)  report,  a few large 
companies  dominate  the  national  market.  The  remaining  companies  include  midsized 
firms with  strong  regional  markets  and  numerous  small  firms with local pharmacists, 
home  health  agencies,  hospitals  and  nursing  homes  increasingly  entering  the  market. 
Medicare  patients  appear  to be  a small part  of the  total  home  infusion  market.  While 
Medicare  coverage  is clearly  defined  for enteral  and parenteral  nutrition,  other  home 
infusion  therapy  semices  are  covered  in a fragmented  way.  Although  Medicare  covers 
drugs  and  biological  when  used  with  an infusion  pump,  carriers  are  given discretion  in 
implementing  this coverage. 
Over  the  last decade,  both  Congress  and  the  Office  of Inspector  General  (OIG)  have 
had  concerns  about  physician  financial  arrangements  with medical  entities,  including 
home  infusion  companies.  The  Omnibus  Budget  Reconciliation  Act  of 1993 generally 
prohibits  payment  by Medicare  and  Medicaid  for services  performed  by clinical 
laboratories,  durable  medical  equipment  providers,  home  health  agencies,  and 
suppliers  of parenteral  and  enteral  nutrition  when  such services  are  ordered  by a 
physician  who  has a financial  relationship  with the  supplier. 
METHODOLOGY 
We gathered  and  analyzed  four  sets of data  relevant  to the  four  parts  of the  studys 
purpose.  (1)  To  estimate  recent  trends  in Medicare  reimbursements  for  home 
infusion  services,  we reviewed  Health  Care  Financing  Administration  (HCFA)  data  on 
allowed  charges  for services  and  supplies  representing  home  infusion  charges  in  1990 
and  1991.  (2)  To  describe  Medicare  coverage  for home  infusion  services,  we looked 
at Medicare  coverage  guidelines,  reviewed  existing  literature,  spoke  to various 
respondents  knowledgeable  in the  industry,  and  analyzed  carrier  payment  data.  (3) 
To  describe  home  infusion  companies  serving  Medicare  patients,  we drew  a random 
sample  of 200 beneficiaries  who had  pumps  billed  in 1991 and  identified  the  . 
companies  which  provided  these  pumps.  From  these  companies,  we identified  and 
i  interviewed  57 which  provide  infusion  therapy  in the  home.  (4)  To  describe  the 
nature  and  extent  of physician  financial  arrangements,  we interviewed  30 
representatives  of 30 randomly  selected  home  infusion  companies,  three  of which  were 
independent  locations  of the  same  company;  a non-random  sample  of 28 physicians; 
and  17 other  respondents  representing  11 professional  organizations  and  6 referring 
agencies. 
FINDINGS 
Me&are  Pqmerus  for Honw  InfMwn  lkem~  are Ri.riizgRapidly 
The  number  of Medicare  beneficiaries  who received  infusion  services  in the  home 
grew by 91 percent  from  14,500 in  1990 to 27,700 in 1991.  Estimated  total  allowed  -
Medicare  charges  for infusion  therapy  in the  home  leapt  213 percent,  from  $61 million 
to $191 million.  The  average  allowed  charges  annually  per  Medicare  beneficiary 
.
jumped  63 percent,  from  $4243 to $6923. 
Caniem Are Not  Uniformly Covering Home  Inn  Therapy 
The  OTA  study,  an  analysis  of carrier  payments,  and  comments  of study respondents 
indicate  great  variability  in coverage  policy among  Medicare  carriers.  While  17 
carriers  have  policies  to cover  only the  drugs  and  conditions  specified  by HCF~  other 
carriers  cover  not  only these,  but  a wide variety  of others  as well. 
Physician Ownmhip  and Other Financial Arrangements Are  Common 
Of the  30 infusion  company  respondents  in our sample,  five (17 percent)  report  having 
physician  owners.  Ten  (33 percent)  of the  sample  infusion  company  respondents 
report  having  some  other  sort  of financial  or business  arrangement  with  one  or more 
physicians.  Such  arrangements  are  complex  and  it is difficult  to determine  what  effect, 
if any, they  may have  on Medicare.  In regard  to both  the  physician  ownership  and 
other  financial  arrangements  discussed  in this report,  we did not  have  sufficient  data  to 
determine  the  effects  that  OBRA  1993 would  have  on Medicare  payment  for services 
ordered  by physicians  with  the  financial  arrangements  we found. 
Perceptions  of company,  physician  and  other  respondents  as to the  extent  of physician 
arrangements  differ  from  physicians  and  companies  reported  behavior,  suggesting 
that  the  full nature  and  extent  of such  arrangements  are  unclear.  Most  company 
respondents,  for example,  believe  physician  arrangements  to be very or somewhat 
common,  even  though  over  half report  having  no such  arrangements. 
In contrast  to the  infusion  industry  in general,  which is dominated  by a few large  firms, 
smaller  companies  are  providing  home  infusion  to Medicare  patients. 
ii  RECOMMENDATIONS 
In light of our  findings,  we believe  that  HCFA  should:  1) monitor  spending  to  better 
identify  trends;  2) provide  more  specific  coverage  guidelines;  and  3) collect  ownership 
and  compensation  information  on form  HCFA-192,  use this information  to monitor 
referral  and  utilization  patterns,  and  refer  suspected  cases  of abuse  to the  Office  of 
Inspector  General. 
COMMENTS 
Written  comments  received  from  HCFA  and  verbal  comments  received  from  OTA 
concur  with the  recommendations  of this report.  Suggestions  for changes  in the 
wording,  clarifications  of the  text  and  any technical  changes  have  for the  most  part 
been  incorporated  into  the  final report.  The  actual  comments  received  from  HCFA 
are  in Appendix  D. 
... 
111  TABLE  OF  CONTENTS

EXEC~  S~Y

1

INTRODU~ON  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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

  Medicare  Home  Infusion  Payments  Rising  Rapidly  . . . . . . . . . . . . . . . . . . . . . . 
8

  Home  Infusion  Therapy  Not  Uniformly  Covered.  . . . . . . . . . . . . . . . . . . . . . . .

10

.  Physician  Ownership  and  Arrangements  Common  . . . . . . . . . . . . . . . .1.  . . . .

..14

RECOIVIMENDA~ONS  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

APPENDI~  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 
A-1

A  MethodoloPJ  to Estimate  Medicare  Reimbursement  . . . . . . . . . . . . . . . . . . . 
.  B-1

B:  Sampling  Methodology  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 
. .  c-1

c.  OTACoverage  Data  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

. .  D-1

D:  Comments  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
 INTRODUCTION

PURPOSE 
The  purpose  of this inspection  is to describe  the  Medicare  home  infusion  industry 
including  reimbursement  trends,  coverage,  company  characteristics  and  physician 
financial  arrangements. 
BACKGROUND 
Home  infusion  therapy,  one  of the  fastest  growing  segments  of home  health  care,  has 
made  it possible  for increasingly  sophisticated  treatment  to be given in the  home, 
including  care  previously  available  only in a hospital.  It offers  a variety  of medical 
treatments.  They  include  enteral  nutrition,  which provides  the  patient  with liquid 
nourishment  through  a tube  inserted  into  the  stomach,  either  directly  through  the  skin 
or through  a naso-gastric  tube;  parenteral  nutrition  which  provides  liquid  nourishment 
intravenously  and  antibiotics  administered  intravenously  when  a drug  cannot  be 
administered  orally  or by injection.  Chemotherapy,  pain  management,  blood 
transfusions,  hydration  therapy,  and  human  growth  hormones  are  other  treatments. 
For  the  purposes  of this study, nutrition  therapy  refers  to enteral  and  parenteral 
services,  while  the  remaining  services  are  referred  to as other  therapies. 
Components  of home  infusion  include:  equipment  (such  as pumps  and  poles);  supplies 
(such  as dressing  supplies  and  infusion  sets);  nutrients,  drugs  and  pharmacy  services; 
nursing  services;  physician  semices;  laboratory  services;  and  patient  assessment  and 
training. 
A significant  development  in home  infusion  has been  the  advent  of the  portable, 
electronic  pump  used  to administer  the  drug.  It allows the  flow of the  drug  to  be 
controlled,  does  not  require  the  constant  care  of a nurse  and  helps  ensure  greater 
patient  safety. 
The Home  Injisibn  lkrapy  Induwy 
The  industry  includes  various  players:  home  infusion  companies,  home  health 
agencies,  visiting nurse  semices,  pharmacies  and  durable  medical  equipment  (DME) 
companies.  The  patients  attending  physician  usually  coordinates  the  care. 
According  to a May  1992 Office  of Technology  Assessment  (OTA)  report,  entitled 
Home  Drug  Infusion  Therapv  Under  Medicare,  a few large  companies  dominate  the 
national  market.  The  remaining  companies  include  midsized  companies  with  strong 
regional  markets  and  numerous  small firms.  Entering  the  business  are  a growing 
number  of community  pharmacists,  as evidenced  by the  growth  of pharmacy  franchise 
companies,  as well as home  health  agencies,  hospitals  and  nursing  homes.  Medicare  patients  appear  to be a small  part  of the  total  market.  The  OTA  estimated

that  roughly  20,000 to  35,000 elderly  were  receiving  home  drug  infusion  therapy  in

1991, about  10 to  15 percent  of all home  drug infusion  patients.  The  National

Alliance  for  Infusion  Therapy  (NAIT),  which represents  nineteen  home  infusion

companies,  including  many  of the  larger  firms, estimates  that  between  11 to  15 percent

of its members  patients  are  on Medicare.  It also reports  that  most  of its members

home  infusion  patients  receive  antibiotic  therapy  and  enteral  nutrition.

The  January  1991 issue  of Homecare  Magazine  listed  the  top  ten  infusion  companies

by sales volume.  The  number  one  company,  Caremark,  had  sales of $625 million  and

operated  in 120 locations.  The  next  nine  companies  ranged  from  $83 million  in sales

to $17.2 million.  These  companies  provide  both  nutrition  and  other  therapies.

Besides  providing  the  therapy  itself  (including  the  necessary  equipment  and  drugs),  the

large  companies  offer  clinical  pharmacy  and  nursing  services.  The  more  traditional

DME  companies  primarily  furnish  equipment  and  supplies.  Companies  may  also  have

patient  advocates  on staff who meet  with patients  to coordinate  their  care,  to answer

questions  and  to  address  their  concerns.  One  large  firm has home  patient

representatives  who  coordinate  the  services  of the  physician  and  company  staff,  such

as nurses  and  pharmacists;  they  also  monitor  patient  compliance.

lUedkare  Cbverage of Home  Infizswn Serviies 
Medicare  coverage  of infusion  services  provided  by companies  to patients  in their 
homes  varies  depending  on the  type  of service.  Claims  for these  services  are 
reimbursed  by Medicare  Part  B carriers,  the  Health  Care  Financing  Administration 
(HCFA)  contractors  who  are  responsible  for paying  Part  B claims. 
Nutrition  therapy  coverage  is clearly  defined  in the  Medicare  Carriers  Manual 
(MCM),  Section  2130, which  discusses  home  enteral  and  parenteral  nutrition  in the 
context  of prosthetic  devices  when  ordered  by a physician.  It states,  Accessories 
and/or  supplies  which  are  used  directly  with an enteral  or parenteral  device  to  achieve 
the  therapeutic  benefit  of the  prosthesis  or to assure  the  proper  functioning  of the 
device  are  covered  under  the  prosthetic  device  benefit...  Medicare  allows nutrition 
therapy  to be  reimbursed  for  patients  at home  or in a nursing  facility, including  a 
skilled  nursing  facility, when  the  products  are  provided  by an outside  supplier  who  bills 
the  Medicare  carrier  directly. 
As noted  in Medicare  Part  B MCM  Section  2100.5, Medicare  covers  home  infusion 
therapy  primarily  through  its DME  benefit.  Infusion  pumps  are  covered  as equipment 
capable  of withstanding  repeated  use when  medically  necessary  to ameliorate  illness 
or injury  or to improve  functioning  of a malformed  body  part.  Medical  supplies  and 
accessories  necessary  for the  proper  functioning  of the  equipment  are  also covered. 
This  includes  tubing,  needles  and  alcohol  swabs, and  also drugs  and  biological  that 
must  be  put  directly  into  the  equipment  to assure  proper  functioning. 
2
 Although  Medicare  covers  drugs  and  biological  when  used  with an infusion  pump,  the

carrier  is given discretion  in implementing  this coverage.  The  HCFA  instructed

carriers  in the  Medicare  Coverage  Issues Manual,  Section  60-14 to cover  the  cost  of

external  infusion  pumps  when  used  in the  administration  oh  deferoxamine  to treat

acute  iron  poisoning  and  iron  overload;  heparin  to treat  thromboembolic  disease

and/or  pulmonary  embolism  (in institutional  settings  only);  chemotherapy  for liver

cancer  patients  and  colorectal  cancer  patients  who  cannot  or will not  undergo  surgical

treatment;  and  morphine  for intractable  cancer  pain.  The  manual  goes  on to say,

Other  uses of external  infusion  pumps  are  covered  if the  contractors  medical  staff

verifies  the  appropriateness  of the  therapy  and  the  prescribed  pump  for the  individual

patient.

Other  distinctions  exist in Medicares  handling  of nutrition  and  other  infusion  therapy  -

services.  Currently,  only two carriers  reimburse  claims for  all nutrition  services,  while

all carriers  pay for  other  infusion  therapy.  As of October  1993 four  regional  carriers

will handle  claims  for all nutrition  and  other  infusion  therapy.  This will allow them  to

make  more  consistent  coverage  decisions.  All providers  who supply  DME  will have  to

fill out  a new Form  HCFA-192,  a disclosure  of ownership  form, in order  to obtain  a

new provider  number  needed  to submit  claims  to the  regional  carriers.

Limits  exist regarding  the  coverage  of physician  services  relating  to home  infusion

therapy.  Medicare  Part  B covers  physician  hospital  visits related  to discharge  and

office visits, but  does  not  ever  cover  physician  administrative  or telephone  consultation

services;  direct  contact  with the  patient  is required  in order  for the  physician  to be

reimbursed.

Lastly,  Medicare  also provides  infusion  services  to homebound  patients  under  its home

health  benefits.  Home  health  agencies  are  reimbursed  by Medicare  intermediaries  for

nursing  services,  infusion  equipment  and  supplies.  Drugs  and  biological  are,  however,

specifically  excluded  under  the  home  health  benefit.  (We  note  that  home  infusion

services  provided  by home  health  agencies  are  not  within  the  scope  of this study.)

M&care  Reimburwnent  of Home  Injksion Services 
In planning  the  study  it was not  possible  to obtain  Medicare  reimbursement  data  for

infusion  patients  treated  in the  home.  Reasons  for this difficulty include  the  large

number  of home  infusion  services  and  supplies  and  the  fact  that  they  are  covered  in a

fragmented  way.  It thus  became  an objective  of the  study to obtain  this

reimbursement  data,  including  trend  information.  .

Concerns About  Physician Financial Amangements 
Over  the  last decade,  both  Congress  and  the  Office  of Inspector  General  (OIG)  have 
had  increasing  concerns  about  the  proliferation  of financial  arrangements  between 
physicians  and various  medical  entities  such as laboratories  and  DME  companies. 
More  recently,  there  has been  an interest  in the  business  of home  infusion.  For 
3  instance,  Modern  Healthcare,  November  1991, reported  that  one  large  company 
acknowledged  paying  $12 to $150 per  week  to hundreds  of physicians  under  its Quality 
of Service  Agreements.  Their  reasoning  for paying the  fees  is a common  refrain  in 
the  homecare  industry:  The  treatments  for home  care  patients  are  getting  more 
complex,  and  physicians  should  be paid  for their  part  in managing  that  treatment. 
Notwithstanding  this rationale,  questions  about  the  appropriateness  of certain 
physician  payments,  and  their  budgetary  impact,  have  prompted  an increase  in studies 
and  regulations. 
In June  1988, Congress  mandated  that  the  OIG  conduct  a study on ownership  and 
compensation  arrangements  involving  physicians  and  the  health  care  entities.  The 
study looked  at  independent  clinical  laboratories  (ICL),  independent  physiological 
laboratories  (IPL),  and  DME  companies,  but  did not  specifically  look  at home  infusion 
companies.  In a report  published  in May  1989, the  OIG  found  that  many  physicians 
are  owners  of or have  other  financial  relationships  with health  care  businesses  to 
which  they  refer  patients.  The  study  also found  that  those  ICLS with physician 
arrangements  had  an increased  utilization  rate  (45 percent  more  than  other  Medicare 
recipients)  attributed  to the  patients  of the  physicians  involved. 
A January  1991 report  by the  State  of Florida  Health  Care  Cost  Containment  Board, 
entitled  Joint  Ventures  Among  Health  Care  Providers  in Florida,  found  that  some 
types  of physician-owned  facilities  had  clearly  increased  costs, charges,  and/or 
utilization,  or were  associated  with greater  access  or quality  problems,  but  the  results 
varied  depending  on the  type  of facility.  Infusion  companies  were  not  included  in this 
study. 
In its May  1992 report,  the  OTA  states,  There  is some  evidence  that  physician 
ownership  of health  facilities  is related  to higher  use  of those  facilities  services.  They 
also report,  There  is little  consensus  among  physician  associations  regarding  the 
acceptability  of different  ownership  and  financial  arrangements. 
The  OIG  has approached  physician  ownership  and  compensation  arrangements  as 
potential  violations  of the  Medicare  and  Medicaid  anti-kickback  statute.  This  criminal 
provision  is useful  to the  Federal  health  care  programs  as a means  of limiting  the 
influence  of money  on physicians  decisions  regarding  when  and  where  to refer 
patients.  In 1987, the  Medicare  and  Medicaid  Patient  and  Program  Protection  Act 
gave the  OIG  additional  remedies  for violations  of the  anti-kickback  statute.  IrI 
addition  to criminal  penalties,  a violator  may be  subject  to exclusion  from  participation 
in the  Federal  health  care  programs.  The  1987 legislation  also directed  the  OIG  to 
develop  the  so-called  safe harbor  regulations,  to clarify the  types  of arrangements  or 
conduct  that  would  not  be  subject  to prosecution  under  the  anti-kickback  laws. 
The  Medicare  Catastrophic  Coverage  Act  of 1988 (later  repealed)  which would  have 
explicitly covered  home  infusion  would  have  prohibited  payment  for home  drug 
infusion  therapy  services  provided  by a company  in which the  physician  ordering  the 
service  had  a financial  interest.  Based  on the  1988 OIG  study, Congress  prohibited 
4  Medicare  payment  for  clinical  laboratory  services when  ordered  by a physician  with  a

financial  stake  in the  supplier.  Anumber  of States  have  banned  or restricted

physician  self-referrals;  while  other  States  permit  self-referral  as long as the  physician

and,  in some  cases,  the  referred  entity  disclose  their  financial  relationship  to patients.

The  Omnibus  Reconciliation  Act  (OBRA)  of 1993 includes  a provision  which  expands

the  current  ban  on payment  for clinical  laboratory  services  when  ordered  by a

physician  who has  a financial  relationship  with the  supplier.  The  expansion  applies  the

prohibition  on payment  to a number  of other  services,  including  DME  and  parenteral

and  enteral  nutrients,  equipment  and  supplies,  and  prohibits  payment  by both

Medicare  and  Medicaid.  This  expansion  on the  current  ban  for clinical  laboratory

services  applies  to referrals  made  after  December  31, 1994.

Joint Conuniwihn  on Accreditation  of Healthcare  Organizations (JCAHO) 
Home  infusion  companies  may voluntarily  apply  for accreditation  from  JC&O  as

home  care  organizations.  Standard  GM.11.1  of JCAHOS Accreditation  Manual  for

Home  Care,  1993 edition,  discusses  physician  involvement  in the  company.  It states,

Professional  experts,  including  physicians,  are  involved  as appropriate  in the

development  of patient/client  care/service  policies  and  procedures  and  the  review  and

revision  processes.  The  disclosure  of ownership  is on the  application  filled out  by

companies  when  applying  for accreditation.  If a physician  or hospital  owner  is

identified  as an owner,  they  are  required  to disclose  their  ownership  to any patients

they  refer  to their  own company  for services.

METHODOLOGY

overview

We gathered  and  analyzed  four  sets of data  relevant  to the  four  parts  of the  studys

purpose.  (1) To  estimate  recent  trends  in Medicare  reimbursements  for home

infusion  services,  we reviewed  HCFA  data  on allowed  charges  for sewices  and

supplies  representing  home  infusion  charges  in 1990 and  1991.  (2) To  describe

Medicare  coverage  for home  infusion  services, we looked  at Medicare  coverage

guidelines,  reviewed  existing  literature,  spoke  to various  respondents  knowledgeable  in

the  industry,  and  analyzed  carrier  payment  data.  (3) To describe  home  infusion

companies  serving  Medicare  patients,  we drew  a random  sample  of 200 beneficiaries

who had  pumps  billed  in  1991 and  identified  the  companies  which provided  these

pumps.  From  these  companies,  we identified  and  interviewed  57 which  provide

infusion  therapy  in the  home.  (4) To  describe  the  nature  and  extent  of physician

financial  arrangements,  we interviewed  representatives  of 30 randomly  selected  home

infusion  companies,  three  of which  are  independent  locations  of the  same  company,  a

non-random  sample  of 28 physicians,  and  17 other  respondents  representing  11

professional  organizations  and  6 referring  agencies.

5
 HCFA Data  on Allowed  Charges 
To  estimate  Medicare  reimbursement  for infusion  services  and  to identi~  trends,  we 
analyzed  the  data  in a one  percent  random  sample  of the  HCFA  Common  Working 
File  (CWF),  HCFAS  system  for collecting  carrier  data  nationally.  These  data 
consisted  of total  allowed  Part  B charges  in 1990 and  1991 for both  total  infusion 
services  and  home  infusion  services.  The  allowed  charges  represent  what  Medicare 
considers  reasonable  for these  services.  The  program  pays 80 percent  of allowed 
charges  with beneficiary  responsibility  for coinsurance  and  deductibles.  To  estimate 
the  payments  for home  infusion  services,  we developed  a list of services  and  supplies 
representing  a total  of 121 billing codes  which we believe,  in the  aggregate,  capture 
these  services.  See  Appendix  A. 
Medicare  Coverage 
In order  to determine  Medicare  coverage  of home  infusion  services  we reviewed  the 
Medicare  Carriers  Manual  (MCM)  and various  surveys and  reports.  Since we became 
aware  of varying  coverage  of drugs  and  biological  we gathered  perceptions  of people 
from  agencies  who referred  patients  for home  infusion,  infusion  company 
representatives,  members  of professional  organizations  and  physicians  about  carrier 
implementation  of Medicare  coverage  guidelines.  We  also analyzed  patterns  of 
payments  made  by carriers  in  1991 for infusion  drugs  including  antibiotics, 
deferoxamine,  some  immunosuppressives  and  a chemotherapeutic  agent,  FUDR,  used 
to treat  liver cancer. 
Infusion Company  Charactetitics 
From  HCFAS  1991 CWF  we selected  a random  sample  of 200 beneficiaries  who  had 
pumps  billed  (the  major  way that  Medicare  pays for home  infusion  therapy).  See 
Appendix  B.  Twenty-one  of these  beneficiaries  had  pumps  billed  by more  than  one 
company.  This should  have  given us the  names  of 221 infusion  companies;  we were 
able  to identify  213 of them.  We were  unable  to identify  eight  companies  because  the 
carrier  did not  supply  us with this information.  Seventy-eight  were  repeats  of the 
same  companies,  thus  giving us 135 different  companies.  We  reached  128 of these 
companies;  the  remaining  seven  were  defunct.  The  128 includes  some  companies  with 
several  locations  and  represents  a total  of 117 firms. 
When  we started  calling  infusion  companies  to ask them  about  the  home  infusion 
therapy  they  provide,  we soon  realized  that  a substantial  number  of the  companies 
only supplied  nutrition  therapy  in nursing  homes.  Some  companies  were  actually 
nursing  homes.  The  companies  which  provide  services  only to nursing  homes  had 
minimal  contact  with the  patients  physicians.  In fact,  the  nursing  homes,  not  the 
physician,  referred  patients  to companies.  We then  screened  all of the  remaining 
companies  in the  sample  and  eliminated  those  which  provided  only nutrition  therapy 
to nursing  homes.  Seventy-one  companies  were  eliminated,  leaving  a total  of 57 that 
provided  infusion  therapy  in the  home. 
6  Physician Financial Awaugernenti 
From  the  57 companies  we randomly  selected  a subsample  of 30.  Three  of the  30 are 
locations  of one  larger  company,  but  each  location  acts independently  with its own 
manager,  policies,  and  operations.  We called  representatives  of the  30 and  asked 
about  the  therapies  they  provide,  any financial  arrangements  they  may have  with 
physicians  and  their  views of the  industry.  We also requested  samples  of any contracts 
they may use with physicians.  Five  of the  ten  companies  who told  us about  financial 
arrangements  sent  us examples  of these  contracts. 
Additionally,  we interviewed  a non-random  subsample  of 28 of the  164 physicians  who 
referred  patients  to the  sample  infusion  companies  about  their  relationships  and 
involvement  with  home  infusion  companies  and  their  general  perceptions  of the 
industry.  We chose  to conduct  a convenience  subsample  when  it became  apparent 
that  most  physicians  had  limited  experience  with home  infusion  companies.. 
We  also interviewed,  by phone  or in person,  11 principals  of professional  and  trade 
organizations  such as the  National  Alliance  for Infusion  Therapy  (NAIT),  the 
Outpatient  Intravenous  Infusion  Therapy  Association  (OPIVITA),  the  American 
Academy  of Home  Care  Physicians  and  the  National  Association  for Home  Care. 
Lastly, we interviewed  a staff person  from  each  of 6 referring  agencies  which  included 
a home  health  agency,  several  hospitals  and  a nursing  home.  We asked  about  their 
experiences  and  their  insights  into  physician  financial  arrangements  with  home  infusion 
companies. 
This inspection  was conducted  in accordance  with the  Quality  Standards  for 
Inspections  issued  by the  Presidents  Council  on Integrity  and  Efficiency. 
7
 FINDINGS

MEDICARE  PAYMENTS  FOR  HOME  INFUSION  THERAPY  ARE  RISING 
RAPIDLY 
There  has been  a rapid  increase  in Medicare  home  infusion  therapy  reimbursement. 
The  number  of Medicare  beneficiaries  who receive  infusion  semices  in the  home  horn 
infusion  companies  grew by 91 percent  from  1990 to  1991 (see  Table  1 below).  From 
1990 to  1991, estimated  total  allowed  Medicare  charges  for infusion  therapy  in the 
home  leapt  213 percent,  from  $61 million  to $191 million. 
The  average  allowed  charges  per  Medicare  beneficiary  receiving  infusion  services  in 
the  home  jumped  63 percent,  from  $4243 to $6923.  One  reason  the  average  cost  is 
growing  so rapidly  according  to OTA  is that  both the  categories  of drugs  that-carriers 
are  willing to cover  and  the  number  of claims  for drugs in those  categories  appear  to 
be  rising. 
TABLE  1: GROWTH  OF  INFUSION  SERVICES  UNDER  MEDICARE  PART  B 
CY  1990  CY  1991  INCREASE 
INFUSION  SERVICES  IN 
THE  HOME 
Estimated  Number  of  14,500  27,700  91% 
beneficiaries 
Estimated  Total  $ allowed  $61 million  $191 million  213% 
Estimated  Average  $ allowed  $4243  $6923  63% 
CARRIERS  ARE  NOT  UNIFORMLY  COVERING  HOME  INFUSION  THERAPY

Medicare  carriers  do not  appear  to be  covering  home  infusion  therapy  in a uniform

manner.  We  initially  identified  this problem  during  our  review  of the  earlier

mentioned  OTA  report  and  developed  it further  in discussions  with OTA  staff  and

industry  experts.  We  also reviewed  some  additional  OTA  coverage  data  not  published

in the  final  report.  Finally,  comments  volunteered  by our  studys respondents  and  our

own data  analysis  further  support  the  existence  of this variable  Medicare  coverage.

The  OTA  study  found  great  variability  in coverage  policy among  Medicare  carriers

(see  Append~  C).  The  OTA  surveyed  43 carriers  and  found  all had  policies  to cover

the  three  drugs  specified  by HCFA  in its Coverage  Issues  Manual:  chemotherapy

drugs  for certain  cancers,  deferoxamine  for acute  iron  poisoning  or overload,  and

morphine  for intractable  cancer  pain.

8
 While  17 carriers  had  policies  to cover  only the  drugs  and  conditions  specified  by

HCFA,  the  other  carriers  had  policies  to cover  not  only those  drugs,  but  a wide  variety

of other  drugs  as well.  The  OTA  February  1991 data  indicate,  however,  that  many

carriers  did not  have  policies  to cover  drugs  and  conditions  other  than  those  specified

by HCFA.  Some  examples  of this disparity  of coverage  among  the  43 carriers

surveyed  by OTA  include:

Twenty-five  carriers  cover  cancer  chemotherapy  drugs  for conditions  other  than 
those  specified  by HCFA. 
Thirteen  carriers  cover  morphine  for conditions  other  than  those  specified  by 
HCFA. 
Fourteen  carriers  cover  analgesics  other  than  morphine  if the  patient  is allergic 
to morphine;  10 cover  other  analgesics  with few categorical  restrictions. 
. 
Fifteen  carriers  cover  antibiotics  for various  chronic  infections;  two cover 
antibiotics  only as an  adjunct  to cancer  therapy. 
Two carriers  cover  hydration  for patients  already  receiving  other  covered 
infusion  therapy. 
A few carriers  even  admitted  covering  certain  drugs  that  are  not  administered  through

infusion  pumps.  The  OTA  report  also states  that,  Some carriers,  for example,

interpret  the  DME  benefit  to include  even  coverage  for antibiotics  administered  by

gravity  drip.  Other  carriers  almost  never  pay for any drug  through  this benefit.

The  OTA  found  where  carriers  covered  unspecified  drugs  and  conditions,  that

coverage  was sometimes  limited  to patients  already  receiving  other  infusion  therapies.

The  OTA  noted  the  present  system  promotes  coverage  for the  sickest  patients,  while

those  healthier  patients  needing  only simple  antibiotic  therapy  with a gravity  drip  must

remain  hospitalized.  Lastly,  the  OTA  stated,  An interesting  characteristic  of current

coverage  of home-infused  drugs  is that  because  changes  are  made  incrementally  at the

local  level, and  because  two of the  three  drugs  sanctioned  by HCFA  are  for  cancer

therapy,  patients  with  severe  cancer  have  the  greatest  coverage.

In its response  to the  OTA  report,  HCFA  did not  take  issue with the  observation  on

varying  coverage  of infusion  services.  Also, we were  able  to verifi  this variation  in

coverage  through  an  analysis  of payments  made  by all carriers  in 1991 for infusion

drugs  including  antibiotics,  immunosuppressives  and  a chemotherapeutic  agent.  We

noted  wide  differences  in the  total  amounts  paid  by carriers  for some  infusion  drugs.

Frequently  these  amounts  paid  were  disproportionate  to what  could  have  been

expected  considering  the  size of populations  served  by the  carriers.  One  example  is

six carriers  made  payments  for  IV immunosuppressive  drugs  in 1991 while  43 made  no

payments  at all.  Another  noticeable  variation  in payment  occurs  in two States  with

multiple  carriers.  One  State  with three  carriers  had  two carriers  paying  for  IV

9  immune  globulin,  vancomycin,  and  FUDR  while the  third  did not  pay for any of them.

Comments  from  our  sample  infusion  companies,  and  from  professional  organizations

and  referring  agencies  combined  also bear  out  OTAS findings.  Forty  percent  of each

group  of respondents  cite  uneven  and  inadequate  Medicare  coverage  of home  infusion

as a major  issue  in the  industry.  Some  believe  drugs  and  biological  are  never

covered,  while others  do not  know what  is covered  and  under  what  circumstances.

One  respondent  reflects  the  view of many when  she says, Carriers  only pay for certain

drugs with pumps,  but  they  dont  pay for all,  We  never  know.  Another  says,

Medicare  does  not  pay for hydration  and  antibiotics.  Patients  must  remain  in the

hospital,  so that  triples  the  cost of therapy.  Still another  respondent  who  has

experience  with several  carriers  remarks  that  one  carrier  pays for antibiotics  on a case-

by-case  basis while  another  pays for no antibiotics  at all.  Therefore,  the  sense  of these  -

respondents  and  others  is that  patients  with similar  conditions  receive  different

benefits  in different  parts  of the  country.  Some  respondents  mention  that  they would

like clearer  direction  from  HCFA  concerning  coverage  of drugs  for home  infusion.

PHYSICIAN  OWNERSHIP  AND  OTHER  FINANCIAL  ARRANGEMENTS  ARE

COMMON

Physician OWneIShip 
Of the  30 infusion  companies  in our  sample,  five (17 percent)  report  having  physician 
owners.  The  prior  OIG  inspection,  Financial  Arrangements  Between  Physicians  and 
Health  Care  Businesses  found  physician  ownership  in 25 percent  of independent 
clinical  laboratories  (ICL),  27 percent  in independent  physiological  laboratories  (IPL) 
and  8 percent  in DME  companies.  Although  the  17 percent  ownership  of infusion 
companies  is somewhat  lower  than  the  percent  for  ICLS and  IPLs found  in the  prior 
OIG  study,  it is a great  deal  higher  than  that  for DME  companies.  This  is significant 
since  home  infusion  is covered  under  the  DME  benefit;  therefore  home  infusion 
companies  are  a type  of DME  company. 
Among  the  five company  respondents  who report  having  physician  owners,  four 
provide  all types  of home  infusion  therapies,  with  the  fifth offering  only nutrition.  All 
five companies  serve  patients  in a variety  of settings  and  range  in size from  one  to 
seven  locations. 
These  five ownership  arrangements  differ  and  can  be characterized  as follows: 
o	 One  physician  owns ten  percent  of one  companys  stock,  serves  as its medical 
director  and  is very  active  in its day-to-day  management. 
o	 A physician  group  clinic with more  than  100 physicians  owns  15 percent  of the 
second  company;  none  of the  physicians,  however,  allegedly  have  any major 
company  responsibilities. 
10
 o	 Six physicians  own 90 percent  of the  third  company  and  are  responsible  for  its 
day-to-day  management  and  all financial  matters.  They  also serve  on all 
company  committees. 
o	 Five oncologists  at a cancer  center  own 100 percent  of the  fourth  company. 
They  claim  to provide  the  supplies  and  pharmaceuticals  to just  their  own 
patients. 
o	 The  fifth company  has  two physicians  who each  own one-third  of the  companys 
stock  and  act  as its medical  directors.  The  company  respondent  claims that 
these  physician  owners  make  no referrals  to their  own company. 
In the  subsample  of 28 physicians,  two claim  to have  less than  one  percent  ownership 
interest  in an infusion  company.  One  of these  firms  is a publicly  traded  company. 
The  remaining  26 do not  report  any ownership. 
. 
Many  infusion  company  respondents  report  a recent  sentinel  effect, which  has 
reportedly  caused  physician  financial  arrangements  to plateau  or to virtually  disappear. 
This change  reportedly  resulted  from  awareness  of investigative  activities  in the  home 
infusion  area. 
Nature of Other Firumcial Arrangements 
Ten  (33 percent)  of the  sample  infusion  companies  report  having  some  other  sort  of 
financial or business  arrange-rnent  with one  or more  physicians.  This  is more  than 
double  the  17 percent  compensation  arrangement  figure  found  for ICLS, IPLs, and 
DMEs  in the  earlier  OIG  study. 
Seven  of the  ten  companies  employ  physicians  as medical  directors  or as advisory 
board  members  in order  to acquire  JCAHO  approval.  Respondents  say that  these 
physicians  typically  review  the  companys  policies  and  procedures,  do quality  assurance 
and  utilization  review,  review  protocols,  write  articles  and  generally  advise  the 
company.  They  are  usually  paid  an annual  salary  or a flat amount,  such  as $200 per 
meeting  plus $400 per  year. 
The  remaining  three  company  respondents  report  having  other  kinds  of financial 
arrangements.  Two  have  financial  arrangements  with physicians  to provide  quality 
assurance  and  compliance  and  the  ongoing  clinical  management  of patients.  Of these 
two, one  pays the  physicians  on a case  by case  basis.  The  third  company  has 
consulting  agreements  with  physicians  to review  the  programs  efficiency.  The 
physicians  are  paid  a flat  fee  on a monthly  basis. 
A review  of the  contracts  submitted  by some  of these  companies  appears  to support 
their  statements  about  the  types  of arrangements  they  have.  The  contracts  detail  the 
physicians  responsibilities  and  payments.  Some  contracts  address  Medicare 
involvement.  One  contract  contains  the  clause,  Due  to Medicare/Medicaid 
11  restrictions,  (physician)  fees will not  be paid  under  this Agreement  on patients  eligible 
for coverage  by Medicare  or Medicaid,  regardless  of whether  the  particular  therapy 
being  provided  is a Medicare  or Medicaid  covered  service.  Another  contract  talks 
about  safe  harbors,  The  parties  acknowledge  that  this Agreement  and  the  business 
relationship  created  satisfies  the  requirements  of safe harbor  provisions  for  personal 
services  and  management  contracts  set forth  in 42 CFR  Section  1001.952(d). 
All 10 respondents  say they  do not  bill the  Medicare  carrier  for physician  services 
although  they  do feel  that  physicians  should  be reimbursed  for their  ongoing 
management  of the  patient.  Some  respondents  report  that  private  insurers  will, in 
fact,  reimburse  physicians  for these  monitoring  services. 
While  none  of the  physician  respondents  report  any financial  arrangements  with 
infusion  companies,  six mention  financial  incentives  they  had  been  offered.  These 
include  a supervision  fee,  $100 a patient  for referrals  or some  other  fee  for-referrals,  a 
consulting  fee,  billing  services,  and  an administration  fee  for each  dialysis pati~nt  that 
gets intradialytic  parenteral  nutrition.  All physicians  claimed  to have  turned  down 
these  offers. 
The  majority  of physician  respondents  report  having  no input  concerning  the  infusion 
company  used  by their  patients.  Most  say this decision  is made  by the  hospital, 
nursing  home,  or home  health  agency  with which the  patient  is associated.  Those 
physicians  who do make  or influence  the  decision  report  hearing  about  infusion 
companies  from  sales  people  or choosing  a company  from  prior  positive  experience. 
In regard  to both  the  physician  ownership  and  other  financial  arrangements  discussed 
in this report,  we did  not  have  sufficient  data  to determine  the  effects  that  OBRA 
1993 would  have  on Medicare  payment  for services  ordered  by physicians  with  the 
financial  arrangements  we found. 
Con.t&g  Perceptions of Financial Awangemenfi 
Perceptions  of company,  physician  and  other  respondents  as to the  extent  of physician 
arrangements  differ  from  physicians  and  companies  reported  behavior,  suggesting 
that  the  full nature  and  extent  of such arrangements  are  unclear. 
Although  17 percent  of infusion  company  respondents  report  having  physician  owners, 
a majority  (53 percent)  nevertheless  believe  physician  ownership  is either  ve~  or 
somewhat  common.  In contrast,  most  physician  respondents  (64 percent)  say either 
that  physician  ownership  is not  at  all common  or that  they  do not  know  how common 
it is. 
The  perceptions  of infusion  company  respondents  and  physician  respondents  also 
differ  regarding  other  financial  arrangements.  Two-thirds  of the  company  respondents 
believe  such arrangements  are  very or somewhat  common,  though  only one-th~d 
report  having  them.  However,  only four  of the  28 physician  respondents  feel  other 
12  financial  arrangements  are  common,  10 feel  they  are  not  common,  and  14 do not 
know. 
Most  of the  17 representatives  of professional  organizations  and  referring  agencies 
believe  that  physician  arrangements  are  very or somewhat  common  in the  industry. 
About  three-fourths  say they  know or have  heard  of specific  cases  of physician 
arrangements.  Seven  of the  17 report  knowing  of cases where  physicians  received  fees 
for referrals. 
Two-thirds  of all respondent  types  agree  that  if physician  ownership  or other  financial 
arrangements  does  occur,  it could  lead  to kickbacks  and  possibly, over-referral. 
Most  respondent  types,  nevertheless,  cite  advantages  to both  physician  ownership  and 
other  financial  arrangements.  The  major  advantage  mentioned  is profit  for the 
physician,  which is seen  as having  little  if any benefit  for the  patient.  Other. 
advantages  cited  include  enhanced  quality  of care,  availability  of physician  inptit  and 
expertise,  and  better  integration  of care.  However,  disadvantages  are  offered  more 
frequently  than  advantages.  These  disadvantages  include  a conflict  of interest  for  the 
physician  which  might  affect  his or her judgement,  reduced  quality  of care,  high costs, 
and  the  patients  lack  of free  choice. 
Company  Character&tics 
In attempting  to learn  about  physician  financial  arrangements  with the  57 sample 
home  infusion  companies  we found  that  most  of the  companies  in our  sample  were 
small  in size.  This  is in contrast  to the  industry  at large  which is dominated  by a few 
very large  companies.  All but  one  of the  top  ten  infusion  companies  have  at least  70 
locations  or more  nationwide. 
Only one  of these  very large  firms shows up in a list of the  top  ten  of our  57 sample 
companies  in terms  of their  market  shares  of Medicare  patients  served  in the  home. 
Its nine  percent  share  of Medicare  patients  is not  even  the  largest.  The  firm with  the 
highest  (13) percent  of patients  actually  cares  for a total  of only 500 patients  at a time, 
approximately  375 of which  are  on Medicare,  and  has but  one  location.  Its patient 
load  is much  smaller  than  that  of industry  leaders  which have  several  thousand 
patients  each.  Also,  nine  of the  top  ten  Medicare  companies  in our  sample  have  ten 
or fewer  locations.  And  none  of these  nine  sample  companies  shows up  on an 
industry  list of the  75 top  infusion  companies,  based  on sales  and  other  criteria.  Of 
the  ten  leading  sample  companies  serving  Medicare  patients  in the  home,  the  top  four 
provide  nutrition  and  other  therapies  while the  next  six provide  only nutrition. 
13
 RECOMMENDATIONS

In light of our findings,  we believe  that  HCFA  should: 
1) Monitor  spending  to better  track  trends.  One  way this can be  accomplished 
is to identify  a unique  series  of codes  for home  infusion  therapy  similar  to the 
approach  used  in this study. 
2) Provide  more  specific  coverage  guidelines  and 
3) Collect  ownership  and  compensation  information  on form  HCFA  - 192, use 
this information  to monitor  referral  and  utilization  patterns,  and  refer  suspected 
cases  of abuse  to the  OIG. 
COMMENTS 
Written  comments  received  from  HCFA  and verbal  comments  received  from  OTA 
concur  with the  recommendations  of this report.  The  OTA  is concprned  that  the  costs 
of infusion  therapy  are  underreported  in this report  because  we did not  include 
Medicare  Part  A services  related  to pump  use.  We  agree  that  including  Part  A 
services  would  increase  total  costs.  However,  Part  A data  was not within  the  focus  of 
this study.  Suggestions  for changes  in the  wording,  clarifications  of the  text  and  any 
technical  changes  have  for the  most  part  been  incorporated  into  the  final report,  The 
actual  comments  received  from  HCFA  are  in Appendix  D. 
14
 APPENDIX  A

METHODOLOGY  TO  ESTIMATE  MEDICARE  REIMBURSEMENT 
To  obtain  Medicare  reimbursement  amounts  the  same  method  was used  to gather 
1990 data  and  1991 data.  Beneficiaries  were  identified  as infusion  patients  from  the 
OIG  Part  B CWF  one  percent  sample  when  an infusion  pump  (HCPCS  B9000-B9006, 
E0781,  E0791)  was found  in their  Part  B sefices.  The  place  of service  code  for  the 
pump  identified  beneficiaries  receiving  infusion  services  at home.  Infusion  services 
were  defined  for these  beneficiaries  as: 
BOOOOthrough  B8999  Enteral  and  parenteral  therapy

B9000 through  B9006,

E0791  Enteral  and  parenteral  pumps

E0781  Ambulatory  infusion  pump

E0776  IV pole

A4214  Sterile  saline  or water

J7050 through  J7130  Various  infused  medications

J7501  Azathioprine,  parenteral

J7503  Cyclosporine,  parenteral

J7504  Lymphocyte  immune  globulin

J7505  Monoclinal  antibodies

J9000 through  J9999  Chemotherapy

J7190 through  J7197  Anti-hemophiliac  factor

J2270  Morphine

J0990  Demerol

J2175  Meperidine

*  Listed  in HCFAS September  1993 DMERC  Supplier  Manual  as one  of a list of 
drugs  used  with  infusion  pumps 
A -1
 APPENDIX  B

SAMPLING  METHODOI.XIGY 
First,  all beneficiaries  who had  received  an infusion  pump  (HCPCS  codes  B9000-
B9006 or E0781,  E0791)  were  extracted  from  the  1%  1991 Part  B Common  Working 
File  (CWF).  There  were  1,178 of these  beneficiaries  with 5,210 pumps  for a total 
allowed  charge  of $594,392.00.  Second,  the  beneficiaries  were  matched  by HICN  back 
to the  CWF  to get  all of their  services  in 1991 (131,343 line items).  These 
beneficiaries  were  matched  against  HCFAS Enrollment  Data  Base  (EDB)  to  get  their 
State  of residence.  These  steps  resulted  in information  about  each  of the  1,178 
beneficiaries.  To  obtain  a workable  sample,  each  State  was given a weight  in 
proportion  to the  number  of pump  beneficiaries  living in that  State.  Random  numbers 
were  used  to pick the  8 states  (KS, NY, CA  IL, CT, TX, TN,  FL).  Next,  a-simple, 
random  sample  was performed  to pick a maximum  of 30 beneficiaries  per  State 
resulting  in a total  of 200 beneficiaries  in the  sample  (CT  and  KS combined  only have 
20). 
Table  I below  shows the  number  of pump  beneficiaries  in the  sample  States  and  their 
probability  of selection. 
TABLE  I 
NUMBER  OF  BENEFICIARIES  WITH
 PUMPS  IN SAMPLE  STATES  AND 
ODDS  OF  STATES
 BEING  CHOSEN 
No.  of  Percent  of  No. of  Probability  of
Benes  Total  Chances  Selection 
CALIFORNIA
 125  10.61 percent  107  10.22 percent 
TEXAS
 97  8.23  83  7,93 
NEW  YORK
 66  5.60  57  5.44 
FLORIDA
 80  6.79  69  6.59 
ILLINOIS
 49  4.16  43  4.11 
I 
TENNESSEE
 43  3.65  38  3.63 
I 
CONNECTICUT
 I 12  1.02  I 11  1.05  I 
I I  )  I 
KANSAS
 8  .68  8  .76 
SUBTOTAL
 480  40.74  416 
I 
II 
[ U.S. TOTAL
 \ 1178  I 1047  I 
B-1
 OTA  COVERAGE  DATA   
Collected  February, 1991 
HCFA-Sanctioned  Coverage for Drugs Undkr the DME Be@ 
Policy in Medicare  Carriers  Manual  if drug  is delivered 
Drug  through  an external  infusion  ~ump 
Morphine:  Covered  for intractable  cancer  pain 
Cancer  chemotherapy:	 Covered  for liver cancer  and  some  colorectal  cancer 
patients 
Deferoxamine:  Covered  for acute  iron  poisoningor  iron  overload 
Heparin:	 Covered  in institutional  settings  to treat  thromboembolic 
disease  and  pulmonary  embolism 
Variation ti  Cawier Coverage Policti  for Dregs Uhder the DME Be@ 
Results  of an OTA  Telephone  Survey  ** 
NUMBER  (PERCENT) 
DRUG  OF  43 CARRIERS 
MORPHINE 
Cover  only for HCFA-specified  conditions  29 (67%) 
Cover  for  above  and  some  other  conditions  13 (30%) 
No claims yet  1 ( 2%) 
CANCER  CHEMOTHERAPY 
Cover  only for HCFA-specified  conditions  17 (40%) 
Cover  for other  cancers/drugs  as well  25 (58%) 
No claims  yet  1 ( 2%) 
DEFEROXAMINE 
Cover  only for  HCFA-specified  conditions  33 (77%) 
Cover  (rarely)  for  other  indications  3 ( 7%) 
No  claims yet  6 (14%) 
No response  1 ( 2%) 
HEPARIN 
Responses  not  reliable  - confused  home/institutional  settings 
c-1  NUMBER  (PERCENT)

DRUG  OF  43 CARRERS 
OTHER  ANALGESICS  BESIDES  MORPHINE 
Cover  if patient  allergic  to morphine 
or tried  unsuccessfully  14 (33%) 
Cover  with few categorical  restrictions  10 (23%) 
No  claims/do  not  cover  19 (44%) 
ANTIBIOTICS 
Cover  for various  chronic  infections  15 (35%) 
Cover  only as an adjunct  to cancer  therapy  2 ( 5%) 
No claims yet  (but  probably  would  cover)  1 ( 2%) 
Do  not  cover  25 (58%) 
ADJUNCT  CANCER  DRUGS  (BESIDES  CYTOTOXIC  DRUGS)   
Cover  when  prescribed  for patients  already 
receiving  infused  cytotoxic  drugs  4 ( 9%) 
Do  not  cover  39 (91%) 
DOBUTAMINE 
Cover  for heart  transplant  candidates  2 ( 5%) 
No  claims yet  (but  would  probably  cover)  1 ( 2%) 
Do  not  cover  40 (93%) 
HYDRATION 
Cover  for patients  already  receiving  other 
covered  infusion  therapy  2 ( 5%) 
Do  not  cover  41 (95%) 
AEROSOLIZED  PENTAMIDINE  *** 
Cover  under  DME  benefit  2 ( 5%) 
Do  not  cover  41 (95%) 
*  Not  published  in final  report
** 
Telephone  survey  information  was not verified  in any way
*** 
Not  infused 
c-2  APPENDIX  D 
HCFA  COMMENTS  ON THE  DRAFT  REPORT 
D-1  ~ealth  Csre 
~  ut-1ART,ME!NT  OF HE.KLTH  & Hu~~AN  SERVICES  Fkancinu  Adminiatrotion 
a 
a  Jgg 
 
-%-2* nsEP  Memorandum 
3RU 
From	 Bruce  C,  VladecSc 
Administrator 
Subject 
Office  of Inspector  General  (OIG)  Draft  Report:  %fedicare  Home  Infusion 
Therapy  (O EI-02-92-00420) 
To 
Bryan  B.  Mitchell 
. 
Pr;ncipal  Deputy  Inspector  General 
We  re~-icwed  the  above-referenced  draft  report  which  describes  the  Medjcare  home 
infusion  industxy. 
We  coucur  w-ith all  of  the  recommendations  contained  in the  reportt  Based  on  our 
review  of  trade  journals  and  discussions  with  i.ui%ion  indus~  rcpreseutatives,  we 
aIso  agree  with  OIG*S findings  regarding  the  rapid  increase  in  e~cnditures  for 
home  infusion  therapy.  We expect  continued  growth  in  the  future  and  suppom  the 
monitoring  of  e.spenditures  on  home  infusion  therapy. 
Our  de~~iled  comments  on  the  report  findings  and  recommendations  are  attached 
for  your  consideration.  Thank  you  for  the  opportunity  to  review  and  comment  on 
this  draft  repom  Ple~e  advise  us  if you  agree  on  our  position  on  the  report 
findings  and  recommendations  at  your  earIiest  c.ouvenience. 
Atr.achrnents  Comments  of  the  Health  Care  Financinq  Administration  (HCF.~)

on  Office  of  Ins txctor  General  (OIG\  Draft  Report:

,Medicare  Home  Infusion  Therapy

(OE1-02-92-00420)

Recommendation  I 
trends,  perhaps  by identitiing  a 
HCFA  should  monitor  spending  to  better  identify 
unique  series  of  cok  for  home  infusion  therapy. 
HCFA  Response  . 
We concur.  Program  expenditures  for  all durable  medical  equipment,  prcsthetiw, 
orthotics,  and  supplies  (DMEPOS),  including  home  infusion  therapy  equipment,  
shctid  be  monitored  closely,  especially  given  the  precipitous  growth  in these 
expenditures.  HCF.4  has  put  procedures  in place  to  track  trends  in infusion 
the:opy.  As  OIG  is aware,  HCFAS  contract  with four  durable  medical  equipment 
regionai  carriers  (D.MERC)  wi!l become  operational  on  October  1.  One  DMERC, 
in addition  to  c\airns  processing  functions,  will seine  as  a statistical  analysis  DMERC 
(SADMERC).  The  SADMERC  will track  spending  and  utilization  trends.  In  order 
to  uniquely  identify  claims  for  infusion  thtrapy  in the  home,  HCFA  iS considering 
establishing  a  two-digit  modifier  to  attach  to existing  codes.  Establishing  modifiers 
would  prevent  the  need  to  create  unique  codes,  which  would  essentially  double  the 
current  number  of infusion-related  cedes.  Utilizing  the  analysis  of  coc!es,  HCFA 
will  be  able  to  track  and  correct  aberrant  trends. 
Recommendalicn  2 
15CF.A should  provide  more  specific  coverage  guide~ines. 
HCFA  Resuonse 
-> 
We  concur.  Wc are  aware  that  the  variability  in caverage  of  home  infusion  therapy 
is due  to  a broad  ccverage  guideiine  which  allows  contractors  to  make  independent 
decisions  regarding  external  infusion  pumps.  Therefore,  we  agree  that  rncre  specific 
guidance  is needed. 
In an~icipation  of  the  tre.mendcus  growth  in the  home  infusion  therapy  indusv, 
HCFA  requested  an  assessme:lt  in September  19S6 of  the  safety  and  effectiveness 
of various  dru g de~ive.r-ySystems,  especially  infusion  pumps,  from  the  Office  of  . 
Health  TeChROlU&WAssessment  [OHTA),  Agency  for  Health  Care  Pcliey  and 
Reseorch,  Public  Health  Seiwice.  \Ve  recei~ d  01-!TAs  initial  drafl  rcpon  on  this 
issue  in late  Aucust  and  are  curre:~t!y  reviewing  it.  We  wouid  like  to  COCsi~cr 
O?-iTAs  advice-and  recommendations  befidrc  revising  national  coverage  of  infusion 
pumps.  , 
Page  2 
In  the  interim,  the  DME  regiordization  initiative,  which  involves  developing 
medid  review  policies  for  the  top  100 items  of DME,  should  bring  about  a 
measure  of  consistency  in current  coverage,  Each  DMERC  will implement  region-
wide  medical  review  policy  and  guidelines.  Additionally,  the  DMERC  Medical 
Directors  will continue  to  meet  periodically  to  review  and  discuss  their  regiomd 
policies.  Efforts  will be  made  to  make  medical  review  policies  as uniform  as 
~ossible  across  regions  (though  in  some  cases,  uniformity  may  not  be  poss]ible 
because  of variations  in  medical  practice  from  one  region  to  another). 
. 
Recommendation  3 
HCFA  should  cokct  ownership  and  compensation  information  cm form 
HCFA-192,  use  this  infortmtion  to  monitor  referral  and  utilization  patterns,  and 
refer  suspected  cases  of abuse  to  OIG. 
HCFA  Response 
We  agree.  Under  the  HCFA  DhlERC  initiative,  the  DNIERC  servicing  the 
National  supplier  clearinghouse  (NSC)  will  collect  information  on  ownership  and 
management  throu:h  the  use  of  (he  supp!ier  registration  form  (HCFA-1%1).  The 
ownership  data,  along  with  utiiiz~ tiun  ck;a  ccllw~td  by the  S,%DMERC,  will be 
analyzed  by the  D.MERCS  to  detect  aberrant  supplier  patterns,  ~nc  information  Cfi 
aberrant  supplier  trends  will be prcvkkd  to  NSC  for  Mgjng  suppliers  Mr further 
review.  If a supplier  is sus~ected  cf  abuse,  D\t  ERCs  will take  appropriate  acticr$ 
which  t-nay include  referral  to  OIC~. 
. 
The  Omnibus  Btidget  Rtcol;ciliction  .+ct of  1993 inc!udes  a  provision  which  expands 
the  current  ban  on  Fhysicizin  ~efer~a!s  ~eyo~d  clil:ic~l iabs  to  othter  sewices~ 
including  DNfS  and  parenteral  ar.d  en[era!  nutr~ents.  equipment,  and  suppIies.  ~,e 
,.
provision for the expansion  in the  ban  on  referrals  will be  effective  after 
December  31,  1994.  Since  the  D\[E  and  paxr.:e.  !-h 1a1nd  eriteral  benefits  ~it?  the
mechanisms  by whic!~ home  infusicn  t!-xmpy  is Fravidec  under  current  lw,  OIGS 
concerns  wit!l  res~ec;  to  c~vnership  and  cornpc:lsa:~oa  arraagem.ents  lm~e  been 
ac!dresscd  with  enactm. dn:  of  this  prmision. 
Technical  Comments: 
On  page  2, line  4 of  the  scccnci  iwr:gr~?l:  u[;der  \ledic3:c  covcra~c  Cf !+om.e 
Infusion  Ser{ices,  we  Stl:gJc  S: c!c!d!ing  :I:c wC:L1>i]: arder,  Ixcause  ;hey  do  cct 
aFFear  in the  imtructicll  qua(ed  (:0::1 Scctidfi  ~ij LI0[ the  \tedic2re  C3rric:s 
Ntanual.  ,,  1 
,, 
.  .,.  Page  3 
If the  data  are  available,  it would  be  helpful  to  have  the  numbers  in Table  1 on 
page  8, Growth  of  Infusion  Services  Under  Medicare  Part  B, broken  into  categories 
by parenteral,  enteral,  and  other. 
It  is unckar  in a number  of  instances  throughout  the  report  whether  OIG  is using 
fiscal  v  caIendar  year  data.  For  example,  it would  be  helpful  to  indicate  fiscal  or 
calendar  year  in the  tex~ and  chart  under  the  findings  lissed  on  page  8. 
After  revieving  the  first  draft  of  the  repor~  it was  recommended  that  some  of  the 
HCPCS  cod:s  chosen  to  estimate  Medicare  reirn&.wsement  amounts  (Appendix  A) 
not  be  incIuded.  Specifically,  OIG  included  codes  J2175  (Meperidine)  and  J2180 
(Mepwidine  and  promethazine  HCL).  While  it is possibIe  to give  these  analgesics 
intravenously,  it k  more  likely  that  they  are  being  given  intramuscularly  in the  home. 
The  revised  report  still  has  these  codes  inciuc!ed.  This  may  lead  to  an  overestimate 
of  home  intravenous  therapy. 
Appendix  B gives  the  percent  of  total  beneficiaries  in eight  States.  TiIe  p~rcent  for 
the  subtotal  shouId  be  40.75,  not  40.13.  AppendL~  B is still not  clear.  It would  be 
helpful  to cktrify  how  the  Number  of Chances  calumn  in table  1 was  generated. 
Appendix  C (pa~e  C - ~) ]ists Aerosali~ed  penta~-dine  (J2545)  as ~ d~g  tht  was 
included  in an  OHTA  tekphone  sut=my.  Pentamidine,  a drug  given  to  MDS 
patients,  can  be  given  intravenously,  but  the  aerosolized  route  is not  intravenous.  Depafiment  of  Health  and Human  Sefices 
OFFICE  OF 
INSPECTOR  GENERAL 
NFUSION  - HERAPY 
MED CARE HOME 
SEPTE~ER  1993  OFFICE  OF  INSPECTOR  GENE~ 
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 Servim,  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 contrac~ors 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  INSPECIIONS 
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-todate  information  on the  efficiency, vulnerability, 
and effectiveness  of departmental  programs. 
This report  was prepared  in the  New York  Regional  Office under  the direction  of Regional 
Inspector  General  Thomas  F. Tully and Deputy  Regional  Inspector  General  Alan  S. Meyer. 
Project  Staff included: 
New York  Headquarters 
Renee  Dunn (Project Leader)  Cathaleen (Kitty) Ahern 
Demetra Arapakos  W. Mark Krushat 
Nancy Harrison  Linda Moscoe  Health  Lare 
DEP.\ RT.VESTOF HE.ALTH& HU.~ANSERvlCES  F,nancr;  ~S~  r  S3  C
 ..  .   ..  . 
Memorandum 
Office  of Inspector  General  (OIG)  Draft  Report:  Inappropriate  Payments  for

Total  Parenteral  Nutrition  (TPN)  (OEI-12-92-W4@)

Bryan  B. Mitchell

Principal  Deputy  Inspector  General

We  reviewed  the  above-referenced  draft  report  which  examined 
Medicare  coverage  of total  parenteral  nutrition  (TPN),  a high tech  means  of 
feeding  patients  who  do  not  have  a functioning  intestinal  tract. 
Our  detailed  comments  on the  report  findings  and  recommendations  are 
attached  for your  consideration.  Thank  you for the  opportunity  to  review  and 
comment  on  this  draft  report.  Please  advise  us if you agree  with  our  position 
at your  earliest  convenience. 
Attachment  Comments  of the  Health  Care  Financing  Administration  (HCFAI 
on the  Office  of Ins~ector  General  [OIG\  Draft  ReDort: 
Inamxomiate  Pavments  for Total  Parenteral  Nutrition  (TPN) 
[OEI-12-92-00460) 
Recommendation  1 
HCFA  should  instruct  carriers  to adhere  to a strict  interpretation  of the 
coverage  guidelines  for TPN. 
HCFA  Resoonse 
We concur.  We will issue  a notice  to remind  the  parenteral  and  enteral 
nutrition  specialty  carriers  of the  existing coverage  guidelines  (contained  in 
sections  2130, 3329, and  4450 of the  Medicare  Carriers  Manual)  concerning 
this use of nutrition.  We  are  particularly  concerned  about  inappropriate 
coverage  of intra-dialytic  parenteral  nutrition  (IDPN),  and  will draw  attention 
to section  3329.5 of the  Medicare  Carriers  Manual,  which  addresses  renal 
dialysis patients,  in communication  with the  carriers. 
Recommendation  2 
HCFA  should  require  the  carriers  to intensify  review  of certificates  of medical 
necessity,  discuss  therapeutic  options  with physicians,  and  monitor  the  use of 
nutrients  over  time. 
HCFA  Resuonse 
We  concur  with  the  intent  of the  recommendation.  We  plan  to share  copies  of 
the final report  with  the  Durable  Medical  Equipment  Regional  Carriers 
(DMERCS)  to make  them  aware  of the  potential  problem  areas  identified. 
The  regionalization  of the  DMERCS  is in the  early  phases  of implementation. 
During  the  process  of developing  region-wide  medical  policies  and  screens.  the 
DMERC  Medical  Directors  will re-examine  the  clinical  indications  for TPN 
and  examine  the  appropriateness  of providing  parenteral  nutrition  to end-
stage  renal  disease  (ESRD)  patients.  The  also  be  providing  the 
DMERCS  will 
Statistical  Analysis  Durable  Medical  Equipment  Regional  Carrier  with  claims 
history data,  which will include  certificates  of medical  necessity  from  which 
statistically  valid  samples  can  be  drawn  to conduct  comprehensive  reviews. 
This will provide  more  representative  samples  to serve  as the  bases  for 
examining  trends  and  patterns  of inappropriate  TPN  payments.  There are  Medicaid  coverage  implications  to TPN  as well.  Section  l~2(a)(ss) 
of the  Social  Security  Act requires  the  State  to establish  a plan  for the  review, 
by an  appropriate  health  professional,  of the  appropriateness  and  quality  of 
care  and  semices  furnished  to recipients  of medical  assistance.  States  are 
required  to have  procedures  in place  to review claims  submitted  by providers. 
Problems  detected  during  these  reviews  are  brought  to the  attention  of the 
provider,  We  believe  it would  be valuable  to alert  State  Medicaid  Agency 
directors  to the  TPN  coverage  issues discussed  in this report  so that  they  can 
consider  strengthening  Medicaid  safeguards  as needed.  When  the  report  is 
issued  in final,  we recommend  that  OIG  send  a copy to each  State  Medicaid 
Agency  director  for this purpose. 
Recommendation  3 
HCFA  should  review  research  concerning  the  use of intra-dialytic  parenteral 
nutrition  (IDPN)  (parenteral  nutrition  given to a patient  who  is being 
dialyzed). 
HCFA  ResDonse 
We  concur  with  the  recommendation.  HCFA  has asked  the  Agency  for  Health 
Care  Policy and  Researchs  Office  of Health  Technology  Assessment  (OHTA), 
PHS,  to do a technical  review of IDPN  for patients  with  a partially  functioning 
alimenta~  system.  This  includes  a literature  review, as well as contacting  the 
American  Society  for Parenteral  Nutrition  for its advice.  We will be  happy  to 
share  the  results  of this review with OIG  when  they become  available. 
Recommendation  4 
If IDPN  is considered  reasonable  and  necessary  for the  treatment  of a subset 
of ESR~D patients,  it should  be  paid  for on a per  capita  basis,  with  discounts 
negotiated  by  each  facility  or  the  networks,  or  by using  some  other  method 
that  takes  into  account  the  efficiencies  associated  with  facility administration  of 
the  nutrients. 
HCFA  ResDo nse 
We defer  comment  on thk  recommendation  until the  assessment  by OHTA  of 
IDPN  is completed.  Consideration  will be given to the  OIGS recommendation 
at that  time.  Page  3 
Generalflechnical  Comments: 
While  OIG  randomly  sampled  the  standard  1 percent  of the  paid  claims  for 
parenteral  setices  for  1991, this sampie  amounted  to only 58 claims.  It is 
difficult  to assess  whether  the  sample  size was adequate  for  projecting  an 
overpayment  of $71 million.  It would  be  helpful  to indicate  in the 
methodology  section  the  confidence  level achieved  and  the  precision  of the 
projection  at  that  confidence  level. 
While  the  review  of claims  data  and  the  certificates  of  need  often  provide 
excellent  information  for  certain  purposes,  a medical  record  review  would 
enhance  the  value  of the  reports  analysis  and  findings. 
On  page  4, it is noted  that  all  hyperalimenation  (high- and  low-tech  feeding

methods)  claims  are  processed  by one  of two carriers:  Transamerica

Occidental  Life  Insurance  Company  in Los Angeles  processes  claims  West  of

the  Mississippi,  and  Blue Cross/Blue  Shield  of South  Carolina  processes  claims

in the  East.  The  first table  in appendix  B, however,  indicates  that  South

Carolina  Blue  Shield  handled  83 percent  of the  patients  included  in the

sample,  In order  to avoid  the  impression  that  there  is a problem  with  the

sample,  it would  be  helpful  on page  4 to indicate  that  the  vast  majority  of

claims  are  processed  by South  Carolina  Blue Shield.