DEPARTMENT OF HEALTH & HUMAN SERVICES 	
Office of Inspector General 
Washington, D.C. 20201 
TO: 	 Donald M. Berwick, M.D. 
Administrator 
Centers for Medicare & Medicaid Services 
FROM:  Stuart Wright 
Deputy Inspector General 
for Evaluation and Inspections 
SUBJECT: 	 Memorandum Report:  Payments/or Medicare Part B Services During 
Non-Part A Nursing Home Stays in 2008, OEI-06-07-00580 
This memorandum report provides information regarding the extent to which Medicare paid for 
Part B services during non-Part Al nursing home2 stays (hereinafter referred to as non-Part A 
stays) in 2008.  We used resident assessment data from the Minimum Data Set (MDS) to identify 
all nursing home stays nationwide during 2008 and reviewed Part B claims that occurred during 
non-Part A stays. 
SUMMARY 
This study is part of the Office oflnspector General's (OIG) activities to address section 313(d) of 
the Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000 (BIPA).3 
BIPA required the Secretary of Health & Human Services, through OIG, to monitor 
Part B payments for items and services fumished to nursing home residents during stays not 
covered by Part A to guard against excessive services.  To facilitate identification of areas where 
such vulnerability may occur, this study provides an overview of Part B services that occurred 
during non-Part A stays.  Insights into payment and utilization pattems, as well as geographic 
differences, may suggest possible areas for further review by OIG and the Centers for Medicare & 
Medicaid Services (CMS). 
I Nursing home stays not paid for by Part A constitute non-Part A stays.  Part A covers posthospital skilled nursing facility (SNF) care to eligible 

beneficiaries for up to 100 days in SNFs, during which Part A will pay for most services as part of the nursing home's daily rate. After the 

100 days or if the beneficiary does not qualify for a Part A stay, Part B may provide coverage for some services. 

2 For purposes of this evaluation, the term "nursing home" refers to any nursing home regardless of primary payer (e.g., Medicare, Medicaid, or 

private resources). 

3 P.L. 106-554. 

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Page 2  Donald M. Berwick, M.D. 
 
 
We found that Medicare paid $4.9 billion for Part B services during non-Part A stays in 2008.  
Three service categories, therapy services, evaluation and management, and major and minor 
medical procedures, made up 58 percent of the total payment.  In addition, Part B services were 
rendered in a variety of places, with 54 percent of payments for services rendered inside nursing 
homes and 46 percent of payments for services rendered outside of nursing homes  
(e.g., outpatient hospitals and physician offices).   
 
On average, Medicare paid $16.75 per day per beneficiary for Part B services across all service 
categories and all beneficiaries.  However, the average varied widely across service categories 
and States in which the services occurred; the highest average daily payments were for dialysis 
services and services in Louisiana.  Examining average daily payments across nursing homes,  
we found that payments to some nursing homes exceeded three times the national average daily 
payment within certain service categories, most prominently drugs and biologicals and durable 
medical equipment, prosthetics, orthotics, and supplies (DMEPOS). 
 
The variation and unusual patterns found in this review raise concerns of potential fraud, waste, 
and abuse.  Therefore, items and services billed under Part B for nursing home residents during 
non-Part A stays continue to warrant specialized monitoring.  To facilitate such monitoring, we 
plan to undertake additional reviews and in-depth analyses focusing on specific service types.   
 
BACKGROUND  
 
The BIPA requirement for special monitoring reflects vulnerabilities with Medicare payments for 
Part B services during non-Part A stays that generally do not exist for the same services provided 
during Part A stays.  During a Part A stay, Medicare requires consolidated billing:  nursing homes 
must arrange for and submit all Medicare claims for the services that their residents receive,4 
including services and supplies delivered by providers other than the nursing home.5  For example, 
if a Medicare beneficiary receives a wheelchair and oxygen tanks from different suppliers 
following a hospital stay, Medicare requires the nursing home to collect, consolidate, and submit 
bills for payment under Part A.  Once paid by Medicare, the nursing home is responsible for 
reimbursing the suppliers their portion of the payment.  Consolidated billing ensures that the 
nursing home is aware of services provided to its residents, which helps it to coordinate care for 
beneficiaries and to safeguard against excessive services by providers.   
 
When Part A does not cover a Medicare beneficiarys nursing home stay (a non-Part A stay), 
individual providers, rather than the nursing home, may bill Medicare directly for Part B services, 
 
4
 Social Security Act,  1862(a)(18) and 1842(b)(6)(E). 
5
 Pursuant to Section 1888(e)(2)(A)(ii) and (iii) of the Social Security Act, services excluded from consolidated billing requirements during    
Part A covered SNF stays include physicians professional services, certain dialysis-related services, certain drugs, and certain ambulance 
services.  Section 1888(e)(2)(A)(ii) of the Social Security Act specifies that physical therapy, occupational therapy, and speech-language 
pathology services for SNF residents are always subject to consolidated billing requirements regardless of whether they are furnished by (or 
under the supervision of) a physician or other health care professional.  A full listing of excluded services may be accessed at 
https://www.cms.gov/SNFPPS/05_ConsolidatedBilling.asp.  
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Page 3  Donald M. Berwick, M.D. 
 
 
creating particular vulnerabilities for program integrity.  For example, although nursing homes are 
likely aware of the services provided to their residents, they may never see the claims submitted to 
Medicare by outside providers and therefore not have an opportunity to verify the accuracy of 
claims.  
  
Related Work  
Several recent OIG reports found improper payments and other vulnerabilities for Part B services 
that occurred during non-Part A stays.  For example, one report found improper payments of  
$30 million made by Part B for durable medical equipment during non-Part A stays in 2006.6  
Suppliers incorrectly listed these items for use in beneficiaries homes when usage actually 
occurred in the nursing home, a place of service not covered by Part B unless the nursing home 
qualifies as the beneficiarys home.  Because these nursing homes were providing primarily skilled 
care or rehabilitation, they could not be considered the beneficiaries homes.  Additionally, OIG 
found problems related to coding, medical necessity, and maintaining adequate documentation for 
enteral nutrition therapy services7 and mental health services,8 resulting in $39 million and  
$74 million, respectively, in improper payments during 2006.   
 
METHODOLOGY 
 
Scope 
We identified Medicare payments for, and beneficiaries utilization of, Part B services during  
non-Part A stays in 2008.  We did not examine (1) any Part B service that occurred during a  
Part A covered stay or (2) the medical appropriateness of any Part B service.   
 
Identification of Part B Services During Non-Part A Stays 
We utilized several databases obtained from CMS to identify Part B payments for services during 
non-Part A stays.  These databases included the MDS; the Online Survey, Certification, and 
Reporting System; the Enrollment Database; and the National Claims History.  (See Appendix A 
for a detailed description of the databases and the methods used to identify Part B services during 
non-Part A stays in 2008.)     
 
Service Categorization 
To facilitate analysis of all services paid for by Part B during non-Part A stays, we developed a 
comprehensive categorization of services by modeling service categories after the American 
Medical Associations Current Procedural Terminology code delineations and the Berenson-Eggers 
Type of Service system.  (See Appendix B for further details regarding the creation and structure of 
the categorization.)  This categorization organized the more than 14,000 Healthcare Common 
Procedure Coding System (HCPCS) codes using a structure that resulted in 14 broad service 
categories.  The categorization also included a category of other services that we were unable to 
 
6
 OIG, Part B Services During Non-Part A Nursing Home Stays:  Durable Medical Equipment (OEI-06-07-00100), July 2009.   
7
 OIG, Medicare Part B Services During Non-Part A Nursing Home Stays:  Enteral Nutrition Therapy (OEI-06-07-00090), June 2010.   
8
 OIG, Medicare Part B Services During Non-Part A Nursing Home Stays:  Mental Health (OEI-06-06-00580), July 2010.   
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Page 4  Donald M. Berwick, M.D. 
 
 
classify into a particular category.  We further divided these 14 categories into subcategories to 
provide more specificity when analyzing services within categories.   
 
Analysis of Payments and Utilization 
We reviewed 8,195 unique HCPCS codes representing the Part B services paid for during  
non-Part A stays in 2008.  After categorizing these codes, we conducted several types of analyses  
to provide an overview of payments and utilization.  
 
Payment analysis.  We calculated the following summary statistics for each of the 14 service 
categories:  total Part B payments, percentage of total Part B payments, number of beneficiaries 
who received a service in the category, percentage of total beneficiaries who received a service in 
the category, and average Part B payments per beneficiary.  For many of the highest dollar service 
categories, we also identified the subcategories in which the majority of payments were made.  In 
addition, we examined Part B payments across places of service for each of the 14 service 
categories.  
 
States payment patterns.  To identify potential differences in States payment patterns, we 
computed the payment percentage for each service category within a State.  For example, if a State 
received $100 million in total Part B payments for services, and the category of evaluation and 
management accounted for $50 million, the payment percentage of the evaluation and management 
category was 50 percent.  Therefore, summing the percentages across each of the 14 service 
categories yielded 100 percent within a State.  After computing payment percentages for each 
State, we compared these rates against the national rate to identify States that had high payment 
rates.   
 
Comparative payment analysis.  By accounting for the duration of beneficiary nursing home stays, 
we computed a measure for comparing cost differences among service categories, States, nursing 
homes, and beneficiaries.  This standardizing measure, the average daily payment, identifies the 
average that Medicare paid per day for services during a beneficiarys nursing home stay.  For 
example, a beneficiary who receives $1,000 in Part B services during a 100-day nursing home stay 
has an average daily payment of $10.  To determine the national average across Part B services, we 
computed an average daily payment rate for each beneficiary within our review and then averaged 
these rates.  To determine average daily payment across service categories, States, and nursing 
homes, we first sorted beneficiaries by these groupings and then calculated average daily payments 
among beneficiaries who received such services.   
 
Standards 
This study was conducted in accordance with the Quality Standards for Inspection and Evaluation 
issued by the Council of the Inspectors General on Integrity and Efficiency. 
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Page 5  Donald M. Berwick, M.D. 
 
 
RESULTS 
 
Medicare Paid $4.9 Billion for Part B Services During Non-Part A Stays in 2008, With Three 
Service Categories Accounting for 58 Percent of the Total Payments 
During non-Part A stays in 2008, Part B paid for a variety of services for 1.5 million beneficiaries 
who resided in 16,059 nursing homes.  Of the 14 Part B categories we reviewed, therapy services, 
evaluation and management, and major and minor medical procedures together accounted for  
$2.8 billionmore than half of the $4.9 billion paid by Part B.  Table 1 contains payment amounts 
and utilization statistics for each of the service categories.  (See Appendix C for additional payment 
and utilization statistics for Part B services during non-Part A stays in 2008.)   
 
Table 1:  Payment and Utilization Statistics for 14 Part B Service Categories During 
Non-Part A Stays in 2008 
Number of  Percentage of 
Total Part B  Average 
Part B  Beneficiaries  Beneficiaries 
Service Category  Percentage  Payment per 
Payment  Who Received  Who Received 
of Payment  Beneficiary 
These Services  These Services 
Therapy services   $1,314,988,128  27%  731,356  48%  $1,798 
Evaluation and management   $1,049,333,598  21%  1,415,945  94%  $741 
Major and minor medical procedures   $464,983,013  10%  1,290,463  85%  $360 
Pathology and laboratory   $394,283,013  8%  1,286,796  85%  $306 
Transportation services  $374,453,747  8%  339,282  22%  $1,104 
Radiology and imaging  $286,748,086  6%  862,805  57%  $332 
Dialysis services  $264,308,170  5%  31,254  2%  $8,457 
Enteral and parenteral therapy   $224,110,762  5%  55,677  4%  $4,025 
DMEPOS  $212,940,491  4%  374,099  25%  $569 
Drugs and biologicals   $211,725,750  4%  420,721  28%  $503 
Endoscopy   $45,997,999  1%  130,716  9%  $352 
Oncology  $26,110,191  1%  12,614  1%  $2,070 
Anesthesia   $10,271,963  <1%  62,789  4%  $164 
Other  $381,402  <1%  2,958  <1%  $129 
Total  $4,880,636,313  100%*  1,511,974**     
Source:  OIG analysis of paid Part B services during non-Part A stays in 2008. 
* The column does not total to 100% because of rounding. 
** The total number of unique nursing home Medicare residents who received any Part B service during non-Part A stays in 2008. 
 
Therapy services, the highest paid service category with $1.3 billion, accounted for 27 percent of 
the total Part B payment.  Forty-eight percent of beneficiaries utilized at least one therapy service.  
The category of therapy services includes physical therapy, occupational therapy, speech-language 
pathology services, hydration and prophylactic therapy, alternative therapies (e.g., acupuncture), 
and other forms of physical medicine and rehabilitation.  Of these subcategories, physical therapy, 
occupational therapy, and speech-language pathology services accounted for 99 percent  
($1.3 billion) of the Part B payment for the therapy services category.  Additionally, therapeutic 
exercise, the highest paid individual HCPCS code within the therapy services category, was also 
the highest paid HCPCS code among all Part B services, with $383 million in total payment.       
 
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Page 6  Donald M. Berwick, M.D. 
 
 
Evaluation and management, the second-highest paid category with $1 billion, accounted for  
21 percent of the total Part B payment.  Nearly all beneficiaries94 percentutilized at least one 
service in this category.  The evaluation and management category encompasses services such as 
medical visits (e.g., nursing home, emergency, office or other outpatient, hospital, and home visits), 
psychiatry and alcohol/drug treatment, consultations, special evaluation and management, and 
preventive medicine.  Of these subcategories, nursing home visits accounted for 57 percent  
($593 million) of the evaluation and management category payment.  Additionally, four HCPCS 
codes (9930799310), corresponding to a group of services encompassing visits lasting between  
10 and 35 minutes called subsequent nursing home care, accounted for 53 percent ($553 million) of 
the amount paid for this category.  
 
Major and minor medical procedures, the third-highest paid category with $465 million, accounted 
for 10 percent of the total Part B payment.  Eighty-five percent of beneficiaries utilized at least one 
service in this category.  The category of major and minor medical procedures consists of surgical 
and other medical procedures grouped according to body systems, such as the cardiovascular, 
integumentary (e.g., skin), vision and hearing, musculoskeletal, and nervous systems.  The vast 
majority of these services involve complex and skilled procedures to repair damaged body parts, 
remove malignancies, or treat dysfunctions.  Of the body systems, cardiovascular ($168 million), 
integumentary ($126 million), and vision and hearing ($89 million) together accounted for  
83 percent of major and minor medical procedures.  Furthermore, services generally provided by 
podiatrists represent 21 percent ($96 million) of the amount paid for services in this category. 
 
Three Places of Service Comprised 76 Percent of the Total Payment Made by Part B During 
Non-Part A Stays in 2008 
Nursing homes, outpatient hospitals, and end-stage renal disease (ESRD) treatment facilities 
together made up $3.7 billion, or 76 percent of the $4.9 billion paid by Part B (see Table 2).  
Nursing homes, the places of service associated with the highest overall payment, accounted for  
54 percent ($2.6 billion) of the total Part B payment.  Outside of nursing homes, several places of 
service together accounted for the remaining 46 percent ($2.3 billion) of the total payment made by 
Part B during non-Part A stays in 2008.   
 
Table 2:  Payments Across Places of Service for Part B Services During Non-Part A 
Stays in 2008 
Place of Service  Part B Payment  Total Part B Percentage of Payment 
Nursing home  $2,631,865,410  54% 
Outpatient hospital  $630,212,887  13% 
ESRD facility  $451,148,936  9% 
Ambulance  $360,129,994  7% 
Physician office  $294,137,372  6% 
Other*  $310,896,613  6% 
Independent laboratory  $202,245,101  4% 
Total  $4,880,636,313  100%** 
Source:  OIG analysis of paid Part B services during non-Part A stays in 2008. 
* Other included a variety of settings, such as the home, ambulatory surgical centers, emergency rooms, custodial care facilities, mobile units, 
intermediate care facilities, assisted living facilities, community mental health centers, and home health agencies. 
** The column does not total to 100% because of rounding. 
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Page 7  Donald M. Berwick, M.D. 
 
 
Certain service categories were primarily associated with a nursing home place of service, 
whereas others were primarily associated with places of service outside of a nursing home.   
Most payments for the categories of enteral and parenteral therapy (98 percent), therapy services 
(97 percent), and evaluation and management (67 percent) were for services rendered within 
nursing homes (see Table 3).  Conversely, most payments for the following service categories were 
for services rendered outside of nursing homes:  major and minor medical procedures (72 percent), 
pathology and laboratory (92 percent), transportation services (99 percent), dialysis services  
(99 percent), drugs and biologicals (95 percent), endoscopy (95 percent), oncology (99 percent), 
and anesthesia (99 percent).  Payments for the remaining service categories, radiology and imaging 
and DMEPOS, were nearly evenly distributed between the nursing home and places outside of the 
nursing home.  (See Appendix D for payment statistics across Part B service categories for all 
places of services during non-Part A stays in 2008.)   
 
Table 3:  Payment (in Millions) Across Places of Service for 14 Part B Service 
Categories During Non-Part A Stays in 2008 
Within Nursing Homes  Outside of Nursing Homes  Total 
Service Category  Percentage of  Percentage of 
Part B  Part B  Part B 
Payment Within  Payment Within 
Payment  Payment  Payment 
Service Category  Service Category 
Therapy services   $1,271  97%  $44  3%  $1,315 
Evaluation and management   $704  67%  $345  33%  $1,049 
Major and minor medical 
$130  28%  $335  72%  $465 
procedures  
Pathology and laboratory   $32  8%  $362  92%  $394 
Transportation services   <$1  <1%  $374  >99%  $374 
Radiology and imaging  $149  52%  $138  48%  $287 
Dialysis services  <$1  <1%  $264  >99%  $264 
Enteral and parenteral therapy   $220  98%  $4  2%  $224 
DMEPOS  $114  53%  $99  47%  $213 
Drugs and biologicals   $11  5%  $201  95%  $212 
Endoscopy   $2  5%  $44  95%  $46 
Oncology  <$1  <1%  $26  >99%  $26 
Anesthesia   <$1  <1%  $10  >99%  $10 
Other  <$1  5%  <$1  95%  <$1 
Total*  $2,632  54%  $2,249  46%  $4,881 
Source:  OIG analysis of paid Part B services during non-Part A stays in 2008. 
* These totals represent the aggregate across all service categories.  
 
Some States Had Much Higher Payment Rates Than the National Rate for Certain Part B 
Service Categories 
The following States exhibited much higher payment rates:  Tennessee, Minnesota, Nevada, 
California, Arkansas, the District of Columbia, South Carolina, Alaska, and North Dakota (see  
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Page 8  Donald M. Berwick, M.D. 
 
 
Table 4).9  For example, payments for the category of enteral and parenteral therapy in 
Tennessee totaled 20 percent of Tennessees total Part B payment, which is 4.4 times higher than 
the national rate of 4.6 percent.  Possible explanations for geographic differences may include 
differences in fraud, waste, and abuse or differences in the levels of patient wellness (i.e., the 
degree to which patients care needs are defined).   
 
Table 4:  States With Higher Payment Rates Than the National Rate Across Part B 
Service Categories During Non-Part A Nursing Home Stays in 2008 
State to 
State  National 
Service  Total Part B  National 
State  Service Category  Payment  Payment 
Payment  Payment  Percentage 
Rate  Rate 
Ratio 
Tennessee  Enteral & parenteral therapy   $28,407,009  $139,698,220  20.3%  4.6%  4.4 : 1 
Minnesota  Enteral & parenteral therapy  $10,039,756  $50,272,634  20.0%  4.6%  4.3 : 1 
Nevada  DMEPOS  $2,153,130  $13,745,084  15.7%  4.4%  3.6 : 1 
California  DMEPOS  $59,510,343  $407,222,450  14.6%  4.4%  3.3 : 1 
Arkansas  DMEPOS  $7,636,268  $58,557,303  13.0%  4.4%  3.0 : 1 
District of Columbia  Dialysis services  $1,111,627  $7,159,009  15.5%  5.4%  2.9 : 1 
South Carolina  Transportation services  $12,563,748  $58,910,790  21.3%  7.7%  2.8 : 1 
Alaska  Dialysis services  $246,590  $1,629,854  15.1%  5.4%  2.8 : 1 
Alaska  Pathology & laboratory  $352,567  $1,629,854  21.6%  8.1%  2.7 : 1 
North Dakota  Drugs & biologicals  $1,628,904  $14,208,702  11.5%  4.3%  2.7: 1 
Source:  OIG analysis of paid Part B services during non-Part A stays in 2008. 
 
On Average, Medicare Paid $16.75 per Day for Beneficiaries Part B Services During  
Non-Part A Stays in 2008  
Aggregating across all Part B services paid for and averaging across all beneficiaries during  
non-Part A stays in 2008, we found that the average daily payment was $16.75 (see Table 5 on  
page 9).  This figure served as a reference point when comparing service categories and States.   
 
Aggregating across service categories, dialysis services exhibited the highest average daily 
payment of $49.74 during non-Part A stays in 2008.  Two factors influenced the average daily 
payment of any given service category:  relative cost per beneficiary (or expensiveness of the 
service category) and the duration of beneficiaries nursing home stays.  The category of dialysis 
services was the most expensive at $8,457 per beneficiary (see Table 1 on page 5).  Further, 
beneficiaries who received a service in this category exhibited short nursing home stays compared 
to beneficiaries who received other services, potentially because of their low survival rate (the 
measure of how long patients live after initial diagnosis).10  We attribute this to the chronic nature 
 
9
 Although Puerto Rico and the U.S. Virgin Islands exhibited unusual payment patterns for certain Part B service categories, we did not include 
them in the analysis because payments for services in each territory totaled less than $50,000. 
10
 As indicated in a 2007 study by the U.S. Renal Data System, the 90-day survival rates of dialysis patients are 92.1, 88.5, 83.6, and 79 percent 
for patients ages 6569, 7079, 8084, and over 85, respectively.  However, these survival rates drop significantly by the end of the first year of 
dialysis to 79.4, 72.5, 63.9, and 57.5 percent for the same age groups.  U.S. Renal Data System, USRDS 2010 Annual Data Report: Atlas of 
Chronic Kidney Disease and End-Stage Renal Disease in the United States, National Institutes of Health, National Institute of Diabetes and 
Digestive and Kidney Diseases.  Accessed at http://www.usrds.org on May 23, 2011.   
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Page 9  Donald M. Berwick, M.D. 
 
 
of ESRD, which requires frequent, expensive dialysis treatments (e.g., three times a week for  
3 hours or more per visit) or a kidney transplant.11   
 
Table 5:  Average Daily Payment Across 14 Part B Service 
Categories During Non-Part A Nursing Home Stays in 2008  
Average Daily Payment 
Across All Part B Services  $16.75 
Service Category   
Dialysis services  $49.74 
Oncology  $20.77 
Enteral and parenteral therapy  $16.42 
Therapy services  $11.25 
Transportation services  $8.71 
Evaluation and management   $3.91 
DMEPOS  $3.39 
Drugs and biologicals  $3.27 
Endoscopy  $2.50 
Radiology and imaging  $2.04 
Major and minor medical procedures  $1.77 
Pathology and laboratory  $1.52 
Anesthesia  $1.25 
Other  $1.06 
Source:  OIG analysis of paid Part B services during non-Part A stays in 2008. 
 
Aggregating across States, Louisiana exhibited the highest average daily payment of  
$19.13 during non-Part A stays in 2008.  Many of the States located along the Gulf of Mexico 
and the Midwest exhibited relatively high average daily payments (see Figure 1).  Conversely, 
States located in the north-central part of the country exhibited relatively low average daily 
payments.   
 
 
   
 
11
 National Institute of Diabetes and Digestive and Kidney Diseases, Treatment Methods for Kidney Failure:  Hemodialysis, December 2006.  
Accessed at http://kidney.niddk.nih.gov/kudiseases/pubs/hemodialysis/ on May 23, 2011. 
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Page 10  Donald M. Berwick, M.D. 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
 
Drugs and biologicals appeared the category most vulnerable to high average daily payments 
among nursing homes; however, DMEPOS may be of greater concern.  On average, Medicare 
paid $3.27 per day during non-Part A stays in 2008 for the category of drugs and biologicals (see 
Table 5 on page 9).  However, of the nursing homes associated with paid for drugs and 
biologicals services, 14 percent (1,247) exhibited an average daily payment greater than $9.81, 
which is triple the national average (see Table 6).  There may be reasonable explanations for 
such high average daily payments.  For example, one nursing home had an average daily 
payment of $37.49; yet, upon further review, we found that the nursing home operated an onsite 
dialysis unit and ESRD drugs drove the average daily payment.  Such nursing home 
specializations may explain high billing in a particular service type.   
 
The 3 percent of nursing homes with average daily payments higher than triple the national 
average for DMEPOS may be of greater concern.  Nursing homes may exhibit high average daily 
payments because of a specialization unit, such as an onsite dialysis unit, but explanations are 
limited for extremely high average daily payments for DMEPOS.  For example, at one nursing 
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Page 11  Donald M. Berwick, M.D. 
 
 
home with an average daily payment of $40, there were 23 beneficiaries who received 
DMEPOS.  Of those, nine had average daily payments ranging from $34 to $160higher than 
the national average of $3.39.  Such high average daily payments lend themselves to concerns of 
potential fraud, waste, and abuse.   
 
Table 6:  Percentage of Nursing Homes That Exceeded Triple the National Average 
Daily Payment Across 14 Part B Service Categories 
Nursing Homes That Exceeded 
National  Triple the  Triple the National Average Daily 
Average  National  Payment 
Categories  Average 
Daily  Daily  Percentage of  Maximum 
Payment  Payment  Nursing  Average Daily 
Homes  Payment 
Across All Part B Services*  $16.75  $50.25  <1%  $76 
Service Category * **         
Drugs and biologicals  $3.27  $9.81   14%  $71 
DMEPOS  $3.39  $10.17   3%  $45 
Endoscopy  $2.49  $7.47   2%  $22 
Transportation services  $8.71  $26.13   2%  $76 
Major and minor medical procedures  $1.77  $5.30  1%  $37 
Therapy services  $11.25  $33.75  <1%  $59 
Evaluation and management   $3.91  $11.72  <1%  $47 
Pathology and laboratory  $1.52  $4.56  <1%  $14 
Radiology and imaging   $2.04  $6.12  <1%  $11 
Anesthesia  $1.25  $3.76  <1%  $5 
Oncology  $20.77  $62.31  None exceeded  $37 
Dialysis services  $49.74  $149.21  None exceeded  $69 
Enteral and parenteral therapy  $16.42  $49.27  None exceeded  $26 
Other  $1.06  $3.18  None exceeded  $2 
Source:  OIG analysis of paid Part B services during non-Part A stays in 2008. 
*  To provide meaningful comparisons among nursing homes, we only analyzed data for those nursing homes with more than 50 beneficiaries who 
received Part B services. 
** To provide meaningful comparisons between service categories, we only included beneficiaries who had a nursing home stay longer than  
14 days and nursing homes that had at least 10 beneficiaries who received a service in the service category (e.g., nursing homes with at least  
10 beneficiaries who received services in the category of drugs and biologicals).   
 
CONCLUSION  
 
Medicare made payments totaling nearly $5 billion for Part B services provided to nursing home 
residents during non-Part A stays in 2008.  This analysis of utilization and payments provides an 
overview of the depth and breadth of the services billed to Part B.  We found significant 
variation in payment and utilization among different Part B service categories, places of service, 
States, and nursing homes.  We also found unusual payment and utilization patterns that greatly 
exceeded national norms.  Such variation and unusual patterns raise concerns of potential fraud, 
waste, and abuse.  Therefore, services billed under Part B for nursing home residents continue to 
warrant monitoring by OIG and CMS.   
 
To facilitate such monitoring, we plan to undertake additional reviews and in-depth analyses 
focusing on specific service types.  Utilizing stay dates from the MDS, our data matches not only 
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Page 12  Donald M. Berwick, M.D. 
 
 
allow us to identify Part B services provided to beneficiaries, but also demographic information 
for the nursing homes, providers, and beneficiaries associated with the claims.  Such 
demographic information will allow us to perform detailed reviews to detect nursing homes that 
exhibit questionable billing patterns and the providers who furnish services to the residents of 
these nursing homes.  For example, identifying a nursing home with beneficiaries who exhibit 
unusually high average daily payment rates for services may also identify providers who are 
billing for unnecessary Part B services.  A subsequent review of these providers claims would 
distinguish between those who have reasonable explanations for questionable billing patterns and 
those who warrant further investigation. 
 
Additionally, we encourage CMSs continued use of its wide range of program integrity        
resources (e.g., Medicare Administrative Contractors and Recovery Audit Contractors) to 
scrutinize provider and supplier billing associated with this vulnerable patient population.  
 
This report is being issued directly in final form because it contains no recommendations.  If you 
have comments or questions about this report, please provide them within 60 days.  Please refer 
to report number OEI-06-07-00580 in all correspondence. 
 
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Page 13  Donald M. Berwick, M.D. 
 
 
APPENDIX A 
 
Identification of Medicare Part B Services During Non-Part A Nursing Home Stays 
To identify Part B services during non-Part A stays, we utilized information from four Medicare 
program databases.     
 
Minimum Data Set.  The Minimum Data Set (MDS) forms the foundation of the comprehensive 
assessment for all residents of long-term care facilities certified to participate in Medicare or 
Medicaid.  It includes information about each residents health, as well as admission and discharge 
dates.  We used the MDS (version 2.0) to identify all nursing home residents in 2008 and their 
Social Security numbers (SSN), related nursing homes, and stay dates.  To determine resident stay 
dates between January 1 and December 31, 2008, we extracted all nursing home admission and 
discharge dates for each resident.  We used assessment dates as proxies for missing admission or 
discharge dates according to the following assumptions: 
  Missing admission date.  If the resident was in the nursing home on January 1, 2008 
(determined from subsequent assessments that the nursing homes conducted), we used the date 
of the first assessment conducted in 2007 as the admission date.   
  Missing discharge date.  We defined the date of the last assessment conducted by nursing 
homes and received by OIG through March 2009 as the discharge date.   
 
Online Survey, Certification, and Reporting System.  The Online Survey, Certification, and 
Reporting System (OSCAR) database contains nursing home facility demographic information, as 
well as survey results from nursing home certification and complaint surveys.  To obtain 
information about nursing homes (e.g., facility name, address, number of beds, and certification 
status), we linked the MDS facility identification numbers with the facility numbers maintained in 
OSCAR.   
 
Enrollment Database.  The Enrollment Database (EDB) includes beneficiary-level data (e.g., name, 
SSN, and Medicare Health Insurance Claim Number (HICN)).  Using this database, we matched 
SSNs contained in the MDS file to SSNs in the EDB to identify Medicare beneficiaries and their 
associated HICNs.  We excluded beneficiaries who had no matching SSN from further analysis.   
 
National Claims History.  We used the National Claims History (NCH), a data reporting system 
that includes both Part A and Part B claims, to identify all claims allowed by Part B during  
non-Part A stays.  To identify claims associated with Medicare beneficiaries with nursing home 
stays (identified earlier), we first matched their HICNs to the claims data.  To identify claims for 
services provided only during non-Part A stays, we then removed all claims for Part A paid skilled 
nursing facility (SNF) stays and inpatient hospital stays by matching the stay dates from the MDS 
to the SNF and inpatient hospital claims in the NCH.  The resulting dataset comprised all Part B 
claims for which billing was allowed for beneficiaries during non-Part A stays in 2008.   
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Page 14  Donald M. Berwick, M.D. 
 
 
APPENDIX B 
 
Categorization of Medicare Part B Services 
To facilitate analysis of all Part B services utilized by beneficiaries during non-Part A nursing 
home stays, we developed a comprehensive and systematic categorization of services.  This 
categorization organized the more than 14,000 services and their related Healthcare Common 
Procedure Coding System (HCPCS) codes into 14 broad service categories.  In addition, each 
category includes subcategories for further detailed analysis across service types.  For example, 
the evaluation and management category includes subcategories of office visits, consultations, or 
alcohol/drug treatment.  To develop the categorization, we adapted three coding systems used by 
the Centers for Medicare & Medicaid Services (CMS) for billing, payment, and analysis:  
Current Procedural Terminology (CPT), Berenson-Eggers Type of Service (BETOS) system, and 
HCPCS. 
 
1.  CPT codes are developed, maintained, and copyrighted by the American Medical Association 
(AMA) and are used to identify services and procedures provided by physicians and other 
health care professionals.   
2.  The BETOS coding system covers all HCPCS codes; CMS uses it to analyze the growth in 
Medicare expenditures.   
3.  HCPCS Level I numerical codes are identical to CPT codes and are used by CMS when 
services and procedures involve Medicare beneficiaries.  HCPCS Level II codes are 
alphanumeric codes, consisting of a letter followed by four numbers.  These codes, which CMS 
developed, represent products, supplies, and services used outside a physicians office  
(e.g., ambulance services and durable medical equipment).   
 
We began the categorization by modeling some of the service categories after AMAs CPT code 
delineations:  evaluation and management, anesthesia, surgery (which we modified and renamed 
major and minor medical procedures), radiology and imaging, pathology and laboratory, and 
medicine (which we modified and renamed therapy services).  We then added eight categories
many of which were derived from the BETOS system and others that we created for this review 
representing a variety of services that allowed for a detailed description of Part B services:  
endoscopy; oncology; dialysis services; transportation services; drugs and biologicals; enteral and 
parenteral therapy; durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS); 
and other.  Listed below are the 14 service categories, including an other category for codes that do 
not readily fit into the previous 13 categories, and the number of HCPCS codes associated with 
each service category during 2008: 
 
1.  Evaluation and management comprised 240 HCPCS codes and includes services occurring 
during medical visits.  These may include visits to physician offices, outpatient facilities, 
emergency rooms, nursing homes, etc.  
 
2.  Anesthesia comprised 213 HCPCS codes relating to anesthesia services necessary for a wide 
range of surgical and medical procedures.  These services are organized by body location, 
such as upper body, lower body, and systemic.  
 
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Page 15  Donald M. Berwick, M.D. 
 
 
3.  Major and minor medical procedures comprised 3,166 HCPCS codes for services ranging 
from minor surgery (e.g., nail debridement) to organ transplants.  We sorted the services in 
this category by the body systems in which the services were associated, such as 
integumentary (i.e., skin), musculoskeletal, and respiratory.  
 
4.  Endoscopy comprised 387 HCPCS codes related solely to endoscopy and related services, 
sorted primarily by the related body systems.   
 
5.  Oncology comprised 102 HCPCS codes and includes cancer treatments, such as radiation 
therapy and chemotherapy.   
 
6.  Dialysis services comprised 16 HCPCS codes and includes all nonsurgical services related to 
the provision of hemodialysis and peritoneal dialysis. 
 
7.  Radiology and imaging comprised 587 HCPCS codes and includes all imaging modalities 
and related supplies.   
 
8.  Pathology and laboratory comprised 1,091 HCPCS codes arranged by type of testing  
(e.g., therapeutic drug testing and urinalysis).   
 
9.  Transportation services comprised 18 HCPCS codes sorted by type and purpose of transport 
(e.g., nonemergency transport, air ambulance, and advanced life support).   
 
10.  Drugs and biologicals comprised 556 HCPCS codes divided by type of drug or biological, 
route of administration, purpose of administration, and dosage.   
 
11.  Therapy services comprised 117 HCPCS codes and includes those services subject to 
consolidated billing requirements regardless of Part A coverage, such as physical therapy, 
occupational therapy, and speech-language pathology services, as well as other therapies, 
such as acupuncture.   
 
12.  Enteral and parenteral therapy comprised 36 HCPCS codes divided by feeding type  
(i.e., enteral or parenteral).  All codes associated with these services fall under this category, 
including pumps and supplies, as they can only be utilized for these specific services. 
 
13.  DMEPOS comprised 1,589 HCPCS codes, including a variety of products (e.g., crutches and 
pacemakers).   
 
14.  Other comprised 76 HCPCS codes and includes all services not in another category, such as 
miscellaneous codes that end in 99, the Not Otherwise Classified codes.   
 
   
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Page 16  Donald M. Berwick, M.D. 
 
 
APPENDIX C 
Table C-1:  Payment and Utilization Statistics for 14 Medicare Part B Service Categories 
and Their Subcategories During Non-Part A Stays in 2008* 
Number of  Percentage of 
Total Part B  Average 
Beneficiaries Who  Beneficiaries Who 
Service Category  Part B Payment  Percentage  Payment per 
Received These  Received These 
of Payment  Beneficiary 
Services   Services 
Therapy services   $1,314,988,128  27%  731,356  48%  $1,798 
Physical therapy, occupational 
therapy, and speech-language 
pathology services **  $1,299,187,587  26.62  674,006  44.54  $1,928 
Hydration, therapeutic, 
prophylactic  $14,142,113  0.29  126,311  8.35  $112 
Alternative therapies  $1,255,790  0.03  5,229  0.35  $240 
Other physical medicine and 
rehabilitation  $263,954  0.01  255  0.02  $1,035 
Evaluation and management   $1,049,333,598  21%  1,415,945  94%  $741 
Nursing home visits  $592,916,446  12.15  1,302,679  86.09  $455 
Psychiatry and alcohol/drug 
treatment  $177,587,963  3.64  365,799  24.17  $485 
Emergency room visits  $100,104,236  2.05  329,957  21.80  $303 
Office visits or other outpatient 
visits  $95,877,111  1.96  494,338  32.67  $194 
Consultations  $48,098,605  0.99  314,471  20.78  $153 
Hospital visits  $16,606,655  0.34  59,380  3.92  $280 
Home visits  $8,384,883  0.17  51,193  3.38  $164 
Special evaluation and 
management services  $5,647,600  0.12  1,517  0.10  $3,723 
Preventive medicine services  $2,902,604  0.06  26,339  1.74  $110 
Care plan oversight services  $877,306  0.02  5,806  0.38  $151 
Prolonged services   $236,244  <0.01  2,687  0.18  $88 
Major and minor medical 
$464,983,013  10%  1,290,463  85%  $360 
procedures  
Cardiovascular system  $168,377,920  3.45  1,164,323  76.94  $145 
Integumentary system  $126,353,521  2.59  803,733  53.11  $157 
Eye and ocular adnexa  $88,995,776  1.82  381,048  25.18  $234 
Musculoskeletal system  $21,382,578  0.44  64,989  4.29  $329 
Nervous system  $19,092,286  0.39  31,783  2.10  $601 
Urinary system  $12,871,508  0.26  65,632  4.34  $196 
Digestive system  $10,402,129  0.21  25,409  1.68  $409 
Respiratory system  $8,348,420  0.17  44,709  2.95  $187 
Auditory system  $6,235,558  0.13  89,904  5.94  $69 
Male genital system  $1,121,210  0.02  1,738  0.11  $645 
Female genital system  $941,551  0.02  4,614  0.30  $204 
Hemic and lymphatic systems  $515,118  0.01  1,336  0.09  $386 
General  $187,754  0.00  1,231  0.08  $153 
Endocrine system  $151,870  0.00  196  0.01  $775 
 
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Table C-1 (continued) 
Number of  Percentage of 
Total Part B  Average 
Beneficiaries Who  Beneficiaries Who 
Service category  Part B Payment  Percentage  Payment per 
Received These  Received These 
of Payment  Beneficiary 
Services   Services 
Pathology and laboratory   $394,283,013  8%  1,286,796  85%  $306 
Chemistry  $113,034,126  2.32  992,918  65.62  $114 
Organ or disease oriented 
panels  $66,282,999  1.36  1,120,218  74.03  $59 
Hematology and coagulation  $65,504,531  1.34  1,087,294  71.85  $60 
Microbiology  $52,014,953  1.07  703,114  46.46  $74 
Specimen procurement and 
other lab procedures  $39,719,213  0.81  695,837  45.98  $57 
Therapeutic drug assays  $20,704,983  0.42  275,428  18.20  $75 
Surgical pathology  $13,110,663  0.27  79,319  5.24  $165 
Transfusion medicine  $9,558,217  0.20  27,558  1.82  $347 
Urinalysis  $7,376,217  0.15  670,406  44.30  $11 
Immunology  $3,566,365  0.07  86,812  5.74  $41 
Cytopathology  $1,858,331  0.04  15,337  1.01  $121 
Drug testing  $840,328  0.02  6,414  0.42  $131 
Cytogenetic studies  $377,898  0.01  999  0.07  $378 
Other procedures  $298,535  0.01  9,857  0.65  $30 
Transportation services   $374,453,747  8%  339,282  22%  $1,104 
Basic life support  $197,279,881  4.04  235,926  15.59  $836 
Air ambulance  $105,453,234  2.16  268,504  17.74  $393 
Transportation unit charges  $65,337,634  1.34  336,973  22.27  $194 
Advanced life support  $4,877,542  0.10  13,347  0.88  $365 
Other ambulance  $1,499,312  0.03  1,121  0.07  $1,337 
Radiology and imaging  $286,748,086  6%  862,805  57%  $332 
Radiology  $266,513,508  5.46  843,767  55.76  $316 
Nuclear medicine  $11,870,967  0.24  26,513  1.75  $448 
Ultrasound  $7,912,786  0.16  82,264  5.44  $96 
Ultrasound guidance  $450,826  0.01  8,098  0.54  $56 
Dialysis services  $264,308,170  5%  31,254  2%  $8,457 
Miscellaneous dialysis 
procedures  $233,599,442  4.79  28,622  1.89  $8,162 
End-stage renal disease 
services  $29,054,327  0.60  26,086  1.72  $1,114 
Other dialysis modality  $1,208,890  0.02  220  0.01  $5,495 
Hemodialysis  $421,458  0.01  1,672  0.11  $252 
Enteral and parenteral therapy   $224,110,762  5%  55,677  4%  $4,025 
Enteral formulae and enteral 
medical supplies  $223,584,867  4.58  55,650  3.68  $4,018 
Parenteral nutrition solutions 
and supplies  $525,895  0.01  35  0.00  $15,026 
Durable medical equipment, 
prosthetics, orthotics, and  $212,940,491  4%  374,099  25%  $569 
supplies 
Medical supplies and surgical 
dressings  $82,401,913  1.69  127,697  8.44  $645 
Durable medical equipment  $56,776,856  1.16  194,421  12.85  $292 
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Page 18  Donald M. Berwick, M.D. 
 
 
Table C-1 (continued) 
Number of  Percentage of 
Total Part B  Average 
Beneficiaries Who  Beneficiaries Who 
Service category  Part B Payment  Percentage  Payment per 
Received These  Received These 
of Payment  Beneficiary 
Services   Services 
Orthotic devices  $38,647,969  0.79  104,649  6.92  $369 
Medical supplies and surgical 
dressings  $35,113,752  0.72  14,680  0.97  $2,392 
Drugs and biologicals   $211,725,750  4%  420,721  28%  $503 
Drugs and biologicals 
administration  $169,857,996  3.48  117,280  7.75  $1,448 
Chemotherapy drugs  $26,032,007  0.53  8,852  0.58  $2,941 
Vaccines and toxoids  $6,537,200  0.13  306,501  20.25  $21 
Immunization administration for 
vaccines  $6,383,368  0.13  326,012  21.54  $20 
Nonprescription drugs  $1,457,997  0.03  8,725  0.58  $167 
Oral medications  $747,470  0.02  673  0.04  $1,111 
Pharmacy fees  $699,934  0.01  10,116  0.67  $69 
Endoscopy   $45,997,999  1%  130,716  9%  $352 
Digestive system  $25,053,556  0.51  37,679  2.49  $665 
Urinary system  $12,137,564  0.25  17,614  1.16  $689 
Eye and ocular adnexa  $4,892,780  0.10  71,526  4.73  $68 
Respiratory system  $2,710,009  0.06  11,197  0.74  $242 
Musculoskeletal system  $651,917  0.01  295  0.02  $2,210 
Female genital  $514,498  0.01  667  0.04  $771 
Oncology  $26,110,191  1%  12,614  1%  $2,070 
Radiation oncology  $22,223,359  0.46  4,840  0.32  $4,592 
Chemotherapy administration  $3,886,832  0.08  8,500  0.56  $457 
Anesthesia   $10,271,963  <1%  62,789  4%  $164 
Upper body  $7,339,343  0.15  43,844  2.90  $167 
Lower body  $2,432,080  0.05  17,412  1.15  $140 
Systemic  $500,540  0.01  4,215  0.28  $119 
Other  $381,402  <1%  2,958  <1%  $129 
Total  $4,880,636,313  100%  1,511,974***     
Source:  Office of Inspector General analysis of paid Part B services during non-Part A stays in 2008. 
* We only included those subcategories with total payments greater than $100,000. 
** Physical therapy, occupational therapy, and speech-language pathology services include all services subject to consolidated billing requirements 
regardless of Part A coverage. 
*** The total number of unique nursing home residents who received any Part B service during non-Part A stays in 2008. 
 
 
 
 
 
 
 
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Page 19  Donald M. Berwick, M.D. 
 
 
APPENDIX D 
Table D-1:  Payment (In Millions) Across Places of Service For 14 Medicare Part B Service 
Categories During Non-Part A Stays in 2008 
End-Stage Renal 
Nursing  Outpatient  Disease  Physician  Independent 
Service Category  Ambulance  Other*  Total 
Home  Hospital  Treatment  Office  Laboratory 
Facility 
$1,271  $20  $13  $0  $5  <$1  $7  $1,315 
Therapy services  
96.6%  1.5%  1%  0%  <1%  <1%  0.5%  100% 
Evaluation and  $704  $118  $52  <$1  $96  <$1  $80  $1,049 
management   67.1%  11.2%  4.9%  <1%  9.1%  <1%  7.6%  100% 
Major and minor  $130  $186  <$1  <$1  $93  $9  $46  $465 
medical procedures  28%  40.1%  <1%  <1%  20.1%  2%  9.9%  100% 
Pathology and  $32  $131  $1  <$1  $9  $193  $28  $394 
laboratory  8.1%  33.2%  <1%  <1%  2.3%  48.9%  7.1%  100% 
Transportation  <$1  $12  $0  $360  <$1  $0  $2  $374 
services 
<1%  3.2%  0%  96.2%  <1%  0%  <1%  100% 
Radiology and  $149  $83  <$1  $0  $26  <$1  $29  $287 
imaging  51.8%  28.9%  <1%  0%  9.2%  <1%  10%  100% 
<$1  $4  $259  $0  <$1  $0  <$1  $264 
Dialysis services 
<1%  1.6%  98%  0%  <1%  0%  <1%  100% 
Enteral and  $220  <$1  <$1  $0  $0  $0  $4  $224 
parenteral therapy  98.1%  <1%  <1%  0%  0%  0%  1.8%  100% 
Durable medical  $114  $1  $1  <$1  <$1  $0  $97  $213 
equipment, 
prosthetics, orthotics,  53.3%  <1%  <1%  <1%  <1%  0%  45.6%  100% 
and supplies 
$11  $24  $124  <$1  $45  <$1  $8  $212 
Drugs and biologicals 
5%  11.5%  58.6%  <1%  21.3%  <1%  3.6%  100% 
$2  $30  <$1  $0  $7  $0  $6  $46 
Endoscopy 
4.7%  65.5%  <1%  0%  15.7%  0%  14%  100% 
<$1  $14  <$1  $0  $11  $0  $1  $26 
Oncology 
<1%  54.5%  <1%  0%  42.5%  0%  2.8%  100% 
<$1  $7  $0  $0  <$1  $0  $3  $10 
Anesthesia 
<1%  69.2%  0%  0%  <1%  0%  30%  100% 
<$1  <$1  <$1  $0  <$1  <$1  <$1  <$1 
Other 
4.8%  31.4%  22%  0%  34.3%  <1%  7.3%  100% 
$2,632  $630  $451  $360  $294  $202  $311  $4,881 
Total 
53.9%  12.9%  9.2%  7.4%  6.0%  4.1%  6.4%  100% 
Source:  Office of Inspector General analysis of paid Part B services during non-Part A stays in 2008. 
* Other included a variety of settings, such as the home, ambulatory surgical centers, emergency rooms, custodial care facilities, mobile units, intermediate care facilities, 
assisted living facilities, community mental health centers, and home health agencies. 
 
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