U.S. Department of Health and Human Services 
Office of Inspector General 
Reducing Medicares Payment 
Rates for Intermittent Urinary 
Catheters Can Save the 
Program and Beneficiaries 
Millions of Dollars Each Year 
Suzanne Murrin 
Deputy Inspector General for Evaluation and Inspections 
August 2022, OEI-04-20-00620  U.S. Department of Health and Human Services 
Office of Inspector General 
Report in Brief 
August 2022, OEI-04-20-00620 
Why OIG Did This Review  Reducing Medicares Payment Rates for 
A 2018  report  by the Medicare 
Intermittent Urinary Catheters Can Save the 
Payment Advisory Commission 
found that Medicare paid  Program and Beneficiaries Millions of 
substantially more than  
Dollars Each Year  
commercial payers for certain  
items, including intermittent  
What OIG Found 
urinary catheters.  The report 
Key Takeaway 
recommended that Medicare  From our analysis of data 
incorporate such items into its  Medicare and its beneficiaries  submitted by  suppliers, we 
competitive bidding program,  paid suppliers $407 million for  estimated that Medicare payments 
thereby reducing the rates that  intermittent urinary catheters in   were 3.4 times suppliers 
Medicare allows. However,   fiscal year 2020, more than   acquisition costs for intermittent  
Medicare has not done so.  In  three times the suppliers  urinary catheters in FY 2020.  In 
fiscal year (FY) 2020, Medicare  estimated acquisition costs of  total, Medicare allowed $407 
Part B and its beneficiaries paid  $121 million.  CMS should take  million in payments for these 
$407 million for all intermittent  steps to  lower Medicares  items, while suppliers paid 
urinary catheters.  OIG   payment rates for these  approximately $121 million to 
evaluated whether Medicares  catheters while continuing to  acquire them (see exhibit below).  
payment amounts  for these   ensure beneficiaries access to  Medicare payments exceeded 
catheters may offer the  the catheters that best serve  suppliers acquisition costs by $286 
potential for savings.   their medical needs.  million.  Each of the three billing 
categories of intermittent  urinary 
How OIG Did This Review  catheters (straight tip, curved tip, and sterile kit) showed large differences 
We sampled 600 Medicare   between Medicare payments and acquisition costs, which indicates a 
claims from FY 2020, for the  potential for substantial savings both to Medicare and beneficiaries, who 
three billing categories of  share responsibility for paying the Medicare-allowed amount.   
intermittent urinary catheters.  
Exhibit. Medicare payments greatly exceeded  acquisition costs. 
We requested that suppliers 
Total Medicare payment amounts ($407 million) were more than three times the 
provide and document the 
suppliers acquisition costs ($121 million). 
acquisition cost for each of the 
catheters in  these claims.  We 
compared the suppliers 
acquisition costs to Medicare 
payment amounts  in three 
ways: in  total, across the three 
categories, and with regard to 
three specific features.   
Additionally, we interviewed the  
Centers for Medicare & 
Medicaid Services (CMS) to 
better understand  the methods   Source: OIG estimates using documentation from suppliers for sampled claims, n = 574. 
available to reduce payment 
Note: Medicare payments  (i.e., the allowed amounts) include the beneficiary responsibility.  
rates while maintaining  Because of rounding, the subtotals for acquisition costs do not  sum to total acquisition 
beneficiaries access to the   costs. 
catheters that best serve their 
medical needs.   
We found potential savings across all categories of catheters.  We also 
found potential savings when catheters had one or more of three specific 
features (hydrophilic coating, grip, or sleeve)in these cases, there were 
smaller but still meaningful differences between Medicare payment rates 
and supplier acquisition costs, reinforcing the potential for savings.  
We recognize that suppliers face other costs beyond the cost of 
acquiring catheters and need an  opportunity to maintain a profit.   
However, the magnitude of the differences between Medicare 
reimbursements and suppliers acquisition  costs indicates that Medicare 
and its beneficiaries can achieve substantial savings while allowing for 
other costs.  To provide an  example of the potential for savings, we 
performed an illustrative analysis of suppliers other costs.  In this 
analysis, we used data in a  report from the home  health  care  industry 
(not specific to catheters), which estimated that for every dollar spent on 
acquisition costs, suppliers spent an additional 72 cents in  other costs.  
We applied this same proportion of other costs to our data on 
acquisition costs in order to obtain an example of suppliers total costs.  
This illustrative analysis yields a total cost  of $209 million, which would 
allow $198 million in potential Medicare savings and supplier profits.  We 
believe that this analysis likely underestimates potential savings by 
overstating suppliers other costs.   
What OIG Recommends and How the Agency Responded 
We recommend that CMS lower Medicares payment rates for  
intermittent urinary catheters.  As it does  so, CMS should continue to  
take steps to ensure beneficiaries access to the catheters that best serve 
their medical needs.  When CMS has previously  sought to obtain savings 
for other items, it  has used  competitive bidding or its inherent  
reasonableness process.  Each of these mechanisms has  its own 
methods for ensuring beneficiary access.  CMS did not explicitly indicate  
whether it concurred with  the recommendation; instead, CMS stated that 
it will take our recommendation under consideration  as it determines 
appropriate next steps. 
 
   
TABLE OF CONTENTS 
 
 
BACKGROUND................................................................................................................................................ 1  
FINDING......................................................................................................................................................... 10  
Medicare payment amounts were 3.4 times suppliers costs to acquire intermittent urinary catheters 
in FY 2020, and opportunities exist for savings ........................................................................................................... 10  
CONCLUSION AND RECOMMENDATION ............................................................................................. 15  
Lower Medicares payment rates for intermittent urinary catheters ................................................................... 15  
AGENCY COMMENTS AND OIG RESPONSE ......................................................................................... 16  
DETAILED METHODOLOGY ....................................................................................................................... 17  
APPENDICES.................................................................................................................................................. 21  
Appendix A: Data Summaries, Cost Estimates, and 95-Percent Confidence Intervals .................................. 21  
Appendix B: Agency Comments........................................................................................................................................ 26  
ACKNOWLEDGMENTS AND CONTACT ................................................................................................ 29  
Acknowledgments ..................................................................................................................................................................29  
Contact........................................................................................................................................................................................ 29  
ABOUT THE OFFICE OF INSPECTOR GENERAL. ................................................................................... 30  
 
 
   
BACKGROUND  
OBJECTIVE 
To compare Medicare payments to supplier acquisition costs for intermittent urinary 
catheters provided in fiscal year (FY) 2020 and assess whether these differences 
demonstrate opportunities for cost savings to Medicare and beneficiaries. 
 
Rationale 
We conducted this study to assess whether CMS has an opportunity to obtain 
substantial cost savings for the Medicare program and its beneficiaries, after 
considering suppliers acquisition costs and other costs.  In FY 2020, Medicare Part B 
and its beneficiaries paid $407 million for all intermittent urinary catheters.  
CMS has not implemented the recommendation from a 2018 Medicare Payment 
Advisory Commission (MedPAC) report for it to incorporate certain items, including 
intermittent urinary catheters, into its competitive bidding program, thereby reducing  
the rates that Medicare pays.  The MedPAC report found that in 2015 Medicare paid 
more than commercial payers for intermittent urinary catheters, specifically 45 percent 
more than commercial payers for straight tip catheters and 57 percent more for 
curved tip catheters.1, 2    
Intermittent Urinary Catheterization for Urinary Retention 
Intermittent catheterization is a technique used to manage urinary retention, the 
inability to empty the bladder voluntarily. Users insert a special tube (a catheter) to 
drain the bladder, usually every four to six hours.  The tube is removed after the 
bladder has been emptied.   
Chronic urinary retention can be caused by a variety of medical problems that either 
block or narrow the urethra or interfere with the nerves and muscles that contract the 
bladder to empty it. Examples of problems that can cause urinary retention are 
_____________________________________________________________________________________________________________________________  
1 MedPAC, Report to the Congress, ch. 6, Issues in Medicares medical device payment policies.  June  
2018. Accessed at https://www.medpac.gov/wp-content/uploads/import_data/scrape_files/docs/default-
source/reports/jun18_ch6_medpacreport_sec.pdf on March 10, 2022. 
2 If we apply these percentages to FY 2020, Medicare payment amounts may have exceeded what 
commercial payers paid by $118 million (considering  that the Medicare program and beneficiaries paid 
$348 million for these two categories of catheters). 
Reducing Medicares Payment Rates for Intermittent Urinary Catheters Can Save the Program and Beneficiaries Millions of 
Dollars Each Year, OEI-04-20-00620     Background | 1     
enlarged prostate, urethral scarring, spinal cord injury, multiple sclerosis, or bladder 
muscles that have been weakened or damaged by age or pregnancy and childbirth.3  
If not addressed, urinary retention can lead to further medical complications.  Urinary 
retention can lead to urinary tract infections (UTIs), which can damage the bladder or 
kidneys. Additionally, the Centers for Disease Control and Prevention (CDC) has 
strongly recommended that if intermittent catheterization is used, it should be 
performed at regular intervals to avoid overdistension (i.e., overstretching) of the 
bladder.4  Without catheterization, urinary retention can block the flow of urine from 
the kidneys and lead to  swelling and kidney damage.5 Kidney damage, resulting from  
UTIs or bladder overdistension, can progress to chronic kidney disease and kidney 
failure.6    
Although intermittent catheterization is used to treat urinary retention, catheter use 
carries some risk. Catheters can move bacteria into and up the urinary tract, causing 
UTIs. Additionally, insertion of the catheter may cause damage to the urinary tract. 
Medicare Coverage and Billing Categories 
When medically necessary and prescribed to replace the emptying function of the 
bladder, urinary catheters are covered under Medicare Part Bs benefit for prosthetic 
devices. Intermittent urinary catheters are covered by Medicare when basic coverage 
criteria are met and the beneficiary or a caregiver can perform the catheterization.7   
An appropriate health care professional must both prescribe catheter use and 
document medical necessity. The maximum number of catheters covered per month 
is 200, unless the prescriber documents medical necessity for a greater quantity.8    
Suppliers bill Medicare for intermittent urinary catheters using one of three Level II 
Healthcare Common Procedure Coding System (HCPCS) codes established by CMS.    
 
_____________________________________________________________________________________________________________________________  
3 National Institutes of Health (NIH), National Institute of Diabetes and Digestive and Kidney Diseases  
(NIDDK), Symptoms & Causes  of Urinary Retention. Accessed at https://www.niddk.nih.gov/health-
information/urologic-diseases/urinary-retention/symptoms-causes on April 15, 2022. 
4 CDC, Guideline for Prevention of Catheter-Associated Urinary Tract Infections (2009, updated 2019). 
https://www.cdc.gov/infectioncontrol/pdf/guidelines/cauti-guidelines-H.pdf. CDC has also stated that 
catheters with hydrophilic coatings might be preferable to other types for intermittent catheterizations.  
That recommendation is based on very low-quality evidence.  (See page  40 of CDC guidelines.)   
5 National Kidney Foundation, A to Z Health Guide: Hydronephrosis.  Accessed at 
https://www.kidney.org/atoz/content/hydronephrosis on March 1, 2022. 
6 NIH, NIDKK, Definition & Facts of Urinary Retention. Accessed at https://www.niddk.nih.gov/health-
information/urologic-diseases/urinary-retention/definition-facts#complications on March 1, 2022. 
7 CMS, Urological Supplies (L33803), available at https://www.cms.gov/medicare-coverage-
database/view/lcd.aspx?lcdid=33803. 
8 The CMS standard maximum of 200 catheters per month allows for an average of 6 catheters per day in 
a 31-day month. (That is, 200 divided by 31 is approximately 6.5.) 
Reducing Medicares Payment Rates for Intermittent Urinary Catheters Can Save the Program and Beneficiaries Millions of 
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CMS assigns catheters to one of the following three billing codes depending on the 
shape of its tip or if allows for sterile catheterization: 
   Straight tip catheters are the most basic billing category (A4351) for 
intermittent catheters. 
   Curved tip catheters are also called coude tip catheters (A4352).  CMS will 
cover these if medically necessary (e.g., the beneficiary is unable to catheterize 
with a straight tip catheter). Depending on physiology (e.g., having an 
enlarged prostate), a curved tip catheter may be easier or less painful to insert 
than a straight tip catheter. CMS advises that beneficiaries categorized as 
female rarely need curved tip catheters.  
   Sterile kit catheters (A4353) can be either straight tip or curved tip catheters. 
This category includes catheters that come with a kit of supplies to facilitate 
sterile catheterization. This category also includes no-touch catheters that 
allow for sterile technique without the use of additional supplies.  CMS covers 
a sterile kit catheter only in specific situations (i.e., if the beneficiary resides in 
a nursing facility; is immunosuppressed; is pregnant and has a spinal cord  
injury; or has a history of UTIs or backward flow of urine to the kidneys while 
using intermittent catheterization).  
Other Intermittent Urinary Catheter Features 
Catheters in each of the three billing categories can have one or more features.  
Different combinations of features give prescribers and beneficiaries options from 
which to choose. Catheter features are often promoted by manufacturers and 
suppliers as increasing comfort and ease of use. Manufacturer representatives told us 
that comfort and ease of use are important factors in patients compliance with their 
intermittent catheterization schedule.9    
In our discussions with manufacturers, three features emerged as examples of 
features likely to be associated with higher acquisition costs:  
   Hydrophilic coating  when exposed to water, a polymer on the catheter that 
forms a slippery coating intended to ease insertion 
   Grip  an insertion aid that keeps the fingers from touching the catheter and 
potentially introducing bacteria 
   Sleeve  a protective polymer wrapping over the entire catheter that keeps the 
fingers from touching the catheter and potentially introducing bacteria 
 
_____________________________________________________________________________________________________________________________  
9 We met with the American Association for HomeCare and some of its members, including 
representatives from Coloplast; Hollister; and Beckton, Dickinson, and Company.  
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Medicare Payment Rates and Beneficiary Utilization 
Medicare payment rates vary among the three billing codes, as does beneficiary 
utilization. In this report, Medicare payment rates and Medicare payment 
amounts (i.e., allowed amounts) refer to the amounts paid by the Medicare program 
and beneficiaries or their supplemental insurance.   
Payment Rates Under the DMEPOS Fee Schedule 
Currently, the Medicare payment rate for intermittent urinary catheters is set through 
the durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS) fee 
schedule. The Medicare-allowed amount for 
catheters is the lesser of the amount charged by 
the supplier or the DMEPOS fee schedule  Typically, the Medicare  
amount.10     program pays 80 percent of the 
rate Medicare allows minus any 
Intermittent urinary catheters are among the 
annual deductible not yet paid 
DMEPOS items with current payment  rates based 
by the beneficiary.  The  
on historical charges adjusted for inflation over 
beneficiary is responsible for  
time. The current rates in the Medicare DMEPOS 
the remaining 20 percent, after
fee schedule are based on payments made in 
paying the annual deductible.  
1986 and 1987 under the prior reasonable 
charges payment methodology, adjusted for 
inflation annually for over 30 years since CMS implemented the fee schedule in 
1989.11, 12    
As described in Exhibit 1 below, the FY 2020 Medicare payment rates per unit were 
$1.98 for straight tip catheters, $6.98 for curved tip catheters, and $8.04 for sterile kit 
catheters. The presence of other features, such as a hydrophilic coating, grip, or 
sleeve, does not alter the Medicare payment rate for a catheter. 
Beneficiary Utilization and Medicares Payments in FY 2020 
Beneficiaries most frequently utilized straight tip catheters, but Medicare allowed 
higher total payments for curved tip catheters because of their higher per-unit 
payment rate (see Exhibit 1). Straight tip catheters accounted for 70 percent of the 
catheters utilized, while curved tip catheters account for 24 percent.  However, curved 
_____________________________________________________________________________________________________________________________  
10 Social Security Act  1834(h).  The Medicare payment rate is set at the lesser of the fee schedule rate or 
the amount charged by the supplier for most items. Customized items and competitively bid items are 
subject to different payment rules.   
11 See 84 Fed. Reg. 60648, 60729-60730 (Nov. 8, 2019) for additional detail, including the exceptions to 
the 1986 and 1987 base period, such as surgical dressings, which have a base period of 1992. 
12 Generally, CMS bases reasonable charge determinations on customary and prevailing charges derived 
from historic charge data.  Under the fee schedule, CMS adjusts payment rates annually by the 
percentage increase in the CPIU (Consumer Price Index for All Urban Consumers), reduced by a 
productivity adjustment. See 84 Fed. Reg. at 60729-60730.   
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tip catheters accounted for 47 percent of spending (i.e., $189 million out of $407 
million) as compared to 39 percent for straight tip catheters.   
Exhibit 1.  Beneficiary utilization and Medicare payments for intermittent 
urinary catheters in fiscal year 2020 
Medicare  Number   Payment  Percentage  
Payment Rate   of Units   Percentage  Amounts   of Total 
Catheter Category   per Unit   (Millions)  of Units   (Millions)  Payments  
Straight Tip (A4351)   $1.98  80.1  70%  $158.7   39% 
Curved Tip (A4352)  $6.98  27.1  24%  $189.1   47% 
Sterile Kit (A4353)  $8.04  7.3  6%  $58.9   14% 
Total  N/A  114.4  100%   $406.7  100%  
Source: OIG analysis of Medicare claims with a date of service from  October 2019 through September 2020.  
Note: Medicare  payment amounts include beneficiary  share.  
Beneficiaries used different types of catheters, in part, according to their health 
condition or physiology (see Exhibit 2).  Sterile catheter kits were mostly used by 
beneficiaries with a spinal cord injury or neurological condition (i.e., 61 percent of the 
6,914 beneficiaries who used sterile kits).13  Curved tip catheters were used almost 
exclusively by beneficiaries categorized as male.14  
Exhibit 2.  Beneficiary characteristics by catheter type in fiscal year 2020 
Beneficiaries with 
Number of  Spinal Cord Injury or  
Catheter Category   Beneficiaries Using  Neurological Condition   Male  Female  
Straight Tip (A4351)   85,114  30%  61%  39% 
Curved Tip (A4352)  34,031  19%  98%  2% 
Sterile Kit (A4353)  6,914  61%  66%  34% 
Total  122,704   28%   71%   29% 
Source: OIG analysis  of  Medicare  claims with a  date of service from  October 2019  through September 2020.  
Note: The beneficiary  subtotals  do not sum to the total number of  beneficiaries  because one beneficiary may  receive 
 
catheters in different billing categories. 
CMSs Alternative Authorities To Adjust Payment Rates and 
Their Beneficiary Access Protections 
Currently, CMS has the ability under Federal statute and regulations to adjust 
Medicares payment rates for DMEPOS under two methodologies.  The two 
methodologies are: (1) the competitive bidding program  and (2) what is known as 
_____________________________________________________________________________________________________________________________  
13 For additional information about the medical conditions of beneficiaries who utilized intermittent 
urinary catheters, see Exhibit A-1 in Appendix A. 
14 For this analysis, we used the sex categorization available from Medicare's National Claims History. 
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the inherent reasonableness process. Both methodologies have mechanisms to 
attempt to protect beneficiary access to medically necessary items. 
DMEPOS Competitive Bidding Program 
The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 
required CMS to create a competitive bidding program for DMEPOS items to obtain 
better payment rates for the Medicare program. CMS was allowed to conduct a 
phased implementation of items under competitive bidding and is allowed to exempt 
items from the program if the bidding process appears unlikely to result in significant 
savings.15    
CMS has not included urological supplies, including intermittent urinary catheters, in 
previous phases of competitive bidding. In 2007, CMS interpreted the statute as 
giving CMS discretion to either include or exclude ostomy supplies (and by extension, 
urological supplies) in the competitive bidding program, but CMS did not take steps 
to include ostomy supplies at that time.16    
In the competitive bidding program, CMS selects items for inclusion, defines 
competitive bidding areas (CBAs), and opens bidding to suppliers willing to provide 
the items in those CBAs.  If the bids are expected to result in savings, CMS determines 
contract payment rates based on the bids. The suppliers that enter into contracts 
with CMS are obligated to provide the items at the contracted payment rates.  
Medicare Part B beneficiaries obtaining DMEPOS items in the CBAs must get those 
items from the contract suppliers if they want the Medicare program to cover the 
items.17   
It remains unclear if and when CMS will begin subsequent rounds of the competitive 
bidding program. Before it introduces a new round, CMS takes several steps to set up 
the bidding process and obtain bids.  For prior rounds, this process has taken about 
1.5 years from the announcement of the bidding process to implementation of the 
contracts. The current round of the competitive bidding program ends in 
December 2023.18  For a subsequent round, CMS would need to announce details on 
_____________________________________________________________________________________________________________________________  
15 Statute also excludes certain DMEPOS items from the competitive bidding program (i.e., class III 
medical devices, certain types of wheelchairs, and certain drugs or biologicals). Social Security Act  1847 
(a)(2).  
16 CMS characterized the statute as ambiguous. See 72 Fed. Reg. 17992, 18023 (April 10, 2007) for CMSs 
interpretation of the statute regarding ostomy supplies.  We note that the statute addresses urological  
supplies and ostomy supplies together, so CMSs statements in the Federal Register about ostomy 
supplies would also be applicable to urological supplies.    
17 In FY 2020, 56 percent of spending on intermittent urinary catheters was in former CBAs, and 
44 percent was in non-CBAs, including 21 percent in rural areas.  
18 CMS currently covers two product categories under Round 2021 of the competitive bidding program 
(i.e., off-the-shelf knee and back orthotics).  
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the bidding process; the methods to determine winning bids and payment rates; and 
which areas and product categories may be included.19    
The competitive bidding program, whether local CBA-based or national mail order, 
includes an authorization process to safeguard the beneficiarys access to a specific 
brand name product when it is needed to avoid an adverse medical outcome.  If the 
prescribing professional adequately documents the need for a particular product 
according to CMS requirements, a supplier must, as a term of its competitive bidding 
contract, ensure that the beneficiary receives the needed item.  The competitively bid 
payment rate would apply to an item prescribed through this authorization process.20  
Inherent Reasonableness Process 
CMS has inherent reasonableness authority to adjust the payment amounts for 
Medicare fee schedule items, or categories of items, if CMS determines that the 
standard rules for calculating payment amounts will result in grossly deficient or 
excessive payment amounts.21  For a payment amount to be considered grossly 
deficient or excessive, CMS must determine that an adjustment of 15 percent or more 
is necessary to produce a realistic and equitable payment amount.22  Furthermore, 
statute and regulations do not require CMS to implement the total necessary 
adjustment at one time; for example, if a reduction of 20 percent were required to 
produce a realistic and equitable payment amount, CMS could implement the 
reduction over 2 years. CMS has used inherent reasonableness to adjust fee schedule 
amounts once, in 1995, to lower Medicares payment rates for standard home blood 
glucose monitors.23  
_____________________________________________________________________________________________________________________________  
19 CMS decided not to issue contracts in Round 2021 for product categories that were previously 
competed because the payment amounts did not achieve expected savings.  These products included 
commode chairs, continuous positive airway pressure devices, enteral nutrition, hospital beds, infusion 
pumps, nebulizers, negative-pressure wound therapy pumps, oxygen and oxygen equipment, patient and 
seat lifts, manual wheelchairs, power wheelchairs,  support surfaces, transcutaneous electrical nerve  
stimulation devices, and walkers.  Additionally, CMS has not rebid contracts for the diabetes testing 
supplies national mail-order program since 2016, and those contracts ended in 2018.  For these product 
categories, fee schedule amounts in CBAs are based on the most recent competitive bidding program 
contract price as of December 31, 2018.  Fee schedule amounts are increased for inflation once per year.  
Source: CMS, Pub 100-04 Medicare Claims Processing, Transmittal 10504: CY 2021 Update for DMEPOS 
Fee Schedule. Accessed at https://www.cms.gov/files/document/r10504cp.pdf on March 15, 2021. 
20 42 CFR  414.420, Physician or treating practitioner authorization and consideration of clinical 
efficiency and value of items.  
21 Social Security Act  842(b). 
22 42 CFR  405.502(g)(1)(ii), (g)(1)(iii), and (g)(1)(v).   
23 Subsequently, in 1999, CMS proposed to use the inherent reasonableness process for other durable 
medical equipment, but this process was halted by Congressional action.  At the time, CMS proposed 
using a markup of 67 percent, which it considered to be the upper end of a range of acceptable markups. 
This markup would include both other costs and supplier profit and was based on data about medical 
equipment and devices submitted to CMS between 1989 and 1998.  See 64 Fed. Reg. 44227, 44229 (Aug. 
13, 1999). 
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CMS must take several steps to use the inherent reasonableness process.  To identify 
grossly deficient or excessive payments and establish new limits that are realistic and 
equitable, CMS must use valid and reliable data that comply with guidelines in the 
regulations to the extent applicable.24   Before adopting a new payment limit, CMS 
must publish proposed and final notices in the Federal Register.   
CMS must take additional steps to propose adjustments of more than 15 percent in 
a single year.25  Specifically, CMS must consult with supplier representatives and 
consider the potential impact on quality, access, beneficiary liability, assignment rates, 
and participation of suppliers.   
The inherent reasonableness process includes some mechanisms to consider the 
protection of beneficiary access. When using the inherent reasonableness process, 
CMS must take public comment during rulemaking, which allows stakeholders to raise 
concerns about beneficiary access. CMS has stated that it will also monitor all 
complaints from beneficiaries, suppliers, providers, and others regarding beneficiary 
access to items with newly established payment limits.26  If CMS were to adjust 
payment amounts by more than 15 percent in 1 year, regulations would require CMS 
to consider the potential impact on quality and beneficiary access.  Additionally, when  
using its inherent reasonableness authority, CMS could adjust payments in ways that 
protect beneficiary access to specific items.  For example, CMS may decide to create a 
new billing category and could potentially use a modifier to adjust payment amounts 
within a billing category.  
Key Terms in This Report 
Total costs   All the expenses paid by a supplier to provide the item to the 
beneficiary, including acquisition costs and other costs of the business. 
Acquisition cost  The cost to the supplier of purchasing the item from the 
manufacturer or an intermediary, inclusive of any discount. 
Other costs   All costs that are not acquisition costs.  Examples: delivery fees, 
and overhead costs such as salaries for customer service personnel, rent, 
utilities, and capital expense. 
 
Profit  What the supplier is paid minus the suppliers total costs. 
_____________________________________________________________________________________________________________________________  
24 These criteria include, among other things, consistent data collection steps, ensuring that sampled 
prices represent the range of prices nationally, and considering geographic variations. 42 CFR  
405.502(g)(4). 
25 For example, if CMS determined that a 20-percent price reduction was necessary, CMS would have to 
take these additional steps if it implemented the 20-percent reduction in a single year.  If CMS 
implemented a 10-percent reduction in 1 year, followed by a 10-percent reduction the next year, it would 
not have to take these additional steps. 
26 70 Fed. Reg. 73623, 73628 (Dec. 13, 2005).  
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Methodology 
To compare Medicare payments and supplier acquisition costs for intermittent urinary 
catheters, we analyzed Medicare claims and collected data from suppliers in our 
sample of claims for catheters provided in FY 2020.  Among the population of 672,561 
claims for catheters billed to Medicare in FY 2020, we selected a stratified random 
sample of 600 claims.  Each stratum contained 200 claims from 1 of the 3 billing 
categories. For each sampled claim, we asked suppliers to report and document the 
acquisition cost for the catheters they provided.  The responding suppliers provided 
documentation for claims, which resulted in a 97-percent overall weighted response  
rate. The data from the random sample includes catheters provided to beneficiaries 
who were representative of all beneficiaries who utilized intermittent urinary catheters 
(see Exhibit A-2 in Appendix A).  We  estimated the total supplier acquisition cost per 
unit for all claims. Additionally, we collected data on whether the catheters had 
specific features (i.e., hydrophilic coating, grip, and sleeve) and projected the 
acquisitions costs to the population of claims.   
To assess whether these differences demonstrate opportunities for Medicare and 
beneficiaries cost savings, we considered additional context.  Specifically, we used a 
third-party report to perform an illustrative analysis of suppliers total costs to supply 
catheters to beneficiaries and the potential for Medicare cost savings.27  We also 
interviewed CMS officials for their perspectives on opportunities and challenges 
associated with obtaining cost savings for intermittent urinary catheters.   
See the Detailed Methodology for more information.  
Limitations 
We did not independently verify the accuracy of supplier-reported information about 
the presence of specific catheter features.  Further, we did not estimate an exact dollar  
amount for potential cost savings because we did not collect data on other costs from 
our sample. Rather, we used the results of the third-party report to perform an 
illustrative analysis of potential cost savings and profits.    
Standards 
We conducted this study in accordance with the Quality Standards for Inspection and  
Evaluation issued by the Council of the Inspectors General on Integrity and Efficiency. 
_____________________________________________________________________________________________________________________________  
27 Dobson DaVanzo & Associates, LLC, Analysis of the Cost of Providing Durable Medical Equipment to the 
Medicare Population: Measuring the Impact of Competitive Bidding  (2016). Accessed at 
https://www.aahomecare.org/  on April 15, 2022. 
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FINDING 
Medicare payment amounts were 3.4 times suppliers costs to 
acquire intermittent urinary catheters in FY 2020, and 
opportunities exist for savings 
Overall, Medicare and beneficiary payments to suppliers were 3.4 times suppliers 
acquisition costs for intermittent urinary catheters in FY 2020.28 Acquisition costs 
increased according to specific features within a billing category; however, acquisition 
costs remained well below Medicare payment rates.  Additionally, we conducted an 
illustrative analysis of suppliers other costs beyond acquisition costs, which shows 
ample room for Medicare to reduce its payment rates while allowing suppliers an 
opportunity to maintain a profit.   
Total Medicare payments exceeded suppliers acquisition costs by 
$286 million in FY 2020 across the three billing categories 
Overall, Medicare allowed $286 million more in payments for intermittent urinary 
catheters than the suppliers paid to acquire those catheters.  Medicare allowed a total 
of $407 million in payments for intermittent urinary catheters in FY 2020, while 
estimated acquisition costs were $121 million.29 Payments to suppliers were 3.4 times 
suppliers acquisition costs (see Exhibit 3).    
Exhibit 3.  Medicare payment amounts exceeded suppliers acquisition costs 
for intermittent urinary catheters. 
Medicare    Ratio of 
Payments  Acquisition Cost  Cost Difference  Medicare Payments 
Catheter Category   (Millions)  (Millions)  (Millions)  to Acquisition Cost 
Straight Tip (A4351)   $158.7   $55.5   $103.2   2.9 
Curved Tip (A4352)  $189.1   $46.9   $142.3   4.0  
Sterile Kit (A4353)  $58.9   $18.7   $40.1   3.1  
Total   $406.7   $121.2   $285.6   3.4 
Source: OIG analysis of Medicare claims  and OIG estimates  of acquisition costs using documentation from suppliers  in  
our sample of claims, n = 574.  
Note: Because of rounding, the numbers may  not  sum. 
 
Medicare and beneficiary payments exceeded suppliers acquisition costs in each of 
the three billing categories. Medicares payment amounts exceeded suppliers 
acquisition costs by $103 million for straight tip catheters, $142 million for curved tip 
_____________________________________________________________________________________________________________________________  
28 The beneficiary responsibility includes payments made by the beneficiary or supplemental insurance.  
29 For detailed estimates of acquisition costs and confidence intervals, see Exhibit A-3 in Appendix A. 
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catheters, and $40 million for sterile kit catheters.  The ratio of the Medicare payments 
to the acquisition cost was 2.9, 4.0, and 3.1, respectively. 
Beneficiaries were responsible for approximately 20 percent of the Medicare 
payments. Therefore, out of the $286 million cost difference, the beneficiary portion 
was approximately $57 million.  
Suppliers acquisition costs within each of the three categories 
increased somewhat by additional catheter features 
Overall, acquisition costs increased for catheters with hydrophilic coating, grip, and 
sleeve, compared to catheters without these features.30, 31  However, the acquisition 
costs remained below Medicares payment rates.    
Exhibit 4.  Average estimated acquisition cost per unit according to the number of 
features present (hydrophilic coating, grip, or sleeve) 
The height of each column represents the Medicare payment rate per unit.  
 
Source: OIG estimates  of acquisition costs using documentation from  suppliers in our sample of claims, n = 574.   
Note: The differences in acquisition costs by number of features were not always statistically significant.  For detailed estimates of 
acquisition costs including 95-percent confidence intervals, see  Exhibit A-8 in Appendix A.  
More than half of the catheters in each billing category had at least one of these 
features. Specifically, half of the catheters in the straight tip and curved tip billing 
categories had at least one of these features, and three out of every four catheters in 
the sterile kit billing category had at least one feature (see Exhibit A-5 in Appendix A).   
   
_____________________________________________________________________________________________________________________________  
30 See Detailed Methodology for more information on how we selected these three features. 
31 For details about the proportion of catheters with specific features, see Exhibit A-5 in Appendix A; 
for detailed estimates of acquisition costs and 95-percent confidence intervals, see Exhibit A-6 in 
Appendix A.  Additionally, some catheters had multiple features (see Exhibit A-7 in Appendix A).  
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Potential savings exist after accounting for suppliers other costs 
beyond acquisition costs 
We recognize that suppliers have additional costs beyond acquiring catheters and 
need to make some profit to stay in business.  However, the magnitude of the 
differences between Medicare payments and suppliers acquisition costs indicate that 
Medicare and its beneficiaries could achieve substantial savings while accounting for 
these other factors. To perform an illustrative analysis of suppliers other costs, we 
used data in a report from the home health care industry (not specific to catheters).  
Even after allowing for these estimates of other costs, there appears to be ample 
room to reduce Medicare payment rates and allow suppliers an opportunity to 
maintain a profit.  
 
Illustrative analysis of other costs:  
We used information from a third-party report to provide a conservative 
example of these other costs and the potential for Medicare cost savings.32   
This report, commissioned by DMEPOS suppliers and issued in 2016, found 
that for every dollar spent on acquisition costs, suppliers spent 72 cents in 
other costs for providing certain DMEPOS items to beneficiaries.  (These items 
did not include catheters.)  To consider potential other costs, we applied the 
same ratio ($1.00 in acquisition costs per $0.72 in other costs) to our 
estimated acquisition costs from suppliers in our sample (i.e., $121 million).   
This example is conservative and likely underestimates potential savings.   
We believe this example likely underestimates the potential for savings by 
overstating suppliers other costs because some items in the commissioned 
report, including oxygen and wheelchairs, generally require more services 
than do urinary catheters.33  Further, we found that an estimated 96 percent 
of catheters were delivered by mail.34  Supplier operating costs of mail order 
businesses are generally less than those for brick and mortar stores.35  
 
 
_____________________________________________________________________________________________________________________________  
32 Dobson DaVanzo & Associates, LLC, Analysis of the Cost of Providing Durable Medical Equipment to the 
Medicare Population: Measuring the Impact of Competitive Bidding  (2016). Accessed at 
https://www.aahomecare.org/  on April 15, 2022. This report specifically looked at costs for different 
types of equipment including beds, oxygen items, sleep items, walkers, and certain types of wheelchairs.  
33 CMSs DMEPOS Quality Standards include product-specific service requirements for several DMEPOS 
items, including oxygen and wheelchairs.  CMS requires fewer services for intermittent urinary catheters. 
34 The 95-percent confidence interval ranged from 94.7 to 98.3 percent.  
35 US Chamber of Commerce, The Pros and Cons of Brick-and-Mortar Locations (April 22, 2019). Accessed 
at https://www.uschamber.com/co/start/startup/opening-brick-and-mortar-location-for-your-business  
on April 18, 2022.  
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Overall, Medicare and beneficiaries have a substantial potential for savings, even when 
factoring in other costs.  In this conservative example illustrated by Exhibit 5, total 
costs (i.e., acquisition costs plus other costs) would have been 51 percent of the 
Medicare-allowed amount, leaving a 49-percent  margin of payments over total costs 
($198 million). Some of this amount is necessary for suppliers to have profits to 
sustain their businesses, and some could be potential savings from reductions in 
Medicares payment rates. Of the $198 million in potential savings and profits, the 
beneficiaries portion would have been approximately $40 million (20%).36    
 
Exhibit 5.  Our illustrative analysis shows $198 million available 
for savings and profits. 
Source: OIG analysis  using acquisition costs estimated from suppliers in our sample (n = 574) and an  
example of other costs.  
Note: There is  potentially $198 million available for savings and profits, assuming that for every  
dollar spent in acquisition cost, suppliers spent an  additional 72 cents  in other costs.  
 
This example demonstrates that Medicare and beneficiaries have the opportunity for  
substantial savings, although we did not determine an exact target for cost savings.  
Overall, the potential savings were larger than the minimum 15 percent savings 
needed for Medicare to use its inherent reasonableness authority, which equated to 
$61 million for FY 2020. 
   
_____________________________________________________________________________________________________________________________  
36 When beneficiaries have supplemental insurance coverage, they may not pay the full cost-sharing 
amount. However, nearly one in five beneficiaries did not have supplemental coverage in 2018.  See 
Kaiser Family Foundation,  A Snapshot of Sources of Coverage  Among Medicare Beneficiaries in 2018. 
Accessed at https://www.kff.org/medicare/issue-brief/a-snapshot-of-sources-of-coverage-among-
medicare-beneficiaries-in-2018/ on February 10, 2022. 
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Each of the three categories of catheters showed potential for significant savings, and 
the potential savings was greatest for the curved tip catheters (see Exhibit 6).  The 
$108 million in potential savings and profits for curved tip catheters represents about 
57 percent of the total payments that Medicare allowed for curved tip catheters 
($189 million). 
 
Exhibit 6.  Curved tip catheters accounted for most of the total $198 million 
in potential savings and profits in our illustrative analysis of acquisition 
costs plus an example of suppliers other costs.   
 
Source: OIG analysis  using acquisition costs from suppliers in our sample (n = 574) and an example of other costs.    
Note: Total payments for intermittent urinary catheters were $407 million.  This  includes straight tip catheters  
(HCPCS A4351), curved tip catheters (A4352), and sterile kit catheters (A4353).  For additional details regarding cost  
estimates, see Exhibit A-9 in Appendix A.  
 
Finally, the above analysis likely underestimates the potential for savings.  We do not 
endorse the example of 72 cents in other costs per dollar of acquisition costs as 
appropriate for CMS to use to determine payment rates.  We used this example solely  
to provide a conservative example of potential savings and profits based on an 
industry-commissioned report. In 1999, CMS considered 67 percent to be the upper 
end of a range of acceptable markups for durable medical equipment and devices.  
Markups include both other costs and profits.  As we previously noted, the cost of 
furnishing intermittent urinary catheters is likely lower than that of furnishing many 
other DMEPOS items because intermittent urinary catheters are generally provided by 
mail order and may require fewer accompanying services.  Therefore, our illustrative 
analysis likely underestimates the potential for savings.  
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CONCLUSION AND RECOMMENDATION 
Medicare and beneficiaries paid suppliers $407 million for intermittent urinary 
catheters in FY 2020, more than three times suppliers estimated acquisition costs of 
$121 million.  Given the magnitude of this difference, Medicare has the opportunity to 
reduce its payment rates for intermittent urinary catheters while allowing suppliers 
adequate payments for the items and services they provide.  Reducing Medicares 
payment rates can save Medicare and beneficiaries millions of dollars annually.     
The differences between Medicare payment amounts and supplier acquisition costs 
varied across the three categories of catheters (straight tip, curved tip, and sterile kit), 
but all showed substantial potential for savings to Medicare and beneficiaries.  
Catheters with features showed smaller but still meaningful differences between 
Medicares payment rates and supplier acquisition costs, reinforcing the potential 
opportunities for savings.    
We recommend that CMS: 
Lower Medicares payment rates for intermittent urinary 
catheters  
CMS should employ a mechanism to lower Medicares payment rates for intermittent 
urinary catheters. In the past, CMS has sought to use two mechanisms to lower 
payment rates for DMEPOS items. These include introducing items into the 
competitive bidding program and use of the inherent reasonableness process.  The 
competitive bidding program could attain substantial savings for intermittent urinary 
catheters, depending on the bids that suppliers submit to Medicare.  The inherent 
reasonableness process would allow CMS to directly modify Medicares payment rates 
for these items.  
As it lowers Medicares payment rates, CMS should also take steps to ensure 
continued access for beneficiaries to the catheters that best serve their medical needs.  
As we noted in our findings, an estimated 96 percent of catheters were delivered by 
mail, so CMS can factor this into its considerations about how to maintain sufficient 
access throughout the country.   
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AGENCY COMMENTS AND OIG RESPONSE 
CMS did not explicitly  agree or disagree with our recommendation to lower 
Medicares payment rates for intermittent urinary catheters.  Instead, CMS stated that 
it will determine appropriate next steps while considering our recommendation.  CMS 
noted that it would need to engage in a public notice and comment period to use 
either of its  mechanisms to reduce Medicare payment rates.  We ask CMS to specify 
in its Final Management Decisionits plans to lower payment rates for intermittent 
urinary catheters.  OIG will monitor CMSs progress in implementing this 
recommendation.  
For the full text of CMSs comments, see the Agency Comments appendix at the end 
of the report. 
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DETAILED METHODOLOGY 
We based this evaluation primarily on analysis of  Medicare claims data and data from 
suppliers included in our sample of claims for intermittent urinary catheters.  We 
reviewed claims information, including data about our sample with an FY 2020 date of 
service (October 1, 2019, through September 30, 2020).  
Comparison of Medicare Payments to Supplier Acquisition Costs  
To compare Medicare payments and supplier acquisition costs for intermittent urinary 
catheters, we analyzed Medicare claims and collected data from suppliers of catheters 
that were provided to beneficiaries in FY 2020.  We took a random sample of 600 
claims for intermittent urinary catheters.  We asked suppliers to report the acquisition  
cost for the catheters they provided for that claim, the features of the catheters, and 
whether the catheters were delivered by mail order.  We used documentation from 
suppliers to verify their responses about acquisition costs and the mode of delivery.  
We determined supplier acquisition costs on a per-unit basis and projected these 
costs to the population of claims.   
Population of Medicare Part B DMEPOS Claims 
Using CMSs National Claims History file, we identified the population of Medicare 
Part B claims for straight tip intermittent catheters (A4351), curved tip intermittent 
catheters (A4352), and intermittent catheters with a kit of sterile insertion supplies 
(A4353). We used claims data for services provided in FY 2020 (i.e., October 1, 2019, 
through September 30, 2020).  There were 672,561 claim lines for which the 
Medicare-allowed amount was greater than $0.  We used the Medicare-allowed 
amounts in this study, which slightly overestimates the amount of money received by 
suppliers since budgetary sequestration resulted in decreases to the Medicare 
responsibility amount of 2 percent during 7 of the 12 months in FY 2020.37   
Data Collection from Suppliers in the Sample  
From the population of claims, we selected a stratified random sample of 600 claims, 
with 200 claims randomly selected from each of the three HCPCS codes.  We sent 
documentation requests to the 157 suppliers associated with our sampled claims.  For 
each claim, we asked the supplier to (1) indicate the type (model and manufacturer) of 
catheter(s) that it provided to the Medicare beneficiary we identified; (2) indicate the 
per-unit acquisition cost for that catheter, inclusive of any discounts received from 
manufacturers or intermediaries; (3) indicate if the catheter had a hydrophilic coating, 
_____________________________________________________________________________________________________________________________  
37 The 2-percent adjustment was temporarily suspended for all Medicare fee-for-service claims with dates 
of service starting from May 1, 2020, meaning sequestration impacted 7 months (i.e., October 2019 
through April 2020) of the time period.   
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grip, or sleeve; (4) indicate if the item was delivered by mail order; and (5) submit 
documentation about the acquisition cost and mode of delivery for the catheters 
provided for the specific claim.  We did not independently verify the accuracy of the 
information that suppliers reported about whether the catheter had specific features.   
We consulted with suppliers and manufacturers before selecting the specific 
features to focus on when collecting data from the suppliers in our sample.  We 
spoke with stakeholders including suppliers, their trade association, manufacturers, 
and beneficiary organizations about potential access concerns.  We asked which 
features of intermittent urinary catheters may increase acquisition costs for suppliers 
and may be more desirable for beneficiaries.  Due to sample size limitations and to 
reduce the burden upon suppliers in our sample, we decided to focus data collection 
on three features of catheters that emerged as potentially associated with higher 
acquisition costs (i.e., hydrophilic coating, gripping aids, and protective sleeves).  
We obtained a 97-percent weighted response rate. Of the 157 suppliers 
associated with our sampled claims, 155 responded.  These 155 responding suppliers 
provided documentation for 574 of the 600 sampled claims.  The stratum-specific 
response rates were 98 percent for straight tip catheters, 99 percent for curved tip 
catheters, and 91 percent for sterile kit catheters.  Together, after weighting by the 
relative number of claims in the population, these responses were representative of 
97 percent of the population.  We made at least  three attempts to obtain acquisition 
cost information from the suppliers associated with the claims in our sample (e.g., 
emails, phone calls, and traditional mailings).  
Illustrative Analysis of Other Costs 
To better understand Medicares potential for savings, we considered other costs in 
addition to acquisition cost.  We used a third-party report to calculate an example of 
these other costs and the potential for Medicare cost savings.  To perform our 
illustrative analysis of other costs, we used the values from the report and multiplied 
our estimate of acquisition costs by approximately 0.724 (i.e., we multiplied by 42/58,  
because the report estimated other costs as 42 percent of costs and acquisition costs 
as 58 percent of costs).  
In our report, we described the ratio as $1.00 in acquisition costs and $0.72 in other 
costs, which approximates the percentage values from the third-party report.  We 
used the monetary example because it may be easier for readers to understand, and 
we note that 0.72 is nearly the same value as 42 percent divided by 58 percent, or 
approximately 0.724.   
We opted to use this ratio to provide a conservative example of the potential for 
savings and profits, although other ratios may be more appropriate to use.  For 
example, in 1999, CMS attempted to use a markup of 67 percent, which it described 
as the upper end of a range of acceptable markups.  Such markups would account for 
both other costs and profits. The ratio we use is marginally higher than this markup, 
but it does not include profits, making it more conservative.  As we noted in our 
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report, the $0.72 estimate came from an industry-commissioned report and likely 
overstates suppliers other costs for intermittent urinary catheters; with this being the 
case, our illustrative analysis likely underestimates the opportunity for savings.  
Additional Sources of Information 
Interview of CMS  
We conducted interviews with CMS to better understand CMSs opportunities and 
challenges associated with obtaining cost savings for intermittent urinary catheters.  
For example, during our interview with CMS,  we asked whether and how it might take 
steps to address potential concerns about beneficiary access to intermittent urinary 
catheters if payment rates were reduced.  
Additional Data Obtained from Medicare Claims 
Utilization in Former Competitive Bidding Areas   
We classified each claim for intermittent urinary catheters in FY 2020 according to its 
geographic area. We used CMSs DMEPOS Fee Schedule file available on CMSs 
website, which includes two zip code files.38  This file allowed us to classify each claim 
as occurring in a former competitive bidding area (CBA) and non-competitive bidding 
area (non-CBA). We used the former CBA zip code file to identify claims from CBAs, 
and we classified claims from all other zip codes as occurring in non-CBAs.   
Additionally, we used the rural zip code file to identify which claims in non-CBAs came 
from a rural area. 
Identification of Beneficiary Health Conditions  
We identified if a beneficiary had a spinal cord injury or a neurological condition 
using information from CMSs integrated data repository.  Specifically, we used the 
hierarchical condition categories (HCC) that CMS assigns to each Medicare beneficiary 
for risk adjustment scoring.39  CMS assigns each beneficiary to applicable HCC groups  
on the basis of the diagnosis codes included in Medicare claims for that beneficiary.  
After obtaining the HCC data for each beneficiary in the population, we used CMSs  
   
_____________________________________________________________________________________________________________________________  
38 CMS, DMEPOS Fee Schedule. Accessed at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-
Payment/DMEPOSFeeSched/DMEPOS-Fee-Schedule on January 23, 2022. 
39  CMS,  Medicare Advantage Rates & Statistics: Risk Adjustment. Accessed at https://www.cms.gov/ 
Medicare/Health-Plans/MedicareAdvtgSpecRateStats/Risk-Adjustors on February 18, 2022. 
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categorization of HCC groupings to determine if the beneficiary had a spinal injury or 
neurological condition.40     
Analyzing the Data  
We determined supplier acquisition costs on a per-unit basis and projected this to the 
population of claims.   
We determined the dollar differences between Medicare-allowed amounts and 
supplier acquisition costs in the population using our sample of claims.  To estimate 
the beneficiary responsibility, we attributed 20 percent of the allowed amount to 
beneficiaries. Medicare Part B covers the cost of DMEPOS items, and after 
beneficiaries pay their annual deductible, Medicare pays for 80 percent of the allowed 
amount and beneficiaries pay the remaining 20 percent.   
Overall and for each HCPCS code, we estimated the acquisition costs including 
95-percent confidence intervals. We used the estimates of average acquisition costs
to determine the cost differences that Medicare and beneficiaries paid compared to
supplier acquisition costs. We also used these estimates of average acquisition costs
for each billing code when performing the illustrative analysis.  Additionally, we
estimated acquisition costs and 95-percent confidence intervals for intermittent
urinary catheters according to the presence of specific features.
 
_____________________________________________________________________________________________________________________________  
40 CMSs HCC categorization defined the spinal grouping (which we referred to as spinal cord injury) to 
include HCCs 70, 71, and 72, which captured the following conditions: quadriplegia and other extensive 
paralysis; paraplegia; and spinal cord disorders/injuries, including spina bifida.  CMSs HCC categorization  
defined the neurological grouping (which we referred to as neurological conditions) to include HCCs 73 
through 80, which captured the following conditions: amyotrophic lateral sclerosis and other motor 
neuron disease; cerebral palsy; myasthenia gravis/myoneural disorders and Guillain-Barre syndrome/ 
inflammatory and toxic neuropathy; muscular dystrophy; multiple sclerosis;  Parkinson's and Huntington's  
diseases; seizure disorders and convulsions; and coma, brain compression/anoxic damage.  
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APPENDICES 
Appendix A: Data Summaries, Cost Estimates, and 95-Percent 
Confidence Intervals 
Exhibit A-1. Prevalence  of certain medical conditions among beneficiaries who utilized 
intermittent urinary catheters, from October 2019 through September 2020     
Straight Tip  Curved Tip   Sterile Kit   Total  
 
A4351   A4352   A4353  
Have Either Condition   29.6%  18.5%  60.5%  28.0% 
(Count)   (25,187)   (6,311)   (4,185)   (34,383)  
Neurological Condition  15.3%  11.0%  19.7%  14.3% 
(Count)   (13,025)   (3,734)   (1,362)   (17,588)  
Spinal Cord Injury  17.9%  9.6%  50.0%  17.1% 
(Count)   (15,215)   (3,262)   (3,459)   (20,999)   
Do Not Have a Neurological Condition  70.4%    81.5%  39.5%  72.0%   
or Spinal Cord Injury  (Count)   (59,927)   (27,720)   (2,729)   (88,321)  
Count of Total Beneficiaries*  85,114  34,031  6,914  122,704 
Source: OIG analysis of Medicare claims.  
*Note: Information on medical conditions was not available for 30 out of 122,734 beneficiaries.  Subtotals may not sum
to totals due to overlap among subgroups.  For example, one beneficiary may receive intermittent urinary catheters in
different billing categories.  Additionally, 4,204 beneficiaries had both a spinal cord injury and a neurological condition. 
 
Exhibit A-2. Beneficiary characteristics in the sample were similar to those in the population.  
Characteristics  Percentage of Beneficiaries with the Characteristic  
  Straight Tip   Curved Tip   Sterile Kit 
A4351   A4352   A4353  
Beneficiaries with Spinal Cord Injury        
or Neurological Condition       
Sample   33%   18%  67%  
Population   30%  19%  61% 
Male       
Sample   60%  97%   64% 
Population   61%  98%  66% 
Female        
Sample   40%  3%  36% 
Population   39%  2%  34% 
Source: OIG analysis of Medicare claims with a date of service from October 2019 through September 
2020, and OIG analysis of beneficiaries included in our sample of claims, n = 574.   
Note: There were 570 unique beneficiaries included in the 574 claims for which we received a response.  
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Exhibit A-3. Estimated acquisition costs for Medicare Part B, October 2019 
through September 2020 
  Straight Tip  Curved Tip   Sterile Kit   Total 
A4351   A4352   A4353  
Estimated Cost   $55,533,973   $46,886,664    $18,735,692   $121,156,329  
            
95-Percent  ($51,259,285,  ($43,280,464,  ($17,536,337, 
Confidence Interval   59,268,548)   50,313,539)   19,947,583)  
Source: OIG estimated the total acquisition costs by multiplying the total number of units for each 
category by the estimated acquisition cost per unit.  OIG determined the total number of units 
using Medicare claims data and estimated the acquisition cost per unit using documentation from 
suppliers in our sample of claims, n = 574.   
 
 
 
Exhibit A-4.  The differences between Medicare payment rates and supplier 
acquisition costs were more substantial for curved tip catheters and sterile kits  
compared to  straight tip catheters.  
Billing Codes for Intermittent Urinary Catheters  
  Straight Tip   Curved Tip   Sterile Kit 
A4351   A4352   A4353  
Medicare Payment Rate per Unit  $1.98  $6.98  $8.04 
Estimated Acquisition Cost per Unit  $0.69   $1.73   $2.56  
Difference per Unit  $1.29  $5.25  $5.48 
Source: OIG analysis using Medicare claims and information from suppliers in our sample  of claims,  
n = 574. 
Note: The 95-percent confidence intervals for the estimated acquisition cost were $0.64 to $0.74 for 
straight tip catheters, $1.60 to $1.86 for curved tip catheters, and $2.40 to $2.73 for sterile kit 
catheters. 
 
   
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Exhibit A-5. Estimated proportion  of intermittent urinary catheters with specific features, 
by billing code 
  Billing Codes for Intermittent Urinary Catheters  
Features of Sampled Catheters   Straight Tip   Curved Tip   Sterile Kit 
A4351   A4352   A4353  
Have  Any of These Features   54.3%   55.6%   73.2%  
(95-Percent Confidence Interval)   (47.2, 61.2%)   (48.6, 62.4%)   (66.2, 79.1%)  
Hydrophilic Coating   46.3%  51.0%  58.7% 
(95-Percent Confidence Interval)   (39.4, 53.3%)   (44.1, 57.9%)   (51.4, 65.6%)  
Grip   15.5%  20.6%  27.4% 
(95-Percent Confidence Interval)   (11.0, 21.3%)   (15.5, 26.8%)   (21.4, 34.4%)  
Sleeve  20.9%  14.2%  43.0% 
(95-Percent Confidence Interval)   (15.8, 27.2%)   (10.0, 19.8%)   (36.0, 50.4%)  
Do Not Have These Features   45.7%   44.4%  26.8%  
(95-Percent Confidence Interval)   (38.8, 52.8%)   (37.6, 51.4%)   (20.9, 33.8%)  
Source: OIG estimates used Medicare claims data and data from suppliers in our sample of claims, n = 574. 
 
Exhibit A-6.  Estimated acquisition costs per unit were higher for catheters that had specific 
features compared to those that did not have any of these features.   
  Billing Codes for Intermittent Urinary Catheters  
Features of Sampled Catheters   Straight Tip   Curved Tip   Sterile Kit 
A4351   A4352   A4353  
Have Any of  These Features   $0.94  $2.07    $2.71   
(95-Percent Confidence Interval)   ($0.88, 0.99)   ($1.92, 2.22)   ($2.51, 2.91)  
Hydrophilic Coating   $1.01  $2.09  $2.88 
(95-Percent Confidence Interval)   ($0.97, 1.06)   ($1.94, 2.25)   ($2.65, 3.11)  
Grip   $0.93  $2.32  $3.06 
(95-Percent Confidence Interval)   ($0.82, 1.03)   ($2.04, 2.59)   ($2.69, 3.43)  
Sleeve  $0.85  $2.29  $2.91 
(95-Percent Confidence Interval)   ($0.75, 0.96)   ($1.97, 2.61)   ($2.66, 3.17)  
Do Not Have These Features   $0.40  $1.32  $2.12 
(95-Percent Confidence Interval)   ($0.37, 0.44)   ($1.13, 1.51)   ($1.88, 2.37)  
Source: OIG estimates used Medicare claims data and data from suppliers in our sample of claims, n = 574. 
Note: For each of the three categories of catheters, acquisition costs were significantly lower for items without 
features when compared to items with any feature (p<0.0001, p<0.0001, and p=0.0003 respectively).  
 
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Exhibit A-7.  Estimated proportion of intermittent urinary catheters with multiple  features, 
by billing code  
  Billing Codes for Intermittent Urinary Catheters  
Number of Features   Straight Tip   Curved Tip   Sterile Kit 
A4351   A4352   A4353  
Three Features   7.8%  8.9%  14.4% 
(95-Percent Confidence Interval)   (4.7, 12.5%)   (5.7, 13.8%)   (10.0, 20.4%)  
Two Features   12.7%  12.5%  26.0% 
(95-Percent Confidence Interval)   (8.7, 18.1%)   (8.6, 17.9%)   (20.1, 32.9%)  
One Feature   33.9%  34.2%  32.8% 
(95-Percent Confidence Interval)   (27.5, 40.8%)   (27.9, 41.0%)   (26.3, 39.9%)  
None   45.7%  44.4%   26.8%  
(95-Percent Confidence Interval)   (38.8, 52.8%)   (37.6, 51.4%)   (20.9, 33.8%)  
Source: OIG estimates used Medicare claims data and data from suppliers in our sample of claims, n = 574. 
Note: We asked suppliers if the catheters provided on the claim had certain features, specifically a hydrophilic 
coating, a grip, or a sleeve.  
 
Exhibit A-8. Estimated acquisition costs per unit were higher for catheters with multiple 
features compared to those that did not have features.  
  Billing Codes for Intermittent Urinary Catheters  
Number of Features   Straight Tip   Curved Tip   Sterile Kit 
A4351   A4352   A4353  
Three Features   $1.04  $2.45  $3.34 
(95-Percent Confidence Interval)   ($0.91, 1.18)   ($2.05, 2.86)   ($2.82, 3.86)  
Two Features   $0.94  $2.30  $3.04 
(95-Percent Confidence Interval)   ($0.84, 1.03)   ($1.97, 2.63)   ($2.74, 3.34)  
One Feature   $0.92  $1.88  $2.15 
(95-Percent Confidence Interval)   ($0.84, 0.99)   ($1.71, 2.05)   ($1.92, 2.39)  
None   $0.40  $1.32  $2.12 
(95-Percent Confidence Interval)   ($0.37, 0.44)   ($1.13, 1.51)   ($1.88, 2.37)  
Source: OIG estimates used Medicare claims data and data from suppliers in our sample of claims, n = 574. 
Note: We asked suppliers if the catheters provided on the claim had certain features, specifically a hydrophilic 
coating, a grip, or a sleeve.  Only some types of catheters had statistically significant differences in acquisition 
costs. For both straight tip and curved tip catheters, those items with one or more feature were significantly 
more expensive than items with none of these features; p<0.0001 and p<0.0001, respectively.  For sterile kit 
catheters, those items with two or more features were significantly more  expensive than items with one or 
none of these features (p<0.0001). 
 
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Exhibit A-9.  The illustrative analysis of other  supplier costs plus acquisition costs found 
approximately $198 million in potential savings and profits. 
  Billing Codes for Intermittent Urinary Catheters    
Type of Expense  Straight Tip   Curved Tip   Sterile Kit  Total 
 (in Millions)  A4351   A4352   A4353  
Medicare Payments   $158.7   $189.1   $58.9   $406.7  
Example of  Total Costs   $95.7   $80.8   $32.3   $208.9  
Estimated Acquisition Costs  $55.5   $46.9   $18.7   $121.2  
Example of  Other Costs   $40.2 $34.0  $13.6   $87.7 
Potential Savings and Profits  $63.0  $108.3   $26.6   $197.8  
(Medicare Payments  Example of Total Costs)  
Source: OIG analysis using acquisition costs from suppliers in our sample of claims (n = 574) and an example of other 
costs. 
Note: Because of rounding, the numbers may not sum.  The illustrative analysis uses an example of other costs that 
we obtained from a third-party report and assumes that for every dollar spent in acquisition cost, suppliers spent an 
additional 72 cents in other costs. 
 
 
Reducing Medicares Payment Rates for Intermittent Urinary Catheters Can Save the Program and Beneficiaries Millions of 
Dollars Each Year, OEI-04-20-00620   Appendix A | 25     
Appendix B: Agency Comments 
Following this page are the official comments from CMS.  
   
Reducing Medicares Payment Rates for Intermittent Urinary Catheters Can Save the Program and Beneficiaries Millions of 
Dollars Each Year, OEI-04-20-00620   Appendix B | 26    DATE:  August 11, 2022 
TO:  Suzanne Murrin 
Deputy Inspector General for Evaluation and Inspections 
Office of Inspector General 
FROM:  Chiquita Brooks-LaSure 
Administrator 
Centers for Medicare & Medicaid Services 
SUBJECT:  Office of Inspector General (OIG) Draft Report: Reducing Medicares Payment 
Rates for Intermittent Urinary Catheters Can Save the Program and Beneficiaries 
Millions of Dollars Each Year (OEI-04-20-00620) 
The Centers for Medicare & Medicaid Services (CMS) appreciates the opportunity to review and 
comment on the Office of Inspector Generals (OIG) draft report.  
CMS serves the public as a trusted partner and steward, dedicated to advancing health equity, 
expanding coverage, and improving health outcomes. One of the ways in which we do this is by 
protecting our programs sustainability for future generations by serving as a responsible steward 
of public funds.  
The DMEPOS Competitive Bidding Program has been an essential tool to help Medicare set 
market-based payment rates for DMEPOS items, save money for beneficiaries and taxpayers, 
and limit fraud and abuse in the Medicare Program. The program has saved billions of dollars 
since implementation while safeguarding access to quality items and services. Under the 
DMEPOS Competitive Bidding Program, DMEPOS suppliers compete to become Medicare 
contract suppliers by submitting bids to furnish certain items in competitive bidding areas. The 
statute requires that single payment amounts replace the current Medicare DMEPOS fee 
schedule payment amounts for competitively bid DMEPOS items and services furnished in 
competitive bidding areas of the country. The single payment amounts are determined by using 
bids submitted by DMEPOS suppliers.    
At this time, intermittent urinary catheters have not been included in the DMEPOS Competitive 
Bidding Program. CMS stated in the 2007 Competitive Acquisition for Certain Durable Medical 
Equipment, Prosthetics, Orthotics, and Supplies and Other Issues final rule that we believe we 
have discretion to interpret section 1847(a)(2)(A) of the Social Security Act (the Act) to include 
or exclude ostomy products and supplies in the competitive bidding programs.1 In the 2007 final 
rule, we stated that while we were not exercising our authority to include ostomy items in the 
DMEPOS Competitive Bidding Program at that time, we would continue to review this issue. 
Therefore, at a minimum, CMS would need to address section 1847(a)(2)(A) of the Act and 
1Medicare Program; Competitive Acquisition for Certain Durable Medical Equipment, Prosthetics, Orthotics, and 
Supplies (DMEPOS) and Other Issues; Final Rule (72 FR 17991) (04/10/2007). Accessed at: 
https://www.govinfo.gov/content/pkg/FR-2007-04-10/pdf/07-1701.pdf#page=94  
Reducing Medicares Payment Rates for Intermittent Urinary Catheters Can Save the Program and Beneficiaries Millions of
Dollars Each Year, OEI-04-20-00620  Agency Comments B | 27 ostomy products and supplies through further notice and comment rulemaking before including 
intermittent urinary catheters in the DMEPOS Competitive Bidding Program.  
As OIG notes, another mechanism that CMS may utilize to reduce Medicare payment for 
intermittent urinary catheters is the inherent reasonableness process, which is a process for 
establishing a realistic and equitable payment amount for Medicare Part B services (other than 
physicians services) when the existing payment amounts are inherently unreasonable because 
they are either grossly excessive or grossly deficient. Sections 1842(b)(8) and (9) of the Act and 
our regulations at 42 CFR 405.502(g) and (h) set forth the steps that the Secretary must follow in 
determining whether a payment amount is grossly excessive and in setting a special payment 
limit. This process also includes a public notice and comment period regarding the proposed 
payment amount or method proposed to be established.  
The OIGs recommendations and CMS responses are below. 
OIG Recommendation  
The OIG recommends that CMS lower Medicares payment rates for intermittent urinary 
catheters. 
CMS Response 
CMS thanks OIG for the work done on this issue. We will consider the OIGs recommendation 
when determining appropriate next steps. As stated above, one of the mechanisms available to 
lower Medicares payment rates for intermittent urinary catheters, inclusion in the DMEPOS 
Competitive Bidding Program, would, at a minimum, require notice and comment rulemaking. The 
inherent reasonableness process, the other mechanism for lowering Medicare payment rates, 
requires the use of valid and reliable data. CMS would need to consider what steps may be 
necessary to obtain data necessary to determine whether the Medicare fee schedule amounts are 
grossly excessive and to determine what realistic and equitable payments would be for these items. 
CMS notes that any policies established as a result of rulemaking or the inherent reasonableness 
process would ultimately determine any potential savings for the Medicare program and 
beneficiaries.  
Reducing Medicares Payment Rates for Intermittent Urinary Catheters Can Save the Program and Beneficiaries Millions of
Dollars Each Year, OEI-04-20-00620  Agency Comments B | 28  
ACKNOWLEDGMENTS AND CONTACT 
Acknowledgments  
Lucio Verani served as the lead analyst for this study.  Others in the Office of 
Evaluation and Inspections who conducted the study include Judith Reilly.  Office of 
Evaluation and Inspections headquarters staff who provided support include Kaliane 
Davidson, Althea Hosein, and Christine Moritz.  
This report was prepared under the direction of Dwayne Grant, Regional Inspector 
General for Evaluation and Inspections in the Atlanta regional office; Evan Godfrey, 
Deputy Regional Inspector General; and Jaime Stewart, Assistant Regional Inspector 
General.  
Contact 
To obtain additional information concerning this report, contact the Office of Public 
Affairs at Public.Affairs@oig.hhs.gov. OIG reports and other information can be found 
on the OIG website at oig.hhs.gov.  
Office of Inspector General 
U.S. Department of Health and Human Services 
330 Independence Avenue, SW 
Washington, DC 20201  
Reducing Medicares Payment Rates for Intermittent Urinary Catheters Can Save the Program and Beneficiaries Millions of 
Dollars Each Year, OEI-04-20-00620   Acknowledgments and Contact | 29    
ABOUT THE OFFICE OF INSPECTOR GENERAL 
The mission of the Office of Inspector General (OIG), as mandated by Public Law 
95-452, as amended, is to protect the integrity of the Department of Health and 
Human Services (HHS) programs, as well as the health and welfare of beneficiaries 
served by those programs.  This statutory mission is carried out through a nationwide 
network of audits, investigations, and  inspections conducted by the following 
operating components: 
The Office of Audit Services (OAS)  provides auditing services for HHS, 
either by conducting audits with its own audit resources or by overseeing audit work 
done by others. Audits examine the performance of HHS programs and/or its 
grantees and contractors in carrying out their respective responsibilities and are 
intended to provide independent assessments of HHS programs and operations.  
These audits help reduce waste, abuse, and mismanagement and promote economy 
and efficiency throughout HHS.  
The Office of Evaluation and Inspections (OEI)  conducts national 
evaluations to provide HHS, Congress, and the public with timely, useful, and reliable 
information on significant issues.  These evaluations focus on preventing fraud, waste, 
or abuse and promoting economy, efficiency, and effectiveness of departmental 
programs. To promote impact, OEI reports also present practical recommendations 
for improving program operations. 
The Office of Investigations (OI)  conducts criminal, civil, and administrative 
investigations of fraud and misconduct related to HHS programs, operations, and 
beneficiaries. With investigators working in all 50 States and the District of Columbia, 
OI utilizes its resources by actively coordinating with the Department of Justice and 
other Federal, State, and local law enforcement authorities.  The investigative efforts 
of OI often lead to criminal convictions, administrative sanctions, and/or civil 
monetary penalties. 
The Office of Counsel to the Inspector General (OCIG) provides 
general legal services to OIG, rendering advice and opinions on HHS programs and 
operations and providing all legal support for OIGs internal operations.  OCIG 
represents OIG in all civil and administrative fraud and abuse cases involving HHS 
programs, including False Claims Act, program exclusion, and civil monetary penalty 
cases. In connection with these cases, OCIG also negotiates and monitors corporate 
integrity agreements. OCIG renders advisory opinions, issues compliance program 
guidance, publishes fraud alerts, and provides other guidance to the health care 
industry concerning the anti-kickback statute and other OIG enforcement authorities.  
Reducing Medicares Payment Rates for Intermittent Urinary Catheters Can Save the Program and Beneficiaries Millions of 
Dollars Each Year, OEI-04-20-00620   About the Office of Inspector General | 30