Department of Health and Human Services
OFFICE OF 
   
INSPECTOR GENERAL 
 
 
 
 
 
M P B S
EDIC  ARE  ART    ERVICES 
 
D N -P A N
URING  ON ART    URSING 
 
 
H S : E
OME  TAYS    NTERAL 
 
N  P  
UTRIENT  RICING
 
 
 
 
 
Daniel R. Levinson  
Inspector General 
 
January 2010 
OEI-06-07-00590   
 E X E C U T I V E   S U M M A R Y  
OBJECTIVE
 
To compare Medicares Part B fee schedule for enteral nutrients 
provided during non-Part A stays to prices available to nursing home 
suppliers and other purchasers. 
BACKGROUND 
Medicare Part A covers nursing home care for up to 100 days in a 
skilled nursing facility during which Part A will pay for enteral 
nutrition therapy (ENT) as part of the nursing homes daily rate.  After 
the 100 days or in cases when beneficiaries do not qualify for Part A 
stays, Medicare Part B may provide coverage for enteral nutrients, 
supplies, and equipment during these non-Part A stays.  Enteral 
nutrients are delivered directly to an individuals digestive tract 
through a feeding tube inserted through the nose or placed in the small 
intestine or stomach.  Nutrients are delivered through the tube using a 
syringe, gravity, or a pump.  Medicare contractors use a fee schedule to 
reimburse for enteral nutrient claims.  During 2006, Medicare Part B 
allowed $284 million for ENT provided to nursing home residents 
during non-Part A stays ($142 million for enteral nutrients and  
$142 million for enteral supplies and equipment).  
Two codes of the Healthcare Common Procedure Coding System, B4150 
and B4154, accounted for nearly all ($117.8 million) of the $142 million 
allowed for enteral nutrients provided during non-Part A stays in 2006.  
As such, we focused our evaluation on these two codes.  We used 
resident assessment data from the Centers for Medicare & Medicaid 
Services (CMS) to identify all nursing home stays nationwide during 
2006.  We then analyzed related Medicare claims data for any allowed 
ENT payments during these stays as well as information provided by a 
sample of nursing homes and suppliers relating to their costs.  
Additionally, we supplemented these results with industry pricing data 
gathered and maintained by a marketing research firm that reports 
capturing 84 percent of national market activity for enteral nutrients, 
including 94 percent of the volume sold to nursing homes in 2006.   
FINDING  
Medicares fee schedule for enteral nutrients provided under Part B 
during non-Part A stays was more than double the prices available 
to suppliers of nursing homes and other purchasers in 2006.  We 
OEI-06-07-00590  MEDICARE PART B SERVICES DURING NON-PART A NURSING HOME STAYS:  ENTERAL NUTRIENT PRICING  i  EEEE XXXX EEEE CCCC UUUU TTTT IIII VVVV EEEE      SSSS UUUU MMMM MMMM AAAA RRRR YYYY     
estimate that the Medicare fee schedule amount of $0.67 exceeded the 
average unit price available to suppliers responding to our survey by 
$0.35 for B4150 nutrients.  The Medicare fee schedule amount of  
$1.22 exceeded the average unit price by $0.66 for B4154 nutrients.  
Using the calculated average unit prices available to the suppliers, we 
estimate that Medicares allowance for these two most frequently billed 
enteral nutrient codes exceeded supplier prices by approximately  
$61 million for non-Part A nursing home stays in 2006.  Specifically, fee 
schedule amounts exceeded the median unit prices available to long 
term care entities by 52 percent for B4150 nutrients and 54 percent for 
B4154 nutrients.  In addition to obtaining pricing data directly from 
nursing homes and suppliers, the Office of Inspector General (OIG) 
purchased industry pricing data.  These data confirmed that Medicares 
fee schedule amounts exceeded unit prices available to nursing homes 
and other purchasers.   
RECOMMENDATION 
This evaluation is consistent with prior OIG reports that have found 
that Medicares fee schedule amounts exceed available market prices for 
ENT.  To ensure appropriate reimbursement for ENT, CMS should:      
Adjust the Medicare fee schedule amounts for enteral nutrients to more 
accurately reflect supplier prices for nutrients provided to nursing home 
residents.  CMS can use inherent reasonableness reviews or may be able to 
act on available pricing information from other sources. 
Payments for ENT could be further impacted if Congress changed the 
prosthetic device benefit to restrict Part B coverage to a beneficiarys home 
and thereby recognized enteral nutrients as food covered under nursing 
home room and board payment.  Such a policy change would end Part B 
payments for ENT costs in nursing homes and would affect nearly half of 
all current Part B ENT payments annually.  The rationale behind a 
change to the benefit is that enteral nutrient feeding costs may be 
comparable to conventional meal costs incurred for other nursing home 
residents.  These conventional meal costs are reimbursed under the 
nursing homes room and board payment.  Further, a change to the 
prosthetic device benefit is consistent with a nursing homes responsibility 
to feed its residents and DME payment policy that places the 
responsibility on nursing homes, as institutions, to provide for the basic 
equipment needs of residents.  Such a payment policy change would 
encourage nursing homes to act as prudent purchases and to exert their 
OEI-06-07-00590  MEDICARE PART B SERVICES DURING NON-PART A NURSING HOME STAYS:  ENTERAL NUTRIENT PRICING  ii EE XX EE CC UU TT II VV EE    SS UU MM MM AA RR YY   
institutional buying power in obtaining nutrients, supplies, and equipment 
for ENT.  Limiting the prosthetic device benefit to the home setting would 
require legislative action and could result in as much as $284 million in 
program savings.  However, additional assessment is needed to establish 
the comparability of conventional meal costs to ENT and the impact of 
such a policy change on nursing homes.  
AGENCY COMMENTS AND OFFICE OF INSPECTOR GENERAL 
RESPONSE 
CMS agreed with our recommendation and described specific actions it 
is taking to more accurately reflect supplier prices for nutrients 
provided to nursing home residents.  We did not make any changes to 
the report based on CMS comments.
OEI-06-07-00590  MEDICARE PART B SERVICES DURING NON-PART A NURSING HOME STAYS:  ENTERAL NUTRIENT PRICING  iii  
 T A B L E   O F   C O N T E N T S  
 
EXECUTIVE SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i
 
 
I N T RO DUC T IO N . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 
 
 
F I N D IN G . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 
Medicares fee schedule for enteral nutrients provided under          
Part B during non-Part A stays was more than double the prices       
available to suppliers of nursing homesand other purchasers                
in 2006  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 
 
 
R E C O MMEN D A T ION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 
Agency Comments and Office of Inspector General Response . . . 18 
 
APPENDIXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 
  A:  Healthcare Common Procedure Coding System Enteral      
Nutrient Codes and Related Fee Schedule Amounts              
During Non-Part A Nursing Home Stays in 2006. . . . . . . . . . 19 
B:  Healthcare Common Procedure Coding System Enteral         
Supply and Equipment Codes and Related Fee Schedule   
Amounts During Non-Part A Nursing Home Stays in 2006. . 20 
  C:  Confidence Intervals for Selected Statistics. . . . . . . . . . . . . . . 21 
  D:  Agency Comments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 
 
A C K NO WL E D G M E N T S . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 
     
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 I N T R O D U C T I O N  
OBJECTIVE 
To compare Medicares Part B fee schedule for enteral nutrients 
provided during non-Part A stays to prices available to nursing home 
suppliers and other purchasers. 
BACKGROUND 
Enteral Nutrition Therapy 
In 2006, Medicare Part B allowed $284 million for enteral nutrition 
therapy (ENT) services, including enteral nutrients, supplies, and 
equipment, during non-Part A nursing home stays.  This represents 
nearly 47 percent of the $608 million Part B paid for ENT used in any 
environment (e.g., nursing homes, beneficiaries homes).  
The ENT services involve the delivery of liquid nutrients directly to an 
individuals digestive tract through a feeding tube inserted through the 
nose or placed in the small intestine or stomach.  Nutrients are 
delivered through the tube using a syringe, gravity, or a pump.  Enteral 
nutrients, supplies, and equipment are assigned procedure codes from 
the Healthcare Common Procedure Coding System (HCPCS).   
Enteral nutrients.  A wide range of enteral nutrients exists to meet health 
care needs, including special formulas for patients with pulmonary or 
metabolic diseases.  In 2006, Medicare Part B allowed $142 million for 
enteral nutrients provided during non-Part A nursing home stays.1  Two 
HCPCS codes, B4150 and B4154, accounted for nearly all of these 
allowed charges ($117.8 million).  HCPCS code B4150 represents the 
most frequently used nutrient; HCPCS code B4154 covers a more 
expensive class of nutrients for patients with special metabolic needs 
(e.g., diabetes). 
Enteral nutrients are billed and reimbursed by units, defined by 
Medicare as 100 calories.2  For example, if a patient is prescribed  
2,000 calories of enteral nutrients per day, Medicare reimbursement is 
based on 20 units of nutrients per day (2,000  100).  (See Appendix A 
 
1 For purposes of this evaluation, the term nursing homes is generic for any nursing home 
regardless of primary payer (e.g., Medicare, Medicaid, or private resources).   
2 Centers for Medicare & Medicaid Services (CMS), Medicare Claims Processing Manual,  
ch. 20,  100.2.2.2.  Available online at  
http://www.cms.hhs.gov/manuals/downloads/clm104c20.pdf.  Accessed in January 2009.  
 
OEI-06-07-00590  MEDICARE PART B SERVICES DURING NON-PART A NURSING HOME STAYS:  ENTERAL NUTRIENT PRICING  1  
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for a list of the HCPCS enteral nutrient codes and their related 
Medicare reimbursement rates in 2006 per unit.)  Nutrient packaging 
generally ranges from closed system containers (i.e., bags or bottles), 
ready to hang from an intravenous pole for immediate administration, 
to containers (usually cans) that require the nutrient to be transferred 
into containers that are ready for administration. 
Enteral supplies and equipment.  Enteral supplies and equipment are used 
to administer the required nutrients.  Patients can receive enteral 
nutrients through three delivery methods:  a syringe (the least 
expensive method), a feeding bag that uses gravity to deliver the 
formula, or a pump (the most expensive method).  (See Appendix B for a 
list of HCPCS codes covering enteral supplies and equipment and their 
related Medicare fee schedule amounts.)  In 2006, Medicare Part B 
allowed $142 million for enteral supplies and equipment during nursing 
home stays not paid for by Part A.    
Medicare and Medicaid Programs 
Nursing homes offer daily living assistance to elderly and disabled 
individuals who are either physically or mentally unable to live 
independently.  Nursing home patients receive a wide array of services 
ranging from medical treatment to meals and from skilled to custodial 
care.  Of the available public programs that pay for nursing home care, 
Medicare and Medicaid represent the largest.  
Medicare.  Medicare covers most people 65 years or older, people under 
age 65 with certain disabilities, and people of any age diagnosed with 
end stage renal disease.  It provides a wide range of benefits for 
eligible beneficiaries from institutional care (e.g., nursing home stays) 
to medical products and supplies (e.g., wheelchairs).   
Medicare is administered by CMS, which contracts with entities 
called Medicare Administrative Contractors (MAC) to process and pay 
claims for covered services.  Medicare-covered services most 
frequently fall under Parts A and B, constituting 46 percent and  
41 percent, respectively, of Medicares 2006 expenditures.3  Medicare 
paid $408.3 billion in 2006, of which nursing home services accounted 
for $20.5 billion (5 percent).4    
 
3 CMS, op.cit. 
4 CMS, Health Care Financing Review, 2007 Statistical Supplement. 
OEI-06-07-00590  MEDICARE PART B SERVICES DURING NON-PART A NURSING HOME STAYS:  ENTERAL NUTRIENT PRICING  2  
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The ENT provided to nursing home residents in a skilled nursing 
facility (SNF) may or may not be paid by Medicare Part A depending 
on how long the beneficiary remains in the facility and whether the 
beneficiary meets other medical qualifications.   
  Part A (hospital insurance) helps cover skilled or rehabilitative care 
during beneficiary stays in SNFs; these stays are called Part A 
stays.  Medicare Part A was the primary payer for 13 percent of the 
nursing home residents in 2006.5, 6  Medicare Part A pays for the 
beneficiarys services in a SNF during the first 100 days of a Part A 
stay.  During a Part A stay in a SNF, Medicare Part A pays for the 
beneficiarys services in the facility using a consolidated daily rate.  
This daily rate covers many routine services provided by SNFs, 
including room and board, skilled care, and rehabilitative care.   
When a beneficiary exhausts the 100 days of care allowed under the 
Part A benefit (or did not otherwise qualify for a SNF stay) and 
continues to reside in the SNF, the subsequent days then constitute 
a non-Part A stay.  During a non-Part A stay, Medicare no longer 
pays for the stay; however, Part B may pay for therapy and supplies 
previously included in the daily rate paid to the SNF.   
  Part B (medical insurance) helps cover a wide range of medical 
services and supplies.  All individuals eligible for Part A may enroll 
voluntarily in Part B by payment of a monthly premium.  In 2006, 
93 percent of all individuals with Part A elected to also enroll in 
Part B.   
Although Medicare Part A does not pay for non-Part A nursing home 
stays, Medicare Part B covers enteral nutrients, as well as the 
equipment and supplies necessary for administration, under 
Medicares prosthetic device benefit.7  Non-Part A stays can occur in 
Medicare-certified SNFs, Medicaid-certified nursing facilities (NF), 
 
5 Medicare Part A pays for up to 100 days in a SNF benefit period, also known as spell of 
illness, if a beneficiary meets certain conditions, such as a prior hospitalization.  The SNF 
benefit period begins the day a beneficiary enters the SNF and ends when the beneficiary 
has not received any subsequent hospital or SNF care for 60 consecutive days.   
6 C. Harrington, H. Carrillo, and B. W. Blank, Nursing Facilities, Staffing, Residents, and 
Facility Deficiencies, 2000 Through 2006, p. 18, Department of Social and Behavioral 
Sciences, University of California, San Francisco.  Available online at 
http://www.nccnhr.org/uploads/PartI-PagesfromHarringtonOSCARcomplete2006.pdf.  
Accessed in March 2008.  
7 Social Security Act (the Act),  1861(s)(8).   
OEI-06-07-00590  MEDICARE PART B SERVICES DURING NON-PART A NURSING HOME STAYS:  ENTERAL NUTRIENT PRICING  3  
I N T R O D U C T I O N  
and dually certified SNF/NFs.  In 2006, Medicare allowed nearly 
$284 million for more than 1.2 million claims for ENT during  
non-Part A nursing home stays.   
The Medicare-allowed ENT claims were associated with 19 HCPCS 
codes that were spread across 61,876 beneficiaries, 11,097 nursing 
homes, and 4,323 suppliers.  Three of the nineteen allowed HCPCS 
codes (B4035, B4154, and B4150) accounted for 78 percent  
($222 million) of the allowed payments, and 10 codes each accounted 
for less than 1 percent of the allowed payments.  The HCPCS code 
with the highest allowed payments, the pump supply kit (B4035), 
represented nearly 37 percent ($105 million) of the total amount.  
The two most frequently billed enteral nutrient codes (B4150 and 
B4154) accounted for 41.5 percent ($118 million) of the $284 million 
allowed by Medicare Part B.   
The average allowed amount for ENT nutrients, supplies, and 
equipment during non-Part A nursing home stays in 2006 was 
$4,597 per beneficiary, $25,634 per nursing home, and $65,802 per 
supplier.  The average daily ENT allowance per nursing home 
resident in a non-Part A stay in 2006 was $19.81.     
Medicare Part B fee schedule for enteral nutrition therapy.  Section 1842(s) of 
the Act authorized a fee schedule for enteral nutrients, equipment, and 
supplies associated with ENT.  Medicare-enrolled suppliers provide 
ENT services to Medicare beneficiaries and then submit claims to one of 
CMSs four regional payment contractors, called Durable Medical 
Equipment (DME) MACs.  Each DME MAC is also associated with a 
program safeguard contractor that conducts benefit integrity activities, 
including medical reviews.  Medicare contractors use the fee schedule to 
reimburse claims for ENT products.  CMS does not take nutrient 
packaging into account when setting fee schedule amounts.  The fee 
schedule is updated annually and percentage increases in the urban 
Consumer Price Index determine changes in the reimbursement 
amounts.   
Fee schedules can also change as a result of CMS revisions and/or 
through application of inherent reasonableness.  CMS has authority to 
establish a realistic and equitable (inherently reasonable) payment 
amount for most Medicare Part B services, other than physicians 
services, when the existing payment amounts are inherently 
unreasonable.  This may result when the payment amounts are either 
grossly excessive or deficient.  Generally, these amounts are defined as 
OEI-06-07-00590  MEDICARE PART B SERVICES DURING NON-PART A NURSING HOME STAYS:  ENTERAL NUTRIENT PRICING  4  
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requiring an adjustment of over 15 percent to produce an equitable and 
realistic payment amount.  Factors that CMS may consider in its 
determination include price markup, charge differences, the  
noncompetitiveness of the market place, payments in particular 
localities that grossly exceed those of other localities for the same 
services, payments that grossly exceed acquisition or production costs, 
payment increases that cannot be explained by inflation or technology, 
and payments for which Medicare and Medicaid are the sole or primary 
payment sources.8   
Medicaid.  Medicaid was the primary payer for 65 percent of nursing 
home stays during 2006.9  All of these stays were non-Part A stays, 
because Medicare did not pay for them.  Unlike Medicare, Medicaid is a 
joint State-Federal program administered by the States.  Within broad 
Federal guidelines, States establish their own eligibility standards 
encompassing Federal requirements and available options; thus, every 
State Medicaid program is different.  All other available third party 
resources, including Medicare, must meet their legal obligation to pay 
for covered health care services before Medicaid makes any payments.10   
To ensure that Medicaid recipients with Medicare eligibility receive 
Part B benefits during their NF stays and to facilitate payment by  
Part B, State Medicaid programs routinely pay Part B premiums for 
eligible beneficiaries.   
Stays in a NF are always considered non-Part A stays because a NF is 
not certified for Medicare Part A services.  NF residents who are eligible 
only for Medicaid and require enteral nutrients may have them paid as 
part of Medicaids daily payment rate to the nursing homes.  For those 
NF residents who are eligible for both Medicaid and Medicare Part B, 
Part B will pay for their enteral nutrients.   
All State Medicaid programs provide payment for ENT.11  State 
Medicaid programs coverage and subsequent payment for ENT 
generally occurs under one of three reimbursement methods:   
 
8 42 CFR  405.502. 
9 C. Harrington, et al., loc. cit. 
10 The Act,  1902(a)(25). 
11 The Henry J. Kaiser Family Foundation, Medicaid Benefits:  Online Database.  Available 
online at 
http://www.kff.org/medicaid/benefits/index.jsp?CFID=32790568&CFTOKEN=15412220.  
Accessed in June 2008. 
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(1) the DME benefit as a prosthetic device, under which the State uses 
the Medicare fee schedule and HCPCS codes; 
(2) the pharmacy benefit, under which the State uses National Drug 
Codes (NDC); or 
(3) a combination of (1) and (2) above using both HCPCS and NDC 
codes. 
Related Payment Legislation 
Congress enacted legislation, such as the Balanced Budget Act of 1997 
(BBA)12 and the Medicare, Medicaid, and SCHIP Benefits Improvement 
and Protection Act of 2000 (BIPA),13 to further define Medicare 
payment criteria for nursing homes.  The BBA established a prospective 
payment system for Part A stays and required nursing homes to 
arrange for and consolidate into a single Medicare bill the Part B 
services that are needed by a resident during his or her nursing home 
stay.14  Prior to the BBA, suppliers and providers of Part B services for 
nursing home residents (e.g., physical therapists) billed Medicare 
directly for their services.  Implementation of consolidated billing first 
occurred only for Part A stays.  In 2000, before the BBA was 
implemented for non-Part A stays, the BIPA was enacted.  It 
maintained consolidated billing for Part A stays and therapy services 
but repealed consolidated billing requirements for non-Part A stays.  
Therefore, claims for beneficiaries during non-Part A stays continue to 
be individually submitted by suppliers and providers.   
Mandate for Office of Inspector General To Monitor Part B Payments 
In repealing the BBAs consolidated billing provisions for non-Part A 
nursing home stays, section 313 of the BIPA directed the Office of 
Inspector General (OIG) to perform monitoring of Medicare Part B 
payments during non-Part A stays.  This ENT evaluation revisits prior 
OIG reports.  Several additional studies will address other, previously 
identified, vulnerable Part B payment areas (e.g., DME and 
psychotherapy).  The prior OIG reports regarding ENT include:  
 
12 P.L. No. 105-33. 
13 P.L. No. 106-554. 
14 BBA,  4432. 
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  Coverage of Enteral Nutritional Therapy:  Medicare and Other 
Payers15 and Medicare Payments for Enteral Nutrition Therapy 
Equipment and Supplies in Nursing Homes16 both reported 
Medicares vulnerability to excessive payments and the need for 
payment restructuring, particularly as related to ENT supplies and 
equipment.   
  Medicare Payments for Enteral Nutrition,17 Payments for Enteral 
Nutrition:  Medicare and Other Payers,18 and Enteral Nutrient 
Payments in Nursing Homes19 each reported excessive Medicare 
payment for enteral nutrients when compared to the actual cost of 
their purchase.  These reports also recommended payment 
restructuring.  Additionally, one of these reports argued that enteral 
nutrients should be redefined as food for Medicare payment 
purposes and thus should not be billed to Part B but included in a 
nursing homes daily rate.    
In response to OIGs recommendations in the reports referenced above, 
CMS agreed that Medicare reimbursement for ENT was excessive and 
that there was a need for payment restructuring.  However, CMS noted 
that any payment restructuring and related definitional changes would 
require legislation.   
CMS also agreed with prior recommendations relating to consolidated 
billing.  Past OIG evaluations supported CMSs seeking legislation to 
exclude enteral nutrients, supplies, and equipment from Part B 
reimbursement for residents in nursing homes engaged primarily in 
providing skilled care or rehabilitation.  Such legislation would seek to 
treat the provision of ENT as room and board costs and thereby include 
them in the facilitys daily room rate.  CMS further agreed with the 
 
15 OIG, Coverage of Enteral Nutritional Therapy:  Medicare and Other Payers              
(OEI-03-94-00020), May 1995.  Available online at http://oig.hhs.gov/oei/subject_index.asp.  
Accessed in June 2008.     
16  OIG, Medicare Payments for Enteral Nutrition Therapy Equipment and Supplies in 
Nursing Homes (OEI-06-92-00866), May 1997.  Available online at  
http://oig.hhs.gov/oei/subject_index.asp.  Accessed in June 2008.   
17 OIG, Medicare Payments for Enteral Nutrition (OEI-03-02-00700), March 2004.  
Available online at  http://oig.hhs.gov/oei/subject_index.asp.  Accessed in June 2008.   
18 OIG, Payments for Enteral Nutrition:  Medicare and Other Payers (OEI-03-94-00021), 
May 1996.  Available online at  http://oig.hhs.gov/oei/subject_index.asp.  Accessed in      
June 2008.   
19 OIG, Enteral Nutrient Payments in Nursing Homes (OEI-06-92-00861), March 1996.  
Available online at  http://oig.hhs.gov/oei/subject_index.asp.  Accessed in June 2008.   
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need for CMS to apply its authority to require competitive bidding for 
enteral nutrition products and inherent reasonableness.  CMS noted 
that for application of inherent reasonableness, its payment contractors 
would have to develop written procedures for conducting reviews 
according to statute and regulation.   
Efforts To Reduce Medicare Payments 
As authorized by the BBA, CMS conducted a competitive bidding 
demonstration for enteral nutrients and associated supplies and 
equipment in Polk County, Florida, from October 1999 to  
September 2001.  The project revealed that demonstration allowances 
were lower than the existing fee schedule for 22 of the 24 enteral 
items.20  Project reviewers estimated that 2001 Medicare fee schedule 
reimbursement rates for the ENT would have decreased by 15.8 percent 
using demonstration prices.21   
Subsequently, section 302 of the Prescription Drug, Improvement, and 
Medicare Modernization Act of 2003 (MMA) authorized use of the 
competitive acquisition authority outlined in section 1847(a) of the 
Act.22  Section 302(b)(1) of the MMA requires CMS to replace the 
current Medicare payment methodology for certain items (including 
ENT) with a competitive acquisition process that, according to CMS, 
provides a way to harness marketplace dynamics to create incentives 
for suppliers to provide quality items in an efficient manner, at a 
reasonable cost to the Medicare beneficiaries with expected savings for 
Medicare.23  Although the competitive process is not yet implemented 
nationally, CMS is introducing it in nine markets for suppliers of 
 
20 Demonstration allowances, or the fee schedule for the bidding demonstration, were 
determined from demonstration suppliers bid submissions.  Demonstration suppliers were 
selected using a four-stage bid evaluation process that included determining a composite bid 
and a cutoff bid based on supplier bid submissions.  Suppliers that bid at or below the cutoff 
bid were eligible to participate in the demonstration if they met quality standards.   
21 CMS, Evaluation of Medicares Competitive Bidding Demonstration for DMEPOS 
(durable medical equipment, prosthetics, orthotics, and supplies), September 2000 (revised    
January 2001).  RTI Project Number 7346-002-008.  Available online at 
http://www.cms.hhs.gov/DemoProjectsEvalRpts/downloads/karon_2001_1.pdf.  Accessed in 
January 2009.   
22 P.L. No. 108-173. 
23 CMS, Competitive Acquisition for DMEPOS.  Available online at 
http://www.cms.hhs.gov/apps/media/press/factsheet.asp?Counter=2812&intNumPerPage=1
0&checkDate=&checkKey=&srchType=1&numDays=3500&srchOpt=0&srchData=&keywor
dType=All&chkNewsType=6&intPage=&showAll=&pYear=&year=&desc=false&cboOrder=
date.  Accessed in March 2009.   
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selected DMEPOS.  Medicare suppliers of DMEPOS, unless exempt, 
were required to be accredited and obtain surety bonds by October 1, 
2009, and October 2, 2009, respectively.  CMS expected to begin the  
60-day bid window for Round 1 Rebid by October 21, 2009, and to 
implement the program by January 1, 2011.24  
METHODOLOGY 
Scope 
This evaluation identifies pricing for the most frequently billed enteral 
nutrient HCPCS codes, B4150 and B4154, during non-Part A stays in 
2006.  These codes represent $117.8 million (83 percent) of Medicare  
Part B-allowed charges for enteral nutrients during these stays.   
Identification of Enteral Nutrients, Supplies, and Equipment During a 
Nursing Home Stay  
We used several databases obtained from CMS to identify Part B 
payments allowed for ENT during nursing home stays.  These 
databases included the:  Minimum Data Set (MDS), Online Survey 
Certification and Reporting system (OSCAR), Enrollment Database 
(EDB), and National Claims History (NCH).     
Minimum Data Set.  We used the MDS to identify all 2006 nursing home 
residents, related nursing homes, and nursing home stay dates.  The 
MDS, a component of the resident assessment instrument, includes 
information about each residents health, physical functioning, mental 
status, and general well-being.25  Each nursing home reports these 
individual assessments electronically upon admission and updates them 
at least quarterly.26  The MDS includes nursing home admission and 
discharge dates.  States receive assessments from nursing homes and 
transmit the data to CMS.  Using the MDS data, we identified all 
assessed residents and their Social Security numbers (SSN).  To 
determine stay dates, we extracted all nursing home admission and 
discharge dates for each resident.   
 
24 CMS, DMEPOS Competitive Bidding, Latest News and Announcements.  Available 
online at http://www.dmecompetitivebid.com/Palmetto/Cbic.nsf/DocsCat/Home (CMSs 
Competitive Bidding Implementation Contractor is Palmetto).  Accessed on August 25, 
2009.  
25 OBRA. 
26 More frequent assessments are required for stays paid under the Part A SNF benefit. 
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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, 2006 (determined from subsequent assessments that the 
nursing homes conducted), we used the date of the first assessment 
conducted in 2005 as the admission date. 
  Missing Discharge Date.  In this instance, we defined the date of the 
last assessment (received through March 2007) as the discharge 
date.   
Online Survey Certification and Reporting.  To obtain information about the 
nursing home (e.g., facility name, address, number of beds, and SNF or 
NF certification), we linked the MDS facility identification number with 
the facility numbers maintained in OSCAR.  OSCAR contains survey 
results from certification and complaint surveys.    
Enrollment Database.  We used the EDB to identify Medicare 
beneficiaries.  This database includes beneficiary-level data (i.e., name, 
SSN, and Medicare Health Insurance Claim Number (HICN)).  Using 
this database, we matched SSNs in the MDS file to SSNs in the EDB to 
identify Medicare beneficiaries and their associated HICNs.  We 
excluded beneficiaries having no matching SSN from further analysis.    
National Claims History.  We used the NCH to identify Part B ENT 
payments made during non-Part A stays.  We matched the HICNs in 
the EDB to those in the NCH to identify all ENT claims allowed for 
Medicare beneficiaries during any nursing home stay.  We then 
removed all ENT claims billed for beneficiaries during Part A paid 
nursing home or inpatient hospital stays.27  The resulting dataset 
comprised all ENT nutrient HCPCS codes (see Appendix A) and all ENT 
supplies and equipment HCPCS codes (see Appendix B) for which 
billing was allowed under Part B during non-Part A stays in 2006.   
Identification of Enteral Nutrient Prices 
To obtain prices and packaging information for enteral nutrients 
covered under HCPCS codes B4150 and B4154, the most frequently 
billed enteral nutrient HCPCS codes, we surveyed nursing homes and 
suppliers represented in a random sample of claims.  We also purchased 
 
27 OIGs Office of Audit Services routinely conducts audits related to inappropriate Part B 
payments occurring during Part A stays.  Consequently, we excluded all Part A stays from 
our review.  
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industry pricing data from a market research firm.  We then compared 
Medicare-allowed payments and fee schedule amounts to data from 
these two sources.   
Survey of nursing homes and suppliers.  We identified nursing homes 
associated with at least one claim for either HCPCS codes B4150 or B4154 
in 2006 and divided the population into two strata based on ENT volume.  
The first stratum contained 8,018 nursing homes associated with allowed 
ENT payments of $17,000 or less, and the second stratum contained  
2,692 nursing homes associated with allowed ENT payments of more than 
$17,000.  We randomly selected 160 nursing homes from each stratum, for 
a total of 320 nursing homes.  We then randomly selected three enteral 
nutrient claims having service dates in 2006 associated with each of the 
320 nursing homes (or all claims if there were fewer than three).  This 
resulted in a sample of 938 claims submitted by 216 suppliers for  
712 beneficiaries.  For these 938 claims, Medicare allowed nearly  
$280,000 and reimbursed nearly $223,000.  For the sampled claims, the 
216 suppliers billed as little as $15 and as much as $13,394, with an 
average of $1,295 per supplier.   
We mailed surveys to the 320 nursing homes and the 216 associated 
suppliers.  We removed 10 suppliers from the sample because of incorrect 
addresses on file; we removed an additional 7 suppliers because of 
company dissolution or ongoing investigations by other governmental 
departments.  Of the remaining 199 suppliers, 190 responded to the 
surveys (88 percent); of the 320 nursing homes, 304 responded  
(95 percent).  Responding suppliers represent about 80 percent of claims 
associated with HCPCS code B4150 (366 claims) in the sample and about 
75 percent of the claims associated with HCPCS code B4154 (230 claims) 
in the sample.28  
Using survey results, we organized enteral nutrient packaging into two 
categories:  ready-to-hang (RTH) and ready-to-use (RTU).  We calculated 
unit prices for RTH and RTU packaging categories for HCPCS codes 
B4150 and B4154.  Using these data, we calculated an average unit price 
for B4150 and B4154 and identified the higher of the two packaging prices 
for each supplier.  For each claim in the sample, we used this higher 
identified price to calculate an average unit price, which provided a 
 
28 Of the 320 nursing homes represented in the sampled claims, 12 percent (39) reported 
that they served as their own suppliers for purchasing enteral nutrients, supplies, and 
equipment. 
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conservative estimate of prices available to nursing home suppliers.  We 
then calculated the difference between the actual Medicare-allowed 
amount and the estimated prices available to suppliers.  We performed 
this calculation using the population of 2006 claims for HCPCS codes 
B4150 and B4154 and their respective estimated average unit prices from 
our sample.  We weighted the sample statistics according to the sampling 
design.     
Industry pricing data.  To buttress results from our sample and to identify 
pricing for other purchasers, we obtained pricing data for 2006 from a 
market research firm that routinely surveys different sectors of the 
business community (i.e., hospitals, nursing homes, and retail outlets).29  
The purchased dataset contained sales information for specific enteral 
nutrients, defined as complete food supplements.  It contains the dollar 
amounts from the actual invoice prices, meaning that the provided 
amounts were exactly what the outlets paid wholesalers to acquire these 
products.  The market research firm estimates that it captures 84 percent 
of the total U.S. market, including 94 percent of the volume sold to nursing 
homes for their residents in 2006.  We calculated unit prices for nutrients 
identified as either HCPCS code B4150 or code B4154 and compared the 
medians of these prices with Medicares fee schedule amounts.  We used 
median prices because outliers skewed the average.  We also used the data 
to identify enteral nutrition prices available to hospitals, home health 
agencies, and the public through retail outlets. 
Limitations 
We did not validate the supplier-reported prices or the market research 
firms pricing data.  Nor did we identify the specific brands of enteral 
nutrients associated with the sampled claims.  Although we did obtain 
some supply contracts, rebate information, and purchase agreements 
from nursing homes and suppliers, very little of this information 
provided specific cost information.  Such information could have lowered 
the average unit prices for the enteral nutrients.   
 
29 The company performs surveys of different sectors of the business community to identify 
purchase patterns of various products.  It markets these data to the provider community.  
One of the products tracked is complete food supplements (enteral nutrients) purchased by 
hospitals, long term care facilities (including nursing homes), and other entities.  A sample 
of sales information is obtained and then projected to the Nation.  Specifically, this 
database contains direct sales from manufacturers to retail and nonretail outlets as well as 
indirect sales from wholesalers to retail and nonretail outlets.   
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Prices obtained from surveys of nursing homes and suppliers also did 
not include shipping and delivery costs.  Further, we did not include 
administrative costs or staffing costs associated with administering the 
enteral nutrients.  Using these costs could have raised the average unit 
prices for the enteral nutrients. 
Finally, we were unable to reliably determine the actual cost of 
conventional food per patient per day among typical nursing homes for 
comparison to enteral nutrient product costs.  Two avenues attempted 
were an assessment of SNF cost reports and a request for cost 
information from large nursing home chains.   
First, SNFs annual cost reports submitted to CMS are not reliable for 
determining an accurate measure of food costs.  We reviewed the 2006 
annual cost summary report and found that reported dietary expenses 
varied widely because the dietary cost center may include not only the 
actual cost of food products but other expenses.  These other expenses 
might include costs associated with food preparation or procurement, 
salaries of feeding assistants (typically a nursing service), and utensils.   
Second, we contacted the 10 largest nursing home chains to request the 
average cost range (from low to high) of conventional food per patient 
per day in their nursing homes.  However, we received data from only 
four and are not able to project the results.  Among these four, 
representing approximately 5 percent of all nursing homes, the reported 
current average daily patient food costs ranged from a low of $4.75 to a 
high of $7.27 in 2009.  This compares to $6.40 for enteral nutrients 
(B4150) calculated using the average supplier cost determined in this 
evaluation and assuming a typical residents dietary needs.  We did not 
verify the costs reported by these chains or obtain more current supplier 
cost data.  However, one of these chains reported that while the cost of 
conventional food has steadily increased since 2006, its cost for enteral 
nutrition therapy products has remained relatively flat.  
Standards 
This study was conducted in accordance with the Quality Standards for 
Inspections approved by the Council of the Inspectors General on 
Integrity and Efficiency.
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 F I N D I N G  
Medicares fee schedule for enteral nutrients  We estimated that the average unit 
provided under Part B during non-Part A stays was  price available to suppliers 
responding to our survey was   
more than double the prices available to suppliers 
$0.32 for HCPCS nutrient code 
of nursing homes and other purchasers in 2006 
B4150 and $0.56 for nutrient code 
B4154.30  (See Appendix C for confidence intervals.)  Medicares fee 
schedule amount for HCPCS code B4150 in 2006 ($0.67) exceeded the 
estimated price by $0.35, which is 52 percent of the fee schedule amount 
for code B4150.  Further, Medicares fee schedule amount for HCPCS 
code B4154 in 2006 ($1.22) exceeded the estimated price by $0.66, which 
is 54 percent of the fee schedule amount.  Using average unit prices 
estimated from our surveys, we determined that Medicares allowance 
for these two most frequently billed enteral nutrient codes exceeded 
prices available to suppliers by approximately $61 million for  
non-Part A nursing home stays in 2006.  (See Table 1.) 
 
Table 1:  Actual Medicare Allowances and Estimated Supplier Prices  
Available for Selected Enteral Nutrient HCPCS Codes During Non-Part A 
Nursing Home Stays in 2006  
HCPCS  Actual Medicare Allowance*  Estimated Supplier Prices**  Difference*** 
B4150  $52.8 million  $26.0 million  $26.8 million 
B4154  $65.0 million  $30.6 million  $34.4 million 
    TOTAL  $117.8 million  $56.6 million  $61.2 million 
*Actual Medicare allowance for HCPCS codes B4150 and B4154 during non-Part A nursing home stays in 2006. 
**Using survey prices, the estimated supplier prices for HCPCS codes B4150 and B4154 during non-Part A nursing 
home stays in 2006. 
***Difference between actual Medicare allowance and estimated supplier prices for HCPCS codes B4150 and B4154 
during non-Part A nursing home stays in 2006. 
Source:  OIGs analysis of supplier surveys and ENT claims made for residents during non-Part A stays in 2006. 
 
 
Industry pricing data confirmed that Medicares fee schedule amounts 
exceeded unit prices available to other purchasers, including nursing 
homes 
No purchaser type in the industry data paid at or above Medicares fee 
schedule amounts for claims with HCPCS codes B4150 or B4154.  The 
fee schedule amount for HCPCS code B4150 exceeded the median unit 
price available to long term care entities, including nursing homes, by 
 
30 We estimate that the median unit price was $0.32 and $0.54 for HCPCS codes B4150 and 
B4154, respectively. 
OEI-06-07-00590  MEDICARE PART B SERVICES DURING NON-PART A NURSING HOME STAYS:  ENTERAL NUTRIENT PRICING  14  
F I N D I N G  
52 percent; the fee schedule amount for HCPCS code B4154 exceeded 
the median unit price available to long term care entities by  
100 percent.  (See Table 2.)  The unit price closest to the fee schedule 
was for HCPCS code B4150 in Federal facilities at 79 percent of the fee 
schedule amount.  The largest unit price difference was for HCPCS code 
B4154 purchased by non-Federal hospitals at 34 percent of the fee 
schedule amount. 
 
 
Table 2:  Comparison of Medicares Fee Schedule Amounts to Prices Available to 
Other Purchasers of Enteral Nutrients in 2006 
B4150  B4154 
Type of Purchaser 
in Industry Report  Median Unit Price (N)  Fee Schedule    Median Unit Price (N)  Fee Schedule 
Exceeds Price By:  Exceeds Price By: 
Chain Stores  $0.48  (269)  $0.19  (40%)  $0.61  (133)  $0.61  (100%) 
Clinics  $0.46  (239)  $0.21  (46%)  $0.59  (106)  $0.63  (107%) 
Federal Facilities  $0.53  (98)  $0.14  (26%)  $0.61  (58)  $0.61  (100%) 
Food Stores  $0.50  (219)  $0.17  (34%)  $0.62  (101)  $0.60  (97%) 
Health Maintenance 
$0.52  (55)  $0.15  (29%)  $0.59  (30)  $0.63  (107%) 
Organizations 
Home Health  $0.41  (263)  $0.26  (63%)  $0.60  (125)  $0.62  (103%) 
Independent  $0.48  (247)  $0.19  (40%)  $0.62  (120)  $0.60  (97%) 
Long Term Care  $0.44  (285)  $0.23  (52%)  $0.61  (135)  $0.61  (100%) 
Mail Service  $0.42  (192)  $0.25  (59%)  $0.49  (86)  $0.73  (149%) 
Non-Federal 
$0.31  (278)  $0.36  (116%)  $0.41  (153)  $0.81  (198%) 
Hospitals 
Prisons  $0.43  (85)  $0.24  (56%)  $0.59  (44)  $0.63  (107%) 
Selected Markets  $0.43  (384)  $0.24  (56%)  $0.56  (196)  $0.66  (118%) 
Universities  $0.52  (35)  $0.15  (29%)  $0.57  (8)  $0.65  (114%) 
Other  $0.49  (143)  $0.18  (37%)  $0.58  (49)  $0.64  (110%) 
Medicare  
$0.67  NA  NA  $1.22  NA  NA 
Fee Schedule 
Median unit prices are shown because outliers skewed the average unit prices. 
N represents the number of entities included in industry dataset. 
The long term care type of provider includes nursing homes and is bolded for easy comparison to the Medicare Fee Schedule. 
Source:  OIGs analysis of 2006 industry pricing data. 
 
Nutrient packaging had little effect on pricing   
Although we used the highest packaging price to compare the Medicare 
fee schedule amounts to supplier prices, average unit prices for RTU 
and RTH products were similar.31  For HCPCS code B4150, 81 percent 
of the suppliers associated with the sampled claims purchased RTU and 
 
31 These averages are unweighted average unit prices among the suppliers in our sample. 
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F I N D I N G  
91 percent purchased RTH.  The average supplier unit price for RTH 
was $0.01 higher than the average supplier unit price for RTU ($0.32 
and $0.31, respectively).  For HCPCS code B4154, 79 percent of 
suppliers purchased RTU and 84 percent purchased RTH.  The average 
supplier unit price for RTH was $0.07 higher than the average supplier 
unit price for RTU ($0.58 and $0.51, respectively).
OEI-06-07-00590  MEDICARE PART B SERVICES DURING NON-PART A NURSING HOME STAYS:  ENTERAL NUTRIENT PRICING  16  
E X E C U T I V E   S U M M A R Y  
 R E C O M M E N D A T I O N  
This evaluation is consistent with prior OIG reports that have found 
that Medicares fee schedule amounts exceed available market prices for 
ENT.  Current Medicare payments do not reflect the buying power of 
nursing home suppliers to obtain nutrients at lower prices than 
reflected in the Medicare fee schedule.  To more appropriately 
reimburse ENT, CMS should:   
Adjust the Medicare fee schedule amounts for enteral nutrients to more 
accurately reflect supplier prices for nutrients provided to nursing home 
residents 
CMS can use inherent reasonableness reviews or may be able to act on 
pricing information from the competitive bidding program for DMEPOS.  
In response to prior OIG reports, CMS has indicated its willingness to 
pursue inherent reasonableness reviews; however, no such reviews have 
been reported.  
Payments for ENT could be further impacted if Congress changed the 
prosthetic device benefit to restrict Part B coverage to a beneficiarys home 
and thereby recognized enteral nutrients as food covered under nursing 
home room and board payment.  Such a policy change would end Part B 
payments for ENT costs in nursing homes and would affect nearly half of 
all current Part B ENT payments annually.  The rationale behind a 
change to the benefit is that enteral nutrient feeding costs may be 
comparable to conventional meal costs incurred for other nursing home 
residents.  These conventional meal costs are reimbursed under the 
nursing homes room and board payment.  Further, a change to the 
prosthetic device benefit is consistent with a nursing homes responsibility 
to feed its residents and DME payment policy that places the 
responsibility on nursing homes, as institutions, to provide for the basic 
equipment needs of residents.  Such a payment policy change would 
encourage nursing homes to act as prudent purchases and to exert their 
institutional buying power in obtaining nutrients, supplies, and equipment 
for ENT.  Limiting the prosthetic device benefit to the home setting would 
require legislative action and could result in as much as $284 million in 
program savings.  However, additional assessment is needed to establish 
the comparability of conventional meal costs to ENT and the impact of 
such a policy change on nursing homes.   
OEI-06-07-00590  MEDICARE PART B SERVICES DURING NON-PART A NURSING HOME STAYS:  ENTERAL NUTRIENT PRICING  17  
R E C O M M E N D A T I O N  
AGENCY COMMENTS AND OFFICE OF INSPECTOR GENERAL 
RESPONSE 
CMS agreed with our recommendation that Medicare payments for 
enteral nutrients be adjusted to more accurately reflect supplier prices 
for nutrients provided to nursing home residents.  CMS cited two 
actions it is taking to accomplish this.  First, the rebid of the DMEPOS 
competitive bidding program is scheduled to take effect on January 1, 
2011, and includes enteral nutrients, supplies, and equipment.  Second, 
CMS will consider adjusting the Medicare fee schedule for enteral 
nutrients once sufficient data are available from the bidding process.  
For the full text of CMSs comments, see Appendix D. 
We did not make any changes to the report based on CMSs comments.  
 
 
OEI-06-07-00590  MEDICARE PART B SERVICES DURING NON-PART A NURSING HOME STAYS:  ENTERAL NUTRIENT PRICING  18  
 A P P E N D I X   A  
 
Table A-1:  Healthcare Common Procedure Coding System Enteral Nutrient 
Codes and Related Fee Schedule Amounts During Non-Part A Nursing Home 
Stays in 2006 
Fee Schedule 
Code  Description 
Amount*  
B4149  Manufactured, blenderized natural foods with intact nutrients  $1.57 
B4150  Nutritionally complete with intact nutrients  $0.67 
B4152  Nutritionally complete, calorically dense, with intact nutrients  $0.56 
B4153  Nutritionally complete, hydrolyzed proteins (amino acids and peptide chain)  $1.91 
B4154  Nutritionally complete, for special metabolic needs  $1.22 
B4155  Nutritionally incomplete/modular nutrients, includes specific nutrients  $0.95 
Nutritionally complete, for special metabolic needs for inherited disease of 
B4157  ** 
metabolism 
B4159  Nutritionally complete, soy based with intact nutrients, for pediatrics  ** 
Bolded codes are those that represent the majority of enteral nutrient claims and for which we determined pricing. 
*Per unit (100 calories). 
**No national fee schedule amount available from the Centers for Medicare & Medicaid Services (CMS) in the Durable 
Medical Equipment Coding System; Durable Medical Equipment Medicare Administrative Contractors must be 
contacted for pricing information. 
Source:  CMS national fee schedule available from the Statistical Analysis Durable Medical Equipment Regional Carrier, the national 
entity contracted by CMS. 
 
 
 
   
 
 
 
 
 
 
 
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   A P P E N D I X   B    
 
Table B-1:  Healthcare Common Procedure Coding System Enteral Supply 
and Equipment Codes and Related Fee Schedule Amounts During Non-Part A 
Nursing Home Stays in 2006 
Fee Schedule 
Code  Description 
Amount   
B4034  Syringe feeding supply kit, per day  $6.12 
B4035  Infusion pump feeding supply kit, per day   $11.66 
B4036  Gravity feeding supply kit, per day  $8.00 
B4081  Nasogastric tubing with stylet  $21.62 
B4082  Nasogastric tubing without stylet  $16.09 
B4083  Stomach tube  Levine type  $2.46 
B4086  Gastrostomy/jejunostomy tube  $25.69 
$1,226.261 
B9000  Infusion pump without alarm  $919.692 
$112.683 
$1,126.261 
B9002  Infusion pump with alarm  $919.692 
$118.773 
B9998  Enteral supply not otherwise classified  * 
$101.981 
E0776  Intravenous pole (must have a BA modifier)  $76.492 
$25.813 
1 New equipment. 
2 Used equipment. 
3 Rented equipment. 
*No national fee schedule amount available from the Centers for Medicare & Medicaid Services (CMS) in the Durable 
Medical Equipment Coding System; Durable Medical Equipment Medicare Administrative Contractors must be 
contacted for pricing information. 
Source:  CMSs national fee schedule obtained from the Statistical Analysis Durable Medical Equipment Regional Carrier. 
 
 
 
 
 
 
OEI-06-07-00590  MEDICARE PART B SERVICES DURING NON-PART A NURSING HOME STAYS:  ENTERAL NUTRIENT PRICING  20  
 A P P E N D I X   C  
Table C-1:  Confidence Intervals for Selected Statistics* 
95-Percent 
Statistic  N  Estimate 
Confidence Interval 
Estimated average unit price for Healthcare 
Common Procedure Coding System (HCPCS)  366 claims  $0.32  $0.310.34 
code B4150, using highest packaging price 
Estimated prices available to suppliers for  
HCPCS code B4150, using unit prices obtained  366 claims  $26.0 million  $24.927.1 million 
from supplier surveys 
Difference between actual Medicare allowance 
and estimated supplier prices for HCPCS code  366 claims  $26.9 million  $25.828.0 million 
B4150 
Estimated average unit price for HCPCS code 
230 claims  $0.56  $0.540.59 
B4154, using highest packaging price 
Estimated prices available to suppliers for 
HCPCS code B4154, using unit prices obtained  230 claims  $30.6 million  $29.132.1 million 
from supplier surveys 
Difference between actual Medicare allowance 
and estimated supplier prices for HCPCS code  230 claims  $34.3 million  $32.835.9 million 
B4154 
*The estimates and 95-percent confidence intervals are based on the population of HCPCS codes B4150 or B4154 claims, using 
the weighted average unit prices estimated from our sample.   
Source:  Office of Inspector Generals sample analysis and projections of enteral nutrient claims for non-Part A nursing home stays during 2006. 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
OEI-06-07-00590  MEDICARE PART B SERVICES DURING NON-PART A NURSING HOME STAYS:  ENTERAL NUTRIENT PRICING  21 A  P  PEN  0  x  o 

Agency Comments 
DEPAH.TMENT OF lIEALTH & HUMAN SERVICES  Centers for Medicare & Medicaid Services 
Administrator 
Washington, DC 20201 
DATE:  NOV  '1  2 2009 
TO:  Daniel R. Levinson 
Inspector General 
FROM:  Charlene Fnzzera 
Acting Administrator 
SUBJECT:  Office of Inspector General Draft Report:  "Medicare Part B Services During 
Non-Part A Nursing Home Stays: Enteral Nutrient Pricing" 
(OEI-06-07-00590) 
Thank you for the opportunity to review and comment on the Office ofInspector General's 
(OlG) draft report entitled "Medicare Part B Services During Non-Part A Nursing Home Stays: 
Enteral Nutrient Pricing." The report compares the Medicare fee schedule amounts for these 
items to prices available to suppliers ofnursing homes and other purchasers in 2006. 
The Centers for Medicare & Medicaid Services (CMS) included enteral nutrients, supplies, and 
equipment as a product category in Round 1 ofthe durable medical equipment, prosthetics, 
orthotics, and supplies (DMEPOS) competitive bidding program. Under the competitive bidding 
program, payment in competitive bidding areas is limited to suppliers who have submitted and 
been awarded contracts with Medicare.  Payment is set at the "single payment amount," which is 
determined using bid amounts and is lower than the fee schedule payment amount.  The 
competitive bidding program went into effect in 10 competitive bidding areas on July 1,2008. 
The single payment amounts for enteral nutrients, supplies, and other covered equipment 
resulting from this competition were 26 percent lower, on average, than the corresponding 
Medicare fee schedule amounts at that time. However, the Medicare Improvements for Patients 
and Providers Act of 2008 (MIPP A) delayed Round I of the DMEPOS competitive bidding 
program and required that re-bidding occur in 2009.  The MIPPA mandated that the Round 1 
re-bid program include the same items that were bid in Round 1, which includes enteral 
nutrients, supplies, and equipment. The bidding for the Round 1 re-bid of the program began on 
October 21, 2009, and the program is scheduled to take effect on January 1,2011. 
The OlG draft report provides valuable insight for CMS on suppliers' costs for enteral nutrients. 
OIG Recommendation: 
Adjust the Medicare fee schedule amounts for enteral nutrients to more accurately reflect 
supplier prices for nutrients provided to nursing home residents. 
OEI060700590  MEDICARE PART B SERVICES DURING NON,PART A NURSING HOME STAYS:  ENTERAL NUTRIENT PRICING  22   
A P P E N D I X   D  
 
 
 
OEI-06-07-00590  MEDICARE PART B SERVICES DURING NON-PART A NURSING HOME STAYS:  ENTERAL NUTRIENT PRICING  23  
 A C K N O W L E D G M E N T S  
 
 
This report was prepared under the direction of Kevin K. Golladay, 
Regional Inspector General for Evaluation and Inspections in the Dallas 
regional office, and A. Blaine Collins, Deputy Regional Inspector 
General.   
Leah K. Bostick served as the team leader for this evaluation, and  
Dana McClellen served as lead analyst.  Other principal Office of 
Evaluation and Inspections staff from the Dallas regional office who 
contributed to this study include Petra Johansson, Sai Loganathan, and 
Jeremy Moore; central office staff who contributed include  
Robert L. Gibbons, Scott Horning, Jennifer Jones, and Sandy Khoury.   
OEI-06-07-00590  MEDICARE PART B SERVICES DURING NON-PART A NURSING HOME STAYS:  ENTERAL NUTRIENT PRICING  24 Office of Inspector General 
http://oig.hhs.gov 
 
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: 
Office of Audit Services 
The Office of Audit Services (OAS) provides all auditing services for HHS, either by 
conducting audits with its own audit resources or by overseeing audit work done by others.  
Audits examine the performance of HHS programs and/or its grantees and contractors 
in carrying out their respective responsibilities and are intended to provide independent 
assessments of HHS programs and operations.  These assessments help reduce waste, 
abuse, and mismanagement and promote economy and efficiency throughout HHS. 
Office of Evaluation and Inspections 
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.  Specifically, these evaluations focus on preventing fraud, waste, or 
abuse and promoting economy, efficiency, and effectiveness in departmental programs.  
To promote impact, the reports also present practical recommendations for improving 
program operations.  
Office of Investigations 
The Office of Investigations (OI) conducts criminal, civil, and administrative 
investigations of allegations of wrongdoing in HHS programs or to HHS beneficiaries 
and of unjust enrichment by providers.  The investigative efforts of OI lead to criminal 
convictions, administrative sanctions, or civil monetary penalties. 
Office of Counsel to the Inspector General 
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 in OIG's internal operations.  OCIG imposes program exclusions and civil 
monetary penalties on health care providers and litigates those actions within HHS.  
OCIG also represents OIG in the global settlement of cases arising under the Civil False 
Claims Act, develops and monitors corporate integrity agreements, develops compliance 
program guidances, renders advisory opinions on OIG sanctions to the health care 
community, and issues fraud alerts and other industry guidance.