Department of Health and Human Services
OFFICE OF 
 
INSPECTOR GENERAL 
 
 
 
 
 
 
 
 
MEDIC ARE PART D PAYMENTS 
 
B P A
FOR  ENEFICIARIES IN  ART   
 
 
S N F
KILLED  URSING  ACILITY 
 
  S 2006 
TAYS IN 
 
 
 
 
Daniel R. Levinson  
Inspector General 
June 2009 
OEI-02-07-00230 
   
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 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.  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.  
Office of Investigations 
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. 
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 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.   
   
E X E C U T I V E   S U M M A R Y  
 E X E C U T I V E   S U M M A R Y  
OBJECTIVE
 
To determine the extent to which Medicare Part D paid for drugs for 
beneficiaries in Part A skilled nursing facility (SNF) stays in 2006. 
BACKGROUND 
Medicare Part D provides outpatient prescription drug coverage for 
Medicare beneficiaries who enroll.  Part D covers most prescription 
drugs; however, it excludes drugs that are covered under Medicare  
Parts A or B.  Specifically, Part D excludes drugs for beneficiaries in 
Part A SNF stays if the drugs were for use in the facility or to facilitate 
the beneficiaries discharge.  
The Centers for Medicare & Medicaid Services (CMS) has identified 
duplicate payments by Medicare Parts A and D as a potential 
vulnerability.  CMS further states that billing multiple payers (e.g., 
Parts A and D) for the same prescription is an example of pharmacy 
fraud, waste, and abuse.   
This review determines the extent to which Medicare Part D paid for 
drugs for beneficiaries in Part A SNF stays in 2006.   
FINDINGS 
Medicare Part D paid for 1.2 million drugs, amounting to $75 million, 
for beneficiaries in Part A SNF stays in 2006; the majority of these 
payments were most likely inappropriate.  Sixty percent of the drugs 
Part D paid for while beneficiaries were in Part A SNF stays in 2006 
were dispensed by long-term care pharmacies.   Long-term care 
pharmacies dispense drugs for use in long-term care settings, including 
SNFs.  These drugs were most likely dispensed for use in the facility 
during a Part A SNF stay and covered under Medicare Part A, rather 
than Part D.  Therefore, Part D payments for these drugs, which 
amounted to $41.3 million, were most likely inappropriate.  Retail and 
other types of pharmacies dispensed the remaining 40 percent of drugs 
paid for by Part D for this population.  If these drugs were for use in the 
facility or were to facilitate the beneficiaries discharge, these Part D 
payments were also inappropriate.  
Part D payments were widespread among SNFs and pharmacies.  
Nearly every SNF and half of all pharmacies had beneficiaries who had 
a drug paid for by Part D during their Part A SNF stay.  At the same 
OEI-02-07-00230      MEDICARE PART D PAYMENTS FOR BENEFICIARIES IN PART A SNF STAYS IN 2006  i   
   
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time, a small number of SNFs and pharmacies were responsible for a 
large percentage of these Part D payments.  Notably, 160 SNFs 
accounted for 12 percent ($8.6 million) of the payments and  
30 pharmacies accounted for 18 percent ($13 million) of all Part D 
payments for beneficiaries in Part A SNF stays. 
RECOMMENDATIONS 
Based on these findings, we recommend that CMS: 
Ensure that Part D payments for drugs for beneficiaries in Part A SNF 
stays are appropriate.  CMS should ensure that Part D does not pay for 
drugs that are covered under Parts A or B for beneficiaries in Part A SNF 
stays.  
Specifically, we recommend that CMS take the following actions: 
Provide additional guidance about when Parts A and D can pay for drugs 
for beneficiaries preparing for discharge.  CMS should provide additional 
guidance to SNFs, pharmacies, and Part D sponsors that clarifies the 
circumstances under which Part D can pay for drugs before 
beneficiaries are discharged from Part A SNF stays.  Specifically, CMS 
should clarify when Part A covers drugs by defining what is considered 
a limited supply and providing further guidance about when Part A 
should cover these drugs to facilitate discharge.  It should also clarify 
when Part D may cover extended supplies of drugs for beneficiaries 
before they are discharged from Part A SNF stays. 
Educate SNFs, pharmacies, and Part D sponsors that drugs covered under 
Parts A or B for beneficiaries in SNF stays are not eligible for payment 
under Part D.  CMS should educate SNFs, pharmacies, and Part D 
sponsors that it is inappropriate for Part D to pay for drugs for 
beneficiaries in Part A SNF stays.  CMS should consider holding  
open-door forums, developing factsheets, or using other methods to 
inform these entities about this issue.  
Implement retrospective reviews to prevent inappropriate Part D payments 
for drugs for this population.  CMS should implement routine reviews to 
ensure that inappropriate Part D payments do not occur.  Further, CMS 
should conduct ongoing analysis and monitor trends in Part D payments 
for beneficiaries in Part A SNF stays.   
Follow up with the SNFs and pharmacies that were responsible for a large 
percentage of Part D payments for beneficiaries in Part A SNF stays.  CMS 
should consider tracking these entities to ensure that payments have 
OEI-02-07-00230      MEDICARE PART D PAYMENTS FOR BENEFICIARIES IN PART A SNF STAYS IN 2006  ii   
   
 E X E C U T I V E   S U M M A R Y  
decreased.  To help CMS address this issue, we will forward information 
in a separate memorandum about the SNFs and pharmacies that were 
responsible for a large percentage of the Part D payments. 
AGENCY COMMENTS AND OFFICE OF INSPECTOR GENERAL 
RESPONSE 
CMS concurred with the three recommendations in our draft report.  
However, it raised several concerns about the report and in response we 
clarified the language in the report and added a recommendation.  
In response to our recommendation to educate SNFs, pharmacies, and 
Part D sponsors, CMS noted that it had recently issued a memorandum 
to Part D sponsors reminding them of the exclusion of Part D payments 
for drugs covered under Medicare Part A stays.  The memorandum also 
announced that effective 2009, Part D sponsors would receive lists twice 
annually of their institutional beneficiaries.   
In response to our recommendation to implement retrospective reviews, 
CMS stated that it expects to better understand the most appropriate 
controls for prevention and detection of inappropriate Part D payments 
after it looks at the specific information the Office of Inspector General 
(OIG) provides about the SNFs and pharmacies that were responsible 
for the largest percentage of payments.  CMS will also review feedback 
from sponsors about the value of the list of institutional beneficiaries, 
including those in SNFs. 
In response to our recommendation to follow up with the SNFs and 
pharmacies that were responsible for a large percentage of the 
payments, CMS stated that it will investigate the allegations of 
duplicate payments upon receipt of OIGs data.   
CMS also raised concerns about our methodology, stating that our draft 
report failed to consider contemporary pharmacy practice and as a 
result inflated the number of potential erroneous Part D payments.  
Specifically, CMS noted that current pharmacy practice allows patients 
to refill a prescription before their current supply is exhausted.  CMS 
further noted that although Part A provides reimbursement for a 
limited supply to facilitate beneficiary discharge, beneficiaries must be 
permitted to have a full outpatient supply available to continue therapy 
once this limited supply is exhausted.   
In response to CMSs comments, we recognize that there are 
circumstances in which drugs may be billed to Part D if they are not for 
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use in the facility or to facilitate the beneficiaries discharge.  Although 
it is unlikely that drugs dispensed by long-term care pharmacies meet 
these conditions, we modified the language in the report to address 
CMSs concerns.  In addition, we note that it would be beneficial for 
CMS to provide additional guidance to SNFs, pharmacies, and Part D 
sponsors that clarifies the circumstances under which Parts A and D 
can pay for drugs for beneficiaries preparing for discharge.  As a result, 
we added a recommendation to the report that CMS provide additional 
guidance on these issues.  We also note that we will provide the 
information about the SNFs and pharmacies that were responsible for a 
large percentage of Part D payments in a separate memorandum.  
OEI-02-07-00230      MEDICARE PART D PAYMENTS FOR BENEFICIARIES IN PART A SNF STAYS IN 2006  iv   
 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 I N G S. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7  
Part D paid for 1.2 million drugs for beneficiaries in  
Part A SNF stays; the majority of payments were most likely 
inappropriate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7  
Part D payments were widespread among SNFs and  
pharmacies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 
   
R E C O MMEN D A T ION S . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 
 Agency Comments and Office of Inspector General Response . . . . . . . 12
   
APPENDIXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 
  A:  Most Frequently Dispensed Drugs Paid for by Part D. . . . . . . 15 
  B:  Drugs with the Highest Part D Expenditures . . . . . . . . . . . . . 16 
  C:  Centers for Medicare & Medicaid Services Comments . . . . . . 17 
 
 
A C K NO WL E D G M E N T S . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21   
   
 I N T R O D U C T I O N  
OBJECTIVE 
To determine the extent to which Medicare Part D paid for drugs for 
beneficiaries in Part A skilled nursing facility (SNF) stays in 2006. 
BACKGROUND 
Medicare Part D provides outpatient prescription drug coverage for 
Medicare beneficiaries who enroll.  Part D covers most prescription 
drugs; however, it excludes drugs that are covered under Medicare 
Parts A or B.  Specifically, Part D excludes drugs for beneficiaries in 
Part A SNF stays.  These drugs are covered under Part A, except for a 
few drugs that are covered under Part B.   
The Centers for Medicare & Medicaid Services (CMS) has identified 
duplicate payments by Medicare Parts A and D as a potential 
vulnerability.  According to CMS, [w]ith the implementation of the 
prescription drug benefit, there is potential for inappropriate duplicate 
coverage between Parts A, B, and D drugs.1  CMS further states that 
billing multiple payers (e.g., Parts A and D) for the same prescription is 
an example of pharmacy fraud, waste, and abuse.2    
This review determines the extent to which Medicare Part D paid for 
drugs for beneficiaries in Part A SNF stays in 2006 during the first year 
of the Part D benefit.   
Medicare Part D Prescription Drug Program 
CMS contracts with private entities, known as sponsors, to provide the 
Part D benefit.  These sponsors may offer a stand-alone prescription 
drug plan or they can offer prescription drug coverage as part of a 
managed care plan, known as a Medicare Advantage Prescription Drug 
Plan.      
Each Part D plan develops its own list of covered drugs, known as a 
formulary, which must meet certain standards.  Each plans formulary 
must contain at least two drugs within each therapeutic category and 
pharmacologic class.3  It also must cover all or substantially all of the 
 
1 CMS, Prescription Drug Benefit Manual, ch. 9Part D Program to Control Fraud, 
Waste and Abuse,  70.2.4 Rev. 2 (April 25, 2006).  Available online at  
http://www.cms.hhs.gov/PrescriptionDrugCovContra/Downloads/PDBManual_Chapter9_F
WA.pdf.  Accessed on July 17, 2008. 
2 Ibid.,  70.1.3. 
3 42 CFR  423.120(b)(2)(i).  
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drugs in six categories:  immunosuppressant, antidepressant, 
antipsychotic, anticonvulsant, antiretroviral, and antineoplastic 
classes.4  Certain classes of drugs are excluded from coverage by Part D.  
These include benzodiazepines, barbiturates, weight management 
drugs, and over-the-counter drugs.5 
In addition, Part D generally excludes from coverage drugs that are 
covered under Parts A or B.  Pursuant to the Medicare Prescription 
Drug, Improvement, and Modernization Act of 2003 (MMA):  
A drug prescribed for a Part D eligible individual that would 
otherwise be a covered Part D drug under this part shall not 
be so considered if payment for such drug as so prescribed 
and dispensed or administered with respect to that 
individual is available (or would be available but for the 
application of a deductible) under Part A or B for the 
individual.6  
CMS stated in the Part D final rule that this requirement means that 
an otherwise covered Part D drug is excluded from coverage under  
Part D if payment is available under Part A or Part B.7  CMS further 
clarified Part D coverage in a subsequent Part D rule issuance that  
.  .  . if payment could be available under Part A or Part B to that 
individual for such drug, then it would not be covered under Part D.8  
Further, CMS has explained that . . . if Medicare Part A is paying for 
the nursing home stay, an individuals drug costs will in all likelihood 
be covered through Medicare Part A payment, and so the issue of Part D 
cost-sharing liability does not apply.9 
Medicare Part A Skilled Nursing Facility Coverage 
Medicare Part A covers posthospital skilled nursing care for 
beneficiaries who meet certain conditions.   To qualify for Part A SNF 
coverage, the beneficiary must first have a medically necessary 
inpatient hospital stay of at least 3 consecutive days.10  The beneficiary 
 
4 CMS, Prescription Drug Benefit Manual.  Available online at 
http://www.healthplus.org/uploadedFiles/PDFs/Medicare/PDBMChap6FormularyReqrmts_0
3.09.07.pdf.  Accessed on December 3, 2008. 
5 42 U.S.C.  1395w-102(e)(2)(A) (citing to 42 U.S.C.  1396r-8(d). 
6 MMA, P.L. No. 108-173, Title I  101(a)(e)(2)(B) (codified at 42 U.S.C. 1395w-102(e)(2)(B)). 
7 70 Fed. Reg. 4194, 4230 (Jan. 28, 2005). 
8 73 Fed. Reg. 20486, 20493 (Apr. 15, 2008).   
9 70 Fed. Reg. 4341, 4372 (Jan. 28, 2005).   
10 42 CFR  409.30(a)(1). 
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I N T R O D U C T I O N  
must be admitted to a SNF within a specified time period (generally  
30 days) of hospital discharge and must require skilled care for the 
condition for which he or she received inpatient hospital services.11  
SNF care provided under Medicare Part A is limited to a benefit period 
of 100 days and requires a copayment for days 21 through 100.12     
Medicare pays SNFs prospectively for beneficiaries in Part A stays.  
These prospective payments cover most services supplied by the SNF, 
including nursing care and physical, occupational, and speech 
therapies.13  The payments also cover drugs and biologicals furnished 
by the facility for use in the facility for the care and treatment of 
beneficiaries.14  In addition, payments cover a limited supply of drugs 
for use outside the SNF if it is medically necessary to facilitate the 
beneficiarys departure from the facility and is required until he or she 
can obtain a continuing supply.15  Further, payments for drugs are not 
limited to those routinely stocked by the facility but include those 
obtained for the patient from an outside source, such as a pharmacy in 
the community.16   
Part A does not cover certain drugs that may be billed separately to 
Medicare Part B.17  For example, Part B covers various chemotherapy 
drugs.18  
Provision of Prescription Drugs in SNFs 
Nursing homes typically contract with long-term care pharmacies to 
provide drugs to their residents.19  These pharmacies provide 
specialized services, such as a comprehensive inventory of drugs 
 
11 42 CFR  409.30(b)(1). 
12  42 CFR  409.61(b); see also CMS, Medicare General Information, Eligibility, and 
Entitlement, ch.  3Deductibles, Coinsurance Amounts, and Payment Limitations,  
Rev. 41, Oct. 27, 2006,  10.4. 
13 42 CFR  413.335 and 409.20.  For critical-access hospitals, Part A pays on a reasonable 
cost basis for SNF services furnished under a swing-bed agreement rather than through 
prospective payments.  See 42 CFR  413.114(a)(2). 
14 42 CFR  409.25. 
15 42 CFR  409.25(a)(2).   
16 CMS, Skilled Nursing Facility Manual, Pub-12,  230.5, Drugs and Biologicals.  
17 42 CFR  411.15(p)(2).   
18 68 Fed. Reg. 46060 (Aug. 4, 2003).  Also see CMS, Overview of SNF Consolidated 
Billing (CB).  Available online at 
http://www.cms.hhs.gov/SNFPPS/05_ConsolidatedBilling.asp#TopOfPage.  Accessed on 
November 25, 2008. 
19 70 Fed. Reg. 4194, 4250 (Jan. 28, 2005).  
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I N T R O D U C T I O N  
commonly used in long-term care settings, specialized packaging, 
intravenous therapy medications, 7-day-a-week delivery, pharmacy  
on-call services, and emergency medications.20 
One long-term care pharmacy generally provides drugs to all 
residents in a nursing facility.  For beneficiaries in Part A SNF stays, 
the SNF is responsible for reimbursing the pharmacy for the drugs 
covered under Part A.  For beneficiaries who are covered by Part D 
and are not in Part A SNF stays, the beneficiary and/or the Part D 
sponsor is responsible for reimbursing the pharmacy.   
Potential Vulnerabilities 
If Part D pays for a drug that is covered by Part A, Medicare, in effect, 
pays twice for this drug and either the SNF or the pharmacy profits.  
Under Part A, Medicare pays SNFs prospectively to cover the costs of 
services and items, including drugs, provided to beneficiaries in Part A 
SNF stays.  If the SNF receives the prospective payments for the 
beneficiary but does not reimburse the pharmacy for the drugs, the SNF 
profits.  If the SNF reimburses the pharmacy for the drug and the 
pharmacy is also paid by Part D, the pharmacy profits.   
Payment Controls 
Part A data files are maintained separately from Part D data files.  
Currently, there is no system in place that combines the data from both 
programs to check for duplicate payments.  Additionally, Part D 
sponsors are responsible for developing a program to control fraud, 
waste, and abuse but do not have access to Part A data.  Further, the 
Medicare Drug Integrity Contractors (MEDIC) are responsible for 
conducting data analysis to identify fraud, waste, and abuse in the  
Part D program; however, they also lack access to Part A data.  
METHODOLOGY 
Scope  
This study determines the extent to which Medicare Part D paid for 
drugs for beneficiaries in Part A SNF stays that began in 2006, the first 
year of the Part D benefit.  Our analysis includes all drugs paid for by 
Medicare Part D for beneficiaries while they were in Part A SNF stays.   
 
20 CMS, Long-Term Care Guidance, March 16, 2005.  Available online at 
http://www.cms.hhs.gov/PrescriptionDrugCovContra/Downloads/LTCGuidance.pdf.  Accessed on 
July 31, 2007. 
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Identifying Part A Skilled Nursing Facility Stays  
We used CMSs Medicare Provider Analysis and Review (MEDPAR) file 
to identify beneficiaries who had SNF stays that began in 2006.  Each 
MEDPAR record represents a SNF stay from admission to discharge.  
We included only the days of each beneficiarys stay that were covered 
by Medicare.  For each stay, we excluded the beneficiarys day of 
discharge from our analysis because SNFs are not reimbursed for the 
day that the beneficiary leaves the nursing home.  The last day of the 
stay that was covered by Medicare is referred to as the day before 
discharge.  
Identifying Drugs Paid for by Part D 
We identified the drugs paid for by Part D for beneficiaries in Part A 
SNF stays using CMSs Prescription Drug Event (PDE) data.  As a 
condition of payment, sponsors must submit a PDE record to CMS for 
each Part D covered drug dispensed.21  We used all final PDE events 
that were received by CMS as of August 1, 2007.   
We identified the drugs paid for by Medicare Part D for beneficiaries in 
Part A SNF stays by matching the MEDPAR data to the PDE data 
using the beneficiaries Health Insurance Claim Number.  If the date of 
service on the drug event was the same as the start date or between the 
start date and the discharge date, then we included the event in our 
population.  
We then merged the data with the National Council for Prescription 
Drug Programs database by pharmacy identification number.  We used 
information from this database to determine the total number of 
pharmacies and to identify the types of pharmacies (e.g., long-term care, 
retail) that dispensed the drugs.  We also obtained information about 
the types of drugs that were dispensed based on the National Drug 
Codes from First DataBanks National Drug Data File.22  
 
 
 
21 CMS, Updated Instructions:  Requirements for Submitting Prescription Drug Event 
Data, April 27, 2006.  Available online at: 
http://www.cms.hhs.gov/DrugCoverageClaimsData/Downloads/PDEGuidance.pdf. 
Assessed on December 30, 2008. 
22 This data file contains descriptive information about all medications approved by the 
Food and Drug Administration, plus information on commonly used over-the-counter drugs 
and alternative therapy agents.  
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Analysis of Drugs Paid for During Part A Skilled Nursing Facility Stays  
We analyzed the merged file described above to determine the total 
amount paid by Part D for drugs while beneficiaries were in Part A SNF 
stays.  This amount is based on the ingredient cost, the dispensing fee, 
and the sales tax from the PDE data for the drugs dispensed to these 
beneficiaries.  It includes the amount paid by Part D sponsors, the 
amount paid by the Government, and the amount paid by or on behalf of 
beneficiaries.  We also analyzed the file to determine the number of 
drugs paid for by Medicare Part D for these beneficiaries, the types of 
drugs that were most frequently dispensed,23 and the drugs with the 
highest Part D expenditures.  We analyzed the average drug costs based 
on the average cost per drug event in the PDE data.  For the purposes of 
this study, we use the term drugs to refer to paid Part D claims, which 
are also known as Part D drug events.   
Limitations 
This study determines the extent to which Part D paid for drugs 
dispensed during beneficiaries Part A SNF stays.  These payments are 
inappropriate if the drugs were dispensed for use in the facility or to 
facilitate the beneficiaries discharge because Medicare covers these 
drugs under Parts A or B.  Based on the data, however, we could not 
determine whether the drugs met these criteria in all situations.  This 
determination can only be made based on a review of the medical 
record, which was beyond the scope of this study.  In addition, we 
cannot determine from the data whether the pharmacy or the SNF was 
profiting from any inappropriate payments.  Lastly, our analysis of drug 
costs did not take into account the dosage of the drugs.   
Standards 
Our review was conducted in accordance with the Quality Standards 
for Inspections issued by the Presidents Council on Integrity and 
Efficiency and the Executive Council on Integrity and Efficiency.    
 
23 For the purposes of this report, the date the drug was dispensed is based on the date of 
service on the drug claim, which is the date that the pharmacy filled the prescription.    
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 F I N D I N G S  
Medicare Part D paid for 1.2 million drugs,  Medicare Part D paid for            
amounting to $75 million, for beneficiaries in  1.2 million drugs for beneficiaries 
while they were in Part A SNF 
Part A SNF stays in 2006; the majority of these 
stays in 2006.24  This amounted to  
payments were most likely inappropriate  
$75 million in Part D payments, 
the majority of which were most 
likely inappropriate.25  Medicare Part D excludes drugs that are covered 
under Parts A or B.  Part A (and in some cases Part B) covers drugs for 
beneficiaries in Part A SNF stays.26  
Sixty percent of the drugs for beneficiaries in Part A stays were dispensed 
by long-term care pharmacies; these payments were most likely 
inappropriate 
As shown in Chart 1 on the next page, long-term care pharmacies 
dispensed 60 percent of the drugs Part D paid for while beneficiaries 
were in Part A SNF stays in 2006.  Nearly one-third (31 percent) of 
these drugs were dispensed on the day of admission to the SNF.   
Long-term care pharmacies dispense drugs for use in long-term care 
settings, including SNFs.  These drugs generally have specialized 
labeling that is used exclusively in an institutional setting.  These drugs 
were most likely dispensed for use in the facility during a Part A SNF 
stay and covered under Medicare Part A, rather than Part D.    
Therefore, Part D payments for these drugs, which amounted to  
$41.3 million, were most likely inappropriate. 
Retail and other types of pharmacies dispensed the remaining  
40 percent of drugs paid for by Part D for beneficiaries in Part A SNF 
stays 
Retail pharmacies dispensed 35 percent of the drugs for these 
beneficiaries for a total of $27.3 million in Part D payments.  Other 
pharmacies (including institutional, home infusion, and mail order) 
 
 
24 For the purposes of this study, we use the term drugs to refer to paid Part D claims, 
which are also known as Part D drug events.   
25 Part D payments are made by Part D sponsors, Medicare, and beneficiaries or by a third 
party on behalf of the beneficiary.  
26 42 CFR  409.25.   
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F I N D I N G S  
dispensed the remaining 5 percent of the drugs, totaling $6 million.27  
About 26 percent of drugs dispensed by retail pharmacies and  
10 percent of drugs dispensed by other types of pharmacies were 
dispensed on the day before discharge.   
As noted earlier, Part A not only covers drugs routinely stocked by the 
facility but also those obtained for the patient from an outside source, 
such as a pharmacy in the community.28  If these drugs were obtained 
for use in the SNF, the Part D payments were inappropriate.  Also,  
Part A covers a limited supply of drugs for use outside the SNF if it is 
medically necessary to facilitate a beneficiarys discharge.  If these 
drugs were for this purpose, these Part D payments were also 
inappropriate.29 
Chart 1:  Source of 
Other 
Drugs Paid by  
Pharmacies
Part D for 
5.2%
Beneficiary in  
Part A SNF Stays in 
2006  
 
Retail 
Pharmacies
P 34.6%
Long-Term 
Care 
Pharmacies
60.2%
  Source:  OIG analysis of CMS data, 2008. 
 
 
27 An institutional pharmacy is a pharmacy in a hospital (inpatient) used by the pharmacist 
for the compounding and delivery of medicinal preparations to be administered to the 
patient by nursing or other personnel.  A home infusion pharmacy is a decentralized patient 
care organization that provides care to patients with acute or chronic conditions generally 
pertaining to drugs and biologics administered through catheters and/or needles in home 
and alternative sites. 
28 CMS, Skilled Nursing Facility Manual, Pub. 12,  230.5, Drugs and Biologicals. 
29 This determination can only be made based on a review of the medical record, which was 
beyond the scope of this study. 
OEI-02-07-00230      MEDICARE PART D PAYMENTS FOR BENEFICIARIES IN PART A SNF STAYS IN 2006  8   
   
FF  FF IIII NNNN DDDD IIII NNNN GGGG SSSS     
The drugs paid for by Part D varied; however, a relatively small number  
of drugs accounted for a large percentage of the Part D payments  
Overall, Part D paid for 2,396 different types of drugs for beneficiaries 
in Part A SNF stays.  On average, each type of drug was dispensed 
513 times, ranging from 1 to 45,832 times.  The average cost per drug 
was $61 and costs ranged from $0.01 to $12,794.  The median drug cost 
was $24 and the most common cost per drug was about $8.  Of the  
25 most frequently dispensed drugs, 13 were generic and 12 were  
brand-name drugs.  Appendix A provides a list of the drugs most 
commonly paid for by Part D for beneficiaries in Part A SNF stays.   
A relatively small number of drugs accounted for a large percentage of 
Part D payments for beneficiaries in Part A SNF stays.  Specifically, 
25 drugs accounted for 40 percent of the Part D payments for these 
beneficiaries.  Twenty-three of the drugs were brand-name drugs, and 
two were generic.  The average cost of these drugs was $124 and the 
median cost was $118.  See Appendix B for a list of the 25 drugs.   
 
Nearly every SNF and half of all 
Part D payments were widespread among SNFs 
pharmacies had beneficiaries who 
and pharmacies  
had a drug paid for by Part D 
during their Part A SNF stay.     
At the same time, a small number of SNFs and pharmacies were 
responsible for a large percentage of these Part D payments.   
Nearly every SNF had beneficiaries in Part A SNF stays who received 
drugs paid for by Part D 
Ninety-seven percent (16,009 of 16,525) of all SNFs had at least one 
beneficiary who had a drug paid for by Part D during a Part A SNF 
stay.  Part D paid for an average of 77 drugs per facility for these 
beneficiaries.  Part D payments for these drugs averaged $4,659 per 
facility. 
Although these payments were widespread, 160 SNFs accounted for  
12 percent ($8.6 million) of the Part D payments for beneficiaries in 
Part A SNF stays.  Notably, one SNF had nearly $270,000 in Part D 
payments for drugs for these beneficiaries.     
About half of pharmacies received Part D payments for beneficiaries  
in Part A SNF stays 
Forty-nine percent (36,171 of 73,398) of all pharmacies received Part D 
payments for beneficiaries in Part A SNF stays.  These pharmacies 
OEI-02-07-00230      MEDICARE PART D PAYMENTS FOR BENEFICIARIES IN PART A SNF STAYS IN 2006  9   
   
FF II NN DD II NN GG SS   
dispensed an average of 34 drugs for these beneficiaries.  On average, 
Medicare Part D payments totaled $2,062 per pharmacy.   
Compared to other types of pharmacies, long-term care pharmacies 
dispensed more drugs paid for by Part D per pharmacy for beneficiaries 
in Part A SNF stays.  Long-term care pharmacies dispensed an average 
of 586 drugs paid for by Part D while beneficiaries were in Part A SNF 
stays.  Part D payments for these drugs were, on average, $32,711 per 
pharmacy and ranged from $5 to over $1 million.  In contrast, retail 
pharmacies dispensed an average of 13 drugs, or $830 per pharmacy.  
Other pharmacies dispensed an average of 31 drugs, or $2,883 per 
pharmacy. 
Although these payments were widespread among pharmacies,  
30 pharmacies accounted for 18 percent ($13 million) of all Part D 
payments for beneficiaries in Part A stays.  Notably, 26 of these  
30 pharmacies were long-term care pharmacies.   
 
OEI-02-07-00230      MEDICARE PART D PAYMENTS FOR BENEFICIARIES IN PART A SNF STAYS IN 2006  10   
   
 RR EE CC OO MM MM EE NN DD AA TT II OO NN SS   
 
 
Based on our review, we found that Medicare Part D paid for 1.2 million 
drugs, amounting to $75 million, for beneficiaries in Part A SNF stays 
in 2006.  The majority of these payments were most likely 
inappropriate.  Medicare Part D excludes drugs that are covered by 
Parts A or B.  Part A (and in some cases Part B) covers drugs for 
beneficiaries in Part A SNF stays if the drugs were dispensed for use in 
the facility or to facilitate the beneficiaries discharge.  
Specifically, we found that 60 percent of the drugs for these 
beneficiaries were dispensed by long-term care pharmacies.  Long-term 
care pharmacies dispense drugs for use in long-term care settings, 
including SNFs.  These drugs were most likely dispensed for use in the 
facility during a Part A SNF stay.  Therefore, Part D payments for these 
drugs, which amounted to $41.3 million, were most likely inappropriate.  
The remaining drugs were dispensed by retail or other types of 
pharmacies.  If these drugs were for use in the facility or were to 
facilitate the beneficiaries discharge, these Part D payments were also 
inappropriate.    
Lastly, we found that Part D payments for drugs for beneficiaries in 
Part A SNF stays were widespread among SNFs and pharmacies.  
Nearly every SNF and half of all pharmacies had beneficiaries who had 
a drug paid for by Part D during a Part A SNF stay.  At the same time, 
a small number of SNFs and pharmacies were responsible for a large 
percentage of these Part D payments.   
Based on these findings, we recommend that CMS:   
Ensure That Part D Payments for Drugs for Beneficiaries in Part A SNF 
Stays Are Appropriate 
CMS should ensure that Part D does not pay for drugs that are covered 
under Parts A or B for beneficiaries in Part A SNF stays.   
Specifically, we recommend that CMS take the following actions: 
Provide additional guidance about when Parts A and D can pay for drugs 
for beneficiaries preparing for discharge.  CMS should provide additional 
guidance to SNFs, pharmacies, and Part D sponsors that clarifies the 
circumstances under which Part D can pay for drugs before 
beneficiaries are discharged from Part A SNF stays.  Specifically, CMS 
should clarify when Part A covers drugs by defining what is considered 
OEI-02-07-00230      MEDICARE PART D PAYMENTS FOR BENEFICIARIES IN PART A SNF STAYS IN 2006  11   
   
R E C O M M E N D A T I O N S  
a limited supply and providing further guidance about when Part A 
should cover these drugs to facilitate discharge.  It should also clarify 
when Part D may cover extended supplies of drugs for beneficiaries 
before they are discharged from Part A SNF stays. 
Educate SNFs, pharmacies, and Part D sponsors that drugs covered under 
Parts A or B for beneficiaries in SNF stays are not eligible for payment 
under Part D.  CMS should educate SNFs, pharmacies, and Part D 
sponsors that it is inappropriate for Part D to pay for drugs for 
beneficiaries in Part A SNF stays.  CMS should consider holding  
open-door forums, developing factsheets, or using other methods to 
inform these entities about this issue.  
Implement retrospective reviews to prevent inappropriate Part D payments 
for drugs for this population.  CMS should implement routine reviews to 
ensure that inappropriate Part D payments do not occur.  Further, CMS 
should conduct ongoing analysis and monitor trends in Part D payments 
for beneficiaries in Part A SNF stays.  As noted earlier, Part D sponsors 
and the MEDICs do not currently have access to Part A data.  CMS 
should consider providing the MEDICs and the sponsors access to 
Part A data to conduct ongoing analysis and to identify inappropriate 
Part D payments for this population.   
Follow up with the SNFs and pharmacies that were responsible for a large 
percentage of Part D payments for beneficiaries in Part A SNF stays. 
CMS should consider tracking these entities to ensure that payments 
have decreased.  To help CMS address this issue, we will forward in a 
separate memorandum information about the SNFs and pharmacies 
that were responsible for a large percentage of the Part D payments.  
AGENCY COMMENTS AND OFFICE OF INSPECTOR GENERAL 
RESPONSE 
CMS concurred with the three recommendations in our draft report.  
However, it raised several concerns about the report and in response we 
clarified the language in the report and added a recommendation.  
In response to our recommendation to educate SNFs, pharmacies, and 
Part D sponsors, CMS stated that it is committed to providing 
additional information about its programs.  Among other things, CMS 
noted that it had recently issued a memorandum to Part D sponsors 
reminding them of the exclusion of Part D payments for drugs covered 
under Medicare Part A stays.  The memorandum also announced that 
OEI-02-07-00230      MEDICARE PART D PAYMENTS FOR BENEFICIARIES IN PART A SNF STAYS IN 2006  12   
   
RRR EEE CCC OOO MMM MMM EEE NNN DDD AAA TTT III OOO NNN SSS    
effective 2009, Part D sponsors would receive lists twice annually of 
their institutionalized beneficiaries, including those in SNFs.  CMS 
advised Part D sponsors that this information will provide them with a 
mechanism to identify beneficiaries for whom the sponsor may be most 
at risk for being billed inappropriately for Part D payment.   
In response to our recommendation to implement retrospective reviews, 
CMS stated that although it concurs in general, it is currently unsure of 
the most appropriate strategy for implementing these reviews.  CMS 
stated that it expects to better understand the most appropriate 
controls for prevention and detection of inappropriate Part D payments 
after it looks at the specific information OIG will provide about the 
SNFs and pharmacies that were responsible for the largest percentage 
of payments.  CMS will also review feedback from sponsors about the 
value of the list of institutional beneficiaries, including those in SNFs.  
CMS stated that it will explore whether the most timely and effective 
strategy for review for potential duplicate Part D payments is at the 
Part D plan level, and if that is the case, it will provide additional 
guidance to sponsors. 
In response to our recommendation to follow up with the SNFs and 
pharmacies that were responsible for a large percentage of the 
payments, CMS stated that it will investigate the allegations of 
duplicate payments upon receipt of OIGs data.   
CMS also raised concerns about our methodology, stating that our draft 
report failed to consider contemporary pharmacy practice and as a 
result inflated the number of potential erroneous Part D payments.  
Specifically, CMS noted that current pharmacy practice allows patients 
to refill a prescription before their current supply is exhausted.  CMS 
further noted that although Part A provides reimbursement for a 
limited supply to facilitate beneficiary discharge, beneficiaries must be 
permitted to have a full outpatient supply available to continue therapy 
once this limited supply is exhausted.   
In response to CMSs comments, we recognize that there are 
circumstances in which drugs may be billed to Part D if they are not for 
use in the facility or to facilitate the beneficiaries discharge.  Although 
it is unlikely that drugs dispensed by long-term care pharmacies meet 
these conditions, we modified the language in the report to address 
CMSs concerns.  In addition, we note that it would be beneficial for 
CMS to provide additional guidance to SNFs, pharmacies, and Part D 
sponsors that clarifies the circumstances under which Parts A and D 
OEI-02-07-00230      MEDICARE PART D PAYMENTS FOR BENEFICIARIES IN PART A SNF STAYS IN 2006  13   
   
R E C O M M E N D A T I O N S  
can pay for drugs for beneficiaries preparing for discharge.  Currently, 
CMS guidance does not explicitly state what is considered a limited 
supply of drugs covered by Part A, nor does it state under which 
circumstances Part D can pay for drugs.  As a result, we added a 
recommendation to the report that CMS provide additional guidance on 
these issues.  We also note that we will provide the information about 
the SNFs and pharmacies that were responsible for a large percentage 
of Part D payments in a separate memorandum.  
The full text of CMSs comments is provided in Appendix C. 
 
OEI-02-07-00230      MEDICARE PART D PAYMENTS FOR BENEFICIARIES IN PART A SNF STAYS IN 2006  14   
   
 AAAA PPPP PPPP EEEE NNNN DDDD IIII XXXX ~~~~ AAAA     
 
 
Most Frequently Dispensed Drugs Paid for by Part D for Beneficiaries in 
Medicare Part A Skilled Nursing Facility Stays   
 
Number of Drugs   
Rank  Drug Name Generic or Brand Name
Dispensed*  
 
1  Furosemide  Generic    45,832 
2  Warfarin sodium  Generic    27,890   
3  Lisinopril  Generic    23,534 
4  Metoprolol tartrate  Generic    23,116   
5  Potassium chloride  Generic    21,215   
6  Lovothyroxine sodium  Generic    20,872   
Hydrocondone w/   
7  acetaminophen  Generic    20,503 
 
8  Norvasc  Brand name   18,087 
 
9  Aricept  Brand name    16,434 
 
10  Protonix  Brand name    15,840 
 
11  Omeprazole  Generic    15,324 
 
12  Levaquin  Brand name    15,181 
13  Lexapro  Brand name    14,322   
14  Lipitor  Brand name    13,759   
15  Seroquel  Brand name    13,419   
16  Prednisone  Generic    13,120   
17  Prevacid  Brand name  12,755   
18  Mirtazapine  Generic    11,970   
19  Gabapentin  Generic    11,566   
20  Plavix  Brand name  11,548   
21  Risperdal  Brand name  11,453   
22  Toprol XL  Brand name  11,100   
23  Albuterol sulfate  Generic    10,602   
24  Novolin R  Brand name  10,385   
25  Isosorbide mononitrate  Generic    9,814   
   Total     419,641   
              
Source:  Office of Inspector General analysis of Centers for Medicare & Medicaid Services data, 2006. 
 
* Note:  For the purposes of this study, we use the term drugs to refer to paid Part D claims. 
OEI-02-07-00230      MEDICARE PART D PAYMENTS FOR BENEFICIARIES IN PART A SNF STAYS IN 2006  15   
   
 AA PP PP EE NN DD II XX ~~ BB   
 
 
 
Drugs With the Highest Medicare Part D Expenditures for Beneficiaries in 
Medicare Part A Skilled Nursing Facility Stays 
 
  
Percentage 
Total Part D   
Rank  Drug Name  Generic or Brand Name of Part D 
Payments
Payments
 
1  Lovenox  Brand name  $2,282,281  3.1% 
2  Aricept  Brand name  $2,137,327  2.9% 
 
3  Seroquel  Brand name  $1,783,011  2.4% 
4  Risperdal  Brand name  $1,749,444  2.3%   
5  Zyprexa  Brand name  $1,727,855  2.3%   
6  Procrit  Brand name  $1,607,826  2.2%   
7  Protonix  Brand name  $1,571,417  2.1%   
8  Prevacid  Brand name  $1,503,141  2.0%   
9  Plavix  Brand name  $1,314,817  1.8%   
10  Lipitor  Brand name  $1,170,750  1.6%   
11  Levaquin  Brand name  $1,133,232  1.5%   
12  Advair Diskus  Brand name  $982,316  1.3% 
 
13  Namenda  Brand name  $977,457  1.3% 
 
14  Lexapro  Brand name  $963,398  1.3% 
 
15  Norvasc  Brand name  $951,693  1.3% 
 
16  Zyvox  Brand name  $912,025  1.2% 
 
17  Nexium  Brand name  $892,506  1.2% 
 
18  Fentanyl  Generic  $845,852  1.1% 
 
19  Thalomid  Brand name  $825,989  1.1% 
 
20  Coreg  Brand name  $824,200  1.1% 
 
21  Lantus  Brand name  $709,699  1.0% 
22  Ambien  Brand name  $709,441  1.0%   
23  Aranesp  Brand name  $700,093  0.9%   
24  Zocor  Brand name  $683,840  0.9%   
 
25  Omeprazole  Generic  $625,870  0.8% 
 
        Total    $29,585,480  39.7% 
                        
         Source:  Office of Inspector General analysis of Centers for Medicare & Medicaid Services data, 2006. 
OEI-02-07-00230      MEDICARE PART D PAYMENTS FOR BENEFICIARIES IN PART A SNF STAYS IN 2006  16  ..
A P PEN D x c
Centers for Medicare & Medicaid Services Comments
i. f. /.
i',I  _. ~,.,f .- DEPARTMENT OF HEALTH & HUMAN SERVICES Cenle'" for Medl.are & Medicaid Services
~""4'''''C''''' . 200 Independenoa Avenus SW
Wa.hington, DC 20201
MA 0,'. .2D9
DATE:
TO: Daniel R: Levinson
Inspector General .
(li;..:,,4:".L~'l'~ ,.
~n;-Frz~ra
FROM:
Aotig Administrator
SUBJECT: Offce of'nspector General' (OIG) Draft Report: "Medicare Part 0 Payments. for
Beneficiaries in Pro'! A Skiled Nursing Facility Stays in 2006," (OEI-02-07-
00230)
Thank you for the opportunity to. review and comment on the OIG's draft report that examines
the appropriateness of Part D plan payments for beneficiaries who resided in a Part A skiled .
nursing facility (SNF) stay during 2006, The Centers for Medicare & Medicaid Servces (CMS)
is committed to upholding the provision of  the Medicare Prescription Drug, Improvement, and
Modernization Act of 2QM (MMA) that requires Part 0 sponsors to exclude from payment an
otherwise covered Par 0 drug if payment is available urder Part A or Par 13, CMS tak.eg .
seriously allga.trons offraud, waste and abuse and wiH foIlQW up, as appropriate; on any
confirmed cases involving a Part 0 sponsor inappropriately paid under a Part A stay.
We acknowledge the real possibilty of inappropriate Part 0 duplicate payments for beneficiaries
under Part A stays, and as described below in detail, we.have taken numerous steps to help plans
identify inappropriate payments. However, we continue to believe that the underlying
methodtilogyutiIlzed by the 010 seti6usiyiiiflatedtlie number of  potential erroneous Part D
payments. '$JieCltically, the study methodology failed to censider contemporary pharmacy
practice and the standard fc'Care prvided in sktUed nUi'Sing facilithiS by usI'ig.the prescription
drug event date (POE) dispensing date as equivalent to the patient administration date, As a
result, any POE dispensing date occurring within the period of a Par A stay is identified as an
errone9us PaitD duplicate payment. eMS believes that this coiiclusi.on is not appropriate in all
cases,
Current pharmacy practice allows  a patient to refill a preseriptionbefore their current siipply is
exhausted. For example, ii patient receiving a 30 day supply of medieation typically Is permitted
to obtain a refill on day 26 so that the individual wil have a fresh supply on hand prior to
exhausting the initial 30 days of medication. Similarly, for patients in a long-term care facility,
medications are generally dispensed and delivered before the existing supply is exhausted (in
some cases a number of days ii advance) to ensure that there wil be no gaps in therapy. '
Consequently, \Joth long term care and retail pharmacies may appropriatelybi1 Par 0 for
OEI.02.07-00230 MEDICARE PART D PAYMENTS FOR BENEFICIARIES IN PART A SNF STAYS IN 2006 17 A P PEN D x c
Page 2 - Daniel R. Levinson
medications dispensed and delivered near the end of a benefieiary's Part A stay beeause .these
medications are being dispensed for consumption after the Par A stay is exhausted,
Nevertheless, in this report, drugs with a PDE dispensing date near the. end of a beneficiary's
par A stay wil appear as inappropriate, duplicate Par D payments. We recommend the OIG
correct its methodology and re-report its findings considering ths is common pharmacy practiee
for all patients, not just for people with Medicare.
. It is important to emphasize that there are legitimate level of care transitions that necessitate the
dispensing ofPart'D drugs before a patient is discharged from a ~art A facility, While Par A
does provide reimburement for "a limited supply" to .faciltate benefieiary discharge,
beneficiaries'must be permitted  to haveI  Ta hfiusl li so uptapratitcieunlat rsluyp tprely f aovr abielanbelfei ctioa rcioens tuinsuineg t hmeraailp-yorder
once this liinited supply is exhausted. 
pharmacy, home infsion therapy, or residing in rural areas where obtaining a continuing supply
of drg may involve certin'delays, Thus, the current standard of care promotes caregivers
receiving outpatient Par D prescriptions in advance of discharge from a Par A stay.
may undercut the beneficiary
In addition, CMS is very concemed that the current draf report, 
protections of CMS' existing.transition policy, Access to Par D drgs during level of care
chages is absolutely ne~ssary to maintaining high quality prescription drug coverage and in
preventing any interruptions in drug therapy. Delays in accessing Part D drugs may hinder
diseharge from a long-term care facilty, Therefore, the OIG should artculate caution in its,final .
report about the conclusions so as to not impede access to transition supplies for some of
Medieare's most vulnerable beneficiaries. Moreover, given that. the report relies on.2006 dEita
that may reflect initial siar up issues, the OIG should frame the final report in such a way as to
ensure that Par D sponsors do not become overly eautious in providing Par D drugs related to
discharge from a Par A stay.
The 010 reeommend eMS ensur, that Part D payments for drugs for beneficiaries in Par A
SNF stays are appropriate. Specifically, the OIG recommend CMS take the following actions:
OIG Recommendation,
Educate SNFs, pharmacies, and Par D sponsors that drugs covered under Par A or 13 for
beneficiaries in SNF stays are not eligible for payment under Par D.
CMS Response
The CMS concurs with this reCommendation and is firmly committed to providing additional'
information about our programs. Since the inception of the Part D program, CMS has worked
tirelessly to provide education to all of our parers regarding the interface of drg coverage
under Medicare Parts A, B, and D. In the 2005 PLu D final rule, CMS provided an extensive
discussion on the relationship' of drug reimbursement of Medicar ,par A, B, and D. This
message was reinforced in hundreds of outreach events specifically targeted at LTC facilties,
pharacies, and phannacists. Furtermore, eMS eonducted numerous pharmacy open door
forus between 200S and 2008 that incJuded information regarding payment for drugs under
i Medicare Benefit Policy Manual, Chapter I, Seciion 30.2, Drugs for Use Outside the 'Hospital.
OE I. 02.07.00230 MEDICARE PART D PAYMENTS FOR BENEFICIARIES IN PART A SNF STAYS IN 2006 18 A P PEN 0
x c
Page 3' - Daniel R. Levinson
various Medicare programs and addressed the exclusion of Par D drug reimbursement when
payment was available under Medicare Parts A and B. .
, Our educational, effort continues today. Recently, the CMS Offce of External Affairs revised an
Drug Coverage under Part A, Par B, and Par D." This tool.
educational tool entitled, "Medicare 
provides'  extensive 'infoqnation on the relationship of drug reimbursem,ent  und.er va'rious
Medicare Programs and is available for use by the pharmacy and long term care community. We
hPavhe iialsor pomstead inc-deypth  inwforemabtions abioutt Meed?icar e p.aym en,t o,n o'ur Long Term Care
In addition, following the OIG's exit conference, in a November 2008 memorandum, we
reminded Pl!t D sponsors of the exclusion of Par D payment for drugs covered under Medicare
Par  A stays.3 This memorandum also anlloUlced that effective 2009, Par D sponsors would
receive lists twice anually of their institutional enrol1ees, including the names aUd addresses of
applicable indieatois of Part A stays from most recent
the paricular LTC facilties and any 
available MDS data. We advised Par D sponsors that this information would assist them in
preventig Part D payment for drgs covered under Medicare Part A stays, The Part A indicator
will provide Par D sponsors with a meehanism to identify beneficiaries for which the sponsor
may be most at risk for being biled inappropriately for Part D pay'ment. .
continue to provide information ori
As educational oPPOl'lnities present themselves, CMS wil 
the relationship and reimburement for drugs under Medicare Pars A, B and D. Moreover, we
contiue to enhance our relationships wi.th the various pharmacy and long ter care associations
and plan to reinforce the message regarding the exelusion of payment for par D drugs for
beneficiaries under 'a par A stay.
OIG Recommendation
lmplement retrospective reviews to prevent inappropriate Par D payments for drLlgs for this
population.
CMS Response
the
The eMS eoncurs with tis recommendation in general; however, we arecuITently unsure of 
retrospective review process. We look forward to
most appropriate strategy for implementing a 
receiving the OIG specific information about the SNFs and phariiacies that were responsible for
a large pereentage ofthe Par D payments under review. After we have looked into this . .
list of
information and receive feedbaek from sponsors on the value of sending out the bianual 
institutiona enrollees, we expeet to better understand the factors underlying this type of error, as '
whether the
well as the most appropriate eontrols for prevention and detection. We wil explore 
most timely and effective strategy for review for potential duplicate Part D payments is at the
the Par D sponsor's
'Par D plan leveL. For example, this review could be a.component of 
. retrospective diug utilzation revi'eW system required under 42 CFR 423.1 53(c)(3), Should.our
provide
analysis determine that this is the most.appropriate place for this review, we wil 
i http://www.cms.hhs.gov/Pha,macy/04-itc.asp#TopOfPage "
, http://www .cms.hhs,gov/PrescriplionDrugCovContra/Down loads/MemoL TeContracting_l! ,25.08,pdf.
o E 1.02. 07 .002 3 0 MEDICARE PART D PAYMENTS FOR BENEFICIARIES IN PART A SNF STAYS IN 2006 19 A P PEN D
x c
. '
'Page 4 - Daniel R, Levinson
additional guidance to Part D sponsors in the annual. Cali Letter and ultimately in Chapter 7 of
the Medicare Prescription Drug BenefitManual, section 20.3, Retrospective Drug Utilzation
Review.
DIG Recommendation
Follow up with the SNFs and pharmacies that wete responsible for a large percentage of Part D
payments for beneficiaries in Part A SNF stays.
'CMS ReSDODse
. The CMS .concurs with.ths recommendation and wil investigate the allegations of duplieate
.  the OIG's supplemental data. We take very seriously the allegations
payments upon receipt of 
about Par D sponsors and wil implement con-ective action upon confirmation of inappropriate
payments.
Thank you for your efforts to study this matter. CMS is serious about enforcing Part D
SpoIIors' adherence to eMS requirements.. To the extent that sponsors are not in complianee
with Part D program requirements, CMS wil investigate and take action,where necessary.
OEI.02.07-00230 MEDICARE PART D PAYMENTS FOR BENEFICIARIES IN PART A SNF STAYS IN 2006 20  
   
AAAA PPPP PPPP EEEE NNNN DDDD IIII XXXX      CCCC     
 AAAA CCCC KKKK NNNN OOOO WWWW LLLL EEEE DDDD GGGG MMMM EEEE NNNN TTTT SSSS     
 
This report was prepared under the direction of Jodi Nudelman, 
Regional Inspector General for Evaluation and Inspections in the New 
York regional office, and Meridith Seife, Deputy Regional Inspector 
General.   
Miriam Anderson served as the team leader for this study.  Other 
principal Office of Evaluation and Inspections staff from the New York 
regional office who contributed to this report include Taryn Eckstein, 
Michelle McInnis, and David Rudich.  Other regional and central office 
staff who contributed include Eddie Baker and Sandy Khoury. 
 
OEI-02-07-00230      MEDICARE PART D PAYMENTS FOR BENEFICIARIES IN PART A SNF STAYS IN 2006  21