Department of Health and Human Services 

OFFICE OF 

INSPECTOR GENERAL 

ENTERAL NUTRIENT PAYMENTS


IN NURSING HOMES


JUNE GIBBS BROWN 

Inspector General 

MARCH 1996 

OEI-06-92-00861 
OFFICE OF INSPECTOR GENERAL 

The mission of the OffIce of Inspector General (OIG), as mandated by Public Law 95-452, as 

amended, is to protect the integrity of the Department of Health and Human Services’ (HHS) 

programs as well as the health and welfare of beneficiaries served by those programs. This 

statutory mission is carried out through a nationwide network of audits, investigations, and 

inspectionsconducted by three OIG operating components: the OffIce of Audit Services, the 

OffIce of Investigations, and the Office of Evaluation and Inspections. The OIG also informs the 

Secretary of HHS of program and managementproblems and recommendscourses to correct them. 

OFFICE OF AUDIT SERVICES 

The OIG’SOffice 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 independentassessmentsof HHS 

programs and operations in order to reduce waste, abuse, and mismanagementand to promote 

economy and et%ciencythroughout the Department. 

OFFICE OF INVESTIGATIONS 

The OIG’SOfllce of Investigations(01) conducts criminal, civil, and administrative investigations 

of allegations of wrongdoing in HHS programs or to HHS beneficiaries and of unjust enrichment 

by providers. The investigativeefforts of 01 lead to criminal convictions, administrative 

sanctions, or civil money penalties. The 01 also oversees State Medicaid fraud control units which 

investigate and prosecute fraud and patient abuse in the Medicaid program. 

OFFICE OF EVALUATION AND INSPECTIONS 

The OIG’SOffIce of Evaluation and Inspections (OEI) conducts short-term management and 

program evaluations (called inspections)that focus on issues of concern to the Department, the 

Congress, and the public. The findings and recommendationscontained in these inspection reports 

generate rapid, accurate, and up-to-date information on the eftlciency, vulnerability, and 

effectivenessof departmental programs. 

Dallas Staff Central OffIce 

Leah Bostick Jennifer Antico 

Kevin Golladay Brian Ritchie 

Sarah Taylor Barbara Tedesco 

Clark Thomas 

For further information contact: Kevin GoIladay at 214/767-3310 or l/800-84S-8%0. 
Department of Health and Human Services 

OFFICE OF 

INSPECTOR GENERAL 

ENTERAL NUTRIENT PAYMENTS 

IN NURSING HOMES 
EXECUTIVE SUMMARY


PURPOSE 

To determine whether Medicare Part B is paying too much for enteral nutrition therapy for 

nursing home residents. 

BACKGROUND 

Enteral nutrition therapy provides nourishment directly to the digestive tract of a patient who 

cannot, for a variety of reasons, ingest an appropriate amount of calories to maintain an 

acceptable nutritional status. 

For this inspection, we gathered data on the utilization of enteral nutrition in nursing homes 

from 1992 Medicare payment records, surveyed nursing homes about their methods and costs 

of securing enteral nutrients for residents, and randomly surveyed 200 hospitals for nutrient 

purchase costs and quantity purchased annually. Additionally, we obtained proprietary data 

from IMS America concerning purchase patterns of various enteral nutrient products obtained 

from its 1994 fiscal year audit of nursing home pharmacies. 

To assess the extent of enteral nutrition billed to Part B for nursing home residents, a sample 

of nursing homes was drawn and payment history extracted for calendar year 1992. Our twostage stratified sample consists of 150 nursing homes randomly selected from 10 States(15 

nursing homes per State). Data from the sample were projected to the total nursing home 

population (residents in Medicare or Medicaid-certified nursing homes). 

This inspection was conducted as a part of Operation Restore Trust. The initiative, focused on 

five States, involves multi-disciplinary teams of Federal and State personnel seeking to reduce 

fraud, waste, and abuse in nursing homes and home health agencies, and by durable medical 

equipment suppliers. 

FINDINGS 

Medicare Part Bpaymen13 for enteral nutrition are excessive. 

.	 Medicare reimbursement for nutrients substantially exceeds purchase prices commonly 

available to nursing homes through volume purchasing and other contractual relationships, 

often by about 42 percent. For example, while Medicare pays $0.61 per 100 calorie unit 

for the most commonly used enteral product, nursing homes report they can buy the same 

nutrients for an estimated average price as low as $0.43 per unit. 

1

.	 An estimated $170 million was allowed for enteral nutrients provided to about 5 percent 

of nursing home residents in 1992, Of this, Medicare paid an estimated $136 million. 

The remaining $34 million was paid by (or on behalf of) beneficiaries. 

.	 Although nursing homes often can buy enteral nutrients at substantially below Medicare 

reimbursement levels, no incentives exist for them to exert their buying power and pass 

the savings onto the taxpayer. 

Most charges (estimated 75 percent) are for Categoy I nutrients, the simplest and most 

readily available type. 

�	 The most common enteral nutrients used in nursing homes are Ensure, Jevity, and 

Osmolite, which are considered basic food (these three products are readily available in 

the marketplace, are often purchased for use as a food supplement, and are considered by 

the Food and Drug Administration to be food). 

RECOMMENDATIONS 

Medicare reimbursement policies fail to recognize the ability of a nursing home to purchase 

nutrients and supplies at costs less than those incurred by the average beneficiary through bulk 

purchasing and institutional buying power. Nor do these policies provide incentives for the 

nursing home to exert its buying power to save the taxpayer money. 

Further, and possibly more critical, current coverage of enteral nutrients does not recognize 

enteral nutrients as “food.” If recognized as food, payment for enteral nutrients would be 

made as apart of the facility payment, rather than separately billed to Medicare Part B. Thus, 

the current excessive Part B payments would be eliminated, along with Medicare’s exposure 

to fraud involving enteral nutrients when they are used as a food supplement (not covered by 

Medicare) rather than as the primary source of nutrition (covered by Medicare). 

To address excessive payments for enteral nutrients, we offer the following options (each 

requiring legislation to implemenz) and our recommendation for consideration: 

Options 

1)	 Exclude enteral nutrients from Part B reimbursement when the patient resides in a 

nursing home. 

2)	 Continue Part B reimbursement, but lower enteral nutrient reimbursement levels 

when provided to residents of nursing homes. 

ii 
Recommendatwn 

We support either option. However, we believe Option 1 is preferable for several reasons. 

First, enteral nutrients represent a resident’s food or meal while in the nursing home. 

Second, this option provides an incentive to nursing homes to exert their buying power to 

get preferred pricing on enteral nutrients. Third, incentives to overutilize enteral feeding 

will be removed. Fourth, this option is supportive of the Health Care Financing 

Administration’s efforts to require consolidated billing for services provided in skilled 

nursing facilities. Finally, most enteral nutrient costs are roughly comparable to general 

nursing home meal costs.l 

AGENCY COMMENTS 

Both the Health Care Financing Administration (HCFA) and the Assistant Secretary for 

Planning and Evaluation (ASPE) provided comments on this report. Both concur that 

Medicare is paying too much for enteral nutrients and support the recommendation’s first 

option on the grounds that enteral nutrients are “food” and, thus, should not be billed 

separately to Medicare Part B. Rather, the cost of enteral nutrients should be included in a 

facility’s costs and covered as a part of payment to the facility for the nursing home stay. 

The HCFA emphasizes legislation would be required to change current payment rules for 

enteral nutrients to implement this payment option. 

The ASPE does express reservations about the impact of this recommendation on the 

general nursing home population whose nursing home stay is paid by other payers (e.g., 

Medicaid). We appreciate ASPE’S concerns and wish to emphasize that the cost of enteral 

nutrients is comparable to that of a meal. Since meals are provided by the nursing home 

and paid by whomever is paying for the nursing home stay, we do not believe a change in 

reimbursement policy for enteral nutrients would pose a financial hardship on the 

beneficiary. However, to ensure this, exceptions might be made for some categories of 

enteral nutrients where it can be shown that costs substantially exceed general food costs. 

... 111 
TABLE OF CONTENTS 

EXECUTIVE SUMMARY


INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . .


FINDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .


Enteral nutrient payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .


. . . . . . . . . . . . . . . 1 

. . . . . . . . . . . . . . . 4 

. . . . . . . . . . . . . . . . . . 4 

Categories ofcharges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...4


Excessivenutrientpayments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...5


Useofoutside suppliers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...6


No incentives for facilitiestopay less . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...6


Preferredpricing arrangements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...7


Variations innutrientusage. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...8


RECOMMENDATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...10


ENDNOTES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...13


APPENDIX A: HCFA Classification ofNutrients . . . . . . . . . . . . . . . . . . . . . . . A-1


APPENDIX B:TextofHCFAad ASPEComments . . . . . . . . . . . . . . . . . . . . . B-1

INTRODUCTION


PURPOSE 

To determine whether Medicare Part B is paying too much for enteral nutrition therapy for 

nursing home residents. 

BACKGROUND 

Enteral nutrition therapy provides nourishment directly to the digestive tract of a patient who 

cannot, for a variety of reasons, ingest an appropriate amount of calories to maintain an 

acceptable nutritional status. Enteral nutrition consists of a liquid nutrient formula which is 

administered by tubing inserted through 1) the nose, 2) an incision to the small intestine, or 3) 

an incision leading to the stomach. 

Enteral nutrients are covered as a routine cost during a Part A covered skilled nursing facility 

(SNF) stay, or are included in the daily rate when provided to a Medicaid-eligible nursing 

home resident. Section 1861h of the Social Security Act specifies covered extended care 

services to an individual in a skilled nursing facility stay. These services include “bed and 

board in connection with the furnishing of nursing care” and are considered routine services. 

Routine services (e.g., dietary) are expected to be provided by the nursing home. 

Medicare Part A and Medicaid coverage includes enteral nutrition products when they are 

used to satis~ dietary needs ~ are provided by a nursing home. In such a case, these 

products are considered food. However, enteral nutrients provided by an outside supplier are 

currently not considered as a cost to the nursing home. Instead, they are covered under the 

Part B prosthetic device benefit, 

Medicare guidelines classifj enteral nutrition under the prosthetic device benefit because 

coverage under Part B is only for therapy required due to an absent or malfunctioning body 

part which normally permits food to reach the digestive tiact. Nutrients are classified by the 

Health Care Financing Administration (HCFA) into six categories, based on the composition 

and/or product. (See Table 1.) 

1

--

TAR117 1 s —-x. A 

HCPCS 

Category Category 

1 134150 

I B4151 

II B4152 

III B4153 

IV B4154 

v B4155 

VI B4156 

. .. . “ require eJJecuvedigestive and absorptive processes for utilization (suitable only for patients with sufficimt 

Medicare 

Reimbursement 

per unit ** 

(1993-1995) 

$0.61 

$1.43 

$0.51 

$1.75 

Varies with 

product 

Varies with 

product 

Varies with 

product 

Content Description 

Semi-syntheticintact 

protein isolates* 

Natural intact 

protein/proteinisolates* 

Intact protein/protein 

isolates* 

Hydrolyzedprotein/protein 

isolates 

Definedformula for 

specificmetabolic need 

Modular components 

Standardizednutrients 

Examples of Products 

Ensure, Osmolite,


Isosource,Jevity


Compleat-B


Vitaneed


Comply,Ensure Plus,


Nutren,


Sustacal, SustacalHN


Criticare HN


Precision HN


TravasorbHN


Citrotein, Fulfill, Promote,


Vivonex Plus


Advera, Sumacal, Isosource


w-ml 

PrevisionL~ 

Travasorb STD, 

Vivonex STD . . 

gastrointestinal function). (See Appendix A for further information on product classifkation.) 

** 1 unit= 100 calories 

The HCFA’Sdecision to consider enteral nutrients as a prosthetic benefit was in direct 

response to 1980 Congressional deliberations in which the House Ways and Means 

Committee expressed its concern that Medicare did not cover enteral therapy for noninstitutionalized patients; although, in the view of the Committee, such coverage was 

warranted. The Committee directed the Secretary to “filly explore” the possibility of 

Medicare coverage for enteral products. However, it is unclear whether committee members 

intended that institutionalized patients be provided enteral nutrition by anyone other than the 

institution providing the care. 

In July 1981, HCFA issued instructions providing coverage under the Part B prosthetic device 

benefit, in addition to the parenteral coverage under this benefit, The coverage of enteral 

nutrients under this provision, rather than as a home health benefit, is based upon several 

reasons. First, the beneficiary does not have to be homebound, as required to receive home 

health benefits. Second, there is no authority to pay for “drugs and biological and food under 

home health.” Finally, “it is these items that represent the most costly component of enteral 

and parenteral therapy.” 

2

METHODOLOGY 

For this inspection, we gathered data on the utilization of enteral nutrition in nursing homes 

from Medicare payment records for 1992, surveyed nursing homes about their methods and 

costs of securing enteral nutrients for residents, and randomly surveyed 200 hospitals for 

nutrient purchase costs and quantity purchased annually. 

Additionally, we obtained proprietary data from IMS America. IMS is a private corporation 

that conducts marketing research in such areas as the medical community. Specifically, IMS 

routinely surveys different sectors of the business community concerning purchase patterns of 

various products. One audit regularly conducted by IMS obtains data for oral supplements 

purchased through nursing home pharmacies, or purchased by pharmacies that conduct a 

majority of business with nursing homes. Results from the 1994 fiscal year audit were 

obtained. 

To assess the extent of enteral nutrition billed to Part B for nursing home residents, a sample 

of nursing homes was drawn and payment history extracted for calendar year 1992. Our twostage stratified sample consists of 150 nursing homes randomly selected from 10 States (15 

nursing homes per State). Those States were California, Delaware, Florida, Indiana, Kansas, 

Louisiana, Maine, Michigan, Montan~ and Wyoming. Stratification was based on facility 

size (large, medium, and small). 

Each sample nursing home provided us with a list of all Medicare eligible beneficiaries 

residing in that nursing home during 1992, along with each resident’s corresponding dates of 

stay. After verification of the beneficiary’s health insurance claim number (HICN) with the 

Medicare enrollment database, all Medicare services provided during the nursing home stay 

were extracted ftom the Medicare National Claims History File for calendar year 1992. The 

Part B services, processed by both the carrier and the intermediary, were identified. Data from 

the sample were projected to the total nursing home population (residents in Medicare or 

Medicaid-certified nursing homes). 

This inspection was conducted as a part of the Presidential initiative, Operation Restore 

Trust (ORT). The initiative involves multi-disciplinary teams of Federal and State 

personnel seeking to reduce fraud, waste, and abuse in nursing homes, home health 

agencies, and involving durable medical equipment supplies. 

Our review was conducted in accordance with the Quality Standards for Inspections issued by 

the President’s Council on Integrity and Efficiency. 

** Unless stated otherwise, jlgures in thik report are natwnal estimates ** 

projectedfrom a random sample 

3

FINDINGS


Medicare allowed an estimated$170 million for enteral nutrients. 

At the 95 percent confidence level, we estimate that during 1992, between $130 and $210 

million was allowed for enteral nutrients to approximately 112,830 nursing home residents in 

more than 15,000 nursing homes. This represents an estimated average bed day cost of $7.20 

per day for enteral nutrition. The overall average daily charge, spread across all nursing home 

residents, is small at $0.36 per day. This is because only an estimated 4.7 percent of nursing 

home residents receive enteral nutrition which is reimbursed by Part B. 

An average daily caloric intake of 1,800 multiplied by the cost of the lowest Part B 

reimbursement for enteral formulae ($0.51 per 100 calories) yields an expected daily charge 

for enteral nutrients of $9.18 per day. However, our estimated daily cost was only $7.20. 

This disparity can be explained if 1) the enteral nutrients were not provided for the entire 

duration of the nursing home stay, 2) the person received a portion of nutrient intake tlom 

other sources, or 3) the person was simply receiving supplemental feeding with enteral (which 

is not covered by Medicare). Also, it is possible that enteral nutrition was paid partially by 

other sources (e.g., Medicaid, private insurance). Further investigation is needed to establish 

the extent to which these or other factors account for the disparity noted. 

Most charges (75percent) are for Catego~ I nutrienti, the simplest and most readily 

available @pe. 

The majority of enteral nutrient charges are 

for Category I ($140 million). Over 90 

percent of the Category I charges ($128 

million) are for products that fall under the 

B4 150 product code and are termed semisynthetic nutrients. These include 

recognizable liquid food brand names such 

as Ensure, Jevity, Osmolyte, and Isocal. The 

remaining charges are distributed among 

four additional categories, as shown in 

Figure 1. 

Surveyed nursing homes and hospitals most 

often purchase one of three products for 

enteral nutrition therapy. These products are 

Most Allowed Charges are for Category I Nutrients 

CategoryII Category1 CategoryIll (semi-synthetic $128 

and natural $12) CategoryI $140 mt[[{on 

Source: 1992 nursing home sample 

Figure 1 

Ensure, Jevity, and Osmolite. Each is manufactured by ROSS labs. Other products used for 

enteral nutrition therapy are manufactured by SANDOZ, MEAD JOHNSON, and CLINTEC. 
------- --------

--------

SANDOZ markets Fibersource, Isosource, Meritene, and Resource. MEAD markets Isocal, 

Sustacal, and Ultracal. Finally, CLINTEC markets Nutren and Replete. 

According to IMS data (see methodology), most purchases through pharmacies for enteral 

nutrients are about equally divided between Ensure, Fibersource, Isosource, and Ultracal. The 

difference between what nursing homes and hospitals reported and the IMS data maybe 

explained by the likelihood that most common (off-the-shelf) enteral products (Ensure, 

Jevity, and Osmolite) are purchased through the nursing home’s dietary center (often directly 

from ROSS Labs or a supplier) rather than through the nursing home’s pharmacy or other 

pharmaceutical supplier. The IMS data focvsed on food supplements purchased through 

pharmacies. 

Medicare payments for enteral nutrients for nursing home residents are excessive because 

reimbursement rates are set too high. 

Data from several sources confii that nursing homes can purchase enteral nutrients at 

significantly lower prices than current Medicare reimbursement levels. To illustrate, 

Medicare reimbursement for Category


I semi-synthetic enteral nutrients


(B41 50) is $0.61 per 100 calorie unit.


The average cost at which nursing


homes can buy this category of


nutrient product (according to nursing


homes in our sample) was estimated


to be $0.43 per unit for their most


frequently used product (thus


Medicare ispaying on average 42


percent more). Proprietary data


gathered by IMS validates this


finding, showing an identical average


estimated purchase cost of $0.43 for


Category I nutrients.


While the average cost is $0.43 per


100 calories, the majority of nursing


homes pay less than the average and


83 percent pay less than the Medicare


allowable amount. (See Figure 2.)


Of the 17 percent of nursing homes


reporting enteral costs in excess of


The Majority of Nursing Homes Can 

Purchase Category I Nutrients At or Below 

40 Cents Per Unit 

Percent of Sample 

Nursing Homes 

50%T ............... ......... ................. ............ .. ...... 

52% km 

40- than 40 cents ~------------- .--------------’

-..<...............34?4?........................ 

30---”- ., e“ 

............23%................................................ 

*O-.18%, . 17% 

. . 

jo -

0 

~o.30 $0.31-$0.40 $0.51-s0.60 SO.61 

or less .$0.41-s0.50 or more 

Category I Nutrient Purchase Price Per Unit 

Source: 1992 nuralng home sample 

Figure 2 

Medicare reimbursement, it is not clear whether the nursing home actually loses or would lose 

money if nutrients were purchased by the nursing home. 

5

In the sample nursing homes reporting purchase costs above $0.61, contact with the nursing 

home revealed that outside suppliers were billing Medicare, or that a contractual relationship 

exists with the supplier causing the nursing home to pay more. Thus, the nursing facility 

incurred no losses directly related to Medicare reimbursement. In only one case did the 

supplier ask the nursing home to pay additional costs beyond the Medicare allowed amount. 

This nursing home experienced high enteral nutrient costs because the nursing home had 

entered into a contractual relationship with a supplier to exclusively purchase supplies. The 

pricing was artificially high because of the contractual terms whereby the supplier was able to 

demand high payments from the nursing home in order to repay loans made by the supplier 

when the nursing home was constructed. 

Medicare costs are also higher because most nursing homes (75percen@ do not directly 

purchase enteral nutrients for residents, but instead, allow outside suppliers to provide 

them and bill Medicare. 

Although a majority of nursing homes report being able to purchase nutrients below Medicare 

reimbursement levels, most nursing homes (an estimated 75 percent) prefer having an outside 

supplier provide, and bill Medicare for, the nutrients used by Medicare residents. These 

suppliers, in turn, bill Medicare at or above the established maximum reimbursement levels. 

Even when a nursing home provides the nutrients (25 percent), it typically acts as a supplier, 

billing Medicare Part Bat current reimbursement levels rather than at or slightly above its 

actual procurement costs. 

Survey results indicate many suppliers (30 percent) are directly affiliated with the nursing 

home. This afilliation could be contractual (29 percent) or through common ownership (49 

percent). The remaining 22 percent were unspecified by the nursing home respondents. 

Additionally, many suppliers (at least one-third) provide supplies to the nursing home on a 

consignment basis, with billing supposedly done after items are used. This practice 

exemplifies the lucrative nature of the nursing home supply business. In few other businesses 

are products provided first and billed for later. Nor is it common for businesses to store 

merchandise at the nursing home until used. Medical products are more commonly bought in 

advance for a specific resident. 

With no incentive to purchase nutrients below Medicare reimbursement levek, it k not 

surprising that some nursing homes report purchase prices at or above Medicare 

reimbursement levelk. 

While the average cost for enteral products in each reimbursement category is far below what 

Medicare allows, the range within categories is more extreme. Some nursing homes pay fm 

more than the Medicare rate for nutrients, while others pay substantially less than the average 

prices reported above. In category B4150, for example, prices ranged from $0.11 to $0.88. 

Interestingly, in two reimbursement categories(B415 1 and B4154), no nursing home reported 

6

paying more than Medicare reimbursement. (See Table 2.) Additionally, no significant cost 

differences were identified between States. 

Nutrient CategoryI 

Category Semi-synthetic 

B4150 

Medicare Pays $0.61 

Most Paid by a 

Nursing Home $0.88 

LeastPaid $0.11 

Table 2 

CategoryI 

Natural 

B4151 

$1.43 

$1.15 

$0.47 

Hospitals, on the other hand, and many nursing 

CategoryII CategoryIll CategoryIV 

Intact Protein Iiydrolized Defined 

B4152 Protein Formula 

B4153 B4154 

$0.51 $1.74 $1.14 

$0.88 $2.08 $0.95 

$0.13 $1.05 $0.40 

homes obtain preferred pricing on enteral 

nutrients through buying groups or by arranging other contractual relationships with 

vendors. 

Based on a random survey of 200 hospitals, Category I semi-synthetic nutrients are purchased 

at an average of only $0.35 per 100 calorie unit. Unlike nursing homes, hospitals do have an 

incentive to keep their costs down. This is because Medicare pays a fixed amount for each 

type of hospital admission no matter what costs that hospital incurs. This average represents a 

good proxy for the best overall average price available in the community. Hospitals report 

negotiated pricing or membership in buying groups as their primary methods for securing low 

costs for products such as enteral nutrients. 

Exhibiting a similar ability to negotiate preferred pricing, sampled Veterans Administration 

hospitals reported routinely purchasing Catego~ I nutrients at a comparably low rate. Some 

Veterans Administration hospitals reported costs as low as $0.12 per 100 calories. 

Although most buying groups representing hospitals and nursing homes were reluctant to 

provide contract pricing to us, a few did provide such information. One of these buying 

groups offered Category I semi-synthetic nutrients to member hospitals and affiliated nursing 

homes for as little as $0.16 per unit (100 calories). Another buying group offered a slightly 

higher price of only $0.25 per unit. 

7

-----------

--

Use of enteral nutrition varies between States and, especially, between nursing homes. 

In our ten-State nursing home sample, estimated use of enteral nutrition therapy ranged from a 

high of eight percent of resident stays in Louisiana to a low of one percent in Maine and 

Wyoming. (See Figure 3.) 

Louisiana Showed the Highest Rate 

of Enteral Use 

Percent of Stays 

With Enteral 

10% 

1 

8- -’ 

~ .,, .6.0% ,. m= 4- -

....................... 

2- -.. ..- .-.. 

(1 

SAMPLE STATES 

Source: 1992 nursing home sample 

Figure 3 

We cannot explain Louisiana’s higher overall Medicare covered enteral nutrition use without 

fiuther work. However, we can speculate that either a higher percentage of nursing home 

residents in Louisiana need tube feedings or Louisiana’s uncommon Medicaid policy of not 

including enteral nutrients under its nursing home daily rate increases billing to Medicare 

Part B. 

Some nursing homes showed heavy use of enteral nutrients relative to the majority of nursing 

homes. In many cases, this heavy use was not explained by the certification status of the 

facility or the level of SNF residents in the facility. For example, 20 percent of facilities 

certified as Medicaid-only provided enteral nutrients to more than 10 percent of their resident 

populations. In contrast, none of the Medicare-only SNF facilities exceeded five percent and 

only 10 percent of the dually-certified facilities exceeded this amount. Such high levels of 

8

enteral nutrient use raise quality of care, as well as excessive cost, concerns. If residents are 

being tube fed as a convenience to the facility, rather than as a necessity to the well being of 

the resident, abuse is occurring. Further study is needed to validate the prevalence of 

inappropriate enteral tube feedings. 

9

RECOMMENDATIONS


Medicare reimbursement policies fail to recognize the ability of a nursing home to purchase 

nutrients and supplies at costs less than those incurred by the average beneficiary through bulk 

purchasing and institutional buying power. Nor do these policies provide incentives for the 

nursing home to exert its buying power to save the taxpayer money. 

Further, and possibly more critical, current coverage of enteral nutrients does not recognize 

enteral nutrients as “food.” If recognized as food, payment for enteral nutrients would be 

made as a part of the facility payment, rather than separately billed to Medicare Part B. Thus, 

the current excessive Part B payments would be eliminated, along with Medicare’s exposure 

to fraud involving enteral nutrients when they are used as a food supplement (not covered by 

Medicare) rather than as the primary source of nutrition (covered by Medicare). Additionally, 

Medicare’s exposure to duplicate payments would be eliminated. 

To address excessive payments for enteral nutrients, we offer the following options (each 

requiring legislation to implemen~ and our recommendation for consideration: 

PAYMENT OPTIONS 

OPTION 1	 Exclude enteral nutrients from Part B reimbursement when the patient 

resides in a nursing home. 

Option 1A:	 Exclude enteral nutrient payments for anyone in a nursing home, 

regardless of payment status (Part A Medicare extended care benefit, 

Medicaid covered stay, or private pay resident). 

Option lB:	 Exclude enteral nutrient payments for anyone in a nursing home whose 

stay is paid by Medicare or Medicaid. Thus, Medicare Part B would 

continue to pay part B for private pay residents only. 

OPTION 2	 Continue Part B reimbursement, but lower enteral nutrient reimbursement 

levels when provided to residents of nursing homes. 

Option 2A:	 Move enteral nutrient reimbursement to a fee schedule, with a reduction 

to the fee schedule, if a nursing home is involved. Base fee schedules 

on average retail pricing. Implement a modifier which causes a 

reduction to the fee schedule if a nursing home resident is involved. 

Option 2B:	 Continue the current reimbursement system and apply inherent 

reasonableness to the charges for nursing home residents. 

10

Cost Savings: The exact amount of savings that could be obtained by the Federal government, 

in implementing this recommendation, depends on a number of factors, including the specific 

option selected, and programmatic controls implemented to expressly allow or expressly 

prevent cost shifting to other parts of the program, the Medicaid program, or beneficiaries. 

For example, by simply not paying for enteral nutrition products under Medicare Part B, the 

Medicare program could save $136 million per year. However, if some of these costs were 

shifted to other sources, including Medicare Part A, savings could be reduced or even 

eliminated. If Medicare Part B continued to pay for enteral products, but reimbursed nursing 

homes at a lower fee schedule amount, reflecting the reduced prices they could obtain for 

these products, savings of $41 million to the Medicare program would result, as well as $10 

million to beneficiaries or their representatives in reduced coinsurance. 

RECOMMENDATION 

We support either option. However, we believe Option 1 (either A or B) is preferable for the 

following reasons: 

�	 It is Food - the Food and Drug Administration categorizes enteral nutrient products as 

food. Medicare does not typically reimburse for dietary expenses unless provided in 

an institutional setting and then only to the institution. 

�	 Incentives to nursing homes - this option provides an incentive to a nursing home to 

exert its buying power to get preferred pricing on nutrients, given Medicare’s 

expectation and enforcement of prudent buying practices. Also, since nursing homes 

would make little or no profit from nutrients, no incentives would exist to over-utilize 

enteral feeding. 

�	 Consistent with Rebundling -it is consistent with HCFA’S effort to consolidate 

billing for services provided in skilled nursing facilities. 

�	 Covered in the Medicaid Daify Rate - virtually all Medicaid agencies consider enteral 

nutrients a supply covered under the daily rate. 

�	 Part B Payment Policy is Inconsistent - Medicare will not pay for a wheelchair in a 

nursing home (DME is noncovered unless provided in the beneficiary’s “home”); 

however, Part B pays for enteral nutrients. If a nursing home is expected to provide a 

wheelchair at no addhional cost to the beneficiary, why is a beneficiary’s meal 

(enteral) an additional cost to Part B and the beneficiary? 

�	 Enteral Costs and Typical Meal Cos& are Roughly Comparable - it can be argued 

that, at a minimum, Category I and 11nutrient costs ($6-$8 per day), are about 

equivalent to the daily cost of meals provided in a nursing home (cost of food plus 

preparation - $7).1 Consequently, beneficiaries should receive enteral feeding nutrients 

as a facility reimbursed cost, just as a meal would be. 

11

These conclusions and recommendations will be shared with appropriate Federal and State 

entities involved in Operation Restore Trnst. 

COMMENTS 

Both the Health Care Financing Administration (HCFA) and the Assistant Secretary for 

Planning and Evaluation (ASPE) provided comments on this report. Both concur that 

Medicare is paying too much for enteral nutrients and support the recommendation’s first 

option on the grounds that enteral nutrients are “food” and, thus, should not be billed 

separately to Medicare Part B. Rather, the cost of enteral nutrients should be included in a 

facility’s costs and covered as a part of payment to the facility for the nursing home stay. The 

HCFA emphasizes legislation would be required to change current payment rules for enteral 

nutrients to implement this payment option. 

The ASPE does express reservations about the impact of this recommendation on the general 

nursing home population whose nursing home stay is paid by other payers (e.g., Medicaid). 

We appreciate ASPE’S concerns and wish to emphasize that the cost of enteral nutrients is 

comparable to that of a meal. Since meals are provided by the nursing home and paid by 

whomever is paying for the nursing home stay, we do not believe a change in reimbursement 

policy for enteral nutrients would pose a financial hardship on the beneficiary. However, to 

ensure this, exceptions might be made for some categories of enteral nutrients where it can be 

shown that costs substantially exceed general food costs. 

12

ENDNOTES


1.	 The following are dietary costs provided from Texas nursing homes in the 1993 

Medicaid cost report. Expressed asaverage perdiem expemes, tiey representa 

good approximation of the cost of food for nursing home residents. 

Food (fresh, frozen, canned, etc.)


Food staff


Supplies (dishes, utensils, etc.)


Miscellaneous


Total Average Daily Cost


13 

$3.30 

$2.88 

$0.32 

$0.42 

$6.92 
CATEGORIZATION 

CATEGORY 1- B4150 

Attain 

Attain LS 

Attain KDS


Ensure


Ensure HN


Ensure Powder


Ensure with Fiber (Enrich)


Entera


Entera Isotonic


Entera Isotonic Fiber


Entralife FIN


Entralife HN Fiber


Entralife HN-2


Entrition HN


Fiberlan


Fibersource


Fibersource HN


Fortison


Hearty Balance


Introlite


Isocal


Isocal HN


Isocal 11


Isofiber


Isokm


Isomil


ISOsource


CATEGORY 1- B4151 

Compleat-B 

Compleat-B Modified 

APPENDIX A 

OF PRODUCTS INTO PROCEDUW CODES 

Isosource HN 

Jevity 

Lonalac 

Meritene 

Newtrition (Flavors) 

Newtrition HN 

Newtrition Isofiber 

Newtrition Isotonic 

Nitrokm 

Nutrapak


Nutren 1.0


Nutren 1.0 with Fiber


Nutrilan


Osmolite


Osmolite FIN


Pediasure


Pediaswe with Fiber


Portagen


Pre-Attain


Profiber


Replete


Resource


Susta II


Sustacal


Sustacal Fiber


Ultracal


Vitaneed


A-1 
CATEGORY II - B4152 

Comply


Ensure Plus


Ensure Plus HN


Entrition 1 ?4


Isocal HCN (Deliver 2.0)


Isotera Isotonic


Lipisorb


Maganacal


Newtrition 1 X


CATEGORY III - B4153 

Accupepha 

Criticare HN 

Lsotein 

Precision HN 

Precision Isotera 

CATEGORY IV - B4154 

Alitraq 

Citrotein 

Fulfil SLD 

Peptomin VHP 

~CAT 

Accupep HPF (XX030)


AmidAid (XX031)


Entera OPD (XX032)


Glucerna (XX033)


Hepatic Aid (XX034)


Impact (XX035)


Impact with Fiber (XX036)


ImunAid (XX037)


Lipisorb (XX038)


Nepro (XX039)


New Replete (XX040)


Nutren 1.5


Nutren 2.0


Nutrivent before 5/93


Resource Plus


Respalor


Sustacal HC


Sustacal Plus


Twocal HN


Ultralan


Reabilan


Travasorb HN


Vital HN


Vivonex HN


Promote


Promote with Fiber


Vivonex Plus


(XX- temporary Codes developed by DMERCS)


Peptamen (XX044)


Peprative (XX045)


Pregestirnil (XX046)


Protain XL (XX047)


Provide (XX048)


Puhnocare (XX049)


Reabilan HN (XX050)


Suplena (Replena) (XX051)


Stresstein (XX052)


Traumacal (XX053)


TraumAid HBC (XX054)


New Replete with Fiber(XX041) Travasorb Hepatic (XX055) 

NutriHep (XX042) Travasorb Renal (XX057) 

Nutrivent after 5/93 ~043) Vivonex TEN (XX058) 

CAT EGORY V LOCAL CODES 

Casec (XX059) Polycose (XX068) 

Conrtolyte (XX060) Promod (XX069) 

A-2

Elementra (XX061) 

Fibrad (XX062) 

Lipomul (XX063) 

MCT Oil (XX064) 

Microlipid (XX065) 

Moducal (XX066) 

Nutrisource (XX067) 

CATEGORY VI -84156 

Prevision LR Powder 

Tolerex 

Premix (XX070) 

Propac (XX071) 

Sumacal (XX072) 

Advera (XX073) 

Crucial (XX074) 

Diabetasource (XX075) 

Isosource VHN (=076) 

Travasorb STD Powder 

Vivonex STD Powder 

A-3 
----

APPENDIX B 

ASSISTANT SECRETARY FOR PLANNING AND EVALUATION 

COMMENTS 

...*...). 

., 

:Jc .“ DEPARTMENT OF HEALTH a HUMAN SERVICES otelwdlb~ 

‘% 

“’%.,,9,. ~ DC -~ 

m ~laudiaCooley 

IomnltivcSecrowy 

FRO\l. :Wing Assktant Semetaty for 

Planning aod Evaiustion 

SUDJLXT; i%rtd Comments -g OIG DE@ pe~ @I McrMcascPaytnents fos 

!&vices Provi&d to Nursing Horrw-! 

IIIour ewlicr mspnse to & b OIG reprts m ~ pa- fbr ruasing home 

rcsidcms. WCe~ptcsed cmccjTI that b mprxta couki indvwtd yicadfotheconciusionthst 

MmJiGut Part B paymco?a Silutlid not ire Ma(ia on Mhaifofllmi!lgbme N3idUUSadtbat w 

\wuldJkmS t& c~ ~ * ~ dulit)ga - With(XG StatTonDecadMr 12, 

1995. .+> a fcsultofttris &CUSSiCMbetwctaASPE and OIG Mthc M fbsmal ASPE 

cotnmcms arc otkui regdng the b OIG mportaesuidad “htt B Scavices in Nusaing 

Ilorw%- 4\rtOverviewY” Durable Medical EquipmentPayments in Numin8 ~“ and 

“-liutcrolNatritnts Payments in Nursing Homee”’. 

Entcrxd Xulritnts Pay- ta Nnrsimg lWIWY 

weitruopposed tob OIGmoommmb“ontoeqaodthea=d~==-MBM 

PWmCXIL\mtWof paSOOainaPartACOVCtCd SNFataYtOdSO_P==O= rnW?* 

.%cuw.swlstays Attltktimgkjsw~astkm -lMdWddbo&hded 

B-1

,n a nursing home payment rate. As a result,wo m tile to i~~tifi which Medieam Part B 

DME paymcnu arc made for routinenursinghomeservirxs(i.e.,semicesthu shouldbe included 

in a nursing Jlomepaymem rate) and which are not- Further, while we understandcurrent law 

IimilsPart B DMEto personswho are residingin [heir“homc~ it is not cksr when a nursing 

home resident (i.e., in non-PiutA coveredstay)is permanentlyresidingin sucha fadity, and, 

thus, is at home in& &i]ity, V~US a ~i&L tit is ~ving shofi-@m me and intendsto 

rmun home. ‘J-Oens~c tit ~nefici~i~ ~ not -pria~~y d~ed n~~ @v~c, a 

tdicy prohibiting pm 5 Dm pa~ents to all n~ng home reside@ ~~d haVCto S-C 

hat pan B J)ME p~y~ents ~ for ro~”ne or core n- h~~ ~i~ md U( th~ ~ no 

.~ng-tem, permanent nursing home residents far whom the nursing home has, in fit, become 

t!lek home. We do noL~fieve ~at theseuc accurate~~@o~ Fhq we areeoncemed 

that denying MedicarePart B DiW?pay~n~ to n- home ~iden~ could have a ne@vc 

Ifect on their quality of cam. Therefore,we beiieve,at leastin the interisrq theDepartment 

should presume that nursinghome residentsin a non-ht A eowred SNF stay are residhg in 

their “home” and permit l’art B DM payme.n~ on Wf of suoh residents in need of these 

supplies. We rccomrncnd the O]Ci study this issue and ticotnmend a eao+piation of 

equipment routinely covered in lwrsi~ home ~ay~t ratesd Ill@ not routinely inchxkd in 

such rates A review of State Me&d nursing fhcilitypayment methods may provide so~ 

insight into this issue. 

Finaliy, we recommend that fie wnc]~ion of this nwrt cl~y indicatethat Part B DME 

paymentsmade wittin a weekof di~~ge for~ n~~ home~id~~ (regtiless of payer) 

who is c]igible for Pm B ~ qprop~iate b f~i[i~ &charge planning. 

I I 

Part B Services in Nursimg Homes I 

We understand that the (XG intends tour&take ~ study of State Medicaid nursing fdty 

pwuent rates and methods, We agxeethat sucha study is needed in O* to undcmtastd ~m 

duplicate payments have beenmade (i.c,Me&are andMe&aid both have paid) d When 

Medieaid cost sharing is inappropriate. 

B-2

HEALTH CARE FINANCING ADMINISTRATION 

COMMENTS 

*.+,’’” “s%, 

.“ DEPARTMENT OF HEALTH& HUMAN SERVICES Health Care Fmancmg Administration : 

s ‘$3

%+ 

>

.*.,m	 The Administrator 

Washington, D.C. 20201 

DATE OEC 151995 

TO June Gibbs Brown 

Inspector General 

FROM Bruce C. Vladeck’% W 

Administrator v 

SUBJECT	 OffIceof InspectorGeneralDrafl Report “Enteral Payments in Nursing 

Homesv (OEI-06-92-O0861) -

We reviewed the subject dr+l report which discusses whether Medicare Part B is paying 

too much for enteral nutrition therapy for nursing home residents. 

Our detailed comments are attached for your consideration. 

Thank you for the opporhmity to review and comment on this report. Please contact us if 

you would like to discuss our comments finther. 

Attachment 

B-3

Health Care Financing Administration (HCFA) Comments 

on Of&e of Insoector General (OIG) Drafl ReDofl. 

“Enteral Nutrient Payments in Nursing Homes.” 

OEI-06-92-00861 

OIG Recommendation 

HCFA should considerwaysto addressexcessivepaymentsfor enteral nulrients. TWO 

options are offered. 

OPTION 1 

The HCFA should exclude enteral nutrients from Part B reimbursementwhen the 

patient resides in a nursinghome. 

OPTION 2 

The HCFA should continue Part B reirnbursemen~ but lower enteral nutrient 

reimbursement levels when provided to residents of nursing homes. 

HCFA Resmmse 

We concur with Option 1. We believe this option is consistent with HCFA’S efforts to 

control overdhation by encouragingnursinghomes to exert buying power to get 

prefmed pricing on nutrientsand by removing the incentive to overdize enteral 

f-. Aa defined by the Food and Drug Administration mosg if not ~ enteral 

nutrientproducts are considered food. Thus, with changes in the statutethat currently 

defines enteral nutrientsas a prostheticdevice, these products could be included in 

MedicarePartA payments. This option is also consistent with HCFA’Scurrentattempt 

to consolidate billing for semices provided in skilled nursing fmilities. 

Technical/ General Commentq 

1.	 Include in the Executive Summarya condensed version of the methodolq found 

inthebody of therepwt 

2.	 State more clearly that all figures are estimates or projections. (The reportwas 

based on 5-percent sample data). 

3. Include data on tbe cost of a “meal”versusthe cost of %nteralf-.” 

4.	 State in the Executive Summary(and more forcefidly in the body of the report) 

thatboth optiona would requirelegislation. 

B4

OPERATION RESTORE TRUST 

AND NURSING HOMES 

On May 3, 1995, President Clinton announced a new anti-fraud initiative undertaken by the


Department of Health and Human Services. Led by the OffIce of Inspector General in


partnership with the Health Care Financing Administration and the Administration on Aging,


this project utilizes the expertise of many Federal, State, and private sector


personnel. They will direct their combined energies to crack down on Medicare and Medicaid


fraud, waste, and abuse initially associated with home health agencies, nursing homes,


hospices, and durable medical equipment sllppliers. They will work closely with the


Department of Justice and an intergovernmental team comprised of other Federal and State


personnel.


In addition to identi~ing and penalizing those who defraud the government, the project is


designed to alert the public and industry to the fraud schemes or vulnerable areas in policy.


To aid in this endeavor, the OffIce of Evaluation and Inspections will work within the Office


of the Inspector General to perform its primary mission of conducting evaluations that provide


timely, usefid, and reliable information and advice to the pertinent decision makers involved


in the demonstration. To this end, the following reports on nursing homes have been


completed:


Medicare Services Provided to Residents of Skilled Nursing Facilities (OEI-06-02-00863) 

Medicare Payments for Nonprofessional Services in Skilled Nursing Facilities (OEI-06-92-00864) 

Payment for Durable Medical Equipment Billed During Skilled Nursing Facili~ Stays (OEI-06-92-

00860) 

Part B Services in Nursing Homes -An Overview (OEI-06-92-00865) 

Enteral Nutrient Payments in Nursing Homes (OEI-06-92-00861) 

Durable Medical Equipment P~ments in Nursing Homes (OEI-06-92-00862) 

Ongoing evaluations are being conducted related to Medicare payments for residents of 

nursing homes for such services as mental health therapy, wound care, imaging, hospice, 

ambulance transportation, and nail debridement. Also under review are duplicate payments 

between Medicare and Medicaid for nursing home services.