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OFFICE OF INSPECTOR GENERAL 

The mission of the Oftlce 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 three OIG operating components: 

the Oftlce of Audit Services, the OffIce of Investigations, and the Oftlce of Evaluation and Inspections. The 

OIG also informs the Secretary of HHS of program and management problems and recommends courses to 

correct them. 

OFFICE OF AUDIT SERVICES 

The OIG’S OffIce of Audit Services (OAS) provides all auditing services for HHS, either by conducting 

audits with its own audit resources or by overseeing audit work done by others. Audits examine the 

performance of HHS programs and/or its grantees and contractors in carrying out their respective 

responsibilities and are intended to provide independent assessments of HHS programs and operations in 

order to reduce waste, abuse, and mismanagement and to promote economy and efficiency throughout the 

Department. 

OFFICE OF INVESTIGATIONS 

The OIG’S Of%ce 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 investigative efforts 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’S OffIce 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 recommendations contained in these inspection reports generate rapid, accurate, 

and up-to-date information on the eftlciency, vulnerability, and effectiveness of departmental programs. This 

report was prepared in the Dallas regional Officeunder the direction of Chester Slaughter, Acting Regional 

Inspector General. Project staff 

DALLAS HEAM2UARTEW 

Kevin Golladay Brian Ritchie 

Pamela A. Smith 

For additional copies of this report, please contact Kevin Golladay at (214) 767-3310. 
Department of Health and Human Services 

OFFICE OF 

INSPECTOR GENERAL 

MEDICARE PAYMENTS FOR NONPROFESSIONAL SERVICES IN SKILLED 

NURSING FACILITIES 
EXECUTIVE SUMMARY 

PURPOSE 

To assess the Part B payment pattern and Medicare policy for the provision of nonprofessional services covered by the skilled nursing facility (SNF) benefit. 

BACKGROUND 

The Medicare program provides coverage under Part A for stays, of up to 100 days per 

benefit period, in SNFS. Section 1861h of the Social Security Act specifies the covered 

SNF services provided to an individual during a Part A skilled nursing stay. Among these 

are services which can be categorized as “non-professional institutional services”(e.g., 

room, board, supplies and equipment). 

Many services and supplies billed directly to Part B are the same as non-professional 

institutional services covered under Part A. Thus, if provided by the SNF, these services 

and supplies would typically be included in the rate paid by Medicare for beneficiaries in 

a Part A covered SNF stay. However, if provided by a supplier directly to the 

beneficiary, billings could be made to Part B rather than Part A. In fact, a recent OIG 

report substantiates that billing Part B for these items does occur in Medicare covered 

SNF stays. 

This report examines the extent of Part B billings for nonprofessional institutional services 

such as enteral nutrition services, incontinence care services, and surgical dressings 

provided to beneficiaries during Medicare covered SNF stays. We did not review 

situations where an individual in a SNF was not covered by Part A but receiving a SNF 

level of care. 

To determine how many payments were made for Medicare beneficiaries during SNF 

stays, we frost developed a one percent sample of Medicare beneficiaries. Within this 

sample, we selected beneficiaries with a Medicare covered SNF stay in 1991 and 1992, 

along with the dates of the stay. We then obtained Part B claims submitted and allowed 

on behalf of these beneficiaries with service dates coinciding with the dates the beneficiary 

was in a SNF stay being paid for by Medicare. 

mlNGs 

Current Medicare Policies May Inappropriately Allow Billing Of Non-Professional 

Services To Part B During Medicare Covered SNF Stays. 

Overall, non-professional institutional services provided during covered Part A SNF stays 

accounted for approximately $90 million in 1991 and $102 million in 1992 in allowed Part 

B payments. Section 1833(d) of the Medicare law states that no payment can be made by 

Part B for a service provided under Part A. However, there is no requirement that SNF 

1 
services must be paid by Part A. Thus, paying for non-professional services through Part 

B rather than part A is often legal. Nevertheless, allowing Part B payment for services 

covered in the SNF benefit seems incongruent with the intent of the benefit. This action 

removes responsibility from the SNF to provide for these services. Part B allowance also 

leads to greater beneficiary financial responsibility. The beneficiaries may not even be 

aware that the facility provides these services in such a way that their personal costs for 

care increase. 

Over $70 Million Were Allowed By Part B For Three Specific Services Provided To 

SNF Residents In 1992. 

� $57 Million for Enteral Nutrition Services. 

� $6 Million for Surgical Dressings. 

� $10 Million for Incontinence Care Items. 

Enteral Nutrition 

Since enteral nutrients provide all needed nutrition for some patients, it is obvious that


they are food. Further, they are considered to be a food by the Food and Drug


Administration. Given this acceptance, to not consider nutrients a basic benefit of a SNF


and allowing billing outside of the per diem-seems illogical., However, SNFS may either


include these services in their routine costs and .bilI-Part A of Medicare, or allow suppliers ~~~


to provide the services and bill Part B. Further, SNFS can perform-as. the suppliers and


thus, bill both the SNF per diem rate under Part A and the food (enteral nutrients) costs


under Part B.


Incontinence Care 

Prior to 1972, incontinence items were included in routine costs of a SNF and thus, were 

payable within the Part A payment. Although they have since been deleted from the 

routine cost listing, they are included under inpatient ancillary services, also a component 

of the SNF payment. Yet, while 92 percent of the nursing homes in 1992 provided 

services to patients with incontinence needs, Part B paid for some of these services. 

Sur~”cal Dressings 

Surgical dressings have also been removed from the list of routine services provided in a 

SNF and are now included as an ancillary service payable by Part A. While dressings are 

considered items generally provided by SNFS, they are also listed in regulation as items 

covered by Part A only if the individual SNF generally provides the service. This further 

complicates the ability to determine the correct payment source during a SNF stay and 

may partially explain why Part B pays for some surgical dressings for SNF residents. 

ii 
Paying For These Services And Supplies Under Part A Could Save Medicare Money 

And Reduce Improper Incentives For Providers. 

Part B payment clouds responsibility for patient care, removes incentives for reasonable 

utilization -and cost control, and makes it more difficult to compare costs and to set 

reasonable limits on per diem rates. If SNFS acted as prudent purchasers, by buying in 

bulk and taking advantage of negotiated rates, savings might result. This activity could 

lead to acquisition costs lower than the Part B reimbursement rates. Including nonprofessional services in the Part A payment would also reduce facility incentives to avoid 

the SNF cost limit by allowing suppliers to provide the services and bill Part B. Finally, 

including non-professional services in the SNF payment could prevent marketing abuses. 

Paying For These Services Under Part A Would AlSO Save Beneficiaries Money. 

By including enteral and incontinence services and surgical dressings in the Part A SNF 

payment, the beneficiary would not bear the burden of the deductible and 20 percent 

copayment involved in Part B. This would have resulted in beneficiary savings of 

approximately $17.6 million in 1991 and $18.5 million in 1992. While a signitlcant 

portion of these savings might shift as costs to Medicare, Part A, these costs may be 

offset by the potential savings described in the previous finding. 

Coding problem Exist On Claims Submitted For These Services. 

While all of the claims included in this report represent. care. provided during a covered ~ 

SNF stay, many claims indicated a place of service other than a SNF. While coding 

practices improved between 1991 and 1992 for incontinence services and surgical 

dressings, problems increased for enteral nutrition service claims. 

RECOMMENDATIONS 

The current fragmented manner in which Medicare payment is made for SNF residents is 

a result of statutory provisions originally intended to ensure access to care. This report 

demonstrates that the ability of a SNF to make use of both Part A and Part B to 

underwrite care to its residents can result in increased progmm expenditures and waste 

and may dissipate the SNFS incentives to oversee the total package of care the resident 

receives. 

In light of this, we recommend that: 

�	 HCFA develop a legislative recommendation to prohibit entities other than the SNF 

from seeking coverage on behalf of persons in Part A covered SNF stays for 

enteral nutrition, incontinence care, and surgical dressings and limit Medicare 

coverage of these services to Part A. 

�	 HCFA clarify 42 CFR 483.35 (Dietary Services) to speciilcally include parenteral 

and enteral nutrition. 

... 111 
COMMENTS 

Comments were received from the HCFA, ASPE, and PHS on the draft report. The full 

text of the comments is included in Appendix C. 

The HCFA and ASPE made suggestions about refocusing the recommendations to more 

clearly address the problems discussed in the report, which we adopted. Both HCFA and 

ASPE stated several concerns about language in the draft report raising questions about 

quality of care and about tying the problems discussed to residents’ rights. We agree with 

HCFA and ASPE and have eliminated the language on these points. 

Both HCFA and ASPE also raised questions about how savings might accrue to the 

Medicare program by implementation of the recommendations. We attempted to clarify 

our discussion of this point within the text of the report. It is true that merely shifting 

costs to Part A, without putting in place proper payment policies, accomplishes little. 

Medicare payment poiicies should both create incentives for prudent purchasing arm 

reflect the economies achieved through prudent purchasing. As indicated in the report, 

the OIG plans more work on this subject, focusing fwst on payment for enteral nutrition. 

Lastly, we adopted a number of suggested technical improvements made by the 

commenters. 

iv 
TABLE OF CONTENTS 

PAGE


EXECUTIVE SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..i


INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...1


FINDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...3


�Inappropriateness Of Part Billings . . . . . . . . . . . . . . . . . . . . . . . . . . . ..3


EnterdNutntion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4


Incontinence Care . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...6


Sur@”calDressings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...7


•partJ3~lowances~atCou1d Have&enB orneBypartA . . . . . . . . . . . . . . 8


� program outlays hdImproper Bovider Incentives . . . . . . . . . . . . . . . . . . . 8


•sav~gs,ForBeneficifies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..9


� Coding problems . . . . . . . . . . . . . . . . . . , . . . . . . . . . . . . . . . . . . . . . .9


RECOWNDATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
 .


ENDNOTES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12


APPENDIX 

A: Confidence Intervals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..A-1


B: Medicare Expenditures By Category of Service . . . . . . . . . . . . . . . . . . . . .B-l


C: Text OfAgencyComments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..C-l 
INTRODUCTION 

PURPOSE 

To assess the Part B payment pattern and Medicare policy for the provision of nonprofessional services covered by the skilled nursing facility (SNF) benefit. 

BACKGROUND 

The Medicare program provides coverage under Part A for stays, ofupto 100 days per 

benefit period, in SNFS. A SNF stay is dependent on a specific set of conditions 

necessary for coverage (e. g., need for skilled services on a daily basis following a threeday qualifying hospital stay). 

Section 1861h of the Social Security Act spec~les the covered SNF services provided to 

an individual during a Part A skilled nursing stay. Among these are services which can 

be categorized as “non-professional institutional services.’; These services are listed in 

Table 1. 

TABLE 1 

Non-professional Institutional Services. 

Covered During Part A SNF Stays 

� Bed and boati in connection with the jimnishing of nursing care. 

� Such drugs biolo “cals, supplies, 

‘?’

pliances and equi ment jhrnished for-use in the W F, as are ordinari y fimished by suc%facikty for the 

care and trea#ment of inp~”ents. 

�	 Such other services necessary to the health of the p~”ent as are genemlly provtied by SNFS. 

Many services and supplies billed directly to Part B are the same as non-professional 

institutional services covered under Part A. Thus, if provided by the SNF, these services 

and supplies would typically be included in the rate paid by Medicare for beneficiaries in 

a Part A covered SNF stay. However, if provided by a supplier directly to the 

beneficiary, billings could be made to Part B rather than Part A. In fact, a recent OIG 

report substantiates that billing Part B for these items does occur in Medicare covered 

WWFstays. ‘ 

1

SCOPE 

This report examines the extent of Part B billings for non-professional institutional 

services such as enteral nutrition services, incontinence care services, and surgical 

dressings provided to beneficiaries during Medicare covered SNF stays. We did not 

review situations where an individual in a SNF was not covered by Part A but receiving a 

SNF level of care. 

Previous OIG reports have presented an overview of Medicare SNF services and payment 

for durable medical equipment (DME) billed during skilled stays. 

METHODOLOGY 

To determine how many payments were made for Medicare beneficiaries during SNF 

stays, we first developed a one percent sample of Medicare beneficiaries. Within this 

sample, we selected beneficiaries with a Medicare covered SNF stay in 1991 and 1992, 

along with the dates of the stay. We then obtained Part B claims submitted and allowed 

on behalf of these beneficiaries with service dates coinciding with the dates the beneficiary 

was in a SNF stay being paid for by Medicare. 

In addition to claims review, we reviewed the law, as well as Medicare Carrier and 

Durable Medical Equipment Regional Carrier (DMERC) manuals, to identify established 

policy in the areas examined. 

2

FINDINGS


Current Medicare Policies May Inappropriately Allow Billing Of Non-Professional 

Services To Part B During Medicare Covered SNF Stays. 

Non-professional institutional services provided to patients and billed to Part B during 

covered Part A SNF stays accounted for $89.8 million in 1991 and $101.6 million in 

1992. Included in this category of services are incontinence care services, surgical 

dressings, and dietary services, such as enteral nutrient services. Such services are 

billable to Part A if provided by the SNF during a Medicare covered SNF stay. 

However, as noted above, these items are also allowed as Part B services during Part A 

stays. 

Non-Professional 

Dollars Spent 

1991 

1992 

- Enteral -

- casts etc M 

. . 

Institutional Services 

By Category of Service 

Millions 

Incontinent - Dressing. - Bra... et. 

Parenteral - Trach M Other 

FIGURE 1 

SOURCE: OIG Projections from a one-percent sample of Medicare beneficiaries. 

Section 1833(d) of the Medicare law states that no payment can be made by Part B for a 

service provided under Part A. However, it does not-indicate that covered institutional 

SNF services must be paid by Part A. Thus, while it is obvious that the law intends for 

these services to be provided during a Part A covered SNF stay, the law does not require 

that the services be provided by the SNF or paid by Part A. The ability of a SNF to 

provide services under arrangements does not remove responsibility from the SNF for the 

overall care provided to a beneficiary. However, it does permit the facility, to the extent 

allowed by law, to determine what costs will be subject to the SNF routine cost limit. 

Allowing Part B payment for covered Part A services not only seems incongruent with the 

intent of the SNF benefit, it also leads to greater beneficiary financial responsibility. This 

occurs since the beneficiary is responsible for an annual deductible and 20 percent copayment for Part B services. However, the beneficiary may not know that the facility 

does not provide these services, thus incurring unexpected personal costs for care. For 

3 
example, in 1991 and 1992, co-payment expenses represented $22 million and $25 

million, respectively. 

The impact of Part B payment for Part A covered services will be explored through three 

examples: enteral nutrition services, incontinence care services, and surgical dressings. 

These items accounted for over 70 percent of the Part B payments allowed in 1991 and 

1992 for non-professional services provided during Medicare covered SNF stays. 

ENTERAL NUTRITION POLICY 

Definition of Enteral Nutrition: Enteral nutrition is a form of liquid nutrition that is 

provided to a patient who, due to a chronic illness or trauma, is unable to eat in the 

normal manner. This diet is generally required to sustain life and provides all of the 

patient’s nutritional and caloric needs. Patients surviving on enteral nutrition require a 

tube to be placed either directly into the stomach or small intestine through the skin, or 

indiredly via the nasal passage. The receipt of enteral nutrition services often requires 

skilled care, although patients can receive this service at home. 

Enteral nutrition is considered reasonable and necessary for a patient with a functioning 

gastrointestinal tract in certain circumstances. Individuals who are unable to ingest food, 

due to pathology or non-functioning of structures that permit food to reach the digestive ~ 

tract, require enteral nutrition services. Examples of conditions that would qualify for 

coverage are head and neck cancer with reconstructive surgery, central nervous system 

disease affecting the ability to ingest food orally, and severe difficulty swallowing after a ~ 

stroke. 

Medicare Covenzge Requirements for Enteral Z%erzz.py:As specified previously, enteral 

nutrition services may be covered by Part A or B during a covered SNF stay. Enteral 

nutrients are classifki as a food by the Food and Drug Administration (FDA), and thus, 

are considered food for pu~oses of Part A coverage.2 However, for Part B coverage, 

enteral nutrition services are considered a prosthetic device and must meet certain 

requirements. First, the beneficiary must have a permanently inoperative internal body 

organ, or an impairment lasting at least 90 days. A second requirement is patient 

dependence on enteral nutrients. To show a dependence on nutrients, the patient must 

require 20 to 35 calories of enteral nutrients, per kilogram of body weight per day. 

Although patients may only require supplements to their daily protein and caloric intake, 

this is not covered under Medicare Part B services. However, supplements are covered 

by Part A. Finally, if these Part B requirements for therapy are met, related supplies, 

equipment, and nutrients are also covered. 

Part B Payment For Enteral Nutrition Provided To Beneficiaries In SNFS Seems 

Inconsistent With The Purpose Of The SNF Benefit. 

A recent OIG review determined that Part B payments were made for enteral nutrition and 

related equipment and supplies in seven percent of Medicare covered SNF stays in 1991, 

and in six percent in 1992. The Health Care Financing Administration (HCFA) has a 

4 
longstanding practice of allowing Part B payment for enteral nutrition services provided to


residents of SNFS. This practice continues under the DMERCS, which have issued


instructions that enteral nutrition services may be covered under either Part A or under


Part B for such beneficiaries, depending on who supplies the service. However, if the


individual “-residesin a SNF under a Medicare covered stay, this policy may effectively


relieve the facility of fundamental responsibilities inherent in the SNF benefit.


The FDA has stated that enteral nutrients may be considered as food or drugs, dependent


on the stated purpose of the claims. Since most patients receiving enteml nutrition


services in SNFS depend on them to sustain life, it would appear that these services should


represent their food consumption and should be included in the SNF’s dietary cost center.


Provision by a SNF 

Despite the FDA classification of enteral nutrients as a food, the DMERC manual 

indicates that a SNF may either provide enteral nutrition services and supplies tiirectly, or 

through an outside supplier. A SNF is considered to be providing enteral items when it 

purchases them directly from any source, and then provides them to a resident. If an 

individual is in a Part A SNF stay and the SNF furnishes the nutrients to the beneficiary, 

the DMERC manual notes that such services are to be billed to Part A. In this case, the 

manual states, “Enteral nutrients are classified as food and are included as a component of 

the SNF’s routine costs. ”3 Further, the DMERC suppliers’ manuals state that no 

payment may be made by Part B for enteral nutrition services provided by the SNF during 

a Part A stay. In addition, the Social Security Act (Section 1833d) and the Medicare 

coverage policy indicate that any item covered. under Part A cannot be billed to Part B. 

Provision by a Supplier 

As mentioned; -the DMERC manual also indicates that nutrients may be furnished by an 

outside supplier to a beneficiary during the course of a covered Part A stay. In such a 

case, the services are covered by Part B since the SNF does not buy the items from the 

supplier. 

It is unclear how a resident in a SNF could obtain enteral nutrition services other than by 

having the facility provide them, since this is generally his/her total nutritional intake. To 

have a resident responsible for providing his/her own food is contradictory to the SNF 

benefit to provide for dietary needs. If an outside supplier assumes the responsibility for 

a resident’s nutritional needs, this also appears to abrogate the provider’s responsibility to 

provide for dietary needs. 

The provision of enteral nutrition services by a supplier can become even further 

complicated, since a SNF can perform as a supplier. If a SNF provides nutrients to a 

patient as a supplier rather than as a provider, the services may be billed to Part B. 

However, in either situation, the SNF is providing the services to the individual. 

5

Die~ary Services Requirement 

Failing to include enteral nutrition services within the Medicare payment raises concerns 

about a facility’s compliance with 42 CFR 483.35 which states that “the facility must 

provide eimchresident with a nourishing, palatable, well-balanced diet that meets the daily 

nutritional and special needs of each resident. ” 

INCONTINENCE CARE POLICY 

Definition of Incontinence Care: UroloD”cal, Ostomy, and Colostomy: Some patients


have an involuntary loss of urine, or permanent urinary incontinence, due to a


permanently inoperative or malfimctioning urinary bladder and/or bladder outlet. The


bladder problem may be due to a structural impairment of a body organ or result from a


nerve dysfimction or obstruction. A urinary collection system is required for patients with


urinary incontinence. Such a collection system may require an indwelling catheter or


intermittent catheter~ation in addition to drainage bags or bottles and related supplies.


Also, some patients may require a surgically created opening to divert urine or feces


outside the body. These individuals require a collection system that attaches directly to


the body and will require bags or pouches, as well as related supplies.


Medicare Coverwge Requirements for Incontinence Items: Incontinence care supplies may


be covered by Part A or B during a covered SNF stay and are considered a prosthetic


device, since they replace all or part of a body organ. For the purposes of Part A


coverage, incontinence services are included as inpatient ancillary services and included in


the provider’s allowable costs. These services are included as a, Part A payment during a


Medicare covered SNF stay. For coverage by Part B, the condition of urinary


incontinence must meet a test of permanence. Permanency is present if the device is


required for a long and indeftite period of time of at least three months.
 . 

Incontinence Care Services Can Also Be Paid By Part B During Covered SNF Stays. 

As previously mentioned, incontinence services may be covered under Part A or B, 

depending upon who supplies the items. Although the coverage policy for incontinence 

care items is not as clear as that of coverage for enteral nutrition services, allowing Part B 

coverage may continue to relieve the SNF of responsibilities implied in the benefit. 

Prior to 1972, the HCFA Providers Reimbursement manual specitlcally included 

incontinence appliances and supplies in the routine costs of a SNF, thus making them 

payable by Part A. After 1972, this clear listing was deleted from the manual. 

Incontinence items, provided by the SNF, are now included under inpatient ancillary 

services, which are included as part of the Part A payment. 

The category of ancillary services allows certain services, not generally provided to all 

patients, to be considered allowable costs for Medicare payment. Thus, while food and 

nursing care are required by all patients, urological and ostom y items are not. Although 

these are individualized items, 1994 nursing home data indicate that 92 percent of all 

6 
nursing homes provide services to patients with indwelling catheters. 4 Incontinence items 

represent critical services for patients requiring them and, if not carefully provided, can 

lead to negative health consequences such as decubitus ulcers. 

Further discussion in various manuals indicates that incontinence care items are generally 

considered services provided by a SNF; thus, they are extended care services.s 

However, convention has allowed coverage of these items to be determined at the 

individual SNF level. This determination resulted from the inclusion of incontinence 

items in the benefit category (referenced earlier) stating that such items are covered if they 

are “ordinarily furnished bv such facilitv for the care and treatment of inpatients. ” 

Despite this categorization, none of the regulations or manuals specitlcally state that 

incontinence items should be covered in this manner. Once again, various references to 

urological and ostomy items state that when these services are provided by the SNF 

payment may only be made under Part B when Part A payment is not available.b Thus, 

if a facility does not choose to furnish incontinence items to its patients, it may allow a 

supplier tG provide tiwm and bill Part B of Medicare for the items. 

SURGICAL DRESSINGS POLICY 

Definition of Surgical Dressings: Patients who have undergone a surgical procedure 

requiring an incision or sharp debridement require surgical dressings in order to promote 

healing or to protect the wound from infection. Surgical dressings are therapeutic and 

protective coverings which are applied directly to wounds, either on the skin or opening to 

the skin. These dressings require regular changing and may be primary; applied -tmthe. 

wound, or secondary, used to secure the primary dressing (e.g. tape, elastic, gauze).7 

Medicare Coven.zge Requirements for Surgical Dressings: Surgical dressings may be 

covered under Part A or Part B during a Medicare covered SNF stay. For purposes of 

covered Part A-stays, these items are considered ancillary services. For Part B coverage, 

dressings must be required as a result of a surgical procedure. Further, they must be 

medically necessary to facilitate the healing of the wound or to protect it from infection. 

Part B Coverage Of Surgical Dressings During SNF Stays Is Also Inconsistent From 

The Perspective Of The SNF Benefit. 

Surgical dressings can also be covered by Part A or B during a covered SNF stay, 

depending upon who provides the service. However, this is a service that many would 

assume is included in a covered skilled stay, given the type of patients generally cared for 

in SNFS. 

Surgical dressings, like incontinence items, were also included as routine supplies and 

costs of a SNF before 1972, but are now included as an inpatient ancillary service. Thus, 

they continue to be covered by Part A. In addition, dressings are included within the 

category of service, “other services necessary to the health of the patient as are generally 

provided by SNFS.” As previously stated, these items are genemlly considered services 

provided by SNFS and would be considered as included within the Medicare SNF benefit. 

7 
However, the regulations applying to coverage of services in post-hospital SNF stays give 

sterile dressings as an example of a service categorized as “supplies, appliances, and 

equipment.”8 This category, as previously discussed, states that these are items included 

as a covered SNF benefit @ if they are ordinarily furnished by the facility to inpatients. 

Thus, the decision to provide this item can be interpreted as being made at the individual 

SNF level. This fhrther complicates the ability to decide what is the most appropriate 

payment source for surgical dressings during a covered SNF stay. 

Over $70 Million Were Allowed By Part B For These Three Services In 1991 And 

1992, When Much Of The Costs Could Have Been Borne By Part A. 

The total allowed Part B payments for enteral nutrition services, incontinence care and 

surgical dressings were $70 million in 1991 and $74 million in 1992. While the amounts 

allowed for enteral nutrition services and surgical dressings remained relatively constant, 

allowed amounts for incontinence care increased substantially. 

An additional concern which arises in the discussion of Medicare covered SNF care is 

whether these services are provided by the facility to some patients but by a supplier to 

other patients. The program requires that a facility use the same method for providing 

services to all of the patients requiring those services. This indicates that either the SNF 

would bill for all services, to Part A or B, or the supplier would bill for all services to 

Part B. We have no information on whether services provided to patients in the same 

facility vary. However, the potential to vary service delivery may also be an issue to 

examine. 

Paying For These Services And Supplies Under Part A Could Save Medicare Money 

And Reduce Improper Incentives For Providers. 

Payment for enteral nutrition services, incontinence items, and surgical dressings under 

the Part A program could result in savings to the Medicare program if the SNF acted as 

the purchaser and negotiated favorable pricing (lower than Medicare Part B allowed 

amounts). 

To illustrate the implications for savings, we provide the following example. Currently, 

Medicare Part B reimburses enteral formulae (procedure code B4150) at the rate of 

approximately 61 cents per unit (100 calories). One large hospital buying group routinely 

obtains nutrients classified under procedure code B4150 for as little as 20 cents. Contacts 

with several nursing homes suggest that, in addition to hospitals, nursing homes may 

obtain nutrients at prices significantly below the 61 cent reimbursement level. Fee 

schedules used for Part B reimbursement may not represent an efficient delivery of service 

when compared to facility acquisition costs. If facility acquisition costs are indeed lower, 

and Medicare payment policy could reflect the lower costs, the program might save 

significant dollars. We are currently conducting an inspection to assess nutrient pricing 

for nursing homes. 

8

Current policies allowing outside suppliers to provide supplies to nursing home residents 

through Part B can lead to excessive utilization. Previous work by the OIG examining the 

marketing of incontinence supplies found: 1) some suppliers engage in questionable 

marketing practices, 2) beneficiaries may be receiving unnecessary or non-covered 

supplies, 3) some suppliers present the nursing home with false or misleading information 

in order to get nursing home business. 

Paying For These Services Under Part A Would Also Save Beneficiaries Money. 

Part B billing for enteral and incontinence services and surgical dressings increases 

patients’ financial liability for their care. Part B coverage includes annual deductibles and 

a co-payment of 20 percent. Unfortunately, the patient may not be aware that the 

provision of his/her enteral nutrition services may result in a greater financial 

responsibility in some SNFS but not others. The inclusion of these services would have 

resulted in beneficiary payment savings of $17.6 million in 1991 and $18.5 million in 

1992.9 

Beneficiary Co-pay Liability 

By Service 

1991 

1992 

~. \ . x I 

0.$ 6$ 10s 15.$ 

Millions 

Z% Enteral - Incontinence - Dresainga 

FIGURE2 

SOURCE: OIG Projections from a one-percent sample of Medicare beneficiaries. 

We recognize that a considerable portion of the co-payment savings discussed might shift 

to Medicare Part A, if Part B payment were prohibited. However, the potential savings 

described in the previous finding may offset these costs. 

Coding Problems Exist On Claims Submitted For T&se Services. 

Although the claims for enteral nutrition services, incontinence care, and surgical 

dressings reviewed for this report represented care billed during a Part A SNF stay, many 

of the claims represented the place of service as a location other than a SNF. While 

coding practices improved for both dressings and incontinence items, coding accuracy 

declined for claims for enteral nutrition services. However, the problem remained the 

greatest for incontinence claims. 

9

Pkzce of Service Coding Problems increased for EnteraJ (Wires during SNF Stays. 

Many of the enteral nutrition services provided to beneficiaries in a Part A SNF stay were


indicated as being for individuals outside of the SFJF Setting. This may indicate continued


billing by individuals who were previously in other locations, as was found to be


occurring for other services billed during a SNF stay. 10 The use of a place of service


code representing a place other than a SNF may also indicate that double billing is


occurring for individuals who received services prior to SNF admission and continued


receiving services, with both facilities billing. A further examination of place of service


coding showed there were some patients with two billings, allowed for the same code and


the same period, with the place of service coded SNF on one and NF on the other.


Place Of Service Coding On Claims 

Incontinence Care Although Place of 

Service coding for 

Incontinence Chzims 

improved, the Majority 

of Allowed Claims 

indicated a Place of o 400 800 i200 1600 2000 2400 Service other than a Number of Claims 

- SNF - NF - Custodial SNF. - Home m Office - Other 

FIGURE 3 

W%ilePlace of Service 

Coding has improved 

on Surgical Dressing 

claims, problems still 

exist. 

While correct coding


on claims for surgical


dressings have


increased from seven


percent in 1991 to 65


percent in 1992,


problems still exist.


Additionally, if the


claims representing “office”


Place Of Service Coding On Claims 

Surgical Dressings 

-) \ u 1 

0 25 50	 75 100 125 150 175 200 225 

Number of Claims 

m Office - Other 

FIGURE 4 

as place of service are correct, this activity would indicate 

additional expenses involved for changing dressings. These expenses may represent 

transportation via ambulance for the beneficiary. 

SOURCE: OIG Projectionsfrom a one-percentsample of Medicare beneficiaries. 

10

RECOMMENDATIONS 

The current fragmented manner in which Medicare payment is made for SNF residents is 

a result of statutory provisions originally intended to ensure access to care. This report 

demonstrates that the ability of a SNF to make use of both Part A and Part B to 

underwrite care to its residents can result in increased program expenditures and waste 

and may dissipate the SNFS’ incentives to oversee the total package of care the resident 

receives. 

In light of this, we recommend that: 

�	 HCFA develop a legislative recommendation to prohibit entities other than the SNF 

from seeking coverage on behalf of persons in Part A covered NW? stays for 

enteral nutrition, incontinence care, and surgical dressings and limit Medicare 

coverage of these services to Part A. 

� HCFA clarify 42 CFR 483.35 (Dietary Services) to specifically include parenteral 

and enteral nutrition. 

COMMENTS 

Comments were received from the HCFA, ASPE, and PHS on the draft report. The full 

text of the comments is included in Appendix C. 

The HCFA and ASPE made suggestions about refocusing the recommendations to more 

clearly address the problems discussed in the report, which we adopted. Both HCFA and 

ASPE stated several concerns about language in the draft report raising questions about 

quality of care and about tying the problems discussed to residents’ rights. We agree with 

HCFA and ASPE and have eliminated the language on these points. 

Both HCFA and ASPE also raised questions about how savings might accrue to the 

Medicare program by implementation of the recommendations. We attempted to 

clarify our discussion of this point within the text of the report. It is true 

that merely shifting costs to Part A, without putting in place proper payment 

policies, accomplishes little. Medicare payment policies should both create 

incentives for prudent purchasing and reflect the economies achieved through 

prudent purchasing. As indicated in the report, the OIG plans more work on 

this subject, focusing fwst on payment for enteral nutrition, 

Lastly, we adopted a number of suggested technical improvements made by the 

commenters. 

11 
EN DNOTES


1. The Office of Inspector Geneml, Office of Evaluation and Inspections has produceda 

report entitled “Medicare Services Provided to Residents of Skilled Nursing Facilities, An 

Overview, ” OEI-06-92-00863. The report presents information on all Part B payments 

made in 1991 and 1992 for services provided to Medicare beneficiaries during Part A 

SNFstays. 

2. The FDA classifies products that contain nutrients. Under current FDA policy, these 

products may be considered to be foods or drugs, or both, depending on their intended use 

as determined by the claims that are made for the product. 

3. All four of the DMERC manuals have this and the following statements present. In 

addition, the Provider Reimbursement Manual, section 2203.1 E, provides the same 

information. 

4. This figure comes from the OnLine Survey and Certification Annual Review (OSCAR) 

database. The percentage represents a combined total of all SNFS and all nursing facilities 

that have patients with indwelling catheters. 

5. A rather disjointed discussion is provided on the extended care benefit and what is 

included in the benefit in both the law, regulations and manuals. While it appears that 

convention has included many items within the category drugs, -biological, supplies, 

appliances, and equipment, this is not clearly indicated in either the regulations or 

manuals. Including incontinence items within this category allows for the items to not be 

covered, since this section indicates these items are only covered if the facility generally 

provides them to its inpatients. 

. . 

The Intermediary Manual refers the reader to several additional sections, including the 

section referring to services covered under a Medicare Hospital stay and services covered 

by Part B if no payment by Part A is available. At the end of the discussion, it becomes 

clear that incontinence services, as prosthetic devices, are considered an extended care 

service under the section of the benefit “such other services necessary to the health of the 

patients. ” A fimther discussion within the Provider Reimbursement Manual, 2203.1 and 

2203.2, discusses the routine and inpatient ancillary services included in the Part A SNF 

payment. Urological and ostomy care items are included within the ancillary services 

area. 

The following provides more specitics on the references made to incontinence services in 

several places. 

There are regulations addressing coverage of services in post-hospital SNF care at section 

409.20. At 409.25 there is a reference to a category called medical supplies, appliances 

and equipment. Within this section there is a reference indicating that these generic items 

(medical supplies, appliances and equipment) are only covered by Part A if they are 

12

ordinarily furnished by the facility to inpatients. However, no mention is made of 

prosthetic devices within this section. In fact, very few specific examples are provided in 

the entire section of items covered during a SNF stay. A clear interpretation of the Part 

A and B benefit is further complicated when wording is absent or is not consistent 

between the law, the regulations and manuals. 

The discussion in the Medicare Intermediary manual, section 3133.9, indicates the SNF 

coverage area mentioned previously, “such other services necessary to the health of the 

patients, ” are covered if SNFS generally provide the service. This area is further defined 

as those “medical and other health services” that are listed in section 3110-3110.5. It is 

stated that the services listed in this section are generally provided by skilled nursing 

facilities and thus they are considered extended care services. Further discussion indicates 

that the SNF medical and other health services are basically the same as those included as 

inpatient hospital ancillary services. Within the listing of inpatient hospital services are 

prosthetic devices and more specifically, catheter, ostomy and colostomy equipment and 

supplies. The discussion also indicates that these items may be covered by Pdi L B only if 

Part A coverage is not available. The reasons for Part A being unavailable are 1) 

benefits have been exhausted, 2) the 3-day prior stay requirement is not met, or 3) the 

patient is receiving a non-covered level of care. No mention is made that some of the 

items in this listing are not covered if the facility does not generally provide them to 

inpatients. 

Within the discussion of the Part B coverage of incontinence care items contained within 

the secondary medical insurance regulations, section 41.0.10, these items are still referred 

to as “medical and other health services. ” However, when these items are covered by 

Part B, the regulation section 410.36(a)(2) indicates that incontinence items are included 

within an area called “medical supplies, appliances and devices, ” equipment is listed 

separately. However, there is no reference to such a category elsewhere. .. 

6. Medicare Intermediary Manual A3 section 3137. 

7. The information presented here and in the next section represents the most recent 

changes to the SNF manual. 

8. Medicare Regulation 409.25. 

9. For purposes of this calculation, a rate of 25 percent was used to account for 

deductibles and co-payments when assessing the burden to the Medicare beneficiary for 

Part B co-payments. This number is used as a conservative approximation of the 

deductible and co-payment portion of the allowed charges. A recent OIG report on Part B 

DME payments during SNF stays indicates that deductibles and co-payments accounted for 

27 percent of the allowed charges. 

10. The Office of Inspector General, OffIce of Evaluation and Inspections has produced a 

report entitled “Payment For Durable Medical Equipment Billed During Skilled Nursing 

Facility Stays” OEI-06-92-00860. one of the problems noted in this report was the 

13

incorrect coding for the place of service. Often the place of service was coded incorrectly 

due to what appears to be the lack of knowledge of the patient’s location. 

14 
APPENDIX A 

CONFIDENCE INTERVALS 

The following presents the 95 percent confidence intervals of the point estimates for the 

three services discussed in this report. We reported our findings by multiplying 100 by 

the point estimates in our samples. The point estimates represent the total Medicare 

allowance for each service as reported in Appendix B. The confidence intervals present 

the range of possible findings at the 95 percent level. 

Year Allowances 

Projected Total 

Enteral Nutrition Services: 1991-1992 

1991 

1992 

Incontinence Services: 

1991 

1992 

$57,138,058 

$57,724,751 

1991-1992 

$7,003,804 

$10,357,533 

95% Confidence Interval 

$55,769,606-$58,506,510 

$56,346,521-$59,102,981 

$6,529,793-$7,477,81 1 

$9,164,521-$11,550,545 

$4,697,988-$7,853,434 

$4,636,487-$7,288,827 

Surgical	 Dressing Services: 1991-1992 

1991 $6,275,711 

1992 $5,962,657 

A-1 
APPENDIX B 

MEDICARE EXPENDITURES BY CATEGORY OF SERVICE 

Medicare Allowed 

Approximately $57 Million 

in Pati B Charges in 1991 

and 1992 for Enteral 

Nutrition, Equipment, and 

Supplies. 

Expenditures for 

Expenditures for Enteral Services 

By Category of Service 

1991 

1992 

~: 7’ 0s 10s 20s 30s 40s 60S 60S 

Millions 

ZZZl Sumlies ~ Formula - PumD.9 

Incontinence Services* 

By Category of Serv[ce 

. . . .J 

0s 2s 4s 6s 2+s 10s 

M1111O”. 

= CMhete,. = Catheter supply ~ salk. 

~ 08tomy bags = 0.twllY SUDldY ~ SLIPPIY, Both 

I

-urological. o.totny, and colostomy owe 

Medicare Allowed $7 

Million in 1991 and 

$10.3 in 1992 in Part 

B Payments for 

Urological, Ostomy, 

and Colostomy 

~	 Services during Part A 

SNF Stays. 

. 

Surgt”calDressings 

Accounted for $6.2 

Million in 1991 and $6.0 

Millwn in 1992 in Pad B 

Payment for Beneficiaries 

in Medicare Covered Pait 

A SNF Stays. 

Expenditures for Surgical Dressing 

By Category of Service 

>907 

19e2 

‘s ‘10s 1s 26	 3s 4* 6s es 7s 

MlllloneJ 

= S...nryry Dr.ssMIG- EZZi Prim.ry Dr*.al.9 

. I“dud.. ml. o.l. n.cw. .UPDII.. 

SOURCE: OIG Projections from a one-percent sample of Medicare beneficiaries. 

B-1

APPENDIX C 

TEXT OF AGENCY COMMENTS 

. 

c-1 
COMMENTS OF THE PUBLIC HEALTH SERVICE


DEPARTMENTOF HEALTH& HUMANSERVICES Fublic&#Jlsm&?

Memorandum 

. 

FE~ 2 /gg5 Director


Office of Resource Management, OM


Office of Inspector General (OIG) Draft Report “Medicare


Payments for Nonprofessional Services in Skilled Nursing


Facilities ,“ 0EI-06-92-O0864


Deputy Inspector General for hbaluations and Inspections, OS


The Public Health Service has reviewed the subject C)IGdraft


report. We have no comments on the re~rt’s recommendations


which are directed to the Health Care Financing


Administration. However, we submit the attached technical


comments for your consideration.


We appreciate the opportunity to review the draft report.


Attachment


.


c-2 
COMMENTS OF THE PUBLIC HEALTH SERVICE ON THE


OFFICE OF INSPECTOR GENEIUL DXikFT REPORT


“MEDICARE PAYMENTS FOR NONPROFES~IONAL SERVICES


IN SKILLED NURSING FACILITIES, ”


_(OEI-06-92-0086~


The Public Health Sewice has reviewed the Office of Inspector


General draft report and has the following comments.


TECHNICAL CON.13mlTS 

1.	 The draft report indicates that the Food and Drug 

Administration (FDA) classifies products intended for use 

in enteral nutrition as food and not drugs in three 

places: page 4, third paragraph; page 4, fifth 

paragraph; and page 5, first paragraph. There are two 

significant points that we want to bring to your 

attention. 

o	 First, all three references to FDA policy use the 

terminology “enteral nutrients. “ In reality, FDA 

does not classify “nutrients,” but classifies the 

products that contain the nutrients. It would be more accurate to use a phrase such as “Products that 

are intended for use in enteral feeding. ..“ 

o	 Secondr the statements that FDA classifies these 

products as foods are not completely accurate. 

Under current FDA policy, these products may be 

considered to be foods or drugs, or both, depending 

on their intended use as determined by the claims 

that are made for the product. 

2.	 The draft report uses a variety of different words and 

phrases in its discussion on the provision of enteral 

nutrition senrices to patients. To improve the clarity 

of the report, we suggest that more precise terminology


be used to discuss enteral nutrition services. We


suggest that the report be amended in the following


instances as indicated:


Paqe iii, third ~arauraph, line 4: Replace “enteral


claims” with “claims for enteral nutrition services. “


pacze 2. first DaraUXaPh, line 3: Replace “enteral 

nutrients” with “enteral nutrition services,” 

Paue 2, second DaracrraDh, line 2: Replace “enteral


nutrients” with “enteral nutrition services. “


paae 6, first full ~araqravh, line 1: Replace “enteral 

nutrients” with “enteral nutrition services.” 

c-3 
-.	Pacre 6., first full DaraqraDh, line 5: Replace “enteral 

services” with “enteral nutrition services. “ 

Pacfe 6, fourth paraqra~h, line 3: Replace “enteral 

policy” with “the policy for providing coverage for 

enteral nutrition services. “ 

Paqe 9, paraqraph at bottom of paqe, line 3: Replace 

“nutrients” with “enteral nutrition services. “ 

Paae 10, first full ParaaraDh, lines 4 and 7: Replace


“enteral nutrition” with “enteral nutrition services. “


Paqe 10, last oarama~h, line 1: Replace “enteral” with 

“enteral nutrition services. “ 

Paae 101 last DarauraDh, line 4: Replace “enteral 

services” with “enteral nutrition services. “ 

Paue 11, second DaraqraPh. line S: Replace “enteral 

service claim” with “claims for enteral nutrition 

services.” 

c-4 

.— _—.— ..__ — 
COMMENTS OF THE HEALTH CARE F7NANC~G ADiVHNrS~TION 

DEPARTMENTOF HEALTH& HUMAN SERVICES 

Health careFtnanc, ng Admtn!strat!o. 

—. 1 

The Admm!q,ator 

was~wtonc D.c. 20201 

DATE: FEB23~ 

TO: June Gibbs Bron 

bspector General 

. 

FROM: BIuce C. VladW & N 

Administrator 

% 

‘~JE~:	 office of hspectorGeneralDraftReport: “MedicarePaymentsfor 

~onprof~ional Sem”~ iIISki]]edNu~@ FaCi]itie$n (OEI--O6-92-W8&) 

We reviewed the subject repoti which e~in~ the approptiaten~ of allowing Part B 

pqnmt for nonprofmionalsam-w includedin theextendedcare or skillednursing facilitybenefit .Our co~ents are atiched for your considemti~. 

Thank YOUfor the”oppo~ni~ to review and co~ent on this report. Please advise us 

if you would like to discuss our position on the repoti’s recommendations. 

At@chment 

I 

c-5 
Commentsof the I-XealtbCare FinancingAdministration[HCFA) 

on C)ffice of Inspector General (OIG) Draft Report: 

“Medicare Payments for Nonrxofessional Services in Skilled 

Nursine Facilities [SNFS’ 

[OEI-06-92-00864) 

OIG Recommendation 1 

HCFA should develop a regulation or ]egi.s]ative recommendation, as appropriate, to 

establish an enforceable requirement for SNFS to provide cover~ %rvices within the 

Part A payment rate. 

HCFAResoonse 

We concur. We developed a legislative proposal that includes a SNF bundling 

requirement. This proposa] would require SN’Fs to provide all nonprofessional services 

or supplies furnished to their patients, thus no paptent wou]d be made under Part B. 

This program change should help to Contro] ovemti]~tion of these services and result in 

reduced cost-shanng for bene~ciariea since they would no longer be required to pay

deductiblesand cotisuranw.’~is Wou]dah ~ist HCFAin trackingthe costof care in 

SNFSand developing a SNF prospective payment system. 

OIG Recommendation 2 

HCFA should clarify the Residents’ Rights regulations, CFR 42483.10, as to whether 

the care and seMces defined as included in the Medi~re and Medimid rate are 

rquired to be provided by the facility. 

liCFAR emonse 

We do-not concur. ne re~lation is clear~ re~ted to both Medicare and Medicaid 

beneficiaries. Requiring the faciuty to tic]ude ~~ WMeS in is Part A bill could be 

accomplished only through legislation to prohl%it outside mppliem from billing for 

unbundled SeMCeS under part B. we do be&re, how~er, that it would be prudent to 

clarify 42 CFR 483.35 (Die@ry Sefi~) to include parenteral and enteral nutrition. 

Additional Comments 

We be[ieve the report wou]d be more helpfil to its Congre=iona] rca&rs if it began with 

a clear statement along the following lines 

C-6

-, 

Page 2 

“Thecurrent fragmentedmwmerin whichMedicarepayment is made for SNF 

residents is a result of stitutory prcwisionsorigh~y timnded toensureaccessto


carg.‘l%is reportamp]ydemonstrates thattheability
 ofa SNF tomake useof


both Part A and Part B to undenvrite care to its residents results in increased 

progmm expendituresandwasteandmaydissipatethe SNFSincentivesto oversee 

the totalpackageof care the residentreceives.” 

“Changesin Medicarepaymentrulesto ensurethatMedicare’sSNFpaymentsare 

appropriatewouldne~ to be madeiIItie ]aw. Giventie ]Ongstindingnatureof 

the currentbusinesspracti~s of SNFS and de PW B Suppfiers,Stitutorychange 

is th: >alywaythat changecouldbe effectivelyimplemented.’ 

Background Section: 

o	 ‘f’he first sentence is misl~tig. part A SNF StqS are dependent on a 

specfic set of conditions necessary for coverage that may result in up to 

100 days of covered care per benefit period. 

o	 The foknving statement is made %e ktent of this benefit is to shorten 

hospital stays while still prw”ding Covemge for a patient who requires 

regularnursingand professionalintervention.-It is incorrectto state that 

the intentof the benefitisto prtide Wenge forregularnursingand 

professionalintervention.-SNFcoverageis dependentupon the need for 

skilled aeMCCS on a daily br@ fo~owing a prior 3-day quali~ng hospital 

stay, which as a practical matter can be furnished only in a SNF. 

.

o. Please define “nonprofessional institutional service.” 

0	 The sentence, “Thus, payments should not be made under Part B for these 

seMces” is a conclusion and should not appar k tie background section. 

Section 1819(b)(4)(A)(iv) of the S- Security Act currently allows for 

paymentof certainservicesundereitherPartA or PartB. 

Introduction: 

o	 The conclusion that “separate payments for these seMces under Part B 

would seem inappropriate” is the purpose of the repo~ not the 

background. 

c-7 
‘Page 3 

0 

Findings: 

o 

0 

0 

0 

0 

Discussion: 

o 

The report’s reliability and validity could be enhanced with a more detailed 

discussion on the methodology utihd to select claims, how the data base 

of valid and reliable claims was developed !mw a statistically valid sample 

size was determined, what data elerncnts were utilized in the analysis, 

which files within the common working file were utilized, and how the 

matching of Part A to Part B stays was performed. 

The ability of SNFS to provide servkxs under arrangements does not 

remove responai%ifity from the SN’F for tie ove.ra]l care provided to a 

beneficiary. It does allow the faci%ty,to the extent allowed by law, to 

determine what cows will be subject to tie SNF routine cost limit. 

Please state the source of the figures relating to pnyments to SNFS for 

enteral services, surgical dressing% and incontinent care items. 

To tie resident rights and quality of care issues to a loophole in the law 

that specifically aUows for payment of these servicxx (enteral nutrition, 

incontinence care, and surgical dressings) under the Part B benefit is 

fallacious. Further, there has been no violation of resident rights if the 

facility has informed the resident of facility charges as specified under 

42 CFR 483.10@)(6). Further, the report does not demonstrate that 

payment of these services under Rut B has causeda negative outcome 

relating to quality of care nor has it presented a factual basis to promote 

this finding. 

Similarly, the statement that the practice of billing incontinence care 

seMces under Part B may have the appearance of compromising the 

quality of care provided is not substantiated and not supported by factual 

analysis. 

Failureto includeincontinenceservicesunderPart A is not a failureto 

observeresidentrightsif the facilityhas informedthe residentof facility 

chargesasspecifiedunder42CFR483.10(b)(6). 

These semices are considered ancilla~ costs under Part A and are paid in 

full and are not included in the SNF ~outine cost Iimit. How will inclusion 

of these expenditures as ancillary costs under Part A reduce Medicare 

costs? SNFS are required to act as prudent purchases for these specific 

services. 

C-8 
Page 4 

0	 Is the OIG indicating that these services should not be paid as ancillary 

cos~ but be subject to the SNF routine cmt limit? If so, we believe that it 

- is unlikely that SNFS would act as pmdent purchasers without increasing 

their costs over the limi~ when they are able to apply for exceptions to the 

SNF routine cost limits. IIIview of this it is unclear where the cost savings 

to the program are to come from. 

o	 Did the OIG question if tie intermediari~’ edi~ were turned on to check 

for incorrect coding? TO speculatemat it is lackof knmIedge by suppliers 

is not recognizing the unive~ of potenti~ pr~lem areas mat are directi 

program related. The OIG may wish to consider this issue more closely 

and make recommendations for improvement, 

c-9 
COMMENTS OF THE ASSISTANT SECRETARY 

FOR PL_G AND EVALUATION 

,..,-,,% 

‘~.

#, DEPARTMENTOF HEALTH& HUMAN SERVICES [G ~tce of the Secrela!y 

SAIG / 

“:.5 PDIG /

~ashington. D C 20201 

DIG-AS . ~ 

MAR I 3 1995 c~~n < 

DIGO1 —


To: June Gibbs Brown AKXXAA _


Inspector
General AIG-MP _


OGC/lG ~ 

From: Assistant Secretary for EXSEC / 

t Planning and Evaluation DATE SENT.-. 

Subject:	 OIG Draft Reports on Medicare Payments for Nonprofessional Serviees in Skilled Nursing Facilities 

We have reviewed the draft inspedon report entitled, “Medicare Payments fa 

Nonprofessional Services in Skilled Nursing Facilities”. The report discusses deumre 

coverage of non-professional services in skilled nursing facilities (SNFS) and Iwzwnta 

concernswithcurrentcoveragepoliciesthat permitcovemgeof theseseM% m= 

eitherPartsA or Bon behalfof personstiding in SNFS.Whilewegenerallyagree 

withthe findingsin thisreport,wehavethe followingcomments. 

A footnote indicates that the scope of the report is limited .to persons residing in SNFS 

during a Part A covered stay -(p. 14, footnote 2). We believe this information -to be. 

significant and recommend - the scope of this report be incorporated in the text of the 

rqort rather than only referenced as a footnote. 

While providing no evidentiary Wls, the report suggests that allowing Part B coverage 

for servhx may have a negative impact on the qudty of care. For example, the report 

states ht “aIlowing suppliers to provide enteral services appears to raise quality of care 

eoncems” (p. 6). Further, the report in sever-alinstancesimpliesthat allowingfor Part B 

coverage for SNF residents relievesSNFSof their responsibtities (e.g., pp.i,4,6, etc.). 

These claims should either be substantiated or elirnizkted from the report. 

The report states that “@aying for these setices and supplies under Part A could save 

Medicare money and reduce improper incentives for providers” (p. 9). The report also 

indicates that in 1992 beneficiary liability for these services under Part B was almost $20 

million and aelmowledges that these costs, now paid by beneficiaries, would shift to the 

progmm if they wem shifted to Part A. The report fails to indicate why or how saving 

wmdd accrue under the proposal, but instead identifies the bask for added Medicare 

- The rationale that SNFS would be prudent purchasers is hardly compelling. 

Finally, given the absence of Part A fee seheduks or cost limits for some of these 

services, Part A payments may not be less than Part B payments. In sum, the report 

ti to clarify its claim that Medkare could save money if Part B payments were 

prohibited for persons residing in SNFS during a Part A covered stay. 

One recommendation advanced in the reporl is that HCFA develop a regulation or 

legislative proposal that would require SNFS “to provide covered services withii the Part 

c-lo 
.-

‘A payment rate.WWhile we generally agreewiththethrust of&s recommendation,we 

suggest itbe clarified. As discussedin the report, SNFS may be considered suppliers of

non-prof~iond serviees and, as such, may bill Part B. Thus, a recommendation 

requiring.SNFSto “provide’ covered seMees W not be sufficient to prohibit Part B 

payments for nonprofessional services. In addition, given that the report is limited to 

persons residing in SNFS during a Part A eoverti stay, we recommend the 

recommendation be modified accordingly. This reeommemiation could be rewritten as 

follows: 

Prohibit entitiesother than the SNF from seeking eovemge on behalf of persons 

in Part A covered SNF stays for enteral nutrition, ineontjnenee care and surgical 

dressing and limit Me&are eovesage of these services to Part A. 

T%e intent of the reeommm&tion to ckrify that tihts’ rights include the SNF’S 

obligation to provide care and services is unckar. Why this recommtition is needed 

and its effect need to be explained. Although current residents’ rights requirements do 

not explicitly provide a right to receive needed care and services provided by the facility, 

elsewhere in the regulations them is a requireww t that facilities provide needed services 

(e.g., 483.2S). l%e report provides no evidencethat t%ilities have t%iledto provide 

needed services. If the intent of this recommention is to prohibit beneficiaryfinancial 

lhbility for enteral nutrition, incontinence am, and surgical dressings, it should be 

modified to require inclusion of these services in the facility’s Part A payment (and 

therefoxe not payable under Part B) and, by so doing, exempt K&&nts from charges for 

these services, 

David T. Ellwood­

_ by: SU~ ~wl 690-7862 and Jennie Harvell 690-644s 

C-II