Department of Health and Human Servces


OFFICE OF


INSPECTOR GENERA


LOW-COST ULTRASOUND EQUIPMENT


$9vr 

Richard P. Kusserow 

INSPECfOR GENERA rr 

OEI-03 1401 
EXECUTIVE SUMMAR 


PUROSE 

This report reviews the appropriateness of Medicare reimbursements for tests 

conducted with low-cost ultrasound equipment. 

BACKGROUN 

Diagnostic ultrasound tests are covered servces under Part B of the Medicare 

program. Medicare law prescribes certain coverage criteria for ultrasound tests. 

Primarily, a test must be "reasonable and necessary" for the diagnosis or treatment of 

a beneficiary s ilness or injury. In addition, the test must be conducted or ordered 

by a physician or performed under the physician s general supervsion. 

Used chiefly as a diagnostic technique, ultrasound is used in lieu of high-risk invasive 

procedures to detect internal diseases and abnormalities. A wide range of 

specialties, such as cardiology, gyecology, and vascular surgery, use ultrasound as a 

diagnostic tool. Ultrasound devices send soundwaves into the body producing echoes 

as they encounter differences in tissue structures. The data produced by the echoes 

can be transmitted into an image which can be recorded in color as well as black 

and white. 

Low-cost ultrasound equipment has gained more prominence in the medical 

marketplace in the past 20 years. Our recent report on noninvasive, diagnostic 

testing (Quality Assurance in Independent Physiological Laboratories, OAI-03-88-

01400), identified a number of concerns regarding this equipment. Primariy, these 

concerns center on the lack of regulation and oversight of these kinds of medical 

equipment devices. 

MEODOLOY 

We obtained information about the capabilties of ultrasound equipment from a 

variety of sources including medical diagnosticians, manufacturers, and technical 

publications. We reviewed data concerning specific ultrasound servces and 

corresponding procedure codes from Medicare Part B payment records. 
MAOR FIINGS


A Varity of Ulasoun Eqpment Exts 

An extensive array of ultrasound equipment, exists in the medical marketplace. 

Equipment ranges from small, hand-held devices, popularly known as "Pocket 

Dopplers " to complex equipment which can perform a variety of tests. Costs range 

from $200 for a Pocket Doppler to more than $300 000 for state-of-the-art 

equipment. 

Medicare Cod Fail to Ditiguh Between Test Type or Res 

Medicare procedure codes do not differentiate between the extent of a test or the 

nature of test results. 

Thre are Strng Incenties for Exese Use of Pocket Dopple 

A 5-minute scan by a $300 Pocket Doppler can yield a payment of over $100. Thus 

excessive payments can be claimed for a relatively simple screening test based on a 

comparatively modest investment. 

Th HCF A is Vulble to Inapproprite Bilgs 

Medicare carrers lack sufficient safeguards to detect ultrasound bilings based on 

inferior test results.


A Precednt Exts to Deny Payt for Pocket Doppler Tests 

In a previous decision regarding small diagnostic equipment, HCF A ruled that a 

portable hand-held x-ray instruent - a device comparable to the Pocket Doppler ­

should be reimbursed as part of the physician s professional servce, and no 

additional charge should be allowed. 

RECOMMATIONS 

The HCFA should (1) prohibit payment for tests conducted with Pocket Dopplers 

and (2) advocate revisions in procedure codes and reimbursement rates to reflect the 

different levels of sophistication and quality of diagnostic information provided in 

ultrasonic vascular testing. 
COMM and OIG REPONSE 

The RCF A concurred with our recommendation to prohibit payment for tests 

conducted with Pocket Dopplers. In the future, such tests will be paid as part of the 

physician s professional servce, and no additional charge will be allowed. 

The RCF A disagreed with our recommendation to revise procedure codes and 

reimbursement rates to reflect the different levels of sophistication and qualty 

provided in ultrasound tests. They indicated they may base payments on lithe level 

of treatment delivery, " rather than acquisition costs. 

Our report recommends that payment be based on different levels of sophistication 

and diagnostic quality, not equipment acquisition costs. If we interpret HCF A' 

response correctly to mean that the codes should encompass the nature and the 

quality of diagnostic testing, we believe our recommendation mirrors HCF A' 

intentions to base payments on "the level of treatment delivery. 

We contiue to believe that RCFA should advocate revisions in procedure codes 

reflecting the various levels of sophistication and quality of diagnostic information 

provided in ultrasound tests. This effort, combined with adjusted reimbursement 

rates, should result in more equitable reimbursement for these tests. We have 

modified our recommendation to give RCF A greater flexibility in achieving this 

result. 

We understand RCF A has encouraged procedure code revisions in vascular tests 

during recent contacts with the American Medical Association s editorial board. 

We support such efforts and encourage continued attempts until appropriate changes 

have been implemented.


We recently issued a Management Advisory Report quantifyg Medicare 

reimbursements and potential savings on Pocket Dopplers. We also plan to issue a 

related second report providing RCF A with information on "Zero-Crossing" devices ­

ultrasound equipment similar to Pocket Dopplers. 
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. .

TABLE OF CONTENTS


EXECUTIV SUMMAY 

INODUCfrON . . . . . . . . . . . 1


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


RECOMMENDATIONS 

APPENDIX A: CPT Definitions of Procedure Codes . . . . . . . . . . . . . . . .. . AAPPENDIX B: Comments ..................................... B­

INTRODUCTION


PUROSE 

This report reviews the appropriateness of Medicare reimbursements for tests 

conducted with low-cost ultrasound equipment. 

BACKGROUN 

Diagnostic ultrasound tests are covered servces under Part B of the Medicare 

program. The Health Care Financing Administration (RCFA) has issued gudelines in Medicare Carrers Manual Section 50-7 which states: "The use of the ultrasound 

technique is sufficiently developed that it can be considered essential to good patient 

care in diagnosing a wide variety of conditions. 

Under Medicare law, diagnostic tests, such as ultrasound, must meet certain coverage criteria. Priariy, a test must be "reasonable and necessary" for the diagnosis or 

treatment of a beneficiary s ilness or injury. Further, the test must be conducted or 

ordered by a physician or performed under the physician s personal supervsion. 

Typically, ultrasound tests are conducted in a physician s office, independent 

laboratory, or outpatient hospital facilty. 

The RCF A requires Medicare carriers to apply safeguards against unnecessary 

utilization of servces furnished by physicians and other providers of servces. 

Carriers conduct prepayment and postpayment reviews designed to detect 

inappropriate, noncovered, or excessive servces. Measures used to correct abuses 

include overpayment recoveries and remedial counseling. 

Ultrasound is one of the most important developments in medical science in the last 

40 years. Primarily used as a diagnostic technique, ultrasound is used in lieu of highrisk invasive procedures to detect internal diseases and abnormalities. 

A wide range of specialties, such as cardiology, gyecology, and vascular surgery, use 

ultrasound as a diagnostic tool. Ultrasound devices send high-frequency soundwaves 

into the body producing echoes as they encounter differences in tissue structures. 

The data produced by the echoes can be transmitted into an image which can be 

recorded in color as well as black and white. Typically, the tests are conducted by 

specially trained individuals known as ultrasonographers or, more commonly, 

sonographers. 

Ultrasound equipment has evolved into different levels of technological sophistication 

with corresponding price ranges. In particular, low-cost ultrasound equipment has 

gained more prominence in the medical marketplace in the past 20 years. Our 

recent report on noninvasive, diagnostic testing (Quality Assurance in Independent 
Physiological Laboratories, OAI-03-88-01400), identified a number of concerns 

regarding this equipment. Primarily, these concerns center on the lack of regulation 

and oversight of these kinds of medical equipment devices. 

The Food and Drug Administration (FDA) has never established performance 

standards for any medical devices, including low-cost ultrasound equipment. 

accordance with the 1976 amendments to the Federal Food, Drug, and Cosmetics 

Act, FDA clears a new device for marketing if it has the same intended use or is 

substantially equivalent to a preenactment device. Low-cost ultrasound equipment 

met this requirement. However, even though performance standards have not been 

developed, FDA uses its own draft guidance instructions to manufacturers and 

voluntary standards to evaluate the performance of ultrasound devices. 

A comparison of 1987 and 1988 Medicare payment records reveals a marked 

increase in diagnostic ultrasound tests. Allowed charges for abdominal ultrasound 

tests reflect a 14 percent increase from 1987 to 1988. Five commonly performed 

ultrasound tests related to vascular diseases increased by approxiately 25 percent 

from 1987 to 1988. Allowed amounts for the 5 tests exceeded $97 millon, an 

increase of more than 34 percent. 

METIODOLOGY 

We obtained information about the capabilties of ultrasound equipment from a 

variety of sources. These sources included medical diagnosticians, equipment 

manufacturers, equipment evaluation organizations, and physiological laboratories. 

We selected respondents based on recommendations provided by experts in 

physiological testing. Our analysis focused on information presented in technical 

journals and periodicals on the performance characteristics of different levels of 

ultrasound devices. We studied materials obtained from equipment manufacturers 

which detailed technical specifications and principles of operation for their 

equipment. We contacted 15 Medicare carrers to determine if they had any special 

policies regarding tests conducted with Pocket Dopplers. In addition, independent 

diagnostic centers and hospital physiological laboratories sent us internal manuals 

describing step-by-step applications of ultrasound instrumentation in various tests. 

We also solicited and reviewed publications and materials submitted by industry 

associations. 

We obtained pertinent statistical information concerning ultrasound servces and 

corresponding procedure codes from HCF A's Part B payment data system. 
FINDINGS


VAR OF ULTROUN EQUIME EXI 

An extensive array of ultrasound equipment :exists in the medical marketplace. The 

gamut of equipment extends from small, hand-held devices, popularly know as 

Pocket Dopplers " to complex, state-of-the-art equipment which can perform a 

variety of intricate tests. Equipment costs range from $200 for a Pocket Doppler to 

more than $300 000 for state-of-the-art equipment. 

The Pocket Doppler is a relatively unsophisticated and inexpensive instrument to 

operate. A hand-held device, often shaped like a ballpoint pen, the tyical Pocket 

Doppler works on a rechargeable 9-volt battery. It transmits a high frequency 

soundwave into the tissues. Soundwaves reflected from internal organs or the flow 

of blood shift in frequency by an amount proportional to blood flow velocity. The 

reflected sound is received and processed as an audible signal or recordable 

waveform. Typically, the Pocket Doppler is nondirectional (Le., it is incapable of 

determining the direction of blood flow), and produces audio signals only. These 

devices are marketed as ultrasound equipment and generally cost between $200 -

$600. 

The two principal methods of documenting test results are analog waveform analysis 

and spectral waveform analysis. Analog waveform ana1ysis provides a single 

frequency display of the soundwave whereas spectral analysis records multiple 

quantitative frequencies. The less costly analog system has been likened to recording 

the average speed of all the cars on a highway while the spectral device records the 

individual speed of each car. 

Manufacturers market Pocket Dopplers to many specialties for a variety of uses. 

Since it is designed primarily to detect a pulse or the flow of blood, its pricipal uses 

are in obstetrics and vascular diseases. Obstetricians use Pocket Dopplers to detect 

and monitor fetal heartbeats. Vascular surgeons and other practitioners, who treat 

diseases of the veins and arteries, employ these instruments to determine 

abnormalities in blood flow. Other specialties who frequently use Pocket Dopplers 

include internists, anesthesiologists, and podiatrists. They are also used in special 

situations, such as at the scene of an accident, in an emergency room, and as an 

adjunct to more complex ultrasound equipment. 
Oinicians who want to use a device more sophisticated than the Pocket Doppler, but 

stil relatively inexpensive, have a variety of equipment to consider. Typically, these 

devices are bidirectional (capable of determining the direction of blood flow), and 

produce objective evidence such as a strip-chart record or graph. Some tyes come


with interchangeable probes and optional accessories depending on the depth and 

sensitivity of the tissues examined. Generally, devices in this category cost between 

$600 - $5 000. 

Diagnostic ultrasound tests are usually conducted using "mid-level" equipment. This 

equipment costs from $15 000 to $60 000 and offers a wide range of sophisticated 

options, such as remote control, selectable frequency ranges, and video spectru analysis of blood flow measurements. More expensive equipment offers twodimensional displays, computerized analysis, and color-flow imaging. Devices 

equipped with color-flow imaging produce video pictures of blood flow velocities in 

combinations of red, blue, and green. Changes in the intensity of color and blood 

flow velocity can indicate an irregularity, such as a blockage. 

State-of-the-art equipment may exceed $300 000 depending on the manufacturer, the 

technological sophistication of the device, and the number of options available. 

Although stil in the experimental stage, some devices are capable of producing 

three-dimensional pictures of clogged arteries and cross-section images of damaged 

blood vessels. 

MEDICAR CODES FAl TO DISTIGUISH BETWEN TE TYES 

REULTS 

Medicare reimbursements for diagnostic ultrasound tests are linked to a procedure 

code system known as the Health Care Financing Administration Common Procedure 

Coding System (HCPCS). Under HCPCS, physician servces are reported as fivedigit codes defied in the American Medical Association Cu"ent Procedural Terminology (CPT). The physician or diagnostic laboratory conducting a test requests 

payment by submitting a claim form to the servcing Medicare carrier indicating the 

appropriate HCPCS code. 

Under the HCPCS system, however, there is no differentiation between the extent of 

the test or the nature of test results. Thus, reimbursement for any particular 

ultrasound test is paid at the same rate without regard to the extensiveness of the 

test or the quality of the data produced. For example, procedure code 93910 

(noninvasive studies of the lower limbs), cites five possible elements of this test. 

(See Appendix A for CPT definitions of procedure codes used in ultrasound tests. 

If a practitioner perfonns anyone of the elements, he is legitimately entitled to claim 

the same reimbursement level as someone who conducts an exhaustive test producing 

more sophisticated results. "The codes do not distinguish the differences in testing, 

one expert said. 
The chart below compares the claims processing results of the same test conducted 

with different levels of equipment and yielding, as a result, dissimilar levels of 

diagnostic evidence.


VASCULR TEST OF LOWER LIMBS 

Type of Pocket Doppler Automated imaging 

Equipment system with 2­

dimensional and 

color doppler


capabilty 

Price of 

Equipment $200-$600 $60 000 - $100 000 

Data Analysis Audio Signals Only Computer-enhanced 

high -res 01 u tion 

color image of 

blood flow 

anatomical parts 

and pathology 

Exten t of 1 Artery Multiple Arteries 

Test 

Length of 5 - 10 minutes 45 - 60 minutes 

Test 

HCPCS Code 93910 93910 

Average $135 $135 

Charge 

Average $97 $97 

Allowance 
, 

There are Strong Incenties for Excessive Use of Pocket Dopplers 

As the chart above indicates, a 5-minute scan by a Pocket Doppler results in the 

same reimbursement as a I-hour scrutiny of multiple arteries using sophisticated 

state-of-the-art equipment costing $100 000. As a result, excessive payments can be 

claimed for a relatively simple screening test based on a comparatively modest 

investment. 

One intervewee who had attended a demonstration of Pocket Dopplers given by a 

manufacturer described the event as reimbursement sellng. " The manufacturer, he noted, continually stressed the financial benefits the device would bring in relation to 

the time and expertise required to operate it. Another manufacturer routinely 

included procedure code descriptions and corresponding payment ranges in its sales 

brochures. 

The RCF A is Vulerable to Inappropriate Bilgs 

Medicare carrers do not have suffcient systemic and utilzation safeguards to detect 

ultrasound billngs based on unsophisticated or inferior test results. However 

although RCF A does not require carriers to determine the tye of equipment used 

to perform vascular tests, some carrers have initiated efforts to ascertain this 

information. Most carrers do not have the means or the resources to capture this 

information or to investigate each claim. 

In an attempt to quantify the extent of Medicare billngs involving low-cost 

equipment, we obtained sales figures from equipment manufacturers. According to 

these sources, at least 100 000 Pocket Doppler units are in active use in the medical 

community. Approximately 20 000 new units were sold in 1990. The most frequent 

purchasers include hospitals, obstetricians, vascular specialists, and podiatrists. We have released a Management Advisory Report quantifyng the monetary effects of 

prohibiting distinct coverage for Pocket Dopplers. 

A Precedent Exts to Deny Payment for Pocket Doppler Tests 

The HCF A previously established a precedent regarding the coverage of small 

diagnostic instruments. Medicare Carriers Manual section 50-48 (Coverage Issues ­

Diagnostic Servces) details the usage of a portable hand-held x-ray instrument, a 

device we consider comparable to the Pocket Doppler. This section states: "The 

use of the portable hand-held x-ray instrument as an imaging device is covered under 

Medicare. It should be reimbursed as part of the physician s professional servce 

and no additional charge should be allowed. 
Some carrers have taken action to prevent inappropriate payments. Eight of the 

carriers we contacted deny payment for ultra50und tests if they know Pocket 

Dopplers were used to conduct the tests. Some carriers, through prior utilization 

contacts, have compiled lists of the kinds of equipment providers use in their servce 

areas. One carrier utilization review representative contacts providers during claims 

processing if there is any question concerning the tye of equipment used: 

Several carrers have instituted wrtten policy changes designed to curb unwarranted 

reimbursements. A written policy implemented by Blue Shield of Alabama was 

tyical of carrers which decided to deny payment for Pocket Doppler usage. The 

policy states: "No reimbursement is allowed for a simple hand-held doppler device 

as this is considered to be a part of the physical examination of the vascular system. 

Pennsylvania Blue Shield implemented a policy change effective March 1 , 1990 

preventing payment for Pocket Dopplers. For vascular tests to be reimbursable, the 

policy requires that equipment: (1) must produce a hard-copy report for objective 

review, and (2) must be bidirectional or capable of determg blood flow diecton. 

The carrer plans to conduct postpayment reviews to monitor adherence to its policy. 

Four carrier representatives stated that Pocket Doppler examinations should be 

considered part of the office visit. " s just an extension of the doctor s servce " one 

medical director said. Another representative compared the Pocket Doppler to a 

mechanical device used by a chiropractor. "Medicare only pays a chiropractor if he 

uses his hands to do a manual manipulation. There is no extra payment if he uses 

a mechanical device. 
RECOMMENDA TIONS


The HCFA should 

prohibit payment for tests conducted with Pocket Dopplers, and 

advocate revisions in procedure codes and reimbursement rates to reflect 

the different levels of sophistication and quality of diagnostic information 

provided in ultrasonic vascular testing. 

SUMY OF RECOMMATIONS AN AGENCY COMM 

The HCFA concurred with our recommendation to prohibit coverage for tests conducted with Pocket Dopplers. They plan to issue a claims manual instruction 

treating Pocket Doppler tests in a manner similar to portable hand-held x-ray 

instruments (Medicare Claims Manual section 50- , Coverage Issues - Diagnostic 

Servces ). 

The HCFA disagreed with our recommendation to revise procedure codes and 

payment rates to reflect different levels of sophistication and diagnostic quality 

provided in ultrasound tests. According to HCF A, it is not a good idea to base payments totally on equipment acquisition costs. Instead, HCF A, which compared vascular testing to radiation therapy servces, intends to base payments on "the level 

of treatment delivery. 

Our report recommends that payment be based on different levels of sophistication 

and diagnostic quality, not equipment acquisition costs. We believe our 

recommendation--if we interpret HCF A's response correctly to mean that the codes 

should encompass the nature and the quality of diagnostic testing--mirrors HCFA' 

intentions to base payments on "the level of treatment delivery. 

We continue to believe that HCFA should advocate revisions in procedure codes 

reflecting the various levels of sophistication and quality of diagnostic information 

provided in ultrasound tests. This effort, combined with adjusted reimbursement 

rates, would result in a more equitable reimbursement system for these tests. 

have modified our recommendation to give HCF A greater flexibility in achieving this 

result. 

We understand HCFA has encouraged procedure code revisions in vascular tests 

during recent contacts with the American Medical Association s editorial board. 

We support such efforts and encourage continued attempts until appropriate changes 

have been implemented.

The Assistant Secretary for Management and Budget provided comments supporting 

our findings and recommendations. The full: text of these comments, as well as 

HCF A' s comments, are contained in Appendix B. 

In addition to the Management Advisory Report on Pocket Dopplers, we wi soon 

issue a related second report providing HCF A with information regarding "zerocrossing" devices--ultrasound equipment similar to Pocket Dopplers. 
APPENDIX


CP DEFIONS OF PROCEUR CODES USED IN ULTROUN TETS 

(Note: Pocket Dopplers. are capable of performing only those elements shown in 

boldface. ) 

Cerebrovascu Arer Stu 

93850 Non-invasive studies of cerebral arteries other than carotid (e. 

periorbital flow direction with arterial compression, periorbital 

photoplethysmography with arterial compression, ocular plethysmography 

with brachial blood pressure, ocular and ear pulse wave timing, vertebral 

arteries flow direction measurement) 

93860 Non-invasive studies of carotid arteries, non-imaging (e. 

phonoangiography with or without spectrum analysis, flow velocty patt 

evuation, analog velocty wave form analyis diastolic flow evuation) 

93870 Non-invasive studies of carotid arteries, imaging (e. , flow imaging by 

ultrasonic arteriography, high resolution B-scan with or without pulsed 

Doppler flow evaluation, Doppler flow or duplex scan with spectrum 

analysis) 

Lim Areril Stu 

93890 Non-invasive studies of upper extremity arteries (e. , segmental blood 

pressure measurements, contiuous wave Doppler analog wave form analis evocative pressure response to exercise or reactive hyperemia, 

photoplethysmographic or pulse volume digit wave form analysis, flow 

velocty signal) 

93910 Non-invasive studies of lower extremity arteries (e.g., segmental blood 

pressure measurements, contiuous wave Doppler analog wave form analis evocative pressure response to exercise or reactive hyperemia 

photoplethysmography or pulse volume digit wave form analysis, flow 

velocity signal) 

Venous Stu 

93950 Non-invaive studies of extemity vein (e. , Doppler studies with 

evuation of venous flow patterns and responses to compression and 

other maneuvers, phleborheogrphy, impedace plethysmography) 
93960 Quantitative venous flow studies (e. , capacitance and outflow 

measurement of calf, measurement of calf venous reflux, quantitative 

photoplethysmography) 

Othe Dign Uloun Tes Commnl Perorm 

Echography, pregnant uterus, B-scan and/or real time with image 

documentation; complete (complete fetal and maternal evaluation) 

Limited (gestational age, hear beat, placental location, fetal position, or 

emergency in delivery room) 

Follow-up or repeat (see 76815)


Echography, transvaginal 

Echogrphy, pelvc area (Doppler) 

Echography, scrotum and contents 

Echography, periphera vascular sytem (e.g., B-sca Doppler or realtie sca)


Echography, head and trunk, vascular system (e. , duplex Doppler) 

76805


76815


76816


76830


76855


76870


76925


76926


A ­
APPENDIX 


COMMNT 
.? .... , . 

, 

r.u 

DmAS 

Health Car. 


DEPARTMENTOFHEALTH&.HUMANSERVJI 

't Adm a =k c :
 Date Administrator C1(L DATE BE '- ;8ndurr 

Heal th Care Financing Administration


;:rom 

OIG Draft Report: LoW-Cost Ultrasound Equipment, -;1

OEI-03-88-01401 

Subject 

The Inspector General ""1 

Office of the Secretary


Thank you for the opportunity to comment on the above


referenced draft report discussing the appropriateness of Medicare payment for certain types of ultrasound equipment. 

We concur with the recommendation that HCFA should


prohibit payment for tests conducted with Pocket Dopplers under the Medicare program. We recently presented this 

issue to our Coverage/Payment Technical Advisory Group
 and the members advised us that Pocket Dopplers are part of the physician I s armamentarium and, like ordinary 

stethoscopes, should not qualify for separate payment
 under the program. Accordingly, we are preparing a 

manual instruction that will limit Medicare payment for tests conducted with the Pocket Doppler in a manner


similar to the way in which we limi tea payment for


portable hand-held x-ray units in section 50-48 of the


Coverage Issues Manual: They will be paid for as part of
 the physician s professional service with no additional
 charge allowed. 

We disagree with the recommendation that HCFA revise


procedure codes and payment rates to reflect the
 different levels of sophistication and quality of diagnostic information provided in ultrasound tests. 

far as the hand-held devices are concerned, we do not believe that revised procedure codes or payment levels are needed, since such procedures should be payable through visit or other physicians I service codes, and


ul trasound codes should never be billed. However, 

should make clear that the codes for ultrasound 

procedures do not apply to the hand-held device. 

wi th respect to the mid-level and upper-level equipment, it is not clear that any action is needed. Further, we do not believe it is a good idea to base payments totally
 on the acquisition costs of the equipment used in providing the service. We are facing a similar problem


with regard to radiation therapy services furnished in 

ambulatory settings. In such situations, the state-of-

Page 2 - The Inspector General


the-art equipment can deliver treatments at all levels, and we intend to base payments at the level of treatment
 deliver! ra her than he acquisition cos s of the equipment. 

Since your office is completing a follow-up study to


determine the extent to which carriers are paying doctors


for ultrasound tests conducted with Pocket Dopplers, we
 request that you defer a determination of potential
 savings until that study is completed. 

Attached are additional comments on technical aspects of
 this report. Please advise us whether you . agree with our position on the report' s recommendations at your earliest convenience. 

Gail R ::nsky, Ph. D. 

Attachment 
Heal th Care Financina Administrion 

Comments on Office of the Ins or General


Draft Re ort - "Lo , Cos Ultrasound EauiDment" (OEI-03-88-01401) 

Procedure Codes


In specifying which Common Procedural Terminology (CPT


codes met the definition of "radiology services" for purposes


of payment under the fee schedules for radiologist services, 42 CFR 40S. 530(c) (1) included those ultrasound services in the


CPT-4 70000 series and excluded those in th 90000 series.


The American College of Radiology has indicated that, for the
 subgroup of procedures classified as ultrasound procedures,


the relative value scale it developed for pUrposes of payment


under the fee schedules for radiologist services reduced the


values assigned to ultrasound procedures by 2 percent. This reduction affected procedures furnished by fee schedule


physicians on or after April 1, 1989.


Effective for services furnished on or after April 1, 1990,
 the prevailing charges for CPT-4 codes 76925 and 76426 were
 limi ted by the radiologist fee schedule amounts in those 

localities in which carriers recognized specialty
 differentials. Furter, section 4102 (c) of the Omnibus Budget Reconciliation Act (OBRA) of 1990 establishes the radiologist 

fee schedule amounts in individual localities as limits
, on prevailing charges for all 70000 series procedures, including


ul trasound procedures , effective for services furnished on or 

after January 1, 1991.


As is the case with nearly all diagnostic procedures,


'11 trasound procedures have both a professional and a technical 

component. If the second recommendation relates only to the


equipment costs of mid-level and upper-level equipment, we


believe that the recommendation should specify that it applies
 only to the technical component of ultrasound procedures. 

this regard, we would point out that section 4108 of OBRA 1990 provides that the reasonable charge for the technical


component of certain high-volume diagnostic tests (including the applicable portion of the global service) may not exceed


the national median of such charges for all localities.


Reasonable charge allowances below the national median are not


raised to the national median level. CPT-4 procedure codes
 93850, 93860, 93870 , 93910, and 93950 are subject to this


limitation effective for services furnished on or after


January 1, 1991. 
Page 2


As far as radiologist fee schedule payments are concerned, we
 have seen no evidence to indicate that technical component paymant levels for ultrasound procedures are out of line. For example, code 76855 has a technical component relative value
 of 4. O. Using the 1990 weighted average conversion factor of $13. 20, the fee schedule amount for the technical component the procedure is $54. 12. This amount would be payable

regardless of the type of ultrasound equipment used to furnish the service and would seem to pale in compari on with 

technical component payments of $200 for computerized Axial
 Tomography (CT) procedures and over $400 for Magnetic Resonance Imaging (MRI) procedures. 

Billinas for Pocket DooDlers


It is not possible to determine the extent of billings for the
 use of Pocket Dopplers from existing Medicare Part B Service Data System (BMD) data. Billings can be determined by place
 of service, but canot be used to determine what device was 

used to perform the diagnostic test. The information 

presented in the report that the largest provider of ambulatory ultrasound services in the country estimated that 10-20 percent of in-office ultrasound tests were conducted


with Pocket Dopplers is also not very helpful. OIG' s estimate of $18 million in Medicare expenditures for the use of Pocket


Dopplers needs furter study and refinement. 
/ 

,,, _ ... : / .(. 

the Secetay (!Lr"..tA..n. 3 Offce of 

DEPARTMENT OF HEALTH &. HUMAN SERVICES SRd 

Washington. D. C. 20201 

JAN 2 8 1991 

C' ::


G) il' ;T 0 CJ 

usserow MEMORADUM TO: Richa - VI c:

Insp neral r ;gm

(" C7


FROM K V n E.
 Assistant ecretary for Management of Bud 

OIG Draft Report: II Low-Cost Ultrasound SUBJECT Equipment 03- i7 - II OIL/o/ 

I have reviewed the OIG draft inspection report entitled
 IILow-cost Ultrasound Equipmentll and I enthusiastically 

support the report findings and recommendations.


I would hope that HCFA would take action as soon as feasible


to implement the report recommendations and prohibit payment
 Addi tionally, HCFA for tests conducted with pocket Dopplers. 


should begin to revise current procedure codes and


reimbursement rates to reflect the varying levels of the
 used. ultrasound devices being 


I commend the Office of the Inspector General on their


excellent work in this area. 

18-

:2:JIG 

IJ: 1-;. 

C:' /IG
OFFCE OF INSPECTOR GENRA


The mission of the Offce 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 Servce 

(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 Offce of Audit 

Servces, the Offce of Investigations, and the Offce of Evaluation and Inpections. The 

OIG also informs the Secretary of HHS of program and management problems and 

recommends courses to correct them. 

OFFICE OF AUDIT SERVICE 

The OIG's Office of Audit Servces (OAS) provides all auditing servces 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 

carrng 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 INTIGATIONS 

The OIG's Offce of Investigations (01) conducts criminal, civi, 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 AN INSPECTONS 

The OIG's Offce 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 effciency, 

vulnerability, and effectiveness of departmental programs. 

The report was prepared by the Philadelphia Regional offce under the direction of 

Joy Quil, Regional Inspector General and Robert Vito, Deputy Regional Inspector General. 

Project Staff: 

Robert A Katz Project Leader 

Linda M. Ragone 

Cynthia R. Hansford 

W. Mark Krushat (Headquarters)

Wayne Powell (Headquarters)