Department of Health and Human Services 

OFFICE OF 

INSPECTOR GENERAL 

PAYMENTS FOR REFERRALS OF


PARENTERAL NUTRITON PATIENTS


A MANAGEMENT ADVISORY REPORT 

JULY 1993 
OFFICE OF INSPECTOR GENERAL 

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

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

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

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

inspections conducted by three OIG operating components: the Office of Audit Services, the 

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

the Secretary of HHS of program and 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 Office 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 efficiency, vulnerability, 

and effectiveness of departmental programs. This report was prepared in the Health Care 

Branch under the direction of Penny R. Thompson, ChiefCathaleen A Ahern, Project Leader 

Lewis Morris, Deputy Chief Counsel, Office of General Counsel, Inspector General Division 

For additional copies of this report, please contact the Health Care Branch at (410)966-3138. 
I Department of Health and Human Services 

OFFICE OF 

INSPECTOR GENERAL 

PAYMENTS FOR REFERRALS OF


PARENTERAL NUTRITION PATIENTS


A MANAGEMENT ADVISORY REPORT 

JULY 1993 OEI-12-92-00461

INTRODUCTION 

PURPOSE To alert the Health Care Financing Administration (HCFA) to payments


being made to End-Stage Renal Disease (ESRD) facilities for referrals of parenteral


nutrition patients.


BACKGROUND The Office of Evaluation and Inspections recently released a report


on inappropriate payments for total parenteral nutrition (TPN), a “high-tech” form of


artificial nutrition used by a small number of patients who lack functioning intestinal


tracts. (See OEI-12-92-00460.) In the course of that inspection, we discovered that


parenteral nutrition is used in ESRD facilities, in a way that does not comply with


Medicare’s coverage policies for this very expensive therapy. (When parenteral


nutrition is infused at the same time as a patient is being dialyzed, the therapy is


called “intra-dialytic parenteral nutrition” (IDPN).)


We recommended that HCFA instruct the specialty carriers who process claims for


TPN to adhere to a strict interpretation of the coverage guidelines, and that HCFA


review research concerning the clinical appropriateness of IDPN. The HCFA agreed


with these recommendations.


While we reported on the use of IDPN in that report, we limited our discussion to


coverage and clinical issues, rather than payment. In this management advisory


report, however, we wish to alert HCFA to a serious kickback vulnerability identified


in our research.


METHODS We examined a one-percent random sample of patients on whose behalf


Medicare paid claims for parenteral nutrients or supplies in 1991. When we found


that half the sample consisted of ESRD patients, we conducted a telephone survey of


93 randomly-selected ESRD facilities, inquiring about their use of IDPN, patient


selection criteria, their choice of a supplier, and other issues. The respondent was


usually a head nurse or other clinician, rather than a business officer. This survey


forms the basis of what we are reporting here. The extent of use and clinical criteria


for use of IDPN were discussed in the TPN report referred to above.


We conducted our review in accordance with the Quality Standards for Inspections


issued by the President’s Council on Integrity and Efficiency.

FINDINGS


Almost h@ the ESRD facilihkswe SLUVqVdwereusingIDPN 

The table below displays the use of IDPN in the facilities surveyed. Forty-five of the 

93 facilities use IDPN. The 55 for-profit facilities (33 of which use IDPN) had 2.9 

percent of their patients on IDPN; the 38 not-for-profit facilities (12 using IDPN) had 

1.5 percent on IDPN. 1 The overall rate was 2.4 percent. 

Facility Stations Census No use Past use Current use Patients 

For-profit; 869 4126 12 9 33 109 

55 

Not for- 534 2592 17 10 12 51 

profit; 38 

Total 93 1,403 6,718 29 19 45 160 

As discussed in our earlier report, patients receiving IDPN account for more than half 

the number of patients with TPN claims, and one-third of the payments. 

Some IDPN suppkimarepayingESRD facilitiesto admhzistertheirparenteralnutrients 

In most cases, facilities arranged for IDPN to be supplied by an outside source. The


outside supplier billed Medicare for the nutrients and supplies. Four hospital-based or


-affiliated facilities procured the nutrients from the hospital’s pharmacy. One large


chain of dialysis facilities also is a supplier of IDPN. It supplied its own facilities, and


was identified as the supplier of 21 of the facilities currently using IDPN (including 7 it


owns). Two other facilities also reported that their parent company supplied their


nutrients.


We asked the 45 facilities currently using IDPN whether their supplier paid the facility


directly or indirectly for administering IDPN (usually this was characterized as


“payment for the nurse’s time” or “an administration fee.”) The table on the following


page displays the answers we received. Of the seven respondents who answered “yes,”


only one was aware of the amount ($60 per infusion, or $180 per week per patient.)


Of the facilities not currently using IDPN, one said it had been paid $25 an infusion


(or $75 per week per patient); a second facility was looking for a supplier and


expected to be paid a per-bag or per-infusion fee.


4 

‘ The designation of two facilities as for-profit is a correction of the table in our earlier 

report, in which they were incorrectly recorded as being not-for-profit. 

2 
--

Response to query about fee, rebate or payment I 

# Responding 

Don’t know about payments I 

21 

Yes, facility receives payment 7 

Believe facility is paid 2 

Payment in kind (refrigerator) I 1II 

No, facility receives no payment I 1 II 

Hospital supplies nutrients 4 

Same parent company 9 

Total 45 

We obtained a copy of the “IDPN Service Agreement” used by the major supplier 

referred to above. The supplier’s cover letter to the agreement says the service 

agreement is used to “allow us to reimburse your unit (on a fee for service basis) for 

the staff time required to administer IDPN and monitor the patient.” The agreement 

itself shows $30.00 as the fee per parenteral therapy treatment. The fee is noted to be 

negotiable should Medicare increase or decrease its reimbursement rates for the 

therapy in question by more than 15 percent. 

l%esepaywumsappearto be illegalas weUas unreasonablyhigh 

We believe that these fees may represent inducements intended to influence the 

selection of an IDPN supplier and to encourage the placement of additional patients 

on IDPN. As such, the payment would be in violation of the Medicare and Medicaid 

Anti-kickback statute, which prohibits the offer or receipt of remuneration to induce 

the referral of Medicare-reimbursed items or services. Our concern is heightened by 

the amount of these “administration” fees $75 to $180 per patient per week for the 5 

to 7 months we found the average IDPN patient to be receiving nutrients. 

The fees raise questions about the reasonableness of Medicare’s reimbursement for 

IDPN, if over $9,000 a year can be paid for “administrative costs” when Medicare’s 

reimbursement for IDPN is $30,000 to $40,000 per patient year. Dialysis facilities are 

paid a composite rate per treatment for dialysis, including supplies, laboratory tests, 

and certain drugs. The prospectively-set base rate ranges from $126 in a free-standing 

facility to $130 dollars in a hospital facility and is adjusted for area wage levels. Thus 

a $25-per-infusion administration fee would represent an additional 20 percent of 

HCFAS base payment. The IDPN nutrients and supplies themselves would account 

for another $230 paid on average per infusion. This payment is made to the IDPN 

supplier, not the facility. Our earlier report discusses why IDPN should cost less 

(rather than more, as it currently does) to administer than TPN, due to bulk 

purchasing, streamlined administration, and other economies. 

3

CONCLUSION


We are concerned that the illegality of offering or receiving payments for referrals is 

not well understood by some ESRD facilities. We intend to alert the provider and 

supplier communities to the prohibition on payments for referrals through this MAR 

and other communication. The HCFA may wish to issue clari&ing instructions as well. 

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