Department of Health and Human Services 

OFFICE OF 

INSPECTOR GENERAL 

Portable Imaging Services: 

A Costly Option 

JUNE GIBBS BROWN 

Inspector General 

NOVEMBER 1997 

OEI-09-95-00090 
OFFICE OF INSPECTOR GENERAL 

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

95-452, is to protect the integrity of the Department of Health and Human Services 

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

mission is carried out through a nationwide program of audits, investigations, inspections, 

sanctions, and fraud alerts. The Inspector General informs the Secretary of program and 

management problems and recommends legislative, regulatory, and operational approaches 

to correct them. 

Office of Evaluation and Inspections 

The Office of Evaluation and Inspections (OEI) is one of several components of the Office 

of Inspector General. It conducts short-term management and program evaluations (called 

inspections) that focus on issues of concern to the Department, the Congress, and the 

public. The inspection reports provide findings and recommendations on the efficiency, 

vulnerability, and effectiveness of departmental programs. 

OEI’s San Francisco Regional Office prepared this report under the direction of 

Kaye D. Kidwell, Regional Inspector General, and Paul A. Gottlober, Deputy Regional 

Inspector General. Principal OEI staff included: 

REGION IX 

Brad Rollin, Project Leader 

Robert Gibbons, Project Leader 

Kathy Dezotte 

Don Loeb 

Thomas Purvis 

Joseph Corso, Consultant 

To obtain a copy of this report, 

HEADOUARTERS 

Stuart Wright, Program Specialist 

call the San Francisco Regional Office at 415-437-7900. 
I I 

Department of Health and Human Services 

OFFICE OF 

INSPECTOR GENERAL 

Portable Imaging Services: 

A Costly Option 

JUNE GIBBS BROWN 

Inspector General 

NOVEMBER 1997 

OEI-09-95-00090 
EXECUTIVE SUMMARY 

PURPOSE 

This inspection determined how different billing practices, financial arrangements, and 

clinical settings affect the cost of imaging services for the Medicare program and its 

beneficiaries. 

BACKGROUND 

Nursing homes* arrange for ancillary services--such as x-rays--for patients who require 

them. In some instances, firms known as portable x-ray suppliers provide the x-ray and 

electrocardiogram (EKG) services in nursing homes.** Imaging services consist of 

several components--technical, professional, transportation, and setup--depending on 

(a) the type of service and (b) where and by whom it is rendered. 

Portable x-ray and EKG services provided to nursing home patients may be billed either 

by a skilled nursing facility to the Part A fiscal intermediary or by the portable supplier to 

the Part B carrier. ‘Direct billing” occurs when the portable supplier bills the carrier. 

“Billing under arrangement” occurs when, based on a contractual agreement, a skilled 

nursing facility bills the fiscal intermediary and pays the portable supplier for services 

rendered. Skilled nursing facilities may bill under arrangement even for patients who are 

not in Part A-covered stays. 

We examined a stratified random sample of 729 imaging services that were provided 

while the beneficiaries were nursing home residents in 1994. 

FINDINGS 

Overall, we found that Medicare pays too much for portable imaging services. Medicare 

could save as much as $66 million in 1 year and $361 million over 5 years, based on the 

following findings and recommendations: 

Portable chest x-rays cost far more than non-portable chest x-rays 

Portable chest x-rays may cost up to nine times more than non-portable chest x-rays. 

Portable x-ray suppliers performed more than 60 percent of chest x-rays rendered to 

* For purposes of this inspection, nursing homes refers to skilled nursing, Medicaid nursing, board and 

care, assisted living, and retirement facilities collectively. Where appropriate, we distinguish between 

skilled nursing facilities and these other facilities. 

** Other options for nursing homes include providing the service with their own equipment or 

transporting patients to hospital outpatient departments, imaging centers, physician offices, or other facilities 

for x-rays or EKGs. 

i 
nursing home residents in 1994. In general, portable chest x-rays cost more because 

Medicare allows a transportation charge, which comprises most of the cost of the service. 

Medicare pays more than twice as much for imaging services when they are billed under 

arrangement rather than when payment is limited to the fee schedule 

In 1994, Medicare paid $14.7 million more for portable chest x-rays and EKGs provided 

under arrangement than it would have if payment were limited to the carrier fee 

schedules. This occurs because (1) portable x-ray suppliers negotiate contracts with 

skilled nursing facilities to ensure that they receive as much as six times more than fee 

schedules would allow and (2) skilled nursing facilities mark up these already inflated 

charges as much as 250 percent for overhead and expenses. In addition, we estimate that 

Medicare spent $9 million more in 1994 on other radiological services billed under 

arrangement than it would have if payments for those services had been limited by the fee 

schedules. 

On average, portable suppliers who bill under arrangement receive double what the fee 

schedule would allow 

Portable x-ray suppliers negotiate contracts with skilled nursing facilities to receive more 

(as much as six times more) than the Medicare fee schedule would allow. Portable x-ray 

suppliers charge radically different amounts to neighboring skilled nursing facilities. 

Skilled nursing facilities receive millions of dollars that they would not receive if they did 

not bill under arrangement 

Skilled nursing facilities mark up portable chest x-ray costs as much as 250 percent above 

what portable x-ray suppliers bill them. This totaled $8.1 million in 1994. 

Medicare pays for services under arrangement that it would not cover if billed directly 

Services billed under arrangement are not subjected to the same routine screens and edits 

as directly billed services are. As a result, skilled nursing facilities are reimbursed for 

charges that would be denied if the portable supplier billed directly. These 

reimbursements include (1) setup charges for portable EKG equipment, (2) after-hours or 

emergency charges, (3) transportation charges not prorated when multiple patients are 

seen, (4) medically unnecessary or duplicate services, and (5) portable equipment 

transportation and setup charges when only a portable technician is provided. 

Beneficiaries’ copayments for services billed under arrangement are almost three times 

more than they would be if the services had been billed directly 

The combination of three factors--inflated supplier charges to skilled nursing facilities, 

excessive markups by these facilities, and the Medicare policy that beneficiary copayments 

are 20 percent of billed amounts for ancillary services--results in vastly higher costs to 

beneficiaries and secondary payers. 

ii 
The amounts that Medicare carriers allow for transportation of portable x-ray equipment 

vary widely, and some are excessive 

In 1994, carrier allowances for portable x-ray transportation when one patient was seen 

ranged from $10.00 to $186.39. Although Medicare requires carriers to prorate 

transportation charges when multiple patients are seen at one nursing home, not all 

carriers do this correctly. There is no statutory authority for the Health Care Financing 

Administration (HCFA) to allow setup charges. The HCFA recently used the lack of 

statutory authority as a rationale for eliminating reimbursement for EKG transportation. 

RECOMMENDATION 

In the draft of this report, we recommended that HCFA: 

b instruct fiscal intermediaries to never pay more than the fee schedule amount for 

portable imaging services billed under arrangement; 

b require$scal intermediary edits and Common Procedure Coding System codes on 

all claims to discontinue payments for non-covered services; 

b require fiscal intermediaries to disallow any skilled nursing facility overhead 

associated with portable imaging services; and 

b convert transportation reimbursement rates to a national fee schedule, rebundle 

equipment setup with transportation, and remind carriers that they must prorate 

transportation charges when multiple patients are seen at the same facility. 

We projected 5-year Medicare savings of $360.9 million for these recommendations, as 

indicated in the following table: 

Projected Medicare savings from implemented recommendations 

Option I l-year savings I 5-year savings 

Limit payment for services billed under $ 28.3 million $160.4 million 

arrangement to fee schedule 

Limit transportation to $70 per beneficiary-service $ 21.8 million $126.6 million 

day (the national median), $35 if 2 beneficiaries 

are seen during the same trip, etc. 

Stop paying for setup $ 15.7 million $ 73.9 million 

TOTALS $65.8 million $360.9 million 

.. . 111 
The HCFA concurred with the majority of the recommendations in our draft report but 

did not concur with our recommendations that it (1) disallow any skilled nursing facility 

overhead associated with portable imaging services and (2) rebundle the equipment setup 

charge with transportation. 

After we released our draft report, President Clinton signed into law the Balanced Budget 

Act of 1997. Among the provisions in this law, it (1) establishes a prospective payment 

system for beneficiaries in Part A-covered stays in skilled nursing facilities, to be phased 

in over several years; (2) requires that all Part B items and services furnished to residents 

of nursing homes (not covered under Part A) be billed by the nursing homes as part of a 

consolidated billing system; (3) limits reimbursement for services paid under consolidated 

billing to the Part B fee schedule; and (4) requires HCFA Common Procedure Coding 

System codes for services provided to skilled nursing facility patients that are billed to 

fiscal intermediaries. 

We believe that implementation of the Balance Budget Act will address our findings and 

the intent of our recommendations. We are concerned, however, that the cost of ancillary 

services has been inflated by the practices described in this report. Therefore, we 

recommend that HCFA: 

b take into account the inflated payments that have been made for portable imaging 

services when it implements the prospective payment and Part B provisions of the 

Balanced Budget Act, seeking legisla&e authority if necessary. 

The HCFA should take into account the inflated charges for (1) services billed 

under arrangement (including payments for services that were non-covered) and 

(2) transportation charges that were excessive or prorated incorrectly. 

Operation Restore Trust 

In May 1995, President Clinton and Health and Human Services Secretary Donna Shalala 

announced the kickoff of Operation Restore Trust (ORT), a crackdown on Medicare and 

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

medical equipment suppliers. The ORT focused on the five States--California, New York, 

Florida, Texas, and Illinois--that account for 40 percent of the nation’s Medicare 

beneficiaries and program expenditures. This was an ORT inspection. A companion 

report, “Portable Imaging Services: Nursing Home Perspectives” (OEI-09-9500091) 

describes when, how, and why nursing homes use portable imaging services. Another 

companion report, “Imaging Services for Nursing Home Patients: Medical Necessity” 

(OEI-09-95-00092), assesses the medical necessity and quality of care. 

iv 
TABLE OF CONTENTS 

PAGE 

EXECUTIVE SUMMARY 

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

FINDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 

Portable services cost far more than non-portables ....................... 8 

Arrangements cost Medicare millions ................................ 9 

Portable suppliers profit from arrangements .......................... 10 

Nursing homes take in millions in overhead from arrangements ............. 11 

Medicare pays for services that should be denied ....................... 11 

Beneficiary copayments soar when services are billed under arrangement ....... 13 

Transportation fee schedules are excessive ............................ 

RECOMMENDATION 

APPENDICES 

A: Agency Comments 

B: Confidence Intervals 

C: Estimated Savings 

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

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

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

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

13 

15 

A-l 

B-l 

C-l 
INTRODUCTION 

PURPOSE 

This inspection determined how different billing practices, financial arrangements, and 

clinical settings affect the cost of imaging services for the Medicare program and its 

beneficiaries. 

BACKGROUND 

Medicare (Parts A and B) 

Congress enacted Medicare in 1965 to provide health services to the elderly and disabled. 

The program consists of two distinct parts. The first part is hospital insurance or Part A. 

Part A covers services furnished by providers, i.e., hospitals, home health agencies, and 

skilled nursing facilities. The second part, supplementary medical insurance or Part B, 

covers a wide range of medical services and supplies. These include physician services, 

outpatient hospital services, diagnostic laboratory tests, x-rays, ambulance services, and 

durable medical equipment. 

The Health Care Financing Administration (HCFA) administers Medicare and contracts 

with private insurance companies to process and pay claims. Contractors that process Part 

A claims are referred to as fiscal intermediaries. Contractors that process Part B claims 

are called carriers.’ Some companies have both fiscal intermediary and carrier contracts. 

The HCFA provides substantial guidance to fiscal intermediaries and carriers on 

applicable laws, regulations, national polices, fee schedules, and other requirements. In 

some areas, Federal law and HCFA allow the fiscal intermediaries and carriers 

considerable latitude in determining both coverage and reimbursement. 

Skilled nursing facilities and other extended care facilities 

Medicare beneficiaries recuperating from an acute episode may be eligible for post-acute 

skilled nursing services. The Medicare program provides coverage under Part A for 

skilled nursing services but not for custodial care. The skilled nursing benefit includes: 

b nursing care, 

b bed and board, 

b physical, occupational, or speech therapy, 

b medical social services, and 

b drugs, biologicals, supplies, appliances, and equipment for use in the facility. 

’ An exception to this general rule is that fiscal intermediaries process Part B claims submitted by 

hospitals (for inpatient and outpatient services), home health agencies, and skilled nursing facilities. 

1 
Medicare law stipulates that beneficiaries are eligible for skilled nursing benefits if they 

are transferred to the skilled nursing facility after a minimum 3-day covered stay in an 

acute hospital. The patient must require skilled nursing care, and a physician must order 

the services. Part A covers skilled nursing services for up to 100 days per “spell of 

illness. ” 

In addition to skilled nursing facilities, other facilities offer varying levels of care for 

Medicare beneficiaries. These include Medicaid nursing, board and care, assisted living, 

and retirement facilities. We have included all of these facilities in the scope of this 

study and refer to them collectively as “nursing homes. ‘I We do, however, refer to 

skilled nursing facilities specifically where findings pertain solely to these entities. 

Portable x-ray and EKG services 

Nursing homes provide directly or arrange for ancillary services--such as x-rays--for their 

patients who require them. In some instances, firms known as portable x-ray suppliers 

provide portable x-ray and electrocardiogram (EKG) services in nursing homes.2 

Medicare’s portable x-ray benefit covers skeletal films of the arms, legs, pelvis, vertebral 

column, and skull as well as chest and abdominal films that do not use contrast media. 

Medicare also covers EKG services under the portable benefit, if they are medically 

necessary and are performed by certified portable x-ray suppliers. All of these services 

must be diagnostic rather than therapeutic. Portable x-ray suppliers must meet HCFA’s 

conditions of participation to receive reimbursement for these services. These conditions 

of participation require, among other things, that suppliers comply with State and local 

laws, which may provide for the licensing and regulation of portable suppliers. The 

HCFA, however, eliminated reimbursement for portable EKG transportation in November 

1996. 

According to Medicare regulations, all portable x-ray services must be ordered by a 

physician. The physician’s signed order must specify the reason why the x-ray is being 

taken, the area of the body to be exposed, the number of x-rays to be taken, and the views 

needed. The physician also must justify the need for portable services. 

Portable x-ray suppliers must maintain records for each patient. These records should 

include the examination date, a description of the x-rays that were taken, the name of the 

referring physician, the equipment operator, the physician to whom the x-rays were sent 

for interpretation, and the date the x-rays were sent to that physician. 

2 Other options for nursing facilities include transporting patients to hospital outpatient departments, 

imaging centers, physician offices, or other facilities for x-rays or EKGs. 
Billing for portable x-ray and EKG services 

Billing comnonents 

Imaging services consist of several components, depending on the type of service and 

where and by whom it was rendered: 

b Technical: All of the activities that are necessary in the actual taking of the x-ray, 

e.g., developing and delivering the x-ray as well as overhead expenses and 

supplies. 

b Professional: Interpretation by a certified radiologist. 

b Transportation: Moving portable x-ray equipment to a nursing home. In 

general, HCFA allows a single transportation charge for each trip that a portable 

x-ray supplier makes to a particular location. When more than one patient is 

x-rayed at a single location, the single allowable charge is prorated among all 

patients receiving these services. 

b Setup: Preparing x-ray equipment for use at a patient’s bedside. A separate setup 

charge is allowed for each body part x-rayed. 

Billing methods 

Portable x-ray and EKG services provided to nursing home patients may be billed by a 

skilled nursing facility to the Part A fiscal intermediary or by the portable supplier to the 

Part B carrier. When the services are provided to a skilled nursing facility, the facility 

and the portable supplier decide who will bill for the services. When the portable supplier 

bills the Part B carrier, this is called “direct billing. ” When a skilled nursing facility 

bills the Part A fiscal intermediary and pays the portable supplier for services rendered, 

this is called “billing under arrangement. ” Skilled nursing facilities may bill under 

arrangement even for patients who are not in Part A-covered stays. In these cases, the 

skilled nursing facility includes a code on the claim that denotes that the beneficiary is not 

covered under Part A. 

When the claim is processed by the fiscal intermediary, reimbursement is based on the 

annual cost report submitted by the skilled nursing facility to its fiscal intermediary. 

When the claim is processed by the carrier, reimbursement is based on a combination of a 

reasonable charge determination and the national fee schedule. 

These different billing methods can result in vastly different costs to the Medicare 

program and its beneficiaries, particularly when one compares reimbursement made by the 

fiscal intermediary to that made by the carrier. The table on the following page illustrates 

the differences between these two billing methods: 

3 
Comparison of different billing methods for portable x-ray services 

Portable supplier bills 

carrier directly 

Medicare payment National fee 

mechanism schedule/reasonable 

charge blended rate. 

Portable x-ray 80 percent of allowed 

supplier is amount (paid by 

reimbursed carrier). 

Nursing home/skilled Nothing. 

nursingfaciliry is 

reimbursed 

Benejiciary 20 percent of allowed 

copayment amount. 

Adjustmentsto No routine postpayment payment adjustments. 

Skilled nursingfacility bills under arrangement to 

fiscal intermediary 

Reasonable cost. Intermediary may refer to fee 

schedule to determine what is reasonable but is not 

required to use it. 

100 percent of supplier’s charge, based on contract 

with skilled nursing facility (paid by skilled nursing 

facility). 

Supplier’s charge plus skilled nursing facility’s 

overhead charges. 

Patients in Part A-covered stays pay coinsurance for 

day 20 through day 100. Patients covered solely by 

Part B pay 20 percent of the m amount 

regardless of when the service is provided. 

The skilled nursing facility submits an annuaI cost 

report. Through audits, the intermediary determines 

whether the costs are reasonable and reconciles any 

difference between interim payments and final 

allowable cost. 

Previous work on costs of imaging services 

In 1991, the Office of Inspector General (OIG) issued a report entitled “Study of Costs 

and Payments for Portable X-Ray Services” (A-01-90-00517). This report found that 

(1) payment levels for portable x-ray services remained consistent when converted from a 

reasonable charge system to a fee schedule and (2) two carriers allowed payments for 

portable x-ray transportation that were significantly more than the amount allowed before 

the fee schedule was implemented. The report also discussed the pros and cons of 

adopting a separate fee schedule for portable x-ray services. 

In 1992, HCFA’s Seattle regional office wrote a memorandum to headquarters detailing 

excessive skilled nursing benefit payments made for portable x-ray services provided 

under arrangement. The memorandum analyzed reimbursement policies, complaints from 

beneficiaries and other portable x-ray suppliers, and claims from three skilled nursing 

facilities. 

4 
Operation Restore Trust 

In May 1995, President Clinton and Health and Human Services Secretary Donna Shalala 

announced the kickoff of Operation Restore Trust (ORT), a new health care anti-fraud 

initiative. The ORT began as a 2-year crackdown on Medicare and Medicaid fraud, 

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

suppliers. It focused on the five States--California, New York, Florida, Texas, and 

Illinois--that account for 40 percent of the nation’s Medicare beneficiaries and program 

expenditures. 

The ORT included Federal and State agencies in collaboration with private sector entities 

and beneficiaries. The Federal agencies involved in this effort include the OIG, HCFA, 

and the Administration on Aging. The OIG undertook a number of national program 

inspections aimed at identifying and eliminating systemic weaknesses that allow fraud, 

waste, and abuse to occur in the areas of home health, nursing homes, and durable 

medical equipment. This inspection was conducted as part of ORT. 

A companion report, “Portable Imaging Services: Nursing Home Perspectives” 

(OEI-09-9500091)) describes when, how, and why nursing homes use portable imaging 

services. Another companion report, “Imaging Services for Nursing Home Patients: 

Medical Necessity” (OEI-09-95-00092), assesses the medical necessity and quality of care. 

METHODOLOGY 

From a 1 percent simple random sample of the Common Working File (CWF), we 

extracted data on all beneficiaries who were in a nursing home or who received a portable 

imaging service at any time during calendar year (CY) 1994. We then extracted claims 

data on all imaging services provided to these beneficiaries during CY 1994. 

We identified these nursing home residents through several indicators in the claims data. 

These indicators included place of service, hospital discharge destination, skilled nursing 

claims, and HCFA Common Procedure Coding System (HCPCS) codes that are likely to 

correspond to a nursing home resident (such as transportation of portable x-ray 

equipment). Based on a pre-test of this approach, we estimate that our database included 

approximately 93 percent of all imaging services provided to nursing home residents. 

From this newly created database, we selected a stratified random sample of 729 imaging 

services that were provided while the beneficiary was a nursing home resident. The strata 

are illustrated in the table on the following page: 

5 
Stratified sample of selected imaging services 

Stratum Sample size 

I I 

Chest x-rays (HCPCS = 

71010 through 71035) 

arrangements 

EKGs (numerous HCPCS codes) 

Computerized axial tomography and magnetic 

resonance imaging (numerous HCPCS codes) 

Non-ORT States 

ORT States 

Non-ORT States 

ORT States 

Non-ORT States 

60 

143 

65 

167 

75 

When there was no skilled nursing facility claim overlapping the date of the imaging 

service in our sample, we attempted to verify that the beneficiary was a nursing home 

resident by contacting providers and nursing homes. We excluded beneficiaries from our 

calculations if they did not reside in skilled nursing, Medicaid nursing, board and care, 

assisted living, or retirement facilities when they received the imaging service in our 

sample. This included patients who were hospital inpatients. We also found several 

billing errors that incorrectly stated that an imaging service had been provided, and we 

removed these beneficiaries from the sample. We undertook a number of steps to 

determine how much was billed and paid for services provided under arrangement: 

b Breaking down cost components of claims submitted to jiscal intermediaries: For 

each beneficiary with a fiscal intermediary claim covering the date of the service in 

our sample, we requested information from the skilled nursing facilities about the 

cost components of each claim. For example, for contracted portable x-ray 

services, we requested the amount that the skilled nursing facility paid the portable 

supplier for the services and other costs that were included in the claim. 

b Determining whether Part B claims submitted to fiscal intermediaries were actually 

for portable services billed under arrangement: These claims do not indicate 

whether the service was provided in a hospital outpatient department or whether it 

was portable, provided in a skilled nursing facility, and billed under arrangement 

for a beneficiary covered only under Part B. To make this distinction, we obtained 

medical records from the facilities that submitted these claims and the physicians 

who submitted Part B claims for the professional component. These records 

showed whether a portable supplier provided the service. 

F Determining allowed amounts for skilled nursing facilities that bill under 

arrangement: We subsequently obtained cost-to-charge ratios for each skilled 

nursing facility that submitted a claim to the fiscal intermediary for radiology 

6 
and/or EKG services in order to estimate how much Medicare allowed for 

individual services in our sample. 

F Applying fee schedules to services billed under arrangement: Using our sample of 

patients for whom an “under arrangement” claim was submitted, we obtained from 

carriers the amount that Medicare would have allowed for the claim if the service 

had been billed directly. 

F Determining allowed amounts for services provided by outpatient departments and 

skilled nursing facilities that provide services directly using their own equipment: 

We obtained radiology and/or EKG cost-to-charge ratios for these facilities. 

F Determining beneficiary copayments: We obtained copies of the Explanation of 

Medicare Benefits for all beneficiaries for whom a claim had been submitted to the 

fiscal intermediary. Because beneficiaries are not required to pay a copayment for 

the first 20 days of a Part A stay and then are required to pay a daily bundled 

coinsurance for subsequent days, we assumed that their coinsurance for a single 

imaging procedure would be $0. We assumed that Part B coinsurance would be 

20 percent of the charge. 

We conducted interviews with the 93 nursing homes that we verified had provided a 

portable chest x-ray for the patients in our sample. We asked the nursing homes how they 

provide services, how they bill for them, and their rationale for these decisions. For 

skilled nursing facilities that bill under arrangement, we obtained copies of their contracts 

with portable suppliers. 

To gather additional information on imaging services provided to nursing home patients, 

we conducted interviews with carriers and fiscal intermediaries. Among other issues, we 

asked questions about (1) their coverage, payment, and audit guidelines, (2) the safeguards 

they have in place to detect and prevent inappropriate services and billing, (3) how they 

developed their reimbursement schedules for portable x-ray transportation, and (4) if they 

had conducted any studies concerning imaging services for nursing home patients. 

For all claims, we requested medical records and original x-rays, EKGs, magnetic 

resonance images (MRIs), and computerized axial tomography (CAT) scans. These 

records were evaluated by a medical review contractor for medical necessity and are the 

subject of our report, “Imaging Services for Nursing Home Patients: Medical Necessity. ” 

Based on our findings from the sample, we projected Medicare costs and savings to all 

radiological services referenced in the report. For further information about our 

calculations, see appendices B and C. 

Because this report focuses on portable imaging services, the findings and 

recommendations pertain to chest x-rays and EKGs only. While MRIs and CAT scans 

might be provided by portable suppliers in the future, no patients in our sample received 

portable MRIs or CAT scans. 

7 
FINDINGS 

Portable chest x-rays cost far more than non-portable chest x-rays 

Portable chest x-rays may cost up to nine times more than non-portable chest x-rays. If a 

physician or nursing home owns and uses its own x-ray equipment, the cost to Medicare is 

always substantially less than when a portable supplier is used. The following graphics 

illustrate the stark differences in costs of nursing home resident chest x-rays taken in 

1994: 

Portable chest x-rays billed under arrangement are the most costly 

� Average allowed amount per chest x-ray 

1 

Portable in Portable in Skilled Physician’s Nming Home Hospital Outpatient Nursing Home-- Nursing Facility--

OffiCe Using Own Equipment Department Billed Directly Under Arrangement 

Most chest x-rays provided to nursing home patients are taken by portable x-ray suppliers. 

They performed more than 60 percent of chest x-rays rendered to nursing home patients in 

1994. The chart on the following page shows the different options for providing x-ray 

services to nursing home residents and how they were utilized in 1994: 

8 
Most chest x-rays for nursing home residents 

are performed in nursing homes 

Options Percent of chest x-rays 

Nursing home, portable, billed directly 55.3 

Skilled nursing facility, portable, billed 6.3 

under arrangement 

Nursing home, using own equipment 13.8 

Hospital outpatient department 20.9 

Physician’s office 3.7 

Portable chest x-rays cost more because (1) Medicare allows a transportation charge which 

frequently is the most expensive cost component; (2) for each body part x-rayed, 

Medicare allows a separate setup charge; and (3) Medicare allows portable services to be 

billed under arrangement. When services are billed under arrangement, fiscal 

intermediaries generally do not limit how much suppliers can charge to skilled nursing 

facilities or how much these facilities can inflate these charges. 

Chest x-rays performed in physician offices, using the physician’s own equipment, cost 

less than those provided in other settings because physicians can bill only for technical and 

professional components. Carriers pay both of these components under the fee schedule. 

In 1994, however, less than 4 percent of chest x-rays for nursing home residents were 

provided in physicians’ offices. 

Many nursing home residents receive chest x-rays in hospital outpatient departments or in 

nursing homes--primarily skilled nursing facilities--that own their equipment. In these 

cases, either the outpatient department or skilled nursing facility submits claims to the 

fiscal intermediary for the technical component. Although no transportation or setup 

charges are billed, the facility bills for overhead. In 1994, approximately 13.8 percent of 

chest x-rays performed on nursing home residents were provided using nursing home 

equipment. In 1994, hospital outpatient departments performed 20.9 percent of chest 

x-rays for nursing home residents. 

Medicare pays more than twice as much for imaging services when they are 

billed under arrangement rather than when payment is limited to the fee 

schedule 

In 1994, Medicare paid $14.7 million more for portable chest x-rays and EKGs provided 

under arrangement than it would have if payment were limited to the carrier fee schedules 

(i.e., $24.4 million versus $9.7 million). Every portable chest x-ray and EKG billed 

under arrangement costs Medicare more than if the same service had been billed directly 

and limited to the fee schedules. This occurs because (1) portable x-ray suppliers 

negotiate contracts with skilled nursing facilities to ensure that they receive more--

9 
sometimes as much as six times more--than fee schedules would allow and (2) skilled 

nursing facilities mark up these already inflated charges as much as 250 percent for, what 

they claim constitutes, overhead and expenses. Overall, approximately 10.2 percent of 

portable chest x-rays and EKGs provided to nursing home residents in 1994 were billed by 

skilled nursing facilities under arrangement. Some policy makers have suggested, 

however, that all ancillary services should be billed by nursing homes. 

Other radiological services billed under arrangement also cost Medicare more than they 

would if they were limited to fee schedules. In reviewing the contracts negotiated 

between portable suppliers and skilled nursing facilities, we found that these facilities pay 

considerably more than the fee schedule would allow for all portable imaging services. 

Using the 1 percent sample and our data on chest x-rays and EKGs, we estimate that 

Medicare spent $9 million more in 1994 on other radiological services billed under 

arrangement than it would have if payments for those services had been limited by the fee 

schedules. For further information about how we estimated this cost, see appendix C. 

On average, portable suppliers who bill under arrangement receive double 

what the fee schedule would allow 

Portable x-ray suppliers negotiate contracts with skilled nursing facilities that ensure 

higher reimbursement than the Medicare fee schedule would allow. At the same time, 

they actually reduce their administrative expenses because the skilled nursing facilities bill 

Medicare, other payors, and beneficiaries. In 1994, portable x-ray suppliers received 

$10.7 million from Medicare and its beneficiaries for chest x-rays and EKGs that they 

would not have received if they had billed directly. 

Portable suppliers always receive more when services are billed under arrangement than 

they would if they billed directly. Some portable suppliers receive almost six times the 

fee schedule amount for specific components, as the following table illustrates. 

Billing under arrangement allows portable suppliers to skirt fee schedules 

HCPCS Description Fee Schedule Under Arrangement 

71020TC Two-view chest x-ray-- $15.05 $87.50 technical component 

RO075 Portable x-ray transportation-- $19.12 $95.00 2 uatients seen 

Skilled nursing facilities that bill under arrangement rarely are prudent buyers. Portable 

x-ray suppliers charge radically different amounts to neighboring skilled nursing facilities. 

We obtained contracts showing several instances where skilled nursing facilities in the 

same city paid widely varying amounts for the same services. The following table 

illustrates these differences. 

10 
Some skilled nursing facilities pay significantly higher prices 

for imaging services than neighboring facilities 

Description Skilled Nursing Skilled Nursing HCPCS 

71010 Chest x-ray, l-view 

71020 Chest x-ray, 2-view 

ROO70 and RO075 Transportation--per patient 

Portable x-ray setup charge--per 40092 procedure 

Facility “A” Facility “B” 

$18 $55 

$18 $65 

$20 $90 

$0” $25 

* Setup charge is included as part of the transportationcharge 

During interviews with the administrators of these skilled nursing facilities, we determined 

that skilled nursing facility “A” routinely solicits bids for portable imaging service 

contracts, thus ensuring competitive charges. Skilled nursing facility “B” was more 

typical of facilities that bill under arrangement in that it had an on-going arrangement with 

one supplier for several years. In these cases, we found that it was rare for the facilities 

to solicit bids, negotiate, or periodically “shop the market” to find out what other 

suppliers would charge. 

Skilled nursing facilities receive millions of dollars that they would not receive 

if they did not bill under arrangement 

Skilled nursing facilities mark up portable chest x-ray costs as much as 250 percent above 

what portable x-ray suppliers bill them. Although the amount paid by Medicare is 

adjusted through cost reports, both Medicare and its beneficiaries paid skilled nursing 

facilities $8.1 million in 1994 to bill for portable chest x-rays and EKGs--$8.1 million that 

they would not have paid if the services had been billed directly by portable x-ray 

suppliers. 

For the most part, skilled nursing facility administrators could not explain why their 

facilities billed under arrangement. The most common response was simply that the 

facility had billed under arrangement prior to their arrival and they maintained the status 

quo. For a more complete discussion of the responses we received from administrators, 

see our companion report, “Portable Imaging Services: Nursing Home Perspectives. ” 

Medicare pays for services under arrangement that it would not cover if billed 

directly 

Fiscal intermediaries do not apply the same routine screens and edits to services billed 

under arrangement that carriers apply to services billed directly. As a result, skilled 

11 
nursing facilities are reimbursed for charges that would have been denied if the portable 

supplier had billed a Medicare carrier directly. Some examples include: 

F Setup charges for portable EKG equipment. Medicare policy excludes payment 

for setting up portable EKG equipment. Nevertheless, we found that skilled 

nursing facilities routinely pay portable suppliers for EKG setup. They 

subsequently bill and receive payment from intermediaries for these charges. 

F After-hours or emergency charges. While carriers indicated that they would not 

allow these charges, portable suppliers who bill under arrangement received as 

much as $66 extra for providing services on an emergency, nighttime, or weekend 

basis. In one instance, a supplier received both an emergency and after-hour 

payment for a single service, totaling $90. 

b Transpotiation charges not prorated when multiple patients are seen. Under 

direct billing, when a portable supplier provides services to more than one patient 

at a nursing home, Medicare requires that the transportation charge be allocated to 

each patient so that the total amount allowed for transportation is always the same. 

However, suppliers’ contracts with skilled nursing facilities almost never prorate. 

For example, one portable supplier received $99 per patient, regardless of how 

many patients he saw in one visit. In addition, there is no way under the present 

system that an intermediary or other oversight agency can determine how many 

patients were seen at a particular skilled nursing facility during the same visit 

unless it conducts an extensive and expensive audit of patient records. 

b Medically unnecessary or duplicate services. Because Part A claims do not list 

individual services that a patient received, it is difficult to determine whether a 

specific service is medically necessary or whether the charge for an individual 

service is excessive. In addition, fiscal intermediaries do not perform routine edits 

to determine if a beneficiary is receiving multiple or duplicate services, such as a 

daily chest x-ray, on a routine basis. 

b Portable equipment transportation and setup charges when only a portable 

technician is provided. In at least one case, we determined that a skilled nursing 

facility had x-ray equipment on-site but required a technician to operate the 

equipment. According to Medicare regulations, this is not a portable service and 

the facility should have paid only a technical component charge and billed 

Medicare accordingly. Instead, they paid the supplier for setup and transportation 

charges in addition to the technical component, marked up the charges, and billed 

the full amount, including mark-up, to Medicare. 

Contracts that bundle individual components make it difficult to review and compare 

costs. Even if intermediaries attempted to apply prudent buyer principles to specific 

services, the contracts sometimes are difficult to interpret. For example, some supplier 

contracts bundle the transportation and technical components, making it difficult to 

12 
determine which component might be overpriced. Other bundling combinations include 

(1) the transportation and setup components and (2) the technical and setup components. 

Beneficiary copayments for services billed under arrangement are almost three 

times more than they would be if the services had been billed directly 

The combination of three factors--inflated supplier charges, excessive markups by skilled 

nursing facilities, and the Medicare policy that beneficiary copayments are 20 percent of 

billed amounts for ancillary services--results in vastly higher costs to beneficiaries and 

secondary payors when services are billed under arrangement. This is particularly true 

when a beneficiary is in a non-covered stay. Beneficiaries whose stays are covered by 

Part A pay less because they pay no coinsurance during the first 20 days of their stay. In 

1994, beneficiaries paid $6.5 million in copayments for services billed under arrangement 

for which they would have paid $2.4 million if the services had been billed directly. 

When a beneficiary has Part B coverage only and the skilled nursing facility bills under 

arrangement, the beneficiary’s copayment skyrockets. The following table illustrates how 

one beneficiary in our sample incurred a higher copayment because his skilled nursing 

facility billed under arrangement: 

Billing under arrangement costs beneficiaries more 

kk 

Total charge billed to Medicare $250.21 N/A 

Total allowed amount $101.74 

71020--chest x-ray, 2 views, $27.53 technical component 

Q0092--setup $13.31 

R0070--transportation, 1 patient seen $60.90 

Beneficiary copayment--technical 

The amounts that Medicare carriers allow for transportation of portable x-ray 

equipment vary widely, and some are excessive 

Even when portable imaging services are billed directly, portable x-ray transportation 

charges and allowed amounts can vary considerably. In 1994, carrier allowances for 

portable x-ray transportation when one patient was seen ranged from $10.00 to $186.39. 

13 
The table below shows the five lowest and five highest transportation allowed amounts in 

our sample when a single patient was seen at a nursing home: 

Lowest Transportation Highest Transportation 

Allowed Amounts--R0070 Allowed Amounts--R0070 

Illinois: $10.00 Michigan: $186.39 

New York: $33.20 New Jersey: $154.00 

Florida: $45.44 New York: $154.00 

Ohio: $50.00 Connecticut: $126.77 

California: $55.43 Washington: $113.42 

Although Medicare requires carriers to prorate transportation charges when multiple 

patients are seen at one nursing home, not all carriers do this correctly. For example, two 

portable suppliers in one State received $123.11 per patient when seeing multiple patients 

during the same visit. 

There is no statutory authority for HCFA to allow setup charges. Prior to 1992, 

equipment setup was considered part of the transportation component. In 1992, 

HCFA instructed carriers to start allowing a separate and additional charge for portable 

x-ray equipment setup. In doing so, HCFA made a distinction between transporting the 

equipment and setting it up at the patient’s bedside. 

In contrast to this policy, in November 1996, HCFA eliminated reimbursement for the 

transportation of portable EKG equipment. In doing so, HCFA stated, “in our judgment, 

statutory authority existed for separate payments for only the transportation of x-ray 

equipment. ” While HCFA states that it believes that Congress intended for it to pay 

separately for portable x-ray transportation, there is no indication that this also applies to 

setup charges. 

14 
RECOMMENDATION 

Legi&z.ti~e Update 

A$er we released our drufi report, President Clinton signed into law the Balanced 

Budget Act of i997, Among the provisions in this law, it; 

w establishes a prospective payment systemfor beneficiaries in Part A-covered 

stays in skilled nursing facilities, to be phased in over several years; 

* reqdres that all Part 3 items and services fikrnished to residents of nursing 

homes (not covered under Part A/ be billed by the nursing homes as part of a 

consolidated billing system; 

b limits reimbursement for services paid under consolidated billing to the Part 

Bfee schedule; and 

b requires HCPCS codes for services provided to skilled nursing facility 

patients that are bt’lledto$scal intermediaries. 

The Balanced Budget Act legislated most of the recommendations in the draft of this 

report. In the draft report, we recommended that HCFA: 

b instruct fiscal intermediaries to never pay more than the fee schedule amount for 

portable imaging services billed under arrangement; 

b require fiscal intermediary edits and Common Procedure Coding System codes on 

all claims to discontinue payments for non-covered services; 

b require fiscal intermediaries to disallow any skilled nursing facility overhead 

associated with portable imaging services; and 

b convert transportation reimbursement rates to a national fee schedule, rebundle 

equipment setup with transportation, and remind carriers that they must prorate 

transportation charges when multiple patients are seen at the same facility. 

15 
II Projected Medicare savings from implemented recommendations 

IIOption I 1-year savings I 5-year savings 

Limit payment for services billed under $ 28.3 million $160.4 million (I arrangement to fee schedule

Limit transportation to $70 per beneficiary-service $ 21.8 million $126.6 million 

day (the national median), $35 if 2 beneficiaries 

are seen during the same trip, etc. 

Stop paying for setup $ 15.7 million $ 73.9 million 

TOTALS $ 65.8 million $360.9 million 

AGENCY COMMENTS AND REVISED RECOMMENDATION 

The HCFA concurred with the majority of the recommendations in our draft report but 

did not concur with our recommendations that it (1) disallow any skilled nursing facility 

overhead associated with portable imaging services and (2) rebundle the equipment setup 

charge with transportation. The full text of HCFA’s comments appears in appendix A. 

We believe that implementation of the Balance Budget Act will address these issues. We 

are concerned, however, that the cost of ancillary services has been inflated by the 

practices described in this report. Therefore, we recommend that HCFA: 

b take into account the inflated payments that have been made for portable imaging 

services when it implements the prospective payment and Part B provisions of the 

Balanced Budget Act, seeking legislative authority if necessary 

The HCFA should take into account the inflated charges for (1) services billed 

under arrangement (including payments for services that were non-covered) and 

(2) transportation charges that were excessive or prorated incorrectly. This 

recommendation should be considered in tandem with our recommendation in the 

report “Portable Imaging Services: Nursing Home Perspectives. ” That report 

recommends that, in implementing the Balanced Budget Act, HCFA should take 

into account the unnecessary payments that have been made because HCFA has not 

enforced the requirement that physicians justify the need for portable services. 

16 
-- 

APPENDIX A 

AGENCY COMMENTS 

Health Care Financing Administration 

DEPARTMENT OF HEALTH & HUMAN SERVICES Health Care Financing Administration 

The Administrator 

WashiMtM. D.C. ‘2ow1 

AUG4 .'I 

JUl24W 

DATE: 

TO: June Gibbs Brown 

Inspector General 

FROM: 

SUBJECT: Oflice of Inspector General (OIG) Draft Reports:“Portable Imaging 

Services: A Costly Option” (OEI-O9-95-00090),and “Portable Imaging 

Services:Nursing Facility Perspectives,”(OEI-O9-95-00091) 

We reviewed the above-referencedreportaidentifying a number of problems with how 

nursing facilities provide and bill for imaging servicesfor their patients. 

Our detailed comments on the recommendationsare attachedfor your consideration. 

Thank you for the opporhmityto review and comment on thesereports. 

Attachment 

A-l 
-- 

Comments of the Health Care Finaucina Administration (HCFA) 

on Offtce of Inspector General (OIG1 Drafl Renorts: 

“Portable Imaeiun Services: A Costlv Ontion” fOEI-09-9500090L and 

“Portable Imagine Services: Nursine Facilitv Perspectives.” (OEI-09-9500091> 

The Inspector General should be aware of legislation proposed by the president in his 

fiscal year (FY) 1998 budget that would mitigate problems with ancillary billing that are 

experienced under current law. 

First, the President proposed to implement a prospective payment system (PPS) for 

skilled nursing facilities (SNFs) effective July 1, 1998. Prospective payments would 

cover all SNF service costs, including routine service costs, ancillary costs (whether 

provided under Part A or Part B of Medicare), and capital-related costs. A PPS would 

eliminate cost-based discrepancies between ‘direct” billing and “under arrangement’ 

billing. 

Second, the President’s consolidated billing proposal is designed to address the current 

law’s lack of restraints on ancilhuy billing. Under the proposal, SNFs would be required 

to bill Medicare for all services (except the services of physicians, certified nurse 

midwives, psychologists, hospice care, and nurse anesthetists). This proposal would 

prohibit payment to any entity other than the SNF for services or supplies furnished to 

Medicare-covered SNF patients. 

Finally, as recommended by OIG, the President’s FY 1998 budget legislation would 

require SNFs to include HCFA common procedure coding system (HCPCS) codes on 

their bills. 

OIG Draft Report - GEL09-95-00090 - Portable Imaeinp: Services: A Costlv Gntioa 

OIG Recommendation 

HCFA should instruct fiscal intermediaries @Is) to never pay more than the fee schedule 

amount for portable imaging services billed under arrangement. 

A-2 
HCFA Response 

We concur. However, we note it will take a considerable amount of administrative work 

to implement this policy. (For example, it is currently impossible to impose this 

requirement because SNPs use revenue codes rather than HCPCS codes when billiag for 

these services. It is impossible to compare services using these codes. It will take time to 

make the chsages necessary to require SNPs to use HCPCS codes.) HCFA already 

instructed the FIs, that in applying the prudent buyer principle, they should compare the 

price paid by SNFs for portable x-my services with the aatomt paid when portable x-ray 

services are billed by the supplier to the carrier. 

OIG Recomamadation 

HCFA should require FI edits aad HCPCS codes on all claims to discontinue paymeats 

for non-covered services. 

HCFA Resuoase 

We concur with the intent of the recommendation. HCFA is currently pursuiag 

legislation that will change SNP payment methodology and make this action unnecessary. 

We believe implementation of coasolidated billing aad aa amendment to the current 

statute is a broader approach to resolving issues sm~oundiag non-covered services aad 

excessive costs associated with SNPs billiag for portable iamgiag services. Ia the 

interim, HCFA explored use of HCPCS codes. However, this would require a major 

change to the Medicare Uniforat Iastitutioaal Provider Billing Form (LIB-92) aad costly 

claims processing systems changes. Therefore, it is not cost effective over the longer 

term. -__ 

OIG Recommendation 

HCFA should require FIs to disallow say nursing facility overhead associated with 

portable mragiag services. 

HCFA Resuoase 

We do not concur. Portable x-ray costs incurred by the SNF under arrangement are 

subject to the test of reasonableaess as required by regulatioas at 42 CPR 413.9, Costs 

Related to Patient Care, and Chapter 21, Costs Related to Patient Care, of the Provider 

m (PRM). As pointed out ia PRM section 2103B, Prudent BuyerApplication of Prudent Buyer principle, intermediaries aray employ various means for 

A-3 
detecting and investigating situations where costs appear to be excessive. Included may 

be such techniques as comparing the prices paid by providers to the price paid by others. 

HCFA instructed the FIs, that in applying the prudent buyer principle, they should 

compare the price paid by SNFs for portable x-ray services with the amount paid when 

portable x-ray services are billed by the supplier to the carrier. After allowing any 

reasonable amount of actual overhead that may be applied to the cost incurred by the SNF 

for the technical component and transportation component of the portable x-ray charge 

made by the.carrier to the SNF, that amount should be compared with the amount paid 

when portable x-ray services are billed by the supplier to the carrier (excluding the 

professional fee portion). 

OIG Recommendation 

HCFA should immediately convert transportation reimbursement rates to a national fee 

schedule, rebundle equipment setup with transportation, and remind carriers that they 

must prorate transportation charges when multiple patients are seen at the same facility. 

HCFA Resnonse 

We partially concur. We will soon publish a proposed rule for the 1998 Medicare 

physician fee schedule. Among the proposals will be one addressing an adjustment of 

practice expense relative values assigned to codes payable under the physician fee 

schedule. As a part of that proposal, we plan to include a national payment rate for the 

portable x-ray tmnsportation codes ROO70- one patient and RO075- multiple patients, 

effective with the 1998 physician fee schedule. 

We made a p&y decision that it was appropriate to pay a setup fee with every portable 

x-ray procedure furnished because there was no question that Medicare had historically 

paid higher amounts for the technical component of x-ray services furnished by portable 

suppliers vis-a-vis procedures performed by stationary entities. The setup fee reflects the 

historic aatioaal average difference between carrier payments for x-rays furnished by 

portable suppliers vis-a-vis payments made for the procedures furnished by other 

facilities. We continue to believe these payments are appropriate. Further, it would be 

inappropriate to bundle setup fees with transportation payments since carriers pay a 

single transportation payment per trip, but would pay multiple setup fees when an 

individual beaeficiaty receives several x-ray procedures during a session. 

A-4 
Separate codes, describing situations in which one patient is seen and those in which 

multiple patients are seen, clearly indicate that carriers should have. different payment 

amounts. Further, a discussion of the required proration when multipIe patients are seen 

was included in a Medicare Carriers Manual revision published in June 1996, transmittal 

number 1546, citation section 15022.G.3. 

OIG Draft Reoort OEI-09-95-00091- Portable Imauine; Services: Nursing Facilitv 

Persaectives 

OIG Recommendation 

HCFA should eliminate the requirement that physicians justify the use of portable 

x-ray services for nursing facility patients. 

HCFA Resuonse 

We do not concur. We believe the current requirement in 42 CFR 486.106(a) should be 

maintained, even though it may not be enforced effectively at this time. We recently 

proposed and adopted a new rule requiring that the physician who orders a diagnostic test 

must be a physician who is responsible for some aspect of the beneficiary’s care. One of 

the primary reasons we took this action was to give the carriers an additional tool to use 

in determining whether diagnostic tests performed in aursing facilities are medically 

necessary. We believe any action taken the following year to relax the ordering 

requirements for a category of diagnostic tests that is usually done in nursing facilities 

would be poorly timed. Further, we believe, since x-ray procedures furnished oa a 

portable basis are more expensive, more extensive justification of the necessity for the 

procedure is wonable. Finally, since relaxing the ordering criteria could not possibly 

save the program any money, we can not see any benefit arising &om making such a 

change. 

Furthermore, section 483.75(k) of g 

requires a SNF to provide or obtain radiology and other diagnostic services to meet the 

needs of its residents. In so doing, the facility must assist the resident in making 

transportation arraugemeats to and thorn the source of services, if the resident needs 

assistance. As stated in your report, 88 percent of the facibties in your sample note that 

beneficiaries routinely travel to medical appointments outside the facility by taking 

wheelchair vans, and 38 percent of the facilities note that family members sometimes 

A-5 
5 

take patients to medical appointments outside the facility. This would indicate the use of 

more costly portable x-ray services performed in the SNF may not always be reasonable 

and necessary in those instances where the use of available outside resources is feasible. 

There is no requirement that an aide be sent with a resident when obtaining services 

outside the facility. We recognize in some instauces an aide may be necessary to ensure 

the safety of the resident. Iu those cases, the SNF may charge the resident for this service. 

Furthermore, under Title 3, Part B, section 321(a) of the Older Americans Act, grants are 

provided to state units on aging to provide supportive services, includiug trausportation 

(i.e., wheelchair vans), that are utilized by all long-term care (LTC) facility residents in 

order to attend medical appoiutments outside the facility. These services are provided at 

no cost to the facility. Also, under the Medicaid program, nursing facilities @IFS)are 

reimbursed for transportation charges as part of the daily rate. 

OIG Recommendation 

HCFA should remind NFs that suppliers should not have access to patient records. 

HCFA Resoonse 

We concur. HCFA is preparing to release a program memorandum that addresses 

medical necessity and con6dentiaIity of medical records for all services provided in LTC 

facilities. 

Technical Comments 

Tbe term musing facility utilized throughout this report is misleading. Current Federal 

regulatioas &tlnguish between two types of LTC facilities: an NF under the Medicaid 

program, and a SNF undtr the Medicare program. We suggest that the term “long-term 

care facility” replace the words “musing facility” throughout this report when referring to 

a genetic nursing home. If a policy or coacem specifically relates to Medicare SNFs or 

Medicaid NPs, it should be so noted. 

The definition of SNF coverage under Part A that appears in the “Background” is too 

general. We suggest it be more specitk. Section 1861(h) of the Social Security Act 

provides for coverage of extended care services furnished to an inpatient of a SNF. Such 

coverage includes: (1) nursing care provided by, or under the supervision of a registered ’ 

professional nurse; (2) bed and board in connection with the furnishing of such musing 

A-6 
6 

care; (3) physical or occupational therapy or speech-language pathology services 

famished by the SNF or others under arrangements with them made by the facility; (4) 

medical social services; (5) such drugs, biologic&, supplies, appliances, and equipment 

fomished for use in the SNP, as are ordinarily tirmished by such facility for care and 

treatment of inpatients; (6) medical services provided by an intern or resident-in-training 

of a hospital with which the facility has in effect a transfer agreement, under an approved 

teaching program of such hospital, and other diagnostic, or therapeutic services provided 

by a hospital with which the facility has such an agreement in effect; and (7) such other 

services necessary to the health of the patients as sre generally provided by SNFs. 

Additionally, the deSnition of the SNF benefit that appears in the “Background” is too 

general. We suggest it be more specific. The SNF benefit is referred to as post-hospital 

extended care services. It is designed to assist persons who have had a 3-day qualifying 

hospital stay, and require skilled services on a daily basis to recuperate from an acute 

episode. Coverage, if approved, is limited to a total of 100 days per benefit period. On 

the 2 1st day the beneficiary becomes responsible for a daily coinsurance amount equal to 

one-eighth of the inpatient hospital deductible, as prescribed by law. 

A statement is made on page 3 of the “Introduction” that “Nursing facilities may bill 

under arrangement even for patients who are not in Part A-covered stays. In these cases, 

the musing facility submits an outpatient claim to the fiscal intermediary.” Although the 

first sentence is technically correct, the second sentence is incorrect and needs 

clarifkation. We suggest the following language: “Payment may be made for a limited 

range of services under Part B when fomished by a participating SNF to an inpatient of 

the SNF, if payment cannot be made under Part A, e.g., the beneficiary exhausted his 

allowed days of inpatient SNF coverage under Part A in his current spell of illness. In 

these cases, the SNF submits a claim to the FIs for those inpatient services rendered.” 

___ 

A-7 
APPENDIX B 

CONFIDENCE INTERVALS FOR SELECTED STATISTICS 

The following tables show the point estimates and 95 percent confidence intervals for 

selected statistics in the order they appear in the report. 

Statistic 

Point estimate 95 percent 

confidence interval 

Amount that Medicare paid during 1994 for portable chest x-rays and EKGs billed under 

arrangement 

$24.4 million $6.2 million - $42.6 million 

Amount that Medicare would have paid during 1994 for portable chest x-rays and EKGs billed 

under arrangement if these services had been billed directly to the Medicare carrier 

$9.7 million $3.0 million - $16.4 million 

Percent of portable chest x-rays that were billed under arrangement during 1994 

10.2 percent 3.8 percent - 16.5 percent 

Difference between (1) the amount that portable suppliers were paid during 1994 for portable 

chest x-rays and EKGs billed under arrangement and (2) the amount that suppliers would have 

received if these services had been billed directly to the Medicare carrier 

$10.7 million $2.9 million - $18.5 million 

Difference between (1) the amount that skilled nursing facilities were allowed during 1994 for 

portable chest x-rays and EKGs billed under arrangement and (2) the amount that skilled 

nursing facilities paid suppliers for these services 

$8.1 million $0.5 million - $15.7 million 

Beneficiaries’ copayments during 1994 for chest x-rays and EKGs billed under arrangement 

$6.5 million $1.3 million - $11.8 million 

Beneficiaries’ copayments during 1994 for chest x-rays and EKGs billed under arrangement if 

these services had been billed directly to the Medicare carrier 

$2.4 million $0.8 million - $4.1 million 

B-l 
Statistic 

Point estimate 95 percent 

confidence interval 

Amount that Medicare would have saved during 1994 if HCFA had required fiscal 

intermediaries to apply the fee schedule to all portable imaging services billed under 

arrangement 

$23.6 million Cannot calculate because only 

chest x-rays and EKGs were 

part of our sample 

Amount that Medicare would have saved during 1994 if HCFA had required fiscal 

intermediaries to apply the fee schedule to chest x-rays and EKGs billed under arrangement 

$14.7 million $3.0 million - $26.4 million 

Amount that Medicare would have saved during 1995 if HCFA had eliminated payment for 

setup charge 

$16.6 million $16.2 million - $17.0 million 

Amount that Medicare would have saved during 1995 if HCFA had limited the amount allowed 

for portable x-ray transportation to $70 per beneficiary per service day 

$18.9 million $18.0 million - $19.8 million 

B-2 
APPENDIX C 

CALCULATION OF ESTIMATED SAVINGS TO THE MEDICARE PROGRAM 

The calculation of estimated savings involved (1) estimating the amount that Medicare 

would have saved during 1994 if HCFA had required the fiscal intermediaries to apply the 

fee schedule to all portable imaging services billed under arrangement, and (2) projecting 

these savings, and the other savings in our recommendations, to a 5-year period from 

1997 through 2001. 

Portable imaging services billed under arrangement 

We calculated this estimate through a three-step process, as described below. We cannot 

calculate a confidence interval for this estimate, because only chest x-rays and EKGs were 

part of our sample. 

1. Using a 1 percent sample of 1994 part B claims, we calculated the amounts that 

Medicare allowed to suppliers for portable EKGs and x-rays that were billed 

directly to the Medicare carrier, as shown in the table below. 

Service (billed directly to carrier) 1994 allowed amount 

Portable EKGs I $15643,243 II 

Portable chest x-rays I $78,249,734 II 

SUB-TOTAL EKGs and chest x-rays $93,892,977 

Portable, non-chest x-rays $56424,623 

TOTAL $150,317,600 

As illustrated below, the ratio of non-chest x-rays to the combination of chest x-rays and 

EKGs is 0.601. We assumed that this ratio would be approximately the same for services 

billed under arrangement as for services billed directly. 

Calculation: Ratio of non-chest x-rays to $56,424,623 + $93,892,977 = 0.601 combination of EKGs and chest x-rays 

2. From our sample of chest x-rays and EKGs, we estimated that portable chest 

x-rays and EKGs billed under arrangement during 1994 cost Medicare 

$14.7 million more than these services would have cost if billed directly. (See the 

body of this report, page 9). 

C-l 
3. As illustrated below, we multiplied the estimate from step 2 by the ratio from 

step 1. 

Calculation: Non-chest x-rays billed under $14,731,933 * 0.601 = $8.85 arrangement during 1994 cost Medicare million $9 million more than if billed directly 

4. By adding the amounts from steps 2 and 3, we estimated that all portable services 

that were billed under arrangement during 1994 cost Medicare $23.6 more than if 

billed directly. 

Estimated savings for 1997 through 2001: transportation and setup 

We used a three-step process to estimate how much Medicare will save from 1997 through 

2001 if HCFA (1) eliminates payment for setup and (2) limits the allowance for portable 

x-ray transportation to $70 per beneficiary per service day. 

1. Using 1 percent sample data for 1994, we calculated that Medicare allowed a 

median of $70 for HCPCS code ROO70(portable x-ray transportation--one patient). 

2. Using 1 percent sample data for each year from 1992 through 1995, we calculated 

how much Medicare would have saved if HCFA had eliminated payment for setup 

and limited the allowance for transportation to $70. (We included portable x-ray 

transportation, but not EKG transportation, in this calculation.) Next, we 

calculated the annual percent changes for each year. We selected the smallest of 

these annual percent changes (a 2.90 percent decrease for setup and a 7.43 percent 

increase for transportation) to use in the step 3 calculations. 

3. Starting with the 1995 estimated savings, we calculated the savings in each 

subsequent year by changing the previous year’s savings by a 2.90 percent 

decrease (for setup) or a 7.43 percent increase (for transportation). The results of 

these calculations are displayed on the following page. 

For example, the table on the following page illustrates how we calculated the 

1997 savings for limiting the transportation allowance. 

c-2 
20001 19987 $21,823,533 $23,445,463 $27,059,906 $29,071,004 $15,217,817 $14,348,237 $15,672,175 $14,776,632 

Starting point: 1995 transport savings $18,908,522 

Smallest percent increase in transport 7.43 percent savings, 1992 through 1995 

1996 transport savings calculation $18908,522 * 1.0743 = $20.313.807 

II 1997 transport savings calculation I $20,313,807 * 1.0743 = $21,823,533 

The precise number used for these calculations was 1.0743201987. 

Statistics from 1 percent sample data 

Savings for 

Year limiting 

transportation 

allowance 

$14,446,335 

$15,892,584 

$17,073,724 

$18,908,522 

Percent change Savings for Percent change 

from previous eliminating setup from previous 

year allowance year 

Not applicable $10,757,229 Not applicable 

10.01% $17,013,946 58.16% 

7.43% $17,118,274 0.61% 

10.75 % $16,621,992 -2.90% 

Data for 1996 were not available at the time of this report 

5-year savings estimates 

~ 

1 1999 $25,187,934 $13,932,262 

TOTAL] $126,587,840 $73,947,123 

c-3 
Estimated savings for 1997 through 2001: services billed under arrangement 

We used a three-step process to estimate how much Medicare will save from 1997 through 

2001 if HCFA requires fiscal intermediaries to apply the fee schedule to all portable 

imaging services billed under arrangement. 

1. Using 1 percent sample data for each year from 1992 through 1995, we calculated 

the total number of portable transportation claims billed directly to Medicare 

carriers. Next, we calculated the annual percent changes for each year. We 

selected the smallest of these annual percent changes (a 6.27 percent increase) to 

use in the step 3 calculations. 

We indexed the billed-under-arrangement savings to directly billed transportation 

claims, because our sample only included 1994 data for services billed under 

arrangement. In these estimates, we are assuming that the number of portable 

services billed under arrangement will increase at the same rate as the number of 

portable services billed directly. 

2. We estimated that Medicare would have saved $23.6 million during 1994 if HCFA 

had required the fiscal intermediaries to apply the fee schedule to all portable 

imaging services billed under arrangement. (See pages C-l and C-2 of this 

appendix for this calculation.) 

3. Starting with the 1994 estimated savings from step 2, we calculated the savings in 

each subsequent year by increasing the previous year’s savings by 6.27 percent. 

The results of these calculations are displayed on the following page. 

For example, the table below illustrates how we calculated the 1997 savings for applying 

the fee schedule to services billed under arrangement. 

Starting point: 1994 savings for services $23,585,03 1 billed under arrangement 

Smallest percent increase in portable 

transportation claims, 1992 through 1995 6.27 percent 

1995 savings calculation $23,585,031 * 1.0627 = $25,063,260 

1996 savings calculation $25,063,260 * 1.0627 = $26,634,140 

1997 savings calculation $26,634,140 * 1.0627 = $28,303,476 

The precise number used for these calculations was I. 06267658. 

c-4 
Statistics from 1 percent sample data 

Year Number of directly billed 

portable transportation claims 

1,345,OOo 

1,429,300 

1,531,800 

1,633,200 

Data for 1996 were not available 

Percent change from 

previous year 

Not applicable 

6.27% 

7.17% 

6.62% 

at the time of this report 

5-year savings estimates 

Estimated savings for applying 

$28,303,476 

$30,077,441 

$3 1,962,593 

$33,965,899 

$36,094,765 

$160,404,174 

c-5 

fee