Department of Health and Human Services

OFFICE OF 

INSPECTOR GENERAL 

 

Daniel R. Levinson 

Inspector General 

June 2009 

OEI-02-07-00230 

 

 

MEDICARE PART D PAYMENTS 

FOR BENEFICIARIES IN PART A 

SKILLED NURSING FACILITY 

STAYS IN 2006 
Office of Inspector General 

http://oig.hhs.gov 

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, 

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mismanagement and promote economy and efficiency throughout HHS. 

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The Office of Evaluation and Inspections (OEI) conducts national evaluations to provide 

HHS, Congress, and the public with timely, useful, and reliable information on significant 

issues. These evaluations focus on preventing fraud, waste, or abuse and promoting 

economy, efficiency, and effectiveness of departmental programs. To promote impact, OEI 

reports also present practical recommendations for improving program operations. 

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The Office of Investigations (OI) conducts criminal, civil, and administrative investigations 

of fraud and misconduct related to HHS programs, operations, and beneficiaries. With 

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by actively coordinating with the Department of Justice and other Federal, State, and local 

law enforcement authorities. The investigative efforts of OI often lead to criminal 

convictions, administrative sanctions, and/or civil monetary penalties. 

Office of Counsel to the Inspector General 

The Office of Counsel to the Inspector General (OCIG) provides general legal services to 

OIG, rendering advice and opinions on HHS programs and operations and providing all 

legal support for OIG’s internal operations. OCIG represents OIG in all civil and 

administrative fraud and abuse cases involving HHS programs, including False Claims Act, 

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also negotiates and monitors corporate integrity agreements. OCIG renders advisory 

opinions, issues compliance program guidance, publishes fraud alerts, and provides other 

guidance to the health care industry concerning the anti-kickback statute and other OIG 

enforcement authorities. 
 

ΔEXECUTIVE SUMMARY EXECUTIVE SUMMA RY 

OBJECTIVE

To determine the extent to which Medicare Part D paid for drugs for 

beneficiaries in Part A skilled nursing facility (SNF) stays in 2006. 

BACKGROUND 

Medicare Part D provides outpatient prescription drug coverage for 

Medicare beneficiaries who enroll. Part D covers most prescription 

drugs; however, it excludes drugs that are covered under Medicare 

Parts A or B. Specifically, Part D excludes drugs for beneficiaries in 

Part A SNF stays if the drugs were for use in the facility or to facilitate 

the beneficiaries’ discharge. 

The Centers for Medicare & Medicaid Services (CMS) has identified 

duplicate payments by Medicare Parts A and D as a potential 

vulnerability. CMS further states that billing multiple payers (e.g., 

Parts A and D) for the same prescription is an example of pharmacy 

fraud, waste, and abuse. 

This review determines the extent to which Medicare Part D paid for 

drugs for beneficiaries in Part A SNF stays in 2006. 

FINDINGS 

Medicare Part D paid for 1.2 million drugs, amounting to $75 million, 

for beneficiaries in Part A SNF stays in 2006; the majority of these 

payments were most likely inappropriate. Sixty percent of the drugs 

Part D paid for while beneficiaries were in Part A SNF stays in 2006 

were dispensed by long-term care pharmacies. Long-term care 

pharmacies dispense drugs for use in long-term care settings, including 

SNFs. These drugs were most likely dispensed for use in the facility 

during a Part A SNF stay and covered under Medicare Part A, rather 

than Part D. Therefore, Part D payments for these drugs, which 

amounted to $41.3 million, were most likely inappropriate. Retail and 

other types of pharmacies dispensed the remaining 40 percent of drugs 

paid for by Part D for this population. If these drugs were for use in the 

facility or were to facilitate the beneficiaries’ discharge, these Part D 

payments were also inappropriate. 

Part D payments were widespread among SNFs and pharmacies. 

Nearly every SNF and half of all pharmacies had beneficiaries who had 

a drug paid for by Part D during their Part A SNF stay. At the same 

OEI-02-07-00230 MEDICARE PART D PAYMENTS FOR BENEFICIARIES IN PART A SNF S TAYS IN 2006 i
 

EXECUTIVE SUMMARY 

time, a small number of SNFs and pharmacies were responsible for a 

large percentage of these Part D payments. Notably, 160 SNFs 

accounted for 12 percent ($8.6 million) of the payments and 

30 pharmacies accounted for 18 percent ($13 million) of all Part D 

payments for beneficiaries in Part A SNF stays. 

RECOMMENDATIONS 

Based on these findings, we recommend that CMS: 

Ensure that Part D payments for drugs for beneficiaries in Part A SNF 

stays are appropriate. CMS should ensure that Part D does not pay for 

drugs that are covered under Parts A or B for beneficiaries in Part A SNF 

stays. 

Specifically, we recommend that CMS take the following actions: 

Provide additional guidance about when Parts A and D can pay for drugs 

for beneficiaries preparing for discharge. CMS should provide additional 

guidance to SNFs, pharmacies, and Part D sponsors that clarifies the 

circumstances under which Part D can pay for drugs before 

beneficiaries are discharged from Part A SNF stays. Specifically, CMS 

should clarify when Part A covers drugs by defining what is considered 

a “limited supply” and providing further guidance about when Part A 

should cover these drugs to facilitate discharge. It should also clarify 

when Part D may cover extended supplies of drugs for beneficiaries 

before they are discharged from Part A SNF stays. 

Educate SNFs, pharmacies, and Part D sponsors that drugs covered under 

Parts A or B for beneficiaries in SNF stays are not eligible for payment 

under Part D. CMS should educate SNFs, pharmacies, and Part D 

sponsors that it is inappropriate for Part D to pay for drugs for 

beneficiaries in Part A SNF stays. CMS should consider holding 

open-door forums, developing factsheets, or using other methods to 

inform these entities about this issue. 

Implement retrospective reviews to prevent inappropriate Part D payments 

for drugs for this population. CMS should implement routine reviews to 

ensure that inappropriate Part D payments do not occur. Further, CMS 

should conduct ongoing analysis and monitor trends in Part D payments 

for beneficiaries in Part A SNF stays. 

Follow up with the SNFs and pharmacies that were responsible for a large 

percentage of Part D payments for beneficiaries in Part A SNF stays. CMS 

should consider tracking these entities to ensure that payments have 

OEI-02-07-00230 MEDICARE PART D PAYMENTS FOR BENEFICIARIES IN PART A SNF S TAYS IN 2006 ii
 

 EXECUTIVE SUMMARY 

decreased. To help CMS address this issue, we will forward information 

in a separate memorandum about the SNFs and pharmacies that were 

responsible for a large percentage of the Part D payments. 

AGENCY COMMENTS AND OFFICE OF INSPECTOR GENERAL 

RESPONSE 

CMS concurred with the three recommendations in our draft report. 

However, it raised several concerns about the report and in response we 

clarified the language in the report and added a recommendation. 

In response to our recommendation to educate SNFs, pharmacies, and 

Part D sponsors, CMS noted that it had recently issued a memorandum 

to Part D sponsors reminding them of the exclusion of Part D payments 

for drugs covered under Medicare Part A stays. The memorandum also 

announced that effective 2009, Part D sponsors would receive lists twice 

annually of their institutional beneficiaries. 

In response to our recommendation to implement retrospective reviews, 

CMS stated that it expects to better understand the most appropriate 

controls for prevention and detection of inappropriate Part D payments 

after it looks at the specific information the Office of Inspector General 

(OIG) provides about the SNFs and pharmacies that were responsible 

for the largest percentage of payments. CMS will also review feedback 

from sponsors about the value of the list of institutional beneficiaries, 

including those in SNFs. 

In response to our recommendation to follow up with the SNFs and 

pharmacies that were responsible for a large percentage of the 

payments, CMS stated that it will investigate the allegations of 

duplicate payments upon receipt of OIG’s data. 

CMS also raised concerns about our methodology, stating that our draft 

report failed to consider contemporary pharmacy practice and as a 

result inflated the number of potential erroneous Part D payments. 

Specifically, CMS noted that current pharmacy practice allows patients 

to refill a prescription before their current supply is exhausted. CMS 

further noted that although Part A provides reimbursement for “a 

limited supply” to facilitate beneficiary discharge, beneficiaries must be 

permitted to have a full outpatient supply available to continue therapy 

once this limited supply is exhausted. 

In response to CMS’s comments, we recognize that there are 

circumstances in which drugs may be billed to Part D if they are not for 

OEI-02-07-00230 MEDICARE PART D PAYMENTS FOR BENEFICIARIES IN PART A SNF S TAYS IN 2006 iii
 

OEI-02-07-00230 MEDICARE PART D PAYMENTS FOR BENEFICIARIES IN PART A SNF S TAYS IN 2006 iv

RECOMMENDATIONS 

use in the facility or to facilitate the beneficiaries’ discharge. Although 

it is unlikely that drugs dispensed by long-term care pharmacies meet 

these conditions, we modified the language in the report to address 

CMS’s concerns. In addition, we note that it would be beneficial for 

CMS to provide additional guidance to SNFs, pharmacies, and Part D 

sponsors that clarifies the circumstances under which Parts A and D 

can pay for drugs for beneficiaries preparing for discharge. As a result, 

we added a recommendation to the report that CMS provide additional 

guidance on these issues. We also note that we will provide the 

information about the SNFs and pharmacies that were responsible for a 

large percentage of Part D payments in a separate memorandum. 
Δ TABLE OF CONTENTS 

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

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

F I N D I N G S...................................................7 

Part D paid for 1.2 million drugs for beneficiaries in 

Part A SNF stays; the majority of payments were most likely 

inappropriate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 

Part D payments were widespread among SNFs and 

pharmacies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 

 

RECOMMENDATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 

 Agency Comments and Office of Inspector General Response . . . . . . . 12

 

APPENDIXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 

 A: Most Frequently Dispensed Drugs Paid for by Part D. . . . . . . 15 

 B: Drugs with the Highest Part D Expenditures . . . . . . . . . . . . . 16 

 C: Centers for Medicare & Medicaid Services Comments . . . . . . 17 

ACKNOWLEDGMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
 

Δ INTRODUCTION 

OBJECTIVE 

To determine the extent to which Medicare Part D paid for drugs for 

beneficiaries in Part A skilled nursing facility (SNF) stays in 2006. 

BACKGROUND 

Medicare Part D provides outpatient prescription drug coverage for 

Medicare beneficiaries who enroll. Part D covers most prescription 

drugs; however, it excludes drugs that are covered under Medicare 

Parts A or B. Specifically, Part D excludes drugs for beneficiaries in 

Part A SNF stays. These drugs are covered under Part A, except for a 

few drugs that are covered under Part B. 

The Centers for Medicare & Medicaid Services (CMS) has identified 

duplicate payments by Medicare Parts A and D as a potential 

vulnerability. According to CMS, “[w]ith the implementation of the 

prescription drug benefit, there is potential for inappropriate duplicate 

coverage between Parts A, B, and D drugs.”1 CMS further states that 

billing multiple payers (e.g., Parts A and D) for the same prescription is 

an example of pharmacy fraud, waste, and abuse.2 

This review determines the extent to which Medicare Part D paid for 

drugs for beneficiaries in Part A SNF stays in 2006 during the first year 

of the Part D benefit. 

Medicare Part D Prescription Drug Program 

CMS contracts with private entities, known as sponsors, to provide the 

Part D benefit. These sponsors may offer a stand-alone prescription 

drug plan or they can offer prescription drug coverage as part of a 

managed care plan, known as a Medicare Advantage Prescription Drug 

Plan. 

Each Part D plan develops its own list of covered drugs, known as a 

formulary, which must meet certain standards. Each plan’s formulary 

must contain at least two drugs within each therapeutic category and 

pharmacologic class.3 It also must cover “all or substantially all” of the 

1 CMS, “Prescription Drug Benefit Manual,” ch. 9—Part D Program to Control Fraud, 

Waste and Abuse, § 70.2.4 Rev. 2 (April 25, 2006). Available online at 

http://www.cms.hhs.gov/PrescriptionDrugCovContra/Downloads/PDBManual_Chapter9_F

WA.pdf. Accessed on July 17, 2008. 

2 Ibid., § 70.1.3. 

3 42 CFR § 423.120(b)(2)(i). 

OEI-02-07-00230 MEDICARE PART D PAYMENTS FOR BENEFICIARIES IN PART A SNF S TAYS IN 2006 1
 

INTRODUCTION 

drugs in six categories: immunosuppressant, antidepressant, 

antipsychotic, anticonvulsant, antiretroviral, and antineoplastic 

classes.4 Certain classes of drugs are excluded from coverage by Part D. 

These include benzodiazepines, barbiturates, weight management 

drugs, and over-the-counter drugs.5

In addition, Part D generally excludes from coverage drugs that are 

covered under Parts A or B. Pursuant to the Medicare Prescription 

Drug, Improvement, and Modernization Act of 2003 (MMA): 

A drug prescribed for a Part D eligible individual that would 

otherwise be a covered Part D drug under this part shall not 

be so considered if payment for such drug as so prescribed 

and dispensed or administered with respect to that 

individual is available (or would be available but for the 

application of a deductible) under Part A or B for the 

individual.6 

CMS stated in the Part D final rule that this requirement means that 

an otherwise covered Part D drug is excluded from coverage under 

Part D if payment is available under Part A or Part B.7 CMS further 

clarified Part D coverage in a subsequent Part D rule issuance that 

“. . . if payment could be available under Part A or Part B to that 

individual for such drug, then it would not be covered under Part D.”8 

Further, CMS has explained that “. . . if Medicare Part A is paying for 

the nursing home stay, an individual’s drug costs will in all likelihood 

be covered through Medicare Part A payment, and so the issue of Part D 

cost-sharing liability does not apply.”9

Medicare Part A Skilled Nursing Facility Coverage 

Medicare Part A covers posthospital skilled nursing care for 

beneficiaries who meet certain conditions. To qualify for Part A SNF 

coverage, the beneficiary must first have a medically necessary 

inpatient hospital stay of at least 3 consecutive days.10 The beneficiary 

2

4 CMS, “Prescription Drug Benefit Manual.” Available online at 

http://www.healthplus.org/uploadedFiles/PDFs/Medicare/PDBMChap6FormularyReqrmts_0

3.09.07.pdf. Accessed on December 3, 2008. 

5 42 U.S.C. § 1395w-102(e)(2)(A) (citing to 42 U.S.C. § 1396r-8(d). 

6 MMA, P.L. No. 108-173, Title I § 101(a)(e)(2)(B) (codified at 42 U.S.C. 1395w-102(e)(2)(B)). 

7 70 Fed. Reg. 4194, 4230 (Jan. 28, 2005). 

8 73 Fed. Reg. 20486, 20493 (Apr. 15, 2008). 

9 70 Fed. Reg. 4341, 4372 (Jan. 28, 2005). 

10 42 CFR § 409.30(a)(1). 

OEI-02-07-00230 MEDICARE PART D PAYMENTS FOR BENEFICIARIES IN PART A SNF S TAYS IN 2006 
 

INTRODUCTION 

must be admitted to a SNF within a specified time period (generally 

30 days) of hospital discharge and must require skilled care for the 

condition for which he or she received inpatient hospital services.11 

SNF care provided under Medicare Part A is limited to a benefit period 

of 100 days and requires a copayment for days 21 through 100.12 

3

of 

Medicare pays SNFs prospectively for beneficiaries in Part A stays. 

These prospective payments cover most services supplied by the SNF, 

including nursing care and physical, occupational, and speech 

therapies.13 The payments also cover drugs and biologicals furnished 

by the facility for use in the facility for the care and treatment 

beneficiaries.14 In addition, payments cover a limited supply of drugs 

for use outside the SNF if it is medically necessary to facilitate the 

beneficiary’s departure from the facility and is required until he or she 

can obtain a continuing supply.15 Further, payments for drugs “are not 

limited to those routinely stocked by the facility but include those 

obtained for the patient from an outside source, such as a pharmacy in 

the community.”16 

Part A does not cover certain drugs that may be billed separately to 

Medicare Part B.17 For example, Part B covers various chemotherapy 

drugs.18 

Provision of Prescription Drugs in SNFs 

Nursing homes typically contract with long-term care pharmacies to 

provide drugs to their residents.19 These pharmacies provide 

specialized services, such as a comprehensive inventory of drugs 

11 42 CFR § 409.30(b)(1). 

12 42 CFR § 409.61(b); see also CMS, “Medicare General Information, Eligibility, and 

Entitlement,” ch. 3—Deductibles, Coinsurance Amounts, and Payment Limitations, 

Rev. 41, Oct. 27, 2006, § 10.4. 

13 42 CFR §§ 413.335 and 409.20. For critical-access hospitals, Part A pays on a reasonable 

cost basis for SNF services furnished under a swing-bed agreement rather than through 

prospective payments. See 42 CFR § 413.114(a)(2). 

14 42 CFR § 409.25. 

15 42 CFR § 409.25(a)(2). 

16 CMS, “Skilled Nursing Facility Manual,” Pub-12, § 230.5, Drugs and Biologicals. 

17 42 CFR § 411.15(p)(2). 

18 68 Fed. Reg. 46060 (Aug. 4, 2003). Also see CMS, “Overview of SNF Consolidated 

Billing (CB).” Available online at 

http://www.cms.hhs.gov/SNFPPS/05_ConsolidatedBilling.asp#TopOfPage. Accessed on 

November 25, 2008. 

19 70 Fed. Reg. 4194, 4250 (Jan. 28, 2005). 

OEI-02-07-00230 MEDICARE PART D PAYMENTS FOR BENEFICIARIES IN PART A SNF S TAYS IN 2006 
 

INTRODUCTION 

commonly used in long-term care settings, specialized packaging, 

intravenous therapy medications, 7-day-a-week delivery, pharmacy 

on-call services, and emergency medications.20

One long-term care pharmacy generally provides drugs to all 

residents in a nursing facility. For beneficiaries in Part A SNF stays, 

the SNF is responsible for reimbursing the pharmacy for the drugs 

covered under Part A. For beneficiaries who are covered by Part D 

and are not in Part A SNF stays, the beneficiary and/or the Part D 

sponsor is responsible for reimbursing the pharmacy. 

Potential Vulnerabilities 

If Part D pays for a drug that is covered by Part A, Medicare, in effect, 

pays twice for this drug and either the SNF or the pharmacy profits. 

Under Part A, Medicare pays SNFs prospectively to cover the costs of 

services and items, including drugs, provided to beneficiaries in Part A 

SNF stays. If the SNF receives the prospective payments for the 

beneficiary but does not reimburse the pharmacy for the drugs, the SNF 

profits. If the SNF reimburses the pharmacy for the drug and the 

pharmacy is also paid by Part D, the pharmacy profits. 

Payment Controls 

Part A data files are maintained separately from Part D data files. 

Currently, there is no system in place that combines the data from both 

programs to check for duplicate payments. Additionally, Part D 

sponsors are responsible for developing a program to control fraud, 

waste, and abuse but do not have access to Part A data. Further, the 

Medicare Drug Integrity Contractors (MEDIC) are responsible for 

conducting data analysis to identify fraud, waste, and abuse in the 

Part D program; however, they also lack access to Part A data. 

METHODOLOGY 

Scope 

This study determines the extent to which Medicare Part D paid for 

drugs for beneficiaries in Part A SNF stays that began in 2006, the first 

year of the Part D benefit. Our analysis includes all drugs paid for by 

Medicare Part D for beneficiaries while they were in Part A SNF stays. 

20 CMS, “Long-Term Care Guidance, March 16, 2005.” Available online at 

http://www.cms.hhs.gov/PrescriptionDrugCovContra/Downloads/LTCGuidance.pdf. Accessed on 

July 31, 2007. 

OEI-02-07-00230 MEDICARE PART D PAYMENTS FOR BENEFICIARIES IN PART A SNF S TAYS IN 2006 4
 

INTRODUCTION 

 

Identifying Part A Skilled Nursing Facility Stays 

We used CMS’s Medicare Provider Analysis and Review (MEDPAR) file 

to identify beneficiaries who had SNF stays that began in 2006. Each 

MEDPAR record represents a SNF stay from admission to discharge.

We included only the days of each beneficiary’s stay that were covered 

by Medicare. For each stay, we excluded the beneficiary’s day of 

discharge from our analysis because SNFs are not reimbursed for the 

day that the beneficiary leaves the nursing home. The last day of the 

stay that was covered by Medicare is referred to as the day before 

discharge. 

Identifying Drugs Paid for by Part D 

We identified the drugs paid for by Part D for beneficiaries in Part A 

SNF stays using CMS’s Prescription Drug Event (PDE) data. As a 

condition of payment, sponsors must submit a PDE record to CMS for 

each Part D covered drug dispensed.21 We used all final PDE events 

that were received by CMS as of August 1, 2007. 

We identified the drugs paid for by Medicare Part D for beneficiaries in 

Part A SNF stays by matching the MEDPAR data to the PDE data 

using the beneficiaries’ Health Insurance Claim Number. If the date of 

service on the drug event was the same as the start date or between the 

start date and the discharge date, then we included the event in our 

population. 

We then merged the data with the National Council for Prescription 

Drug Program’s database by pharmacy identification number. We used 

information from this database to determine the total number of 

pharmacies and to identify the types of pharmacies (e.g., long-term care, 

retail) that dispensed the drugs. We also obtained information about 

the types of drugs that were dispensed based on the National Drug 

Codes from First DataBank’s National Drug Data File.22 

5

21 CMS, “Updated Instructions: Requirements for Submitting Prescription Drug Event 

Data,” April 27, 2006. Available online at: 

http://www.cms.hhs.gov/DrugCoverageClaimsData/Downloads/PDEGuidance.pdf. 

Assessed on December 30, 2008. 

22 This data file contains descriptive information about all medications approved by the 

Food and Drug Administration, plus information on commonly used over-the-counter drugs 

and alternative therapy agents. 

OEI-02-07-00230 MEDICARE PART D PAYMENTS FOR BENEFICIARIES IN PART A SNF S TAYS IN 2006 
 

INTRODUCTION 

Analysis of Drugs Paid for During Part A Skilled Nursing Facility Stays 

We analyzed the merged file described above to determine the total 

amount paid by Part D for drugs while beneficiaries were in Part A SNF 

stays. This amount is based on the ingredient cost, the dispensing fee, 

and the sales tax from the PDE data for the drugs dispensed to these 

beneficiaries. It includes the amount paid by Part D sponsors, the 

amount paid by the Government, and the amount paid by or on behalf of 

beneficiaries. We also analyzed the file to determine the number of 

drugs paid for by Medicare Part D for these beneficiaries, the types of 

drugs that were most frequently dispensed,23 and the drugs with the 

highest Part D expenditures. We analyzed the average drug costs based 

on the average cost per drug event in the PDE data. For the purposes of 

this study, we use the term “drugs” to refer to paid Part D claims, which 

are also known as Part D drug events. 

Limitations 

This study determines the extent to which Part D paid for drugs 

dispensed during beneficiaries’ Part A SNF stays. These payments are 

inappropriate if the drugs were dispensed for use in the facility or to 

facilitate the beneficiaries’ discharge because Medicare covers these 

drugs under Parts A or B. Based on the data, however, we could not 

determine whether the drugs met these criteria in all situations. This 

determination can only be made based on a review of the medical 

record, which was beyond the scope of this study. In addition, we 

cannot determine from the data whether the pharmacy or the SNF was 

profiting from any inappropriate payments. Lastly, our analysis of drug 

costs did not take into account the dosage of the drugs. 

Standards 

Our review was conducted in accordance with the “Quality Standards 

for Inspections” issued by the President’s Council on Integrity and 

Efficiency and the Executive Council on Integrity and Efficiency. 

6

23 For the purposes of this report, the date the drug was dispensed is based on the date of 

service on the drug claim, which is the date that the pharmacy filled the prescription. 

OEI-02-07-00230 MEDICARE PART D PAYMENTS FOR BENEFICIARIES IN PART A SNF S TAYS IN 2006 
 

Δ FINDINGS 

Medicare Part D paid for 

1.2 million drugs for beneficiaries 

while they were in Part A SNF 

stays in 2006.24 This amounted to 

$75 million in Part D payments, 

the majority of which were most 

likely inappropriate.25 Medicare Part D excludes drugs that are covered 

under Parts A or B. Part A (and in some cases Part B) covers drugs for 

beneficiaries in Part A SNF stays.26 

Medicare Part D paid for 1.2 million drugs, 

amounting to $75 million, for beneficiaries in 

Part A SNF stays in 2006; the majority of these 

payments were most likely inappropriate 

Sixty percent of the drugs for beneficiaries in Part A stays were dispensed 

by long-term care pharmacies; these payments were most likely 

inappropriate 

As shown in Chart 1 on the next page, long-term care pharmacies 

dispensed 60 percent of the drugs Part D paid for while beneficiaries 

were in Part A SNF stays in 2006. Nearly one-third (31 percent) of 

these drugs were dispensed on the day of admission to the SNF. 

Long-term care pharmacies dispense drugs for use in long-term care 

settings, including SNFs. These drugs generally have specialized 

labeling that is used exclusively in an institutional setting. These drugs 

were most likely dispensed for use in the facility during a Part A SNF 

stay and covered under Medicare Part A, rather than Part D. 

Therefore, Part D payments for these drugs, which amounted to 

$41.3 million, were most likely inappropriate. 

Retail and other types of pharmacies dispensed the remaining 

40 percent of drugs paid for by Part D for beneficiaries in Part A SNF 

stays

Retail pharmacies dispensed 35 percent of the drugs for these 

beneficiaries for a total of $27.3 million in Part D payments. Other 

pharmacies (including institutional, home infusion, and mail order) 

7

24 For the purposes of this study, we use the term “drugs” to refer to paid Part D claims, 

which are also known as Part D drug events. 

25 Part D payments are made by Part D sponsors, Medicare, and beneficiaries or by a third 

party on behalf of the beneficiary. 

26 42 CFR § 409.25. 

OEI-02-07-00230 MEDICARE PART D PAYMENTS FOR BENEFICIARIES IN PART A SNF S TAYS IN 2006 
 

FINDINGS 

dispensed the remaining 5 percent of the drugs, totaling $6 million.27 

About 26 percent of drugs dispensed by retail pharmacies and 

10 percent of drugs dispensed by other types of pharmacies were 

dispensed on the day before discharge. 

As noted earlier, Part A not only covers drugs routinely stocked by the 

facility but also those obtained for the patient from an outside source, 

such as a pharmacy in the community.28 If these drugs were obtained 

for use in the SNF, the Part D payments were inappropriate. Also, 

Part A covers a limited supply of drugs for use outside the SNF if it is 

medically necessary to facilitate a beneficiary’s discharge. If these 

drugs were for this purpose, these Part D payments were also 

inappropriate.29

Chart 1: Source of 

Drugs Paid by 

Part D for 

Beneficiary in 

Part A SNF Stays in 

2006 

Source: OIG analysis of CMS data, 2008.

Other 

Pharmacies

5.2%

Retail 

Pharmacies

34.6%

Long-Term 

Care 

Pharmacies

60.2%

P

8

27 An institutional pharmacy is a pharmacy in a hospital (inpatient) used by the pharmacist 

for the compounding and delivery of medicinal preparations to be administered to the 

patient by nursing or other personnel. A home infusion pharmacy is a decentralized patient 

care organization that provides care to patients with acute or chronic conditions generally 

pertaining to drugs and biologics administered through catheters and/or needles in home 

and alternative sites. 

28 CMS, “Skilled Nursing Facility Manual,” Pub. 12, § 230.5, Drugs and Biologicals. 

29 This determination can only be made based on a review of the medical record, which was 

beyond the scope of this study. 

OEI-02-07-00230 MEDICARE PART D PAYMENTS FOR BENEFICIARIES IN PART A SNF S TAYS IN 2006 
 

FINDINGS FINDINGS 

The drugs paid for by Part D varied; however, a relatively small number 

of drugs accounted for a large percentage of the Part D payments 

Overall, Part D paid for 2,396 different types of drugs for beneficiaries 

in Part A SNF stays. On average, each type of drug was dispensed 

513 times, ranging from 1 to 45,832 times. The average cost per drug 

was $61 and costs ranged from $0.01 to $12,794. The median drug cost 

was $24 and the most common cost per drug was about $8. Of the 

25 most frequently dispensed drugs, 13 were generic and 12 were 

brand-name drugs. Appendix A provides a list of the drugs most 

commonly paid for by Part D for beneficiaries in Part A SNF stays. 

A relatively small number of drugs accounted for a large percentage of 

Part D payments for beneficiaries in Part A SNF stays. Specifically, 

25 drugs accounted for 40 percent of the Part D payments for these 

beneficiaries. Twenty-three of the drugs were brand-name drugs, and 

two were generic. The average cost of these drugs was $124 and the 

median cost was $118. See Appendix B for a list of the 25 drugs. 

Nearly every SNF and half of all 

pharmacies had beneficiaries who 

had a drug paid for by Part D 

during their Part A SNF stay. 

At the same time, a small number of SNFs and pharmacies were 

responsible for a large percentage of these Part D payments. 

Part D payments were widespread among SNFs 

and pharmacies 

Nearly every SNF had beneficiaries in Part A SNF stays who received 

drugs paid for by Part D 

Ninety-seven percent (16,009 of 16,525) of all SNFs had at least one 

beneficiary who had a drug paid for by Part D during a Part A SNF 

stay. Part D paid for an average of 77 drugs per facility for these 

beneficiaries. Part D payments for these drugs averaged $4,659 per 

facility. 

Although these payments were widespread, 160 SNFs accounted for 

12 percent ($8.6 million) of the Part D payments for beneficiaries in 

Part A SNF stays. Notably, one SNF had nearly $270,000 in Part D 

payments for drugs for these beneficiaries. 

About half of pharmacies received Part D payments for beneficiaries 

in Part A SNF stays 

Forty-nine percent (36,171 of 73,398) of all pharmacies received Part D 

payments for beneficiaries in Part A SNF stays. These pharmacies 

OEI-02-07-00230 MEDICARE PART D PAYMENTS FOR BENEFICIARIES IN PART A SNF S TAYS IN 2006 9
 

FINDINGS 

dispensed an average of 34 drugs for these beneficiaries. On average, 

Medicare Part D payments totaled $2,062 per pharmacy. 

Compared to other types of pharmacies, long-term care pharmacies 

dispensed more drugs paid for by Part D per pharmacy for beneficiaries 

in Part A SNF stays. Long-term care pharmacies dispensed an average 

of 586 drugs paid for by Part D while beneficiaries were in Part A SNF 

stays. Part D payments for these drugs were, on average, $32,711 per 

pharmacy and ranged from $5 to over $1 million. In contrast, retail 

pharmacies dispensed an average of 13 drugs, or $830 per pharmacy. 

Other pharmacies dispensed an average of 31 drugs, or $2,883 per 

pharmacy. 

Although these payments were widespread among pharmacies, 

30 pharmacies accounted for 18 percent ($13 million) of all Part D 

payments for beneficiaries in Part A stays. Notably, 26 of these 

30 pharmacies were long-term care pharmacies. 

OEI-02-07-00230 MEDICARE PART D PAYMENTS FOR BENEFICIARIES IN PART A SNF S TAYS IN 2006 10
 

Δ RECOMMENDATIONS 

Based on our review, we found that Medicare Part D paid for 1.2 million 

drugs, amounting to $75 million, for beneficiaries in Part A SNF stays 

in 2006. The majority of these payments were most likely 

inappropriate. Medicare Part D excludes drugs that are covered by 

Parts A or B. Part A (and in some cases Part B) covers drugs for 

beneficiaries in Part A SNF stays if the drugs were dispensed for use in 

the facility or to facilitate the beneficiaries’ discharge. 

Specifically, we found that 60 percent of the drugs for these 

beneficiaries were dispensed by long-term care pharmacies. Long-term 

care pharmacies dispense drugs for use in long-term care settings, 

including SNFs. These drugs were most likely dispensed for use in the 

facility during a Part A SNF stay. Therefore, Part D payments for these 

drugs, which amounted to $41.3 million, were most likely inappropriate. 

The remaining drugs were dispensed by retail or other types of 

pharmacies. If these drugs were for use in the facility or were to 

facilitate the beneficiaries’ discharge, these Part D payments were also 

inappropriate. 

Lastly, we found that Part D payments for drugs for beneficiaries in 

Part A SNF stays were widespread among SNFs and pharmacies. 

Nearly every SNF and half of all pharmacies had beneficiaries who had 

a drug paid for by Part D during a Part A SNF stay. At the same time, 

a small number of SNFs and pharmacies were responsible for a large 

percentage of these Part D payments. 

Based on these findings, we recommend that CMS: 

Ensure That Part D Payments for Drugs for Beneficiaries in Part A SNF 

Stays Are Appropriate 

CMS should ensure that Part D does not pay for drugs that are covered 

under Parts A or B for beneficiaries in Part A SNF stays. 

Specifically, we recommend that CMS take the following actions: 

Provide additional guidance about when Parts A and D can pay for drugs 

for beneficiaries preparing for discharge. CMS should provide additional 

guidance to SNFs, pharmacies, and Part D sponsors that clarifies the 

circumstances under which Part D can pay for drugs before 

beneficiaries are discharged from Part A SNF stays. Specifically, CMS 

should clarify when Part A covers drugs by defining what is considered 

OEI-02-07-00230 MEDICARE PART D PAYMENTS FOR BENEFICIARIES IN PART A SNF S TAYS IN 2006 11
 

RECOMMENDATIONS 

a “limited supply” and providing further guidance about when Part A 

should cover these drugs to facilitate discharge. It should also clarify 

when Part D may cover extended supplies of drugs for beneficiaries 

before they are discharged from Part A SNF stays. 

Educate SNFs, pharmacies, and Part D sponsors that drugs covered under 

Parts A or B for beneficiaries in SNF stays are not eligible for payment

under Part D. CMS should educate SNFs, pharmacies, and Part D 

sponsors that it is inappropriate for Part D to pay for drugs for 

beneficiaries in Part A SNF stays. CMS should consider holding 

open-door forums, developing factsheets, or using other methods to 

inform these entities about this issue. 

Implement retrospective reviews to prevent inappropriate Part D payments 

for drugs for this population. CMS should implement routine reviews to 

ensure that inappropriate Part D payments do not occur. Further, CMS 

should conduct ongoing analysis and monitor trends in Part D payments 

for beneficiaries in Part A SNF stays. As noted earlier, Part D sponsors 

and the MEDICs do not currently have access to Part A data. CMS 

should consider providing the MEDICs and the sponsors access to 

Part A data to conduct ongoing analysis and to identify inappropriate 

Part D payments for this population. 

Follow up with the SNFs and pharmacies that were responsible for a large 

percentage of Part D payments for beneficiaries in Part A SNF stays.

CMS should consider tracking these entities to ensure that payments 

have decreased. To help CMS address this issue, we will forward in a 

separate memorandum information about the SNFs and pharmacies 

that were responsible for a large percentage of the Part D payments. 

AGENCY COMMENTS AND OFFICE OF INSPECTOR GENERAL 

RESPONSE 

CMS concurred with the three recommendations in our draft report. 

However, it raised several concerns about the report and in response we 

clarified the language in the report and added a recommendation. 

In response to our recommendation to educate SNFs, pharmacies, and 

Part D sponsors, CMS stated that it is committed to providing 

additional information about its programs. Among other things, CMS 

noted that it had recently issued a memorandum to Part D sponsors 

reminding them of the exclusion of Part D payments for drugs covered 

under Medicare Part A stays. The memorandum also announced that 

OEI-02-07-00230 MEDICARE PART D PAYMENTS FOR BENEFICIARIES IN PART A SNF S TAYS IN 2006 12
 

RECOMMENDATIONS 

effective 2009, Part D sponsors would receive lists twice annually of 

their institutionalized beneficiaries, including those in SNFs. CMS 

advised Part D sponsors that this information will provide them with a 

mechanism to identify beneficiaries for whom the sponsor may be most 

at risk for being billed inappropriately for Part D payment. 

In response to our recommendation to implement retrospective reviews, 

CMS stated that although it concurs in general, it is currently unsure of 

the most appropriate strategy for implementing these reviews. CMS 

stated that it expects to better understand the most appropriate 

controls for prevention and detection of inappropriate Part D payments 

after it looks at the specific information OIG will provide about the 

SNFs and pharmacies that were responsible for the largest percentage 

of payments. CMS will also review feedback from sponsors about the 

value of the list of institutional beneficiaries, including those in SNFs. 

CMS stated that it will explore whether the most timely and effective 

strategy for review for potential duplicate Part D payments is at the 

Part D plan level, and if that is the case, it will provide additional 

guidance to sponsors. 

In response to our recommendation to follow up with the SNFs and 

pharmacies that were responsible for a large percentage of the 

payments, CMS stated that it will investigate the allegations of 

duplicate payments upon receipt of OIG’s data. 

CMS also raised concerns about our methodology, stating that our draft 

report failed to consider contemporary pharmacy practice and as a 

result inflated the number of potential erroneous Part D payments. 

Specifically, CMS noted that current pharmacy practice allows patients 

to refill a prescription before their current supply is exhausted. CMS 

further noted that although Part A provides reimbursement for “a 

limited supply” to facilitate beneficiary discharge, beneficiaries must be 

permitted to have a full outpatient supply available to continue therapy 

once this limited supply is exhausted. 

In response to CMS’s comments, we recognize that there are 

circumstances in which drugs may be billed to Part D if they are not for 

use in the facility or to facilitate the beneficiaries’ discharge. Although 

it is unlikely that drugs dispensed by long-term care pharmacies meet 

these conditions, we modified the language in the report to address 

CMS’s concerns. In addition, we note that it would be beneficial for 

CMS to provide additional guidance to SNFs, pharmacies, and Part D 

sponsors that clarifies the circumstances under which Parts A and D 

OEI-02-07-00230 MEDICARE PART D PAYMENTS FOR BENEFICIARIES IN PART A SNF S TAYS IN 2006 13
 

RECOMMENDATIONS 

can pay for drugs for beneficiaries preparing for discharge. Currently, 

CMS guidance does not explicitly state what is considered a limited 

supply of drugs covered by Part A, nor does it state under which 

circumstances Part D can pay for drugs. As a result, we added a 

recommendation to the report that CMS provide additional guidance on 

these issues. We also note that we will provide the information about 

the SNFs and pharmacies that were responsible for a large percentage 

of Part D payments in a separate memorandum. 

The full text of CMS’s comments is provided in Appendix C. 

OEI-02-07-00230 MEDICARE PART D PAYMENTS FOR BENEFICIARIES IN PART A SNF S TAYS IN 2006 14
 

 

Source: Office of Inspector General analysis of Centers for Medicare & Medicaid Services data, 2006.

Most Frequently Dispensed Drugs Paid for by Part D for Beneficiaries in 

Medicare Part A Skilled Nursing Facility Stays 

Rank Drug Name Generic or Brand Name Number of Drugs 

Dispensed* 

1 Furosemide Generic 45,832 

2 Warfarin sodium Generic 27,890 

3 Lisinopril Generic 23,534 

4 Metoprolol tartrate Generic 23,116 

5 Potassium chloride Generic 21,215 

6 Lovothyroxine sodium Generic 20,872 

7 

Hydrocondone w/ 

acetaminophen Generic 20,503 

8 Norvasc Brand name 18,087 

9 Aricept Brand name 16,434 

10 Protonix Brand name 15,840 

11 Omeprazole Generic 15,324 

12 Levaquin Brand name 15,181 

13 Lexapro Brand name 14,322 

14 Lipitor Brand name 13,759 

15 Seroquel Brand name 13,419 

16 Prednisone Generic 13,120 

17 Prevacid Brand name 12,755 

18 Mirtazapine Generic 11,970 

19 Gabapentin Generic 11,566 

20 Plavix Brand name 11,548 

21 Risperdal Brand name 11,453 

22 Toprol XL Brand name 11,100 

23 Albuterol sulfate Generic 10,602 

24 Novolin R Brand name 10,385 

25 Isosorbide mononitrate Generic 9,814 

 Total 419,641 

Δ APPENDIX~A 

* Note: For the purposes of this study, we use the term “drugs” to refer to paid Part D claims.

OEI-02-07-00230 MEDICARE PART D PAYMENTS FOR BENEFICIARIES IN PART A SNF S TAYS IN 2006 15
 

OEI-02-07-00230 MEDICARE PART D PAYMENTS FOR BENEFICIARIES IN PART A SNF S TAYS IN 2006 16

 

Drugs With the Highest Medicare Part D Expenditures for Beneficiaries in 

Medicare Part A Skilled Nursing Facility Stays 

 

Rank Drug Name Generic or Brand Name Total Part D 

Payments

Percentage 

of Part D 

Payments

1 Lovenox Brand name $2,282,281 3.1% 

2 Aricept Brand name $2,137,327 2.9% 

3 Seroquel Brand name $1,783,011 2.4% 

4 Risperdal Brand name $1,749,444 2.3% 

5 Zyprexa Brand name $1,727,855 2.3% 

6 Procrit Brand name $1,607,826 2.2% 

7 Protonix Brand name $1,571,417 2.1% 

8 Prevacid Brand name $1,503,141 2.0% 

9 Plavix Brand name $1,314,817 1.8% 

10 Lipitor Brand name $1,170,750 1.6% 

11 Levaquin Brand name $1,133,232 1.5% 

12 Advair Diskus Brand name $982,316 1.3% 

13 Namenda Brand name $977,457 1.3% 

14 Lexapro Brand name $963,398 1.3% 

15 Norvasc Brand name $951,693 1.3% 

16 Zyvox Brand name $912,025 1.2% 

17 Nexium Brand name $892,506 1.2% 

18 Fentanyl Generic $845,852 1.1% 

19 Thalomid Brand name $825,989 1.1% 

20 Coreg Brand name $824,200 1.1% 

21 Lantus Brand name $709,699 1.0% 

22 Ambien Brand name $709,441 1.0% 

23 Aranesp Brand name $700,093 0.9% 

24 Zocor Brand name $683,840 0.9% 

25 Omeprazole Generic $625,870 0.8% 

 Total $29,585,480 39.7% 

Δ APPENDIX~B 

 Source: Office of Inspector General analysis of Centers for Medicare & Medicaid Services data, 2006.
..

OEI.02.07-00230

A P PEN D x c

Centers for Medicare & Medicaid Services Comments

~""4'''''C''''' .

if/ . . .

i ~, 'I . ,. . ,_f- DEPARTMENT OF HEALTH & HUMAN SERVICES Cenle'" for Medl.are & Medicaid Services

200 Independenoa Avenus SW

Wa.hington, DC 20201

MA 0,'. .2ÐD9

DATE:

TO: Daniel R: Levinson

Inspector General .

(li;..:,,4:".L~'l'~ ,. ~ñ;-Frz~ra

Aotig Administrator

FROM:

SUBJECT: Offce of'nspector General' (OIG) Draft Report: "Medicare Part 0 Payments. for

Beneficiaries in Pro'! A Skiled Nursing Facility Stays in 2006," (OEI-02-07-

00230)

Thank you for the opportunity to. review and comment on the OIG's draft report that examines

the appropriateness of Part D plan payments for beneficiaries who resided in a Part A skiled .

nursing facility (SNF) stay during 2006, The Centers for Medicare & Medicaid Servces (CMS)

is committed to upholding the provision of the Medicare Prescription Drug, Improvement, and

Modernization Act of 2QM (MMA) that requires Part 0 sponsors to exclude from payment an

otherwise covered Par 0 drug if payment is available urder Part A or Par 13, CMS tak.eg .

seriously all€ga.trons offraud, waste and abuse and wiH foIlQW up, as appropriate; on any

confirmed cases involving a Part 0 sponsor inappropriately paid under a Part A stay.

We acknowledge the real possibilty of inappropriate Part 0 duplicate payments for beneficiaries

under Part A stays, and as described below in detail, we.have taken numerous steps to help plans

identify inappropriate payments. However, we continue to believe that the underlying

methodtilogyutiIlzed by the 010 seti6usiyiiiflatedtlie number of potential erroneous Part D

payments. '$JièCltically, the study methodology failed to censider contemporary pharmacy

practice and the standard øfc'Care prøvided in sktUed nUi'Sing facilithiS by usI'ig.the prescription

drug event date (POE) dispensing date as equivalent to the patient administration date, As a

result, any POE dispensing date occurring within the period of a Par A stay is identified as an

errone9us PaitD duplicate payment. eMS believes that this coiiclusi.on is not appropriate in all

cases,

Current pharmacy practice allows a patient to refill a preseriptionbefore their current siipply is

exhausted. For example, ii patient receiving a 30 day supply of medieation typically Is permitted

to obtain a refill on day 26 so that the individual wil have a fresh supply on hand prior to

exhausting the initial 30 days of medication. Similarly, for patients in a long-term care facility,

medications are generally dispensed and delivered before the existing supply is exhausted (in

some cases a number of days i¡i advance) to ensure that there wil be no gaps in therapy. '

Consequently, \Joth long term care and retail pharmacies may appropriatelybi1 Par 0 for

MEDICARE PART D PAYMENTS FOR BENEFICIARIES IN PART A SNF STAYS IN 2006 17
A P PEN D x c

Page 2 - Daniel R. Levinson

medications dispensed and delivered near the end of a benefieiary's Part A stay beeause .these

medications are being dispensed for consumption after the Par A stay is exhausted,

Nevertheless, in this report, drugs with a PDE dispensing date near the. end of a beneficiary's

par A stay wil appear as inappropriate, duplicate Par D payments. We recommend the OIG

correct its methodology and re-report its findings considering ths is common pharmacy practiee

for all patients, not just for people with Medicare.

. It is important to emphasize that there are legitimate level of care transitions that necessitate the

dispensing ofPart'D drugs before a patient is discharged from a ~art A facility, While Par A

does provide reimburement for "a limited supply" to .faciltate benefieiary discharge,

beneficiaries'must be permitted to have a full outpatient supply available to continue therapy

once this liinited supply is exhausted. 

I This is particularly tre for beneficiaries using mail-order

pharmacy, home infsion therapy, or residing in rural areas where obtaining a continuing supply

of drg may involve certin'delays, Thus, the current standard of care promotes caregivers

receiving outpatient Par D prescriptions in advance of discharge from a Par A stay.

In addition, CMS is very concemed that the current draf report, may undercut the beneficiary

protections of CMS' existing.transition policy, Access to Par D drgs during level of care

chages is absolutely ne~ssary to maintaining high quality prescription drug coverage and in

preventing any interruptions in drug therapy. Delays in accessing Part D drugs may hinder

diseharge from a long-term care facilty, Therefore, the OIG should artculate caution in its,final .

report about the conclusions so as to not impede access to transition supplies for some of

Medieare's most vulnerable beneficiaries. Moreover, given that. the report relies on.2006 dEita

that may reflect initial siar up issues, the OIG should frame the final report in such a way as to

ensure that Par D sponsors do not become overly eautious in providing Par D drugs related to

discharge from a Par A stay.

The 010 reeommend eMS ensur¡, that Part D payments for drugs for beneficiaries in Par A

SNF stays are appropriate. Specifically, the OIG recommend CMS take the following actions:

OIG Recommendation,

Educate SNFs, pharmacies, and Par D sponsors that drugs covered under Par A or 13 for

beneficiaries in SNF stays are not eligible for payment under Par D.

CMS Response

The CMS concurs with this reCommendation and is firmly committed to providing additional'

information about our programs. Since the inception of the Part D program, CMS has worked

tirelessly to provide education to all of our parers regarding the interface of drg coverage

under Medicare Parts A, B, and D. In the 2005 PLu D final rule, CMS provided an extensive

discussion on the relationship' of drug reimbursement of Medicar ,par A, B, and D. This

message was reinforced in hundreds of outreach events specifically targeted at LTC facilties,

pharacies, and phannacists. Furtermore, eMS eonducted numerous pharmacy open door

forus between 200S and 2008 that incJùded information regarding payment for drugs under

i Medicare Benefit Policy Manual, Chapter I, Seciion 30.2, Drugs for Use Outside the 'Hospital.

OE I. 02.07.00230 MEDICARE PART D PAYMENTS FOR BENEFICIARIES IN PART A SNF STAYS IN 2006 18
A P PEN 0 x c

Page 3' - Daniel R. Levinson

various Medicare programs and addressed the exclusion of Par D drug reimbursement when

payment was available under Medicare Parts A and B. .

, Our educational, effort continues today. Recently, the CMS Offce of External Affairs revised an

educational tool entitled, "Medicare Drug Coverage under Part A, Par B, and Par D." This tool.

provides' extensive 'infoqnation on the relationship of drug reimbursement under various

Medicare Programs and is available for use by the pharmacy and long term care community. We

have iilso posted in-depth information about Medicare payment on our Long Term Care Pharmacy website? . ,,', .'

In addition, following the OIG's exit conference, in a November 2008 memorandum, we

reminded Pl!t D sponsors of the exclusion of Par D payment for drugs covered under Medicare

Par A stays.3 This memorandum also anlloUlced that effective 2009, Par D sponsors would

receive lists twice anually of their institutional enrol1ees, including the names aÙd addresses of

the paricular LTC facilties and any applicable indieatois of Part A stays fróm most recent

available MDS data. We advised Par D sponsors that this information would assist them in

preventig Part D payment for drgs covered under Medicare Part A stays, The Part A indicator

will provide Par D sponsors with a meehanism to identify beneficiaries for which the sponsor

may be most at risk for being biled inappropriately for Part D pay'ment. .

As educational oPPOl'lnities present themselves, CMS wil continue to provide information orì

the relationship and reimburement for drugs under Medicare Pars A, B and D. Moreover, we

contiue to enhance our relationships wi.th the various pharmacy and long ter care associations

and plan to reinforce the message regarding the exelusion of payment for par D drugs for

beneficiaries under 'a par A stay.

OIG Recommendation

lmplement retrospective reviews to prevent inappropriate Par D payments for drLlgs for this

population.

CMS Response

The eMS eoncurs with tis recommendation in general; however, we arecuITently unsure of 

the

most appropriate strategy for implementing a retrospective review process. We look forward to

receiving the OIG specific information about the SNFs and phariiacies that were responsible for

a large pereentage ofthe Par D payments under review. After we have looked into this . .

information and receive feedbaek from sponsors on the value of sending out the bianual 

list of

institutiona enrollees, we expeet to better understand the factors underlying this type of error, as '

well as the most appropriate eontrols for prevention and detection. We wil explore whether the

most timely and effective strategy for review for potential duplicate Part D payments is at the

'Par D plan leveL. For example, this review could be a.component of the Par D sponsor's

. retrospective diug utilzation revi'eW system required under 42 CFR 423.1 53(c)(3), Should.our

analysis determine that this is the most.appropriate place for this review, we wil 

provide

i http://www.cms.hhs.gov/Pha,macy/04-itc.asp#TopOfPage "

, http://www .cms.hhs,gov/PrescriplionDrugCovContra/Down loads/MemoL TeContracting_l! ,25.08,pdf.

o E 1.02. 07 .002 3 0 MEDICARE PART D PAYMENTS FOR BENEFICIARIES IN PART A SNF STAYS IN 2006 19
A P PEN D x c

'Page 4 - Daniel R, Levinson

additional guidance to Part D sponsors in the annual. Cali Letter and ultimately in Chapter 7 of

. '

the Medicare Prescription Drug BenefitManual, section 20.3, Retrospective Drug Utilzation

Review.

DIG Recommendation

Follow up with the SNFs and pharmacies that wete responsible for a large percentage of Part D

payments for beneficiaries in Part A SNF stays.

'CMS ReSDODse

. The CMS .concurs with.ths recommendation and wil investigate the allegations of duplieate . 

payments upon receipt of the OIG's supplemental data. We take very seriously the allegations

about Par D sponsors and wil implement con-ective action upon confirmation of inappropriate

payments.

Thank you for your efforts to study this matter. CMS is serious about enforcing Part D

SpoIIors' adherence to eMS requirements.. To the extent that sponsors are not in complianee

with Part D program requirements, CMS wil investigate and take action,where necessary.

OEI.02.07-00230 MEDICARE PART D PAYMENTS FOR BENEFICIARIES IN PART A SNF STAYS IN 2006 20
 

OEI-02-07-00230 MEDICARE PART D PAYMENTS FOR BENEFICIARIES IN PART A SNF S TAYS IN 2006 21

ΔAPPENDIX C ACKNOWLEDGMENTS 

This report was prepared under the direction of Jodi Nudelman, 

Regional Inspector General for Evaluation and Inspections in the New 

York regional office, and Meridith Seife, Deputy Regional Inspector 

General. 

Miriam Anderson served as the team leader for this study. Other 

principal Office of Evaluation and Inspections staff from the New York 

regional office who contributed to this report include Taryn Eckstein, 

Michelle McInnis, and David Rudich. Other regional and central office 

staff who contributed include Eddie Baker and Sandy Khoury.