. , . 

Department of Health and Human Servqes 

OFFICE OF


INSPECTOR GENERAL

OFFICE OF 
 INSPECTOR GENERA 

OEI- 09- 88- 01006

EXECUTIVE SUMMAR 


PUROSE 

This report estimates the amount Medicare paid for beneficiaries who underwent 

outpatient upper gastrointestinal (GI) endoscopy or colonoscopy surgeries, known 

collectively as GI endoscopies, that were determed to be medically unnecessary or 

did not meet professionally recognzed standards of care. 

BACKGROUN 

Section 1154 of the Social Security Act authories the peer review organizations 

(PROs) to (1) deny payment for questionable care and (2) review quality of care in 

postacute and ambulatory settings. In Apri 1989, PROs implemented 100 percent 

preprocedure review of at least 10 non emergency procedures. The PROs 

retrospectively review 5 percent of their preprocedure approvals each quarter. 

Section 1842( a )(2)(B) of the Social Security Act requires Medicare carrers to apply 

safeguards against unnecessary utilzation of servces furnshed by providers." The 

carrers are responsible for identifng providers, by locality and specialty, whose 

utilation patterns are different from medically recognzed community standards and 

norms. The carrers are also required to monitor claims data to develop profiles on 

providers. 

We recently completed an inspection in which we examined 360 Medicare outpatient 

GI endoscopies performed in ambulatory surgical centers and hospital outpatient 

departments. The independent medical review contractor found that, for those cases 

with adequate documentation, 23.3 percent of the upper GI endoscopies and 

7 percent of the colonoscopies were medically unnecessary. The contractor also 

found that 5.9 percent of the upper GI endoscopy patients and 3.3 percent of the 

colonoscopy patients received poor care. By reviewing the beneficiary histories and 

claims obtained from the Medicare carrers and fiscal intermediaries, we determined 

the payments for the unnecessary and poor quality GI endoscopies. 

FIINGS 

Medicare spent approximately $45.3 milion in 1988 for medically unnecessary 

GI endoscopies. 

Medicare spent almost $9.5 millon in 1988 for poor care rendered to GI 

endoscopy patients. 

RECOMMNDATION 

The Health Care Financing Administration should reduce the incidence of payments 

for unnecessary and poor quality GI endoscopies. 
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

TABLE OF CONTENTS


EXECUTIV SUMY


BACKGROUN. . . . . . 
 . . . . . . 1


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


Medicare spent approxiately $45.3 mion in 1988 for medicaly unnecessary


GI endoscopies. . . . . . . . . . . 3


Medicare spent almost $9.5 miion in 1988 for poor care rendered to 


APPENDIX


endoscopy patients. .......................................... 4


REC011NDATION .......................................... 5

OUTATINT SURGERY: 

MEICAR PAYMNT FOR UNCEARY AN POOR QUALIT GAS1ROINTIAL ENDOSCOPIE OEI-0100


PUROSE 

This report estimates the amount Medicare paid for beneficiaries who underwent 

outpatient upper gastrointestinal (GI) endoscopy or colonoscopy surgeries, known 

collectively as gastrointestinal endoscopies, that were determed to be medically 

unnecessary or did not meet professionally recognized standards of care. 

BACKGROUN 

Although Section 1862(a)(1)(A) of the Social Security Act states that no Medicare 

payment may be made for servces that are not reasonable and necessary, the law 

and regulations do not specifically define medical necessity or quality of care. 

Determinations regarding medical necessity and quality of care have been based on 

local community standards. To fil ths gap, durig the 1980s, many professional 

organizations, such as the American Society for Gastrointestinal Endoscopy, 

developed uniform guidelines for their members outlining medical necessity and 

suggesting standards of care for their various procedures. 

PRO Responsibilities 

Prior to 1985, the peer review organizations (PROs) were not responsible for 

reviewing outpatient quality of care. Since that time, several legislative bils 

expanded the PRO authority, including the Consolidated Omnibus' Reconciliation Act 

(COBRA) of 1985 and the Sixh Omnibus Budget Reconciliation Act (SOBRA) of 

1986. The COBRA authorized PROs to deny payment for questionable care while 

SOBRA mandated PROs to review quality of care in postacute and ambulatory care 

settings. In April 1989, PROs implemented 100 percent preprocedure review of at 

least 10 nonemergency inpatient or outpatient surgical procedures. The PROs were 

given this authority under Section 9401 of Public Law 99-272. At this time, neither 

GI endoscopy procedure is included on the optional review list, but the PROs can 

select the procedures based on historical data. In addition, the Health Care 

Financing Administration (HCFA) requires the PROs to review retrospectively the 

medical records for 5 percent of their preprocedure requests on a quarterly basis. 

Under the upcoming fourth scope of work, which is scheduled for contract renewals 

beginning October 1, 1991, HCF A has eliminated mandatory review of nonemergency 

inpatient or outpatient surgical procedures. The PROs would be authorized to focus 

their resources on surgical or nonsurgical procedures and other servces which appear 
to be overutilized or substandard. The PROs will retrospectively review 3 percent of 

their preprocedure approvals. 

Medicare Carrer Responsibilities 

In addition to processing Medicare claims for payment, Section 1842(a)(2)(B) of the 

Social Security Act requires Medicare carrers to apply "safeguards against 

unnecessary utilization of servces furnished by providers." Carrer responsibilities are 

detailed in the Medicare Carrer s Manual (MCM). The carrers are responsible for 

identifg providers, by locality and specialty, whose utilzation patterns are diferent 

from medically recognized community standards and norms. The carrers are 

required to monitor claims data to develop profies on providers and their specialty 

groups. The carrers also conduct studies to identif areas of special concern. 

The HCF A periodically alerts Medicare fiscal agents of current abusive practices 

through intermediary letters or carrier bulletins. In this way, the carriers can refocus 

their monitoring activities while the MCM is updated. 

Prior Office of Inspector General Studies 

We recently completed an inspection in which we examined Medicare outpatient 

surgery performed in ambulatory surgical centers (ASCs) and hospital outpatient 

departments (OPDs). In February 1991, we released the medical outcome analysis in 

a fial report entitled "Outpatient Surgery--Medical Necessity and Quality of Care 

(OEI -09-88-01000). 

The independent medical review contractor found that, for those cases with adequate 

documentation, 23.3 percent of the upper GI endoscopies and 7.7 percent of the 

colonoscopies were medically unnecessary. As mentioned in the medical outcome 

report, the most common reasons why the procedures were found' to be medically 

unnecessary were (1) substantiation for the procedure was inadequate, e.g., the 

patient did not have a trial of medical therapy prior to the procedure 

(2) symptoms did not justif the procedure, e. , the procedure was used as a routine 

follow-up to a previously documented noncancerous condition. 

The contractor also found that 5.9 percent of the upper GI endoscopy patients and 

3.3 percent of the colonoscopy patients received poor care. Some reasons why the 

beneficiaries received poor care included the (1) untimely follow-up of a cancerous 

condition or (2) use of a follow-up colonoscopy too soon after the initial procedure. 

This management advisory report is limited to a discussion of the costs associated 

with the medically unnecessary and poor quality G I endoscopies. The sampled 

surgeries were completed before preprocedure review was implemented in 

April 1989.

METIODOLOGY 

Our random sample of 1 170 Medicare beneficiaries included 360 GI endoscopies-­

202 upper G I endoscopies and 158 colonoscopies. Half of the surgeries were 

completed in ASCs, and the other half were completed in OPDs. The surgeries 

were performed in the 10 States with the highest number of Medicare-certifed ASCs 

in February 1988: Arona, Californa, Florida, Illiois, Louisiana, Maryland, North 

Carolina, Ohio, Pennsylvania, and Texas. The surgeries were completed during the 

fist quarter of calendar year 1988.


We collected the medical records from the physicians, ASCs, and OPDs. We used 

an independent medical review contractor to review the cases. The contractor used 

physician specialists to develop the procedure-specifc criteria and to review each 

record for medical necessity, appropriateness of the outpatient setting, and quality of 

care. In addition, we intervewed a sample of ASC and OPD gastroenterologists to 

identify currently acceptable standards for medical necessity and quality of care. 

We determned OPD and ASC payments by reviewing the beneficiary histories and 

claims obtained from the Medicare carriers and fiscal intermediaries. For OPDs, the 

payments represent the interim payments. These interi payments are subject to 

adjustment based on the intermediary s audit of the hospital cost report for the fiscal 

year in which the servces were rendered. For the GI endoscopies, our analysis 

included the physicians' fees , ASC prospective reimbursement, OPD facilty 

payments, and specimen biopsies. We excluded offce visits from the cost data 

because gastroenterologists are viewed as consultants rather than primary care 

physicians. 

In order to gain a national perspective, we made two nonstatistical projections for 

the data. First, we projected the 10 States' quarterly costs to annual costs. Second 

since the number of procedures in our sample represents 49 percent of the Medicare 

procedures performed nationally, we calculated the national costs by dividing the 

sampled costs by 0.49. This methodology assumes the 10 sampled States are 

representative of the nation as a whole.


FIINGS 

MEDICA SPENT APPROXITELY $45.3 MILON IN 1988 FOR 

MEDICAY UNECESSAY GI ENDOSCOPIES. 

In our sample, 56 of 344 GI endoscopies were deemed medically unnecessary by the 

physician reviewers. In 1988, Medicare could have saved at least a portion of 

$45.3 millon nationally for 16.3 percent medically unnecessary GI endoscopies-­

$31.55 millon for upper GI endoscopies and $13.78 milion for colonoscopies. The 

56 cases were composed of 44 upper GI endoscopies and 12 colonoscopies. Based 

on this finding, Medicare could have denied payment under Section 1862 (a)(l)(A). 
The cost projections for both procedures are included in tables 1 and 2 in the 

appendix. 

According to the medical reviewers, 93.6 percent (189 of 202 cases) of the upper GI 

endoscopies had adequate documentation for the determination of medical necessity. 

The 23.3 percent (44 of 189 cases) of upper GI endoscopies that were deemed 

medically unnecessary were evenly divided between ASCs and OPDs. 

According to the medical reviewers, 98. 1 percent (155 of 158 cases) of the 

colonoscopies had adequate documentation for the evaluation of medical necessity. 

The 7.7 percent (12 of 155 cases) of the colonoscopies that were deemed medically 

unnecessary were almost evenly divided between ASCs and OPDs. 

MEDICA SPENT ALOST $9.5 MILlON IN 1988 FOR POOR 

RENDERED TO GI ENDOSCOPY PA11NT. 

In our sample, 16 of 341 GI endoscopy beneficiaries received poor care. In 1988 

Medicare could have saved at least a portion of $9.5 millon nationally for 

7 percent of poor care rendered to GI endoscopy patients--$4.9 millon for upper 

GI endoscopies and $4.6 milion for colonoscopies. The 16 cases were composed of 

11 upper GI endoscopies and 5 colonoscopies. The cost projections for poor care 

rendered to GI endoscopy patients are included in tables 3 and 4 in the appendix. 

Accordig to the medical reviewers, 92.6 percent (187 of 202 cases) of the upper GI 

endoscopies had adequate documentation for the evaluation of quality of care. The 

reviewers determed that 5.9 percent (11 of 187 cases) of the beneficiaries received 

poor care--7 ASC and 4 OPD beneficiaries. 

According to the reviewers, 97.5 percent (154 of 158 cases) of the colonoscopies had 

adequate documentation for the evaluation of quality of care. Of these cases 

3.3 percent (5 of 154 cases) of the beneficiaries received poor care--2 ASC and 

3 OPD cases. 

RECOMMATION 

mE HCFA SHOUL REDUCE mE INCIDENCE OF PAYMENT FOR 

UNECESSAY AN POOR QUAL GI ENDOSCOPIES. 

Ths recommendation could be accomplished through a combination of efforts by 

both PROs and carrers. Both PROs and carrers can target for review those 

providers whose practice profies indicate a higher than average likelihood of 

unnecessary or poor quality care.


In addition, HCF A could issue a carrer bulletin to reemphasize medical and 

postpayment review of upper GI endoscopies and colonoscopies. Among the 
procedures included on the postpayment alert list in MCM Section 7514(E), carriers 

should monitor (1) the "use of endoscopic procedures in lieu of less costly and 

medically adequate x-rays" and (2) colonoscopies that are "not indicated by diagnosis 

or medical documentation." ay combining several methods, HCF A could save at 

least a portion of $54.8 milion annually for medically unnecessary and poor quality 

G I endoscopies. 
APPENIX: COST PROJECTONS 

The tables on the following pages represent the cost savigs for medically 

unnecessary upper GI endoscopies and colonoscopies (tables 1 and 2) and poor quality upper GI endoscopies and colonoscopies (tables 3 and 4). 
TABLE 1: ESTIMATED SAVINGS FOR MEDICALLY UNNECESSARY UPPER GASTROINTESTINAL ENDOSCOPY 

MEDICALL Y PERCENT AVERAGE AVERAGE ESTIMATED 

STATE SITE SAMPLE UNNECESSARY MED I CALL QUARTERLY ANNUAL ADJUSTED ANNUAL 

CASES CASES UNNECESSARY PAYMENTS PAYMENTS UNIVERSE SAVINGS 

Arizona	 OPD 20. 00% $488. $1 , 955. 16 927 $362 486. 

ASC 00% $0. $0. $0. 

California	 OPD 31. 25% $626. 77 * 507. 731 $515 439. 

ASC 18. 18% $592. 369. 1781 $767 280. 

Florida	 OPD 40. 00% $765. 061. 6849 386 573. 

ASC 50. 00% $500. 003. $21, 039. 

III i no i 	 OPD 00% $0. $0. $0. 

ASC 00% $0. $0. $0. 

Loui s i ana	 OPD 16. 67% $4 19 . 28 $1 , 677. 12 1543 $431 299. 

ASC 20. 00% $325. 302. 594. 

Maryland	 OPD 00% $0. $0. 1493 $0. 

ASC 25 . 00% 211.18 844. $12 , 111. 80 

North Caro l i na OPD 14 . 29% $619. 479. 1916 $678 559. 

ASC 00% $0. $0. $0. 

Ohi 0	 OPD 33. 33% $507. 38 * 029. 2385 075 645. 

ASC 30. 00% $603. 413 . $43 448. 

pennsyl vani a	 OPD 21. 43% $642. 569. 3888 140 843. 

ASC 42. 86% $649. 44 * 597. $38 038. 

Texas	 OPD 9 . 09% $676. 706. 3960 $974 275. 

ASC 15 . 38% $680. 723. 285. 

TOTALS: 189	 N/A 310. 19 $37 240. 25681 $15 461 923. 

ESTIMATED NATIONAL 

Cases had inadequate paid information ANNUAL SA V I NGS: to be included in calculations. 

$31 554 945. 
TABLE 2: ESTIMATED SAVINGS FOR MEDICALLY UNNECESSARY COLONOSCOPIES 

MED I CALLY PERCENT AVERAGE AVERAGE ESTIMATED 

STATE SITE SAMPLE UNNECESSARY MED I CALLY QUARTERLY ANNUAL ADJUSTED ANNUAL 

CASES CASES UNNECESSARY PAYMENTS PAYMENTS UN I VERSE SAVINGS 

Ar i zona	 OPD 0 . 00% $0. $0. $0. 

ASC 0 . 00% $0. $0. $0. 

Cal ifornia	 OPD 25% 267. 069. 423 $134 032. 

ASC 1 0 . 00% $764. 059. 1141 $349 136. 

Florida	 OPD 18. 18% $1 , 086. 14 344. 4681 697 615. 

ASC 0 . 00% $0. $0. $0. 

III i no i 	 OPD 0 . 00% $0. $0. $0. 

ASC 0 . 00% $0. $0. $0. 

Loui s i ana	 OPD 0 . 00% $0. $0. 566 $0. 

ASC 0 . 00% $0. $0. $0. 

Maryland	 OPD 0 . 00% $0. $0. 1193 $0. 

ASC 00% $0. $0. $0. 

North Carol ina OPD 25 . 00% 533. 134. 576 $883 359. 

ASC 0 . 00% $0. $0. $0. 

ohio	 OPD 0 . 00% $0. $0. 1429 $0. 

ASC 0 . 00% $0. $0. $0. 

pennsyl vani a	 OPD 18. 18% $736. 945. 3126 $1, 673 830. 

ASC 16. 67% $765. 060. $13 772. 

Texas	 OPD 00% $0. $0. 1517 $0. 

ASC 0 . 00% $0. $0. $0. 

TOTALS: 155	 N/A 153. $24 614. 14879 751 747. 

EST I MA TED NA T IONAL 

ANNUAL SA V I NGS : 

$13 779 076. 
TABLE 3: ESTIMATED SAVINGS FOR POOR QUALITY UPPER GASTROINTESTINAL ENDOSCOPY


POOR PERCENT AVERAGE AVERAGE ESTIMATED 

STATE SITE SAMPLE QUAL I TV POOR QUARTERLY ANNUAL ADJUSTED ANNUAL 

CASES CASES QUAL I TY PAYMENTS PAYMENTS UNIVERSE SAVINGS 

Arizona	 OPD 0 . 00% $0. $0. 927 $0. 

ASC 33. 33% $735. 943. 813 . 

California	 OPD 13% $452. 810. 731 $41, 368. 

ASC 03% $625. $2, 501. 1781 $135 030. 

Florida	 OPD 00% $0. $0. 6849 $0. 

ASC 00% $0. $0. $0. 

III i no i 	 OPD 00% $0. $0. $0. 

ASC 00% $0. $0. $0. 

Loui s i ana	 OPD 0 . 00% $0. $0. 1543 $0. 

ASC 00% $0. $0. $0. 

Maryl and	 OPD 00% $0. $0. 1493 $0. 

ASC 25 . 00% $743. 974. 435. 

North Carol ina OPD 0 . 00% $0. $0. 1916 $0. 

ASC 12. 50% $392. 569. 530. 

Ohio	 OPD 11.11% $0. 00 $0. 2385 $0. 

ASC 0 . 00% $0. $0. $0. 

pennsyl vani a	 OPD 0 . 00% $0. $0. 3888 $0. 

ASC 69% $0. 00 $0. $0. 

Texas	 OPD 18. 18% $766. 065 . 3960 207 001. 

ASC 15. 38% $813. 252. 505. 

TOTALS: 187	 N/A 529. $18 117. 25681 411 , 684 . 

ESTIMATED NATIONAL 

Cases had inadequate paid information ANNUAL SAVINGS: to be included in calculations. 

921 804. 
TABLE 4: ESTIMATED SAVINGS FOR POOR QUALITY COLONOSCOPIES 

POOR PERCENT AVERAGE 

STATE SITE SAMPLE QUAL I TY POOR QUARTERL Y 

CASES CASES QUALITY PAYMENTS 

Arizona	 OPD 0 . 00% $0. 

ASC 0 . 00% $0. 

California	 OPD 00% $0. 

ASC 33% $1 , 153. 14 

Fl or i da	 OPD 0 . 00% $0. 

ASC 00% $0. 

I II i no i s	 OPD 0 . 00% $0. 

ASC 00% $0. 

Loui s i ana	 OPD 0 . 00% $0. 

ASC 0 . 00% $0. 

Maryland	 OPD 0 . 00% $0. 

ASC 00% $0. 

North Carol ina OPD 25 . 00% 533. 

ASC 00% $0. 

Ohio	 OPD 16. 67% $640. 

ASC 00% $0. 

Pennsyl vani a	 OPD 33% $552. 

ASC 12 . 33% $905 . 

Texas	 OPD 00% $0. 

ASC 00% $0. 

TOTALS: 154	 N/A $4 , 785. 14 

AVERAGE 

ANNUAL 

PAYMENTS 

$0. $0. 

$0. 

$4, 612. 

$0. $0. $0. $0. $0. 

$0. $0. 

$0. 

134. 

$0. 

563. 

$0. 

209. 

620. 

$0. $0. 

$19 140. 

ADJUSTED


UNIVERSE


423 

1141 

4681 

566 

1193 

576 

1429 

3126 

1517 

14879 

ESTIMATED


ANNUAL


SAVINGS


$0. $0. 

$0. 

$175 431. 

$0. 

$0. $0. $0. 

$0. $0. $0. $0. 

$883 359. 

$0. 

$610 649. 

$0. 

$575 600. 

145. 

$0. 

$0. 

253 186. 

EST I MA TED NA T IONAl 

ANNUAL SAVINGS: 

598 338.