Department of Health and Human Services 

OFFICE OF 

INSPECTOR GENERAL 

Medicare Payments For Enteral 

Nutrition Therapy Equipment and 

Supplies in Nursing Homes 

JUNE GIBBS BROWN 

Inspector General 

MAY 1997 

OEI-06-92-00866 
OFFICE OF INSPECTOR GENERAL 

The mission of the 3ffice 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, evaluations, 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 OIG’s Office of Evaluation and Inspections (OEI) conducts short-term management and program 

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

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

vulnerability, and effectiveness of departmental programs. 

OEI’s Dallas Regional Office prepared this report under the direction of Chester Slaughter, Regional 

Inspector General. Principal OEI staff included: 

Dallas Retion Headauarters 

Leah Bostick Jennifer Antic0 

Kevin Golladay Stuart Wright 

Clark Thomas Barbara Tedesco 

For further information on this report or to obtain a copy, call Kevin Golladay, Dallas Regional 

Office at (214) 767-3310. 
EXECUTIVE SUMMARY 

PURPOSE 

To describe the extent of Medicare Part B payments and potential vulnerabilities related to 

enteral nutrition therapy equipment and supplies for nursing facility patients and to discuss 

possible alternative Medicare payment policies. 

BACKGROUND 

Enteral nutrition therapy provides nourishment directly to the digestive tract of a patient 

who cannot, for a variety of reasons, ingest an appropriate amount of calories to maintain 

an acceptable nutritional status. Medicare covers enteral nutrition therapy under the 

prosthetic device benefit, because the therapy is required due to an absent or 

malfunctioning body part (which would normally permit food to reach the digestive tract). 

Enteral nutrition therapy supplies typically include tubing, bags to hold nutrient formulas, 

and syringes. Equipment involves infusion pumps and intravenous (I-V) poles. Enteral 

nutrient formulas (e.g., ENSURE, JEVITY) were separately covered in our report, “Enteral 

Nutrient Payments in Nursing Homes” (OEI-06-92-00861). 

For this inspection, we reviewed Medicare payment policy and gathered data on the 

utilization of enteral nutrition therapy equipment and supplies in Medicare- or Medicaidcertified nursing facilities from a 1 percent sample taken from the Medicare National 

Claims history file for calendar years 1992-95. 

This inspection was conducted as a part of the Presidential initiative, Operation Restore 

Trust (ORT). The initiative involves multi-disciplinary teams of Federal and State 

personnel seeking to reduce fraud, waste, and abuse in musing facilities and home health 

agencies, as well as by durable medical equipment (DME) suppliers. 

FINDINGS 

The costs for equipment and supplies associated with enteral nutrition therapy are 

substantial, totaling approximately $260 million in 1995. This includes such items as 

intravenous (I-V) poles, infusion pumps, feeding kits, and tubing. 

Equipment used for enteral nutrition therapy meets the definition of durable medical 

equipment (DME), which is not covered during a typical nursing facility stay. 

Although Medicare pays for durable medical equipment like beds, wheelchairs, canes, 

crutches, oxygen concentrators, and intravenous I-V poles when used in patients’ homes, it 

does not make separate payments for them in nursing facilties. These items are considered 

standard equipment for nursing facility operations and are covered as part of the daily rate 

that Medicare or Medicaid pay for the stay. However, Medicare does pay for equipment 

used in connection with enteral feeding in nursing facilities, even if the same equipment 

would not otherwise be covered. An example is the simple I-V pole. Recently (1994), 

Medicare began paying for such poles when used for enteral feeding, but not for other 

i 
purposes. As a result, Medicare paid $3.4 million that year, and $3.5 million in 1995, for 

I-V poles used in nursing facilities. 

Equipment used for enteral nutrition therapy costs more than identical equipment 

billed under the DME fee schedule. Not only does Medicare pay for enteral feeding 

equipment in nursing homes, but it pays more than if payment was based on the DME fee 

schedule. Again, the I-V pole is a good example. If it is used for enteral nutrition, it is 

reimbursed at the monthly rental rate of approximately $24. In contrast, the same I-V pole 

used to hang cancer fighting intravenous solutions in a resident’s home is reimbursed using 

the DME fee schedule at a monthly rental rate of approximately $17. This represents a 29 

percent reimbursement difference. 

Current Medicare payment policy for enteral nutrition therapy equipment and 

supplies fails to capitalize on market forces and efficiencies available to nursing 

facilities, which could substantially reduce costs. Payment rates for feeding supply kits 

and equipment exceed market costs. As an example, we estimate that Medicare could be 

paying nearly three times the cost of the necessary components billed as a supply kit. In 

1995, the excessive payments could have exceeded $140 million (65 percent of $216 

million). Additionally, the potential exists for overutilization of expensive delivery systems 

utilizing infusion pumps. In 1995, most patients (85 percent) utilized the more costly 

pump delivery method. Discussion with program integrity staff at the DMERCs confirms 

that cases of medically unnecessary billing for pumps has occurred. In some of these 

cases, it is suspected that the pump, rather than gravity feeding, is used more for the 

convenience of the nursing facility staff than based on a patient’s need for the more costly 

controlled delivery system. 

RECOMMENDATIONS 

This report is not intended to suggest that suppliers or nursing facilities are submitting false 

claims for equipment and supplies associated with nutrition therapy. Rather, the purpose is 

to illustrate an area of Medicare payment which is vulnerable to excess and conflicts with 

other related payment policies. Approaches to solve vulnerabilities and wasteful spending 

associated with enteral nutrition therapy payment policy range from resolving specific areas 

of identified excess to restructuring the global payment mechanism for Medicare services 

provided to nursing facility patients. The following discussion describes these two 

approaches. 

APPROACH I: Addressing Specific Payment Areas 

I-V Poles 

The Health Care Financing Administration (HCFA) should take appropriate action to 

prevent excessive payments for the rental and purchase of I-V poles used in nursing 

facilities. We recommend that total rental payments be limited to the purchase cost of the 

pole and that the following two options be considered: 

ii 
Option 1: Utilize the lower of the enteral nutrition payment and the DME fee schedule 

payment. Annual savings could be $1.3 million ($0.4 million due to limitations 

on total rental payments and $0.9 million (29 percent of the remaining $3.1 

million) based on limiting payment to the lower of the fee schedule or the 

reasonable and customary charge). 

Option 2: Evaluate the inherent reasonableness of payment rates under reasonable charge.’ 

Payment levels for residents of nursing facilities should be based on a typical 

facility’s ability to purchase I-V poles economically. Annual savings could 

exceed $0.9 million assuming HCFA’s inherent reasonableness study finds the 

typical monthly rental rates are $17 or less, instead of the current $24. 

Feeding Supply Kits 

The HCFA should take appropriate action to prevent excessive payments for supplies 

related to enteral nutrition therapy. We recommend three options be considered: 

Option 1: Review the inherent reasonableness of payment rates. Annual savings could be 

as much as $140 million (assuming the payment rate is set at a price 65 percent 

below 1995 allowed charges of $216 million). 

Option 2: Place these supplies on a fee schedule (seek legislation if necessary). If fee 

schedule rates are set conservatively at 75 percent of current rates, annual 

savings could exceed $54 million. 

Option 3: Discontinue payment for the “kit” and establish codes specific to each necessary 

component of the kit. One code might be established for the bag (with tubing) 

and the other code would be for the syringe. Assuming the payment rate for 

each new code is set at the lowest price we identified (see body of report) and 

assuming no other items are deemed to be necessary, annual savings could be as 

much as $140 million. 

Enteral Infwion Pumps 

We did not separately examine the reasonableness of Medicare payments for pumps; 

however, based on our finding that Medicare Part B payments for I-V poles, supply kits, 

and nutrient formulas (discussed in a prior report) appear to be excessive, HCFA should 

consider beginning a review of the appropriateness of payment rates for pumps. Assuming 

HCFA’s review yields a disparity between nursing facility costs and Medicare payment 

rates similar to those found for I-V poles (29 percent difference), the annual savings could 

exceed $10.3 million. 

APPROACH II: Global Payment Restructuring 

Structural changes in the way Medicare pays for services provided to nursing facility 

patients may address some or all of our concerns with enteral nutrition therapy payments. 

. . . 111 
Structural changes include 1) folding payment into the nursing facility per diem (daily 

rate), 2) consolidated billing, 3) competitive bidding strategies, and 4) capitation payments. 

Each of these strategies attempts to take advantage of the ability of nursing facilities to 

more economically provide services and supplies to their patients with the cost savings 

passed on to Medicare. Additionally, these payment mechanisms recognize the importance 

of the nursing facility in achieving a more cost effective program. Since nursing facilities 

are significantly involved in the planning and provision of patient care, they, arguably, are 

the most appropriate entity to scrutinize providers and determine the most cost effective 

methods of obtaining and utilizing the services and supplies needed to meet the medical 

needs of their patients. 

The following summarizes some of the options HCFA is or should be considering. 

A. Folding Payment into the Per Diem 

Institutions are expected to provide certain routine equipment and supplies in addition to 

the cost of room and board. Generally, nursing facilities are reimbursed for these services 

based on a daily per diem payment. By including enteral nutrition therapy as a part of the 

per diem payment, Medicare could reduce the overall cost of providing care. Savings to 

Medicare Part B would total approximately $260 million based on 1995 data. However, 

some or all of the savings could be passed on as costs to States (for dually eligible 

patients), Part A (for Medicare skilled nursing facility (SNF) patients), and to beneficiaries 

(in the case of private pay patients). The extent of savings depends on the routine charge 

limits Medicare and Medicaid impose, exceptions to these limits, and the extent to which 

nursing homes act as prudent purchasers. 

B. Consolidated Billing 

Consolidated billing involves a policy that restricts anyone but the nursing facility from 

billing for Part B services the nursing facility is authorized to furnish. Currently, HCFA is 

considering a consolidated billing proposal for routine nursing facility services provided to 

Medicare SNF patients. We support HCFA’s efforts in this area. By making the nursing 

facility the focal point of services to its patients, the nursing facility is far more 

accountable for patient care. Further, such an approach lessens opportunities for fraud and 

abuse by outside suppliers and makes Government monitoring efforts less complicated. 

While we are unable to determine the savings that could result from such a policy change, 

if payment rates are modified to reflect the impact of a nursing facility’s buying power, 

substantial savings could be realized. Assuming enteral nutrition therapy payment rates are 

reduced by 25 percent (a conservative estimate given estimates of excessive payment levels 

noted in the report), savings of $65 million could be realized based on 1995 data. 

iv 
C. Competitive Bidding 

As another cost saving option, the Government could establish competitive bidding 

contracts to provide nursing facilities with access to services and supplies at lower costs 

than currently available. Additionally, such contracts could provide enhanced access to 

patient care services and supplies. We support HCFA’s efforts in this area. Currently, 

HCFA is evaluating the potential for competitive bidding. Any competitive bidding 

strategy should include enteral equipment and supplies. Assuming competitive bidding 

results in pricing at or below the costs noted in this report, savings could total $152 million 

($140 million for supply kits, $1.3 million for I-V poles, and $10.3 million for purnp~).~ 

D. Capitation 

Another option would be to switch payment for Part B services in nursing facilities from a 

fee-for-service mode to a flat rate per beneficiary. Capitation would provide incentives to 

the nursing facility to provide services in the most economical fashion. This is because 

Medicare will not pay more if the nursing facility utilizes a more costly approach (e.g., 

provides a more costly service although less expensive equally effective alternatives exist 

or the nursing facility is not purchasing services and supplies as a prudent purchaser). By 

setting the capitation payment at 75 percent of the 1995 average allowed charge for 

equipment and supplies, the savings would be $65 million. 

Although we support all of the options raised in this report, we believe restructuring 

Medicare’s payment mechanism for Part B services to patients of nursing facilities 

(Approach II) is most responsive to our overall concerns. Enteral nutrition therapy is but 

one example of the possible benefits from changes to current policy which will ensure 

Medicare is paying the most reasonable cost. Payment mechanisms that utilize a nursing 

facility’s capability to purchase medical supplies more cost effectively than the average 

beneficiary offer the greatest potential. We recognize that further study would be needed 

to assess the relative costs and benefits of the global options and the extent of cost shifting 

to other programs, States, and beneficiaries. Finally, we recognize that any efforts to 

modify the enteral nutrition therapy benefit and global restructuring strategies will require 

legislation and must be accompanied by adequate protections for nursing facility patients. 

AGENCY COMMENTS 

We received comments from the Health Care Financing Administration (HCFA). (See 

Appendix B for the full text.) The HCFA concurred with the recommendations made in 

this report. To resolve identified problems noted in this report, HCFA is pursuing a 

number of actions such as evaluating the reasonableness of payment for pumps and I-V 

poles, applying DME reimbursement criteria to I-V pole coverage, and pursuing research of 

broader payment restructuring through capitation, competitive bidding, and bundling of 

enteral nutrition services. 

V 
TABLE OF CONTENTS -

PAGE 

EXECUTIVE SUMMARY 

INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..a 

FINDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

Costs Are Substantial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

Conflict of Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

Enteral Equipment Costs More than DME . . . . . . . . . . . . . . . . . . . . . . . . . . 

Market Forces and Efficiencies Lost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

RECOMMENDATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

ENDNOTES 

APPENDIX 

A: Confidence Intervals .......................................... A-l 

B: Agency Comments ........................................... B-l 
INTRODUCTION 

PURPOSE 

To describe the extent of Medicare Part B payments and potential vulnerabilities related to 

enteral nutrition therapy equipment and supplies for nursing facility patients and to discuss 

possible alternative Medicare payment policies. 

BACKGROUND 

Enteral Nutrition Therapy 

Enteral nutrition therapy provides nourishment directly to the digestive tract of a patient 

who cannot, for a variety of reasons, ingest an appropriate amount of calories to maintain 

an acceptable nutritional status. Enteral nutrition consists of a liquid nutrient formula 

which is administered by tubing inserted through 1) the nose, 2) an incision to the small 

intestine, or 3) an incision leading to the stomach. 

Enteral nutrition may be administered by syringe, gravity, or pump. Some enteral patients 

may experience complications associated with the syringe or gravity method of 

administration. In such cases, an enteral infusion pump can be used. The pump allows 

controlled delivery of the nutrients to the digestive tract. If a pump is ordered, there must 

be documentation accompanying the certificate of medical necessity (CMN) to justify its 

use (e.g., gravity feeding is not satisfactory due to reflux and/or aspiration, severe diarrhea, 

dumping syndrome, administration rate less than 100 ml/hr, blood glucose fluctuations, 

circulatory overload). 

Medicare Coverage Guidelines 

Although Medicare pays for durable medical equipment like beds, wheelchairs, canes, 

crutches, oxygen concentrators, and intravenous (I-V) poles when used in patients’ homes, 

it does not make separate payments for them in nursing homes. These items are 

considered standard equipment for nursing home operations and are covered as part of the 

daily rate that Medicare or Medicaid pay for a nursing home stay. However, Medicare 

does pay for equipment used in connection with enteral feeding in nursing homes, even if 

the same equipment would not otherwise be covered. 

Medicare guidelines classify enteral nutrition therapy under the prosthetic device benefit, 

because the therapy is required due to an absent or malfunctioning body part which would 

normally permit food to reach the digestive tract. The Health Care Financing 

Administration’s (HCFA) decision to consider enteral nutrition equipment and supplies as a 

prosthetic benefit was a direct response to 1980 Congressional deliberations during which 

the House Ways and Means Committee expressed its concern that Medicare did not cover 

enteral therapy for non-institutionalized patients (although, in the view of the Committee, 

such coverage was warranted). The Committee directed the Secretary to “fully explore” 

1 
the possibility of Medicare coverage for enteral products. However, it is unclear whether 

Committee members intended that institutionalized patients be provided enteral nutrition by 

anyone other than the institution providing the care (i.e., outside suppliers). 

Issued in 198 1, HCFA instructions for the Part B prosthetic device benefit state that if 

coverage requirements are met, medically necessary nutrients, administration supplies, and 

equipment are covered. Covered items are to be billed to the Durable Medical Equipment 

Regional Carrier (DMERC) unless provided by the nursing facility during a Part A covered 

stay. If provided by the nursing facility during a Part A covered stay, costs are covered as 

ancillary costs rather than included in the routine per diem payment. Additionally, dually 

entitled patients, in a nursing facility stay not paid for by Part A, will qualify for Part B 

coverage even though States routinely cover enteral nutrition therapy in their daily payment 

rate to nursing facilities. 

Enteral nutrition therapy supplies typically include tubing, bags to hold the nutrients, and 

syringes. Equipment involves enteral infusion pumps and intravenous (I-V) poles. 

Nutrient formulas refer to products such as Ensure, Jevity, and Osmolite. 

Previous Work in this Area 

This report is an extension of work previously discussed in our reports, “Enteral Nutrient 

Payments in Nursing Homes” (OEI-06-92-00861), “Durable Medical Payments in Nursing 

Homes” (OEI-06-92-00862), and “Payment for Durable Medical Equipment Billed During 

Skilled Nursing Facility Stays” (OEI-06-92-00860). In the report on enteral nutrients, we 

described how only about five percent of nursing facility patients receive enteral nutrition 

therapy; however, the costs of enteral nutrient formulas alone exceeded $170 million in 

1992 (the period of review). We also discussed how Medicare payments for nutrients are 

considerably higher (often by over 40 percent) than the cost to nursing facilities which buy 

nutrients through volume (bulk) purchasing or other contractual relationships. Further, and 

possibly more critical, current payment of enteral nutrients does not recognize enteral 

nutrients as “food.” If recognized as food, payment for enteral nutrients would be made as 

part of the facility payment, rather than paid by Medicare Part B under the prosthetic 

benefit. 

In the other reports, we discuss the extent of billing during 1992 for DME such as 

wheelchairs, oxygen concentrators, nebulizers, hospital beds, I-V poles, and crutches. 

Since DME is not covered unless provided for use in a beneficiary’s home, most of the 

money allowed by Medicare ($35 million) was inappropriate. This conclusion is based on 

a recognition that most nursing facilities are not considered a beneficiary’s home. When a 

facility is determined to be primarily engaged in providing “skilled” care, Medicare law 

specifically precludes the facility from being considered a beneficiary’s home. Thus, 

patients in such facilities are denied Part B DME payment, as it is expected that the facility 

(not outside suppliers) will provide DME when needed by any patient. 
METHODOLOGY 

For this inspection, we reviewed Medicare payment policy and gathered data on the 

utilization of enteral nutrition therapy equipment and supplies in aursing facilities from a 

1 percent sample taken from the Medicare National Claims history file for calendar years 

1992-95. Payments for enteral nutrition therapy were extracted whenever the place of 

service was coded as a nursing facility (place of service “3 1” or “32’7, which we 

determined was an accurate indicator of nursing facility services based on our review of a 

1992 nationally projectable two-stage random sample of 1.50 nursing facilities.3 (This 

review showed that 98 percent of the enteral nutrition therapy services provided to nursing 

facility patients were accurately coded as provided in a nursing facility.) 

This inspection was conducted as a part of the Presidential initiative, Operation Restore 

Trust (ORT). The initiative involves multi-disciplinary teams of Federal and State 

personnel seeking to reduce fraud, waste, and abuse in nursing facilities and home health 

agencies, as well as by DME suppliers. 

Our review was conducted in accordance with the Quality Standards for Inspections issued 

by the President’s Council on Integrity and Efficiency. 

3 
F I N D J N Gji__-_-_-----

The Costs for Equipment and Supplies Associated With Enter& iai’utrition Therapy are 

Substantial, Totaling Approximately $260 Million in I995 

During 1995, we project (at the 95 percent confidence level) that KIedicare allowed 

between $257 and $264 million for the equipment, supply kits, and tubing used for enteral 

nutrition therapy.4 (See Figure 1.) When added to the cost of the nutrient formula ($221 

to $228 million), these costs bring the total Part B cost of enteral nutrition therapy in 

nursing facilities to nearly one-half billion dollars ($480 to $490 million). This represents 

one of the most expensive components that Medicare Part B paid for nursing facility 

patient supplies. This is especially striking when one considers that only a small 

percentage (five percent) of nursing facility patients receive enteral nutrition therapy 

services. 

Part B Allowed Charges for Enteral Infusion Therapy 

Equipment and Supplies 

(in millions) 

1992 1993 1994 

EQUIPMENT 

Infusion Pumps $46.2 $38.6 $34.2 

I-V Poles <$O.Ol <$O.Ol $3.4 

SUPPLIES 

Supply Kits $200.7 $193.7 $202.5 

Tubing $6.3 $4.7 $5.3 

TOTAL $253.2 $237.0 $245.4 

‘ource: Projections from an Office of Inspector General (OIGI 1 Percent Sample 

See Aooendix A for Confidence Inter/ah 

FIGURE 1 

1995 

$35.2 

$3.5 

$216.2 

$5.3 

$260.2 

One contributing factor to the high cost of enteral nutrition therapy is that most enteral 

nutrients are delivered by infusion pumps, the most costly method available. For those 

patients receiving enteral nutrition therapy during 1995, approximately 85 percent (83 to 87 

percent at the 95 percent confidence level) utilized pumps to deliver the nutrient formulas; 

the remaining 15 percent used gravity or syringe delivery. The percentage of patients 

utilizing pumps has remained relatively constant over the four year period of this review, 

marked only by a slight decrease in 1995 from the 88 percent level of prior years. 

4 
While the percentage of pump use has remained relatively constant, the overall cost 

dropped noticeably between 1992 and 1993 and has remained somewhat constant in 

subsequent years. We were unable to determine the factors contributing to the 1993 

decline. 

Equipment used for enteral nutrition therapy meets the definition of durable medical 

equipment (DME), which is not covered during a typical nursing facility stay. 

DME is equipment which can withstand repeated use, is primarily used to serve a medical 

purpose, and is generally not useful to a person in the absence of illness or injury. Typical 

DME includes such items as wheelchairs, hospital beds, canes, crutches, oxygen 

concentrators, and nebulizers. 

This definition clearly includes enteral infusion pumps and I-V poles. In fact, I-V poles 

and infusion pumps are considered DME when used for purposes other than nutrition 

therapy (e.g., I-V pole used to hang intravenous solutions, infusion pump used for pain 

management or chemotherapy). If used for these other purposes, the equipment would not 

be payable in a “skilled” nursing facility.’ 

Such a policy of providing payment for equipment in some cases (under the prosthetic 

device benefit) and not others (under the DME benefit) appears inconsistent. If both 

services are medically necessary, the payment policies in the nursing facility setting, 

arguably, should be the same. 

. Payment policies have fluctuated over the years with regard to I-V poles. 

Between 1987 and 1994, I-V poles were considered DME and not covered in 

nursing homes. In 1994, this policy was reversed (I-V poles were covered 

under the prosthetic device benefit), resulting in an escalation of I-V pole 

payments. 

Over the years, payment policy for I-V poles has fluctuated. Prior to 1987, an I-V pole 

was covered in a “skilled” nursing facility under the prosthetic device benefit. In 1987, 

carriers responsible for processing enteral and parenteral nutrition therapy claims reversed 

this policy, declaring I-V poles were no longer covered in a nursing facility; payment was 

limited to a patient’s home. An I-V pole was considered DME and limited to DME 

payment policies. 

This policy remained in effect until 1994 when the DMERCs began processing enteral 

claims and reversed the long-standing policy of not paying for I-V poles in a nursing 

facility. We were unable to determine the reasons for this policy change or whether HCFA 

requested the change. 

5 
The 1994 change in policy, providing for the payment of 1-V pok in nursing facilities, 

resulted in a sharp rise in payments. With I-V poles not payable except in a beneficiary’s 

home, virtually no payments were allowed between 1987 and 1994. However, the payment 

policy change ir 1994 resulted in an immediate escalation of payments for I-V poles to 

over $3.4 million in 1994 and $3.5 million in 1995. (See Figure I.) 

More recent data from the Statistical Analysis Durable Medical Equipment Regional 

Carrier (SADMERC) suggests that I-V pole costs are escalating at an ever higher rate. 

From the last quarter of 1995 to the first quarter of 1996, payments for I-V poles in the 

home and nursing facility increased by over 285 percent. It may be that only recently have 

some nursing facilities and suppliers recognized the “new” policy covering I-V poles. 

Equipment Used for Enteral Nutrition Therapy Costs More Than Identical Equipment 

Billed Under the DME Fee Schedule. 

. Enteral nutrition therapy reimbursement policies result in higher costs than if 

payments were based on the DME fee schedule. 

Although the SNF Coverage Manual (260.4) states “reimbursement rules relating to DME 

will continue to apply” to equipment used for enteral nutrition therapy, the reimbursement 

methodologies continue to remain different (DME is paid based on a fee schedule, while 

enteral nutrition therapy equipment is paid based on r:asonable charge). This results in a 

different payment amount for the same piece of equipment. To illustrate, an I-V pole 

used for enteral nutrition is reimbursed at the monthly rental rate of $24. In contrast, the 

same I-V pole used to hang cancer fighting intravenous solutions in a resident’s home is 

reimbursed using the DME fee schedule at a monthly rental rate of approximately $17. 

This represents a 29 percent reimbursement difference. 

. By allowing unlimited rental, Medicare pays considerably more than the 

purchase cost for I-V poles. 

Review of payment claims shows that current payment policy allows unlimited rental 

payments for I-V poles used for enteral nutrition therapy. We noted cases where rental 

payments for a single I-V pole exceeded the purchase cost. At the 95 percent confidence 

level, we project this occurred for 26 to 34 percent of the cases. Five percent of such 

payments exceeded $400 which is four times the current Medicare reimbursement amount 

for the purchase of a pole on the DME fee schedule ($80-94 depending on the State). 

An unlimited rental payment policy conflicts sharply with current DME reimbursement 

rules which do not allow rental payments to exceed the purchase cost.6 This is especially 

troubling given that enteral infusion pumps are subject to the rules for DME capped rental 

(i.e., 15 month rental); however, I-V poles are not subject to the payment rules for 

inexpensive, frequently purchased DME. If payments were subject to these limitations, 

rental payments for I-V poles would not exceed purchase costs. 

6 
Current Medicare Payment Policy for Enteral Nutrition Therapy Equipment and 

Supplies Fails to Capitalize on Market Forces and Efficiencies ‘4vailable to Nursing 

Facilities, Which Could Substantially Reduce Costs. 

. Payment rates for feeding supply kits exceed market costs for kit components. 

The components of a feeding supply kit are not well defined. According to a discussion 

with one DMERC medical director, the “components of a kit are anything the nursing 

facility needs to facilitate use of the pump.” In our review, we found only two items are 

usually needed in association with pump or gravity administration.’ These items are a bag 

(typically comes with tubing) to hold the nutrient formula and a syringe to irrigate and 

deliver fluids to the patient. These items, when purchased in bulk by nursing facilities, can 

cost nursing facilities considerably less than current reimbursement rates. As an example, 

it is possible for a nursing facility to purchase nutrient bags for as little as $2.88 from a 

national supplier and syringes for as little as $0.81. At a total cost of $3.69, this is 

considerably less (by 65 percent) than Medicare’s average allowed payment of $10.46 

(based on 1995 data). Thus, Medicare could be paying nearly three times the cost of the 

components for a supply kit. Were Medicare to have paid this lower cost, savings of $140 

million could have been realized (65 percent of $216 million). 

This finding is consistent with prior inspection results showing that Medicare is paying too 

much for enteral nutrient formulas. Our prior inspection report, “Enteral Payments in 

Nursing Facilities,” showed that Medicare reimbursement rates for enteral nutrients 

averaged 42 percent higher than costs for the typical nursing facility. Assuming similar 

price differences between the cost of feeding supply kits and nursing facility prices, the 

excessive cost to the taxpayer was nearly $91 million in 1995 (42 percent of $216 million). 

. Also, payment rates for enteral equipment appear excessive. 

The I-V pole represents an example of an item of equipment whose reimbursement rate 

may be excessive. If purchased in bulk rather than individually, I-V poles can cost as little 

as $33 (4 wheel, 2 hook model). This estimate is based on contact with several local 

equipment suppliers in the Dallas area. While the pricing varied considerably and could 

differ in other parts of the country, it is clear that I-V poles can be purchased at prices 

considerably lower than Medicare’s current reimbursement amount of between $110 and 

$130. Thus, prudent purchasing by nursing facilities and competitive bidding strategies 

could yield Medicare savings by reducing the purchase cost of a new I-V pole to only 27 

percent of the current reimbursement. This finding reaffirms that nursing facilities can 

obtain medical equipment and supplies at considerably lower prices when purchased in 

bulk, through competitive bidding strategies, or from suppliers offering such prices to 

attract the nursing facility’s overall business. 

7 
In addition to the purchase cost difference, rental rates are excesske. As discussed earlier, 

reimbursement is considerably higher than the reimbursement rate on the DME fee 

schedule ($17 versus $24 per month). With prudent purchasing utilizing cost saving 

strategies, nursing facilities might achieve even lower rental rates. We found a local 

supplier whose rental rate was only $15. 

. In addition to the excessive cost of equipment and supplies, the potential exists 

for overutilization of expensive delivery systems. 

Currently, nursing facilities have little incentive to limit excessive use of infusion pumps to 

deliver the nutrient formula to the patient. This is due to current payment mechanisms 

which do not encourage nursing facilities and physicians to use less costly enteral nutrition 

delivery systems when medically appropriate. One incentive for the nursing facility is to 

utilize delivery systems requiring less nursing facility staff involvement with the patient. 

Infusion pump delivery is often less labor intensive and can result in less nursing staff 

involvement than is needed to administer and monitor non-pump delivery systems. 

Discussion with program integrity staff at the DMERCs confirms that cases of medically 

unnecessary billing for pumps has occurred. In some of these cases, it is suspected that a 

pump rather than gravity feeding is used more for the convenience of the nursing facility 

staff than based on a patient’s need for the more costly controlled delivery system. 

8 
RECOMMENDATIONS -.--.-- -...wL.w--.~­

This report is not intended to suggest that suppliers or nursing f&z,ilities are submitting false 

claims for equipment and supplies associated with nutrition therapy. Rather, the purpose is 

to illustrate an area of Medicare payment which is subject tc excess and conflicts with 

other related payment policies. 

Approaches to solve vulnerabilities and wasteful spending associated with enteral nutrition 

payment policy range from resolving specific areas of identified excess to restructuring the 

global payment mechanism for Medicare services provided to nursing facility patients. The 

following discussion describes these two approaches in detail. 

APPROACH I: ADDRESSING SPECIFIC PAYMENT AREAS 

I- V Poles 

The Health Care Financing Administration (HCFA) should take appropriate action to 

prevent excessive payments for the rental and purchase of I-V poles used in nursing 

facilities. We recommend that total rental payments be limited to the purchase cost of the 

pole and that the following two options be considered: 

Option 1: Utilize the lower of the enteral nutrition payment and the DME fee schedule 

payment. Annual savings could be $1.3 million ($0.4 million due to 

limitations on total rental payments and $0.9 million (29 percent of the 

remaining $3.1 million) based on limiting payment to the lower of the fee 

schedule or the reasonable and customary charge). 

Option 2: Evaluate the inherent reasonableness of payment rates under reasonable 

charge, Payment levels for residents of nursing facilities should be based on 

a typical facility’s ability to purchase I-V poles economically. Annual 

savings could exceed $0.9 million assuming HCFA’s inherent reasonableness 

study finds the typical monthly rental rates are $17 or less, instead of the 

current $24. 

We support either of these options. However, we believe Option #l is preferable for the 

following reasons: 

. Payments should be the same for the same item. Whether an I-V pole is 

covered as DME (covered under the DME benefit) or used in conjunction with 

enteral nutrition therapy (covered under the prosthetic benefit), it seems inconsistent 

to pay different amounts. 

Recognizes HCFA’s efforts to evaluate the appropriate costs for DME. HCFA 

is currently conducting studies to determine the appropriate reimbursement for 

9 
several items of DME (including I-V poles). If DME rates are adjusted 

accordingly, the payments will reflect the most reasonable amounts, thereby 

obviating the need to conduct an inherent reasonableness study.8 

Recognizes and encourages economies available to nursing facilities when 

purchasing supplies. Nursing facilities present a unique environment. Options 

such as bulk purchasing and competitive bidding can yield significant price 

reductions to the nursing facility. The proposed reduction in payment levels for 

nursing facility patients recognizes this fact. Without a reduction, Medicare will not 

realize the potential savings, since payment rates currently reflect the cost to the 

average beneficiary and not a nursing facility. 

One practical method of implementing either option is to use an adjustment (reduction) in 

the normal beneficiary payment rate when the service or supply is provided to a 

beneficiary residing in a “skilled” nursing facility. 

Feeding Supply Kits 

The HCFA should take appropriate action to prevent excessive payments for supplies 

related to enteral nutrition therapy. We recommend that three options be considered: 

Option 1: Review the inherent reasonableness of payment rates. Annual savings could 

be as much as $140 million (65 percent of $216 million). 

Option 2: Place (seek legislation if necessary) these supplies on a fee schedule. If fee 

schedule rates are set conservatively at 75 percent of current rates, annual 

savings could exceed $54 million. 

Option 3: Discontinue payment for the “kit” and establish codes specific to each 

necessary component of the kit. One code might be established for the bag 

(with tubing) and the other code would be for the syringe. Assuming the 

payment rate for each new code is set at the lowest price we identified (see 

body of report) and assuming no other items are deemed to be necessary, 

annual savings could be as much as $140 million. 

We support all of these options. However, we believe Option 1 is preferable for the 

following reasons: 

. Payment levels appear to substantially exceed costs. To ensure equity, payment 

levels should be set after a thorough review of what components are necessary and 

routinely used and what is a fair price, given that nursing facilities can obtain these 

products at rates typically lower than the average beneficiary. 

. Recognizes and encourages economies available to nursing facilities when 

purchasing supplies. Nursing facilities present a unique environment. Utilization 

of such opportunities as bulk purchasing and competitive bidding can provide 

10 
significant price reductions to the nursing facility. The proposed reduction in 

payment levels for nursing facility patients recognizes this fact. Without a 

reduction, Medicare will not realize the potential savings, since payment rates 

should reflect the cost to the average beneficiary and not a nursing facility. 

Enteral Infusion Pumps 

We did not separately examine the reasonableness of Medicare payments for pumps; 

however, based on our finding that Medicare Part B payments for I-V poles, supply kits, 

and nutrient formulas (discussed in a prior report) appear to be excessive, HCFA should 

consider beginning a review of the appropriateness of payment rates for pumps. Assuming 

HCFA’s review yields a disparity between nursing facility costs and Medicare payment 

rates similar to those found for I-V poles (29 percent difference), the annual savings could 

exceed $10.3 million. 

APPROACH II. GLOBAL PAYMENT RESTRUCTURING 

Structural changes in the way Medicare pays for services provided to nursing facility 

patients may address some or all of our concerns with enteral nutrition therapy payments. 

Structural changes attempt to take advantage of the ability of nursing facilities to more 

economically provide services and supplies to their patients with the cost savings passed on 

to Medicare. Each of these payment mechanisms recognizes the importance of the nursing 

facility in achieving a more cost effective program. Since nursing facilities are 

significantly involved in the planning and provision of patient care, they arguably are the 

most appropriate entity to scrutinize providers and determine the most cost effective 

methods of obtaining and utilizing the medical services and supplies needed by their 

patients. 

The following summarizes some of the options HCFA is or should be considering. 

A. Folding Payment into the Per Diem 

Institutions are expected to provide certain routine equipment and supplies in addition to 

the cost of room and board. Generally, nursing facilities are reimbursed for these services 

based on a daily per diem payment. By including enteral nutrition therapy as a part of the 

per diem payment, Medicare could reduce the overall cost to the taxpayer of providing 

care. Savings to Medicare Part B would total $260 million based on 1995 data. However, 

some of the savings could be passed on as costs to States (for dually eligible patients), Part 

A (for Medicare SNF patients), and to beneficiaries (in the case of private pay patients). 

The extent of savings depends on the routine charge limits Medicare and Medicaid impose, 

exceptions to these limits, and the extent to which nursing homes act as prudent purchasers. 

Under current Medicare Part B reimbursement policy, nursing facilities have little or no 

incentive to employ money saving techniques (e.g., bulk purchasing). In fact, most enteral 

nutrition equipment and supplies are provided by suppliers rather than the nursing facility. 

11 
Not only does the nursing facility exert little influence on the cost paid for enteral nutrition 

therapy, but the nursing facility provides little oversight to ensure the least expensive, 

medically appropriate alternative is utilized. 

In addition to the argument that savings can be achieved through folding enteral nutrition 

therapy into the per diem, the following factors support such a policy decision: 

Enteral nutrients are just “food.” Because enteral nutrition is clearly “food,” an 

argument can be made that nursing facilities should pay for enteral nutrients in the 

same manner as traditional food consumed by the average facility patient. 

Enteral delivery systems are DME. Delivery systems (i.e., equipment and 

supplies) are arguably just DME which is not separately reimbursable, except as a 

part of the per diem. The same argument for not covering DME in a “skilled” 

nursing facility setting could be applied to enteral nutrition therapy. 

States include enteral nutrition therapy in their per diem. Including enteral 

nutrition therapy as a part of the per diem payment is consistent with the Medicaid 

policies of most states. Only a few states allow additional billing beyond the per 

diem rate. States with case-mix systems provide for a daily rate which could be 

higher if the patient requires infusion pump or gravity feeding. 

B. Consolidated Billing 

Consolidated billing would restrict anyone but the nursing facility from billing for Part B 

services the nursing facility is authorized to furnish. We support HCFA’s efforts in this 

area. Currently, HCFA is considering a consolidated billing proposal for routine nursing 

facility services provided to Medicare SNF patients. By making the nursing facility the 

focal point of services to its patients, the nursing facility is far more accountable for patient 

care. Further, such an approach lessens opportunities for fraud and abuse by outside 

suppliers and makes Government monitoring efforts less complicated. 

While we are unable to determine the savings that could result from such a policy change, 

if payment rates are modified to reflect the impact of a nursing facility’s buying power, 

savings could be realized. Assuming enteral nutrition therapy payment rates are reduced 

by 25 percent (a conservative estimate), savings of $65 million could be realized based on 

1995 data. 

C. Comnetitive Bidding 

As another cost saving option, the Government could establish competitive bidding 

contracts to provide nursing facilities with access to services and supplies at lower costs 

than currently available. Such contracts could provide enhanced access to some services 

and supplies. We support HCFA’s efforts in this area. Currently, HCFA is evaluating the 

potential for competitive bidding. Any competitive bidding strategy should include enteral 

equipment and supplies. Assuming competitive bidding results in pricing at or below the 

12 
costs noted in this report, savings could total $152 million ($140 million for supply kits, 

$1.3 million for I-V poles, and $10.3 million for pumps). 

D. Capitation 

Another option would be to switch payment for Part B services in nursing facilities from a 

fee-for-service mode to a flat rate per beneficiary. Such a system could base the fixed 

payment on some type of case-mix payment scheme where payments are based on the level 

of illness and resource needs of the patient (e.g., a prospective payment system for 

Medicare SNFs is currently being developed’). Additionally, payment could be based on a 

daily rate similar to those found in Medicaid programs (per diem rate) or a monthly rate 

similar to managed care programs such as Health Maintenance Organizations (HMOs). 

The payment rate could also be a function of the type of service or supply. For example, a 

daily rate of $10 might be determined to be an equitable payment for patients needing 

enteral nutrition therapy. Capitation would incentivize the nursing facility to provide 

services in the most economical fashion, since Medicare will not pay more if the nursing 

facility utilizes a more costly approach (e.g., provides a more costly service although less 

expensive equally effective alternatives exist or the nursing facility is not purchasing 

services and supplies as a prudent purchaser). 

By setting the capitation payment conservatively at 75 percent of the 1995 average allowed 

charge (a 25 percent reduction) for equipment and supplies, the savings could be $65 

million. 

Capitation for Nursing Facility Dual Eligibles 

Dual eligibles are patients of nursing facilities for whom Medicaid is paying for the 

nursing facility stay and Medicare is paying for an assortment of services and supplies 

(e.g., physician care, physical therapy, lab testing, and supplies). The shared responsibility 

for payment exists because Medicaid is considered the payor of last resort. Since dual 

eligibles are entitled to Medicare, Medicaid pays for only those services and supplies not 

covered by Medicare (i.e., coinsurance and deductible). This overlap in coverage creates a 

complicated system of payment which is very difficult to audit and assess whether services 

provided under Medicare overlap payments made by Medicaid (i.e., the Medicaid daily rate 

paid the nursing facility). 

In addition to the complexity of monitoring “who pays for what,” such a system of 

multiple payers and providers able to bill for services creates an attractive environment for 

fraudulent and abusive practices. Currently, providers can submit claims for services 

directly to Medicare without the nursing facility or attending facility affirming whether the 

services were necessary and provided as claimed. Further, Medicare payment systems 

cannot determine whether a dual eligible is in a Medicaid covered*stay in a nursing facility 

(i.e., States are not required to provide stay information to Medicare). This makes it 

impossible to determine whether some types of services are covered (e.g., DME is not 

covered in a nursing facility). 

13 
One solution to this dilemma is to limit Part B payments for dual eligibles. Rather 

than Medicare paying for the services, Medicaid would be responsible for payment. To 

compensate States, Medicare could develop a capitation payment provided directly to the 

State. Such a ;layment scheme could significantly reduce Medicare costs. Since nursing 

facilities are paid a per diem, nursing facilities would have an incentive to utilize cost 

constraining methods (bulk purchasing, competitive bidding, limiting overutilization, 

selection of the least expensive medically appropriate treatment, etc.). 

Although we support all of the options raised in this report, we believe restructuring 

Medicare’s payment mechanism for Part B services to patients of skilled nursing facilities 

(Approach II) is most responsive to our overall concerns. Enteral nutrition therapy is but 

one example of the possible benefits from changes to current policy which will ensure 

Medicare is paying the most reasonable cost. Payment mechanisms that utilize a nursing 

facility’s capability to purchase medical equipment and supplies more cost effectively than 

the average beneficiary offer the greatest potential. 

We recognize that further study would be needed to assess the relative costs and benefits of 

the global options and the extent of cost shifting to other programs, States, and 

beneficiaries. The projections of cost savings in this report are used as illustrations and are 

based on various stated assumptions. The savings refer to the Medicare Part B program 

and include savings to both the Part B program and the beneficiary. 

Any efforts to modify the enteral nutrition therapy benefit and global restructuring 

strategies will require legislation and must be accompanied by adequate consideration and 

protections (liability, access and quality of care, etc.) for nursing facility patients, nursing 

homes, and States.” 

14 
AGENCY COMMENTS 

We received comments from the Health Care Financing Administration (HCFA). (See 

Appendix B for the full text.) The HCFA concurred with the recommendations made in 

this report. To resolve identified problems noted in this report, HCFA is pursuing a 

number of actions such as evaluating the reasonableness of payment for pumps and I-V 

poles, applying DME reimbursement criteria to I-V pole coverage, and pursuing research of 

broader payment restructuring through capitation, competitive bidding, and bundling of 

enteral nutrition services. 

15 
ENDNOTES 

1. In some instances, the use of customary and prevailing charge data alone may lead 

to a result that is not inherently reasonable for the purpose of reimbursing items 

and services furnished by suppliers of services. If standard rules for calculating 

reasonable charges result in grossly deficient or grossly excessive charges, HCFA 

and contractors can apply other factors to set reasonable charge limits. Examples 

of circumstances which may result in excessive charges include: the marketplace is 

not competitive, Medicare is the primary source for payment, charges are grossly 

in excess of acquisition costs, etc. When inherent reasonableness criteria have 

been applied, the contractor must solicit comments from the affected group on the 

proposed limitation and the methodology and documentation used. A minimum of 

a 30-day comment period is provided. 

2. $140 million for supply kits (assuming the payment rate is set at a price 65 percent 

below 1995 allowed charges of $216 million) 

$1.3 million for IV poles (Annual savings could be $1.3 million ($0.4 million due 

to limitations on total rental payments and $0.9 million (29 percent of the 

remaining $3.1 million) based on limiting payment to the lower of the fee schedule 

or the reasonable and customary charge) 

$10.3 million for pumps (29 percent of $35 million). 

3. Data was obtained from a nationally projectable two-stage random sample of 150 

Medicare or Medicaid nursing homes from California, Delaware, Florida, Indiana, 

Kansas, Louisiana, Maine, Michigan, Montana, and Wyoming (15 per State). 

Stratification was based on facility size (large, medium, and small). 

Each sample nursing home provided us with a list of all Medicare-eligible 

beneficiaries residing in the nursing home during 1992, along with each resident’s 

corresponding date(s) of stay. After verification of the beneficiaries’ health 

insurance claim numbers (HICN) with the Medicare enrollment database, all 

Medicare services provided during the nursing home stay were extracted from the 

Medicare National Claims History File for calendar year 1992. The Supplementary 

Medical Insurance (SMI) for the Aged and Disabled services (Part B Medicare), 

processed by both the carrier and the intermediary, were identified. Data from the 

sample were projected to the total nursing home population (patients in Medicare or 

Medicaid-certified nursing homes). 

4. During 1995, Medicare allowed $260 million (+/- $3.6 million at the 95 percent 

confidence level) for the equipment, supply kits, and tubing used for enteral 

nutrition therapy. When added to the cost of the nutrient formula ($225 +/- $3.7 

million at the 95 percent confidence level), these costs bring the total Part B cost 

of enteral nutrition therapy in nursing homes to nearly one-half billion dollars 

($485 million +/- $5.3 million at the 95 percent confidence level). 

16 
5. Durable medical equipment may be covered under Medicare’s Supplemental 

Insurance Program (Part B), if it is furnished for use in the beneficiary’s home. 

Medicare defines a beneficiary’s home as his or her dwelling, an apartment, a 

relative’s home, a home for the aged, or some other type of institution. However, 

a nursing facility primarily engaged in providing to inpatients skilled nursing care 

or rehabilitation may not be considered a beneficiary’s home for purposes of DME 

coverage. 

6. An IV pole billed as DME is considered to be paid under the category of 

inexpensive or other routinely purchased DME. Such DME is defined as equipment 

costing less than $150 or which is purchased at least 75 percent of the time. 

7. While these two items (bag and syringe) are the main components of kits. Contact 

with some suppliers yielded the following list of items that might be included under 

the broad category of a kit: 

Tubing (4 - 5 feet) 

Flow clamp control regulator 

Interlocking feeding set connector 

Additional connectors (Y port) as needed 

Gauze pads for gastrostomy site wound care 

Alcohol swabs, antibiotics as necessary 

Tape 

Gloves 

In some cases, a secondary bag and tubing combination 

to permit automatic hydration 

8. HCFA is currently conducting several projects related to DME to establish more 

reasonable reimbursement rates and take advantage of competitive bidding 

strategies. These studies are: 

Study 1 A study of variations in DME supplier costs. This study will collect 

data on supplier costs of DME and will determine the proportions of 

such costs attributable to the services and the proportion attributable 

to the product components. The review will analyze this by type of 

equipment and geographic area. 

Study 2 An evaluation of the inherent reasonableness of payment levels for 

decubitus care equipment, TENS, and any other items considered 

appropriate by the Secretary (IV poles are considered appropriate). 

The contractor will obtain cost data from private payers, Medicaid, 

and other Federal health programs. A cost-benefit and actuarial 

analysis will also be undertaken. 

Study 3 HCFA is using its current authority to undertake a project on 

competitive bidding. HCFA has contracted with Palmetto 

17 
Government Benefit Administrators test whether competitively bid 

prices can be used to purchase some types of DME. 

9. HCFA is currently administering a six-State Medicare skilled nursing facility (SNF) 

prospective payment system (PPS) demonstration to: 1) develop a patient 

classification system, 2) develop a payment rate based on the patient classification, 

and 3) evaluate the adequacy of facility payments under the demonstration. Many 

of the basic elements of the demonstration will be incorporated into the structure of 

a national SNF PPS. HCFA believes that the quality of care rendered to Medicare 

beneficiaries is not hindered. HCFA is committed to implementing a SNF PPS as 

soon as it is technically possible and the Administration has offered a legislative 

proposal to Congress. 

10. Most beneficiaries (75 percent) are covered under a Part A SNF stay or a Medicaid 

stay. The remaining beneficiaries (25 percent) pay for nursing home stays 

themselves or with the aid of alternate insurance programs. 

18 
APPENDIX A 

MEDICARE PART B PAYMENTS 

FOR 

ENTERAL EQUIPMENT AND SUPPLIES 

95 Pert 

Point Estimate f 

Enteral Equipment and Supplies - Total 

1992 

1993 

1994 

1995 

Enteral Infusion Pumps 

1992 

1993 

19941 

19951 

Enteral Feeding Supply Kits 

1992 

1993 

1994 

1995 

Intravenous (I-V) Poles 

1992 

1993 

1994 

1995 

Tubing 

1993 

1994 

1995 

$253,240,044 

$237,035,25 1 

$245,704,806 

$260,156,084 

$46,191,376 

$38,65 1,228 

$34,249,692/ 

$35,244,409] / 

$200,709,626 

$193,718,048 

$202,655,147 

$216,137,807 

$6,79 1 

$7,054 

$3,391,134 

$3,502,864 

$6,332,25 11 I 

$4,65 8192 1 

$5,408,833 

$5,27 1,004 

x Ths calculatron resulted because of an extremely low precison caused by so few claims. 

Source: Based on Analysis of an OIG I Percent File extracted from the National Claims History 

,ntteaTtidence 

+I- $3,2 11,207 

+I- $3,156,623 

+I- $3,624,939 

+/- $3,640,33 1 

+I- $713,576 

+I- $791,357 

+/- $898,646 

+/- $802,9481 

+I- $2,197,334 

+I- $2,170,587 

+/- $2,685,116 

+I- $2,772,656 

+I- $7,728 * 

+/- $7,739 * 

+I- $99,702 

+I- $106,377 

+/- $155,7841 

+/- $133,517 

+I- $210,376 

+!- $178,606 

file. 

A-l 
APPENDIX B 

AGENCYCOMMENTS 

DEPARTMENT OF HEALTH 8r HUMAN SERVICES Health Care Financing Adm!nlstratron 

The AdmlnMrator 

Washington. DC. 20201 

MAR I 7 1337 

DATE: 

TO: June Gibbs Brown 

Inspector General 

FROM: Bruce C. Vladeca& 

Administrator ’ a/ 

SUBJECT: Office of Inspector General (OIG) Draft Report: “Medicare Payments for 

Enteral Nutrition Therapy Equipment and Supplies in Nursing Homes,” 

(OEI-06-92-00866) 

b 

We reviewed the above-referenced report that describes the extent of Medicare Part B 

payments and potential vulnerabilities related to enteral nutrition therapy equipment and 

supplies provided to residents of nursing homes. 

Our detailed comments on the report recommendations are attached for your 

consideration. Thank you for the opportunity to review and comment on this report. 

Attachment 

B-l 
Comments of the Health Care Financing Administration (HCFA) on 

Office of Inspector General (OIG) Draft Renort: 

“Medicare Pavments for Enteral Nutrition Theranv Equipment and 

Supplies in Nursing Homes,” (OEI-06-92-008661 

OIG Recommendation - Equipment Payment Policy 

HCFA should take appropriate action to prevent excessive payments for the rental and 

purchase of intravenous (I-V) poles used in nursing facilities. 

HCFA Response 

We concur with the report finding that payments for poles used in nursing facilities are 

excessive. HCFA created a parenteral and enteral nutrition (PEN) Workgroup that will 

concentrate on current PEN issues impacting on program costs and abuses. The Workgroup 

includes staff from central office and the regional offices. 

The Workgroup is reviewing the appropriate skilled nursing facility manual section and 

plans to issue a clarification or revision, as necessary, that would support a carrier policy to 

pay for PEN poles as inexpensive/routinely purchased durable medical equipment (DME). 

The Workgroup will also review the reimbursement rules that apply to DME used in the 

nursing facility when the stay is covered under Part A, and will evaluate the inherent 

reasonableness of payment rates under the reasonable charge system. The projected 

completion date for this activity is March 31. 

OIG Recommendation - Enteral Infusion Pumps 

HCFA should consider beginning a review of the appropriateness of payment rates for 

P-Ps. 

HCFA Response 

We concur. The PEN Workgroup is applying the same review to enteral infusion pumps as 

it is to its review if I-V poles as discussed in response to the first recommendation. 

OIG Recommendation - Global Payment Restructuring 

HCFA should consider structural changes in the way Medicare pays for services provided 

to nursing facility patients. 

B-2 
HCFA Response 

We concur and are currently developing a competitive bidding demonstration. The use of 

the competitive market mechanism would establish Medicare’s payment for enteral 

nutrition. 

The Workgroup will consider other payment mechanisms that include inherent 

reasonableness, bundling of enteral nutrition services, and capitation. Staff from our Dallas 

Regional Office are working closely with DME regional carriers to develop a pricing 

scheme to collapse enteral nutrient codes for categories IV and V by weighting the 1995 

Medicare allowances for each enteral code in these categories and using the average of 

product specific allowances paid under codes from within the respective categories. The 

Workgroup will design a model to work with the statistical analysis DME regional carrier 

to study the use of inherent reasonableness and bundling as approaches to price PEN. We 

expect to complete this project and propose a new mechanism for these categories by 

April. 

B-3