I 

I 

I 

Depafiment of Health and Human Services 

OFFICE OF 

INSPECTOR GENERAL 

MEDICARE HOME INFUSION THERAPY 

SEPTEWER 1993 OEI-02-92-00420 

I 
EXECUTIVE SUMMARY


PURPOSE 

The purpose of this inspection is to describe the Medicare home infusion industry 

including reimbursement trends, coverage, company characteristics and physician 

financial arrangements. 

BACKGROUND 

Home infusion therapy, one of the fastest growing segments of home health care, has 

made it possible for increasingly sophisticated treatments to be given in the home. 

These include enteral and parenteral nutrition and other therapies such as intravenous 

antibiotics and chemotherapy. 

According to a May 1992 Office of Technology Assessment (OTA) report, a few large 

companies dominate the national market. The remaining companies include midsized 

firms with strong regional markets and numerous small firms with local pharmacists, 

home health agencies, hospitals and nursing homes increasingly entering the market. 

Medicare patients appear to be a small part of the total home infusion market. While 

Medicare coverage is clearly defined for enteral and parenteral nutrition, other home 

infusion therapy semices are covered in a fragmented way. Although Medicare covers 

drugs and biological when used with an infusion pump, carriers are given discretion in 

implementing this coverage. 

Over the last decade, both Congress and the Office of Inspector General (OIG) have 

had concerns about physician financial arrangements with medical entities, including 

home infusion companies. The Omnibus Budget Reconciliation Act of 1993 generally 

prohibits payment by Medicare and Medicaid for services performed by clinical 

laboratories, durable medical equipment providers, home health agencies, and 

suppliers of parenteral and enteral nutrition when such services are ordered by a 

physician who has a financial relationship with the supplier. 

METHODOLOGY 

We gathered and analyzed four sets of data relevant to the four parts of the study’s 

purpose. (1) To estimate recent trends in Medicare reimbursements for home 

infusion services, we reviewed Health Care Financing Administration (HCFA) data on 

allowed charges for services and supplies representing home infusion charges in 1990 

and 1991. (2) To describe Medicare coverage for home infusion services, we looked 

at Medicare coverage guidelines, reviewed existing literature, spoke to various 

respondents knowledgeable in the industry, and analyzed carrier payment data. (3) 

To describe home infusion companies serving Medicare patients, we drew a random 

sample of 200 beneficiaries who had pumps billed in 1991 and identified the . 

companies which provided these pumps. From these companies, we identified and 

i 
interviewed 57 which provide infusion therapy in the home. (4) To describe the 

nature and extent of physician financial arrangements, we interviewed 30 

representatives of 30 randomly selected home infusion companies, three of which were 

independent locations of the same company; a non-random sample of 28 physicians; 

and 17 other respondents representing 11 professional organizations and 6 referring 

agencies. 

FINDINGS 

Me&are Pqmerus for Honw InfMwn lkem~ are Ri.riizgRapidly 

The number of Medicare beneficiaries who received infusion services in the home 

grew by 91 percent from 14,500 in 1990 to 27,700 in 1991. Estimated total allowed -

Medicare charges for infusion therapy in the home leapt 213 percent, from $61 million 

to $191 million. The average allowed charges annually per Medicare beneficiary . jumped 63 percent, from $4243 to $6923. 

Caniem Are Not Uniformly Covering Home Inn Therapy 

The OTA study, an analysis of carrier payments, and comments of study respondents 

indicate great variability in coverage policy among Medicare carriers. While 17 

carriers have policies to cover only the drugs and conditions specified by HCF~ other 

carriers cover not only these, but a wide variety of others as well. 

Physician Ownmhip and Other Financial Arrangements Are Common 

Of the 30 infusion company respondents in our sample, five (17 percent) report having 

physician owners. Ten (33 percent) of the sample infusion company respondents 

report having some other sort of financial or business arrangement with one or more 

physicians. Such arrangements are complex and it is difficult to determine what effect, 

if any, they may have on Medicare. In regard to both the physician ownership and 

other financial arrangements discussed in this report, we did not have sufficient data to 

determine the effects that OBRA 1993 would have on Medicare payment for services 

ordered by physicians with the financial arrangements we found. 

Perceptions of company, physician and other respondents as to the extent of physician 

arrangements differ from physicians’ and companies’ reported behavior, suggesting 

that the full nature and extent of such arrangements are unclear. Most company 

respondents, for example, believe physician arrangements to be very or somewhat 

common, even though over half report having no such arrangements. 

In contrast to the infusion industry in general, which is dominated by a few large firms, 

smaller companies are providing home infusion to Medicare patients. 

ii 
RECOMMENDATIONS 

In light of our findings, we believe that HCFA should: 1) monitor spending to better 

identify trends; 2) provide more specific coverage guidelines; and 3) collect ownership 

and compensation information on form HCFA-192, use this information to monitor 

referral and utilization patterns, and refer suspected cases of abuse to the Office of 

Inspector General. 

COMMENTS 

Written comments received from HCFA and verbal comments received from OTA 

concur with the recommendations of this report. Suggestions for changes in the 

wording, clarifications of the text and any technical changes have for the most part 

been incorporated into the final report. The actual comments received from HCFA 

are in Appendix D. 

... 

111 
TABLE OF CONTENTS


EXEC~ S~Y


1


INTRODU~ON . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .


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

8


� Medicare Home Infusion Payments Rising Rapidly . . . . . . . . . . . . . . . . . . . . . . 

8


� Home Infusion Therapy Not Uniformly Covered. . . . . . . . . . . . . . . . . . . . . . . .


10


. Physician Ownership and Arrangements Common . . . . . . . . . . . . . . . .1. . . . .


..14


RECOIVIMENDA~ONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .


APPENDI~ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

A-1


A 

B: 

c. 

D: 

MethodoloPJ to Estimate Medicare Reimbursement . . . . . . . . . . . . . . . . . . . 

. B-1


Sampling Methodology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . c-1


OTACoverage Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .


. . D-1


Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

INTRODUCTION


PURPOSE 

The purpose of this inspection is to describe the Medicare home infusion industry 

including reimbursement trends, coverage, company characteristics and physician 

financial arrangements. 

BACKGROUND 

Home infusion therapy, one of the fastest growing segments of home health care, has 

made it possible for increasingly sophisticated treatment to be given in the home, 

including care previously available only in a hospital. It offers a variety of medical 

treatments. They include enteral nutrition, which provides the patient with liquid 

nourishment through a tube inserted into the stomach, either directly through the skin 

or through a naso-gastric tube; parenteral nutrition which provides liquid nourishment 

intravenously and antibiotics administered intravenously when a drug cannot be 

administered orally or by injection. Chemotherapy, pain management, blood 

transfusions, hydration therapy, and human growth hormones are other treatments. 

For the purposes of this study, nutrition therapy refers to enteral and parenteral 

services, while the remaining services are referred to as other therapies. 

Components of home infusion include: equipment (such as pumps and poles); supplies 

(such as dressing supplies and infusion sets); nutrients, drugs and pharmacy services; 

nursing services; physician semices; laboratory services; and patient assessment and 

training. 

A significant development in home infusion has been the advent of the portable, 

electronic pump used to administer the drug. It allows the flow of the drug to be 

controlled, does not require the constant care of a nurse and helps ensure greater 

patient safety. 

The Home Injisibn l’krapy Induwy 

The industry includes various players: home infusion companies, home health 

agencies, visiting nurse semices, pharmacies and durable medical equipment (DME) 

companies. The patient’s attending physician usually coordinates the care. 

According to a May 1992 Office of Technology Assessment (OTA) report, entitled 

Home Drug Infusion Therapv Under Medicare, a few large companies dominate the 

national market. The remaining companies include midsized companies with strong 

regional markets and numerous small firms. Entering the business are a growing 

number of community pharmacists, as evidenced by the growth of pharmacy franchise 

companies, as well as home health agencies, hospitals and nursing homes. 
Medicare patients appear to be a small part of the total market. The OTA estimated


that roughly 20,000 to 35,000 elderly were receiving home drug infusion therapy in


1991, about 10 to 15 percent of all home drug infusion patients. The National


Alliance for Infusion Therapy (NAIT), which represents nineteen home infusion


companies, including many of the larger firms, estimates that between 11 to 15 percent


of its members’ patients are on Medicare. It also reports that most of its members’


home infusion patients receive antibiotic therapy and enteral nutrition.


The January 1991 issue of Homecare Magazine listed the top ten infusion companies


by sales volume. The number one company, Caremark, had sales of $625 million and


operated in 120 locations. The next nine companies ranged from $83 million in sales


to $17.2 million. These companies provide both nutrition and other therapies.


Besides providing the therapy itself (including the necessary equipment and drugs), the


large companies offer clinical pharmacy and nursing services. The more traditional


DME companies primarily furnish equipment and supplies. Companies may also have


patient advocates on staff who meet with patients to coordinate their care, to answer


questions and to address their concerns. One large firm has home patient


representatives who coordinate the services of the physician and company staff, such


as nurses and pharmacists; they also monitor patient compliance.


lUedkare Cbverage of Home Infizswn Serviies 

Medicare coverage of infusion services provided by companies to patients in their 

homes varies depending on the type of service. Claims for these services are 

reimbursed by Medicare Part B carriers, the Health Care Financing Administration 

(HCFA) contractors who are responsible for paying Part B claims. 

Nutrition therapy coverage is clearly defined in the Medicare Carriers Manual 

(MCM), Section 2130, which discusses home enteral and parenteral nutrition in the 

context of prosthetic devices when ordered by a physician. It states, “Accessories 

and/or supplies which are used directly with an enteral or parenteral device to achieve 

the therapeutic benefit of the prosthesis or to assure the proper functioning of the 

device are covered under the prosthetic device benefit...” Medicare allows nutrition 

therapy to be reimbursed for patients at home or in a nursing facility, including a 

skilled nursing facility, when the products are provided by an outside supplier who bills 

the Medicare carrier directly. 

As noted in Medicare Part B MCM Section 2100.5, Medicare covers home infusion 

therapy primarily through its DME benefit. Infusion pumps are covered as equipment 

capable of withstanding repeated use when “medically necessary to ameliorate illness 

or injury or to improve functioning of a malformed body part.” Medical supplies and 

accessories necessary for the proper functioning of the equipment are also covered. 

This includes tubing, needles and alcohol swabs, and also drugs and biological that 

must be put directly into the equipment to assure proper functioning. 

2

Although Medicare covers drugs and biological when used with an infusion pump, the


carrier is given discretion in implementing this coverage. The HCFA instructed


carriers in the Medicare Coverage Issues Manual, Section 60-14 to cover the cost of


external infusion pumps when used in the administration oh deferoxamine to treat


acute iron poisoning and iron overload; heparin to treat thromboembolic disease


and/or pulmonary embolism (in institutional settings only); chemotherapy for liver


cancer patients and colorectal cancer patients who cannot or will not undergo surgical


treatment; and morphine for intractable cancer pain. The manual goes on to say,


“Other uses of external infusion pumps are covered if the contractor’s medical staff


verifies the appropriateness of the therapy and the prescribed pump for the individual


patient.”


Other distinctions exist in Medicare’s handling of nutrition and other infusion therapy -


services. Currently, only two carriers reimburse claims for all nutrition services, while


all carriers pay for other infusion therapy. As of October 1993 four regional carriers


will handle claims for all nutrition and other infusion therapy. This will allow them to


make more consistent coverage decisions. All providers who supply DME will have to


fill out a new Form HCFA-192, a “disclosure of ownership form,” in order to obtain a


new provider number needed to submit claims to the regional carriers.


Limits exist regarding the coverage of physician services relating to home infusion


therapy. Medicare Part B covers physician hospital visits related to discharge and


office visits, but does not ever cover physician administrative or telephone consultation


services; direct contact with the patient is required in order for the physician to be


reimbursed.


Lastly, Medicare also provides infusion services to homebound patients under its home


health benefits. Home health agencies are reimbursed by Medicare intermediaries for


nursing services, infusion equipment and supplies. Drugs and biological are, however,


specifically excluded under the home health benefit. (We note that home infusion


services provided by home health agencies are not within the scope of this study.)


M&care Reimburwnent of Home Injksion Services 

In planning the study it was not possible to obtain Medicare reimbursement data for


infusion patients treated in the home. Reasons for this difficulty include the large


number of home infusion services and supplies and the fact that they are covered in a


fragmented way. It thus became an objective of the study to obtain this


reimbursement data, including trend information. .


Concerns About Physician Financial Amangements 

Over the last decade, both Congress and the Office of Inspector General (OIG) have 

had increasing concerns about the proliferation of financial arrangements between 

physicians and various medical entities such as laboratories and DME companies. 

More recently, there has been an interest in the business of home infusion. For 

3 
instance, Modern Healthcare, November 1991, reported that one large company 

acknowledged paying $12 to $150 per week to hundreds of physicians under its Quality 

of Service Agreements. “Their reasoning for paying the fees is a common refrain in 

the homecare industry: The treatments for home care patients are getting more 

complex, and physicians should be paid for their part in managing that treatment.” 

Notwithstanding this rationale, questions about the appropriateness of certain 

physician payments, and their budgetary impact, have prompted an increase in studies 

and regulations. 

In June 1988, Congress mandated that the OIG conduct a study on ownership and 

compensation arrangements involving physicians and the health care entities. The 

study looked at independent clinical laboratories (ICL), independent physiological 

laboratories (IPL), and DME companies, but did not specifically look at home infusion 

companies. In a report published in May 1989, the OIG found that many physicians 

are owners of or have other financial relationships with health care businesses to 

which they refer patients. The study also found that those ICLS with physician” 

arrangements had an increased utilization rate (45 percent more than other Medicare 

recipients) attributed to the patients of the physicians involved. 

A January 1991 report by the State of Florida Health Care Cost Containment Board, 

entitled “Joint Ventures Among Health Care Providers in Florida”, found that some 

types of physician-owned facilities had clearly increased costs, charges, and/or 

utilization, or were associated with greater access or quality problems, but the results 

varied depending on the type of facility. Infusion companies were not included in this 

study. 

In its May 1992 report, the OTA states, “There is some evidence that physician 

ownership of health facilities is related to higher use of those facilities’ services.” They 

also report, “There is little consensus among physician associations regarding the 

acceptability of different ownership and financial arrangements.” 

The OIG has approached physician ownership and compensation arrangements as 

potential violations of the Medicare and Medicaid anti-kickback statute. This criminal 

provision is useful to the Federal health care programs as a means of limiting the 

influence of money on physicians’ decisions regarding when and where to refer 

patients. In 1987, the Medicare and Medicaid Patient and Program Protection Act 

gave the OIG additional remedies for violations of the anti-kickback statute. IrI 

addition to criminal penalties, a violator may be subject to exclusion from participation 

in the Federal health care programs. The 1987 legislation also directed the OIG to 

develop the so-called “safe harbor” regulations, to clarify the types of arrangements or 

conduct that would not be subject to prosecution under the anti-kickback laws. 

The Medicare Catastrophic Coverage Act of 1988 (later repealed) which would have 

explicitly covered home infusion would have prohibited payment for home drug 

infusion therapy services provided by a company in which the physician ordering the 

service had a financial interest. Based on the 1988 OIG study, Congress prohibited 

4 
Medicare payment for clinical laboratory services when ordered by a physician with a


financial stake in the supplier. Anumber of States have banned or restricted


physician “self-referrals;’ while other States permit self-referral as long as the physician


and, in some cases, the referred entity disclose their financial relationship to patients.


The Omnibus Reconciliation Act (OBRA) of 1993 includes a provision which expands


the current ban on payment for clinical laboratory services when ordered by a


physician who has a financial relationship with the supplier. The expansion applies the


prohibition on payment to a number of other services, including DME and parenteral


and enteral nutrients, equipment and supplies, and prohibits payment by both


Medicare and Medicaid. This expansion on the current ban for clinical laboratory


services applies to referrals made after December 31, 1994.


Joint Conuniwihn on Accreditation of Healthcare Organizations (JCAHO) 

Home infusion companies may voluntarily apply for accreditation from JC&O as


home care organizations. Standard GM.11.1 of JCAHO’S Accreditation Manual for


Home Care, 1993 edition, discusses physician involvement in the company. It states,


“Professional experts, including physicians, are involved as appropriate in the


development of patient/client care/service policies and procedures and the review and


revision processes.” The disclosure of ownership is on the application filled out by


companies when applying for accreditation. If a physician or hospital owner is


identified as an owner, they are required to disclose their ownership to any patients


they refer to their own company for services.


METHODOLOGY


overview


We gathered and analyzed four sets of data relevant to the four parts of the study’s


purpose. (1) To estimate recent trends in Medicare reimbursements for home


infusion services, we reviewed HCFA data on allowed charges for sewices and


supplies representing home infusion charges in 1990 and 1991. (2) To describe


Medicare coverage for home infusion services, we looked at Medicare coverage


guidelines, reviewed existing literature, spoke to various respondents knowledgeable in


the industry, and analyzed carrier payment data. (3) To describe home infusion


companies serving Medicare patients, we drew a random sample of 200 beneficiaries


who had pumps billed in 1991 and identified the companies which provided these


pumps. From these companies, we identified and interviewed 57 which provide


infusion therapy in the home. (4) To describe the nature and extent of physician


financial arrangements, we interviewed representatives of 30 randomly selected home


infusion companies, three of which are independent locations of the same company, a


non-random sample of 28 physicians, and 17 other respondents representing 11


professional organizations and 6 referring agencies.


5

HCFA Data on Allowed Charges 

To estimate Medicare reimbursement for infusion services and to identi~ trends, we 

analyzed the data in a one percent random sample of the HCFA Common Working 

File (CWF), HCFA’S system for collecting carrier data nationally. These data 

consisted of total allowed Part B charges in 1990 and 1991 for both total infusion 

services and home infusion services. The allowed charges represent what Medicare 

considers reasonable for these services. The program pays 80 percent of allowed 

charges with beneficiary responsibility for coinsurance and deductibles. To estimate 

the payments for home infusion services, we developed a list of services and supplies 

representing a total of 121 billing codes which we believe, in the aggregate, capture 

these services. See Appendix A. 

Medicare Coverage 

In order to determine Medicare coverage of home infusion services we reviewed the 

Medicare Carrier’s Manual (MCM) and various surveys and reports. Since we became 

aware of varying coverage of drugs and biological we gathered perceptions of people 

from agencies who referred patients for home infusion, infusion company 

representatives, members of professional organizations and physicians about carrier 

implementation of Medicare coverage guidelines. We also analyzed patterns of 

payments made by carriers in 1991 for infusion drugs including antibiotics, 

deferoxamine, some immunosuppressives and a chemotherapeutic agent, FUDR, used 

to treat liver cancer. 

Infusion Company Charactetitics 

From HCFA’S 1991 CWF we selected a random sample of 200 beneficiaries who had 

pumps billed (the major way that Medicare pays for home infusion therapy). See 

Appendix B. Twenty-one of these beneficiaries had pumps billed by more than one 

company. This should have given us the names of 221 infusion companies; we were 

able to identify 213 of them. We were unable to identify eight companies because the 

carrier did not supply us with this information. Seventy-eight were repeats of the 

same companies, thus giving us 135 different companies. We reached 128 of these 

companies; the remaining seven were defunct. The 128 includes some companies with 

several locations and represents a total of 117 firms. 

When we started calling infusion companies to ask them about the home infusion 

therapy they provide, we soon realized that a substantial number of the companies 

only supplied nutrition therapy in nursing homes. Some companies were actually 

nursing homes. The companies which provide services only to nursing homes had 

minimal contact with the patients’ physicians. In fact, the nursing homes, not the 

physician, referred patients to companies. We then screened all of the remaining 

companies in the sample and eliminated those which provided only nutrition therapy 

to nursing homes. Seventy-one companies were eliminated, leaving a total of 57 that 

provided infusion therapy in the home. 

6 
Physician Financial Awaugernenti 

From the 57 companies we randomly selected a subsample of 30. Three of the 30 are 

locations of one larger company, but each location acts independently with its own 

manager, policies, and operations. We called representatives of the 30 and asked 

about the therapies they provide, any financial arrangements they may have with 

physicians and their views of the industry. We also requested samples of any contracts 

they may use with physicians. Five of the ten companies who told us about financial 

arrangements sent us examples of these contracts. 

Additionally, we interviewed a non-random subsample of 28 of the 164 physicians who 

referred patients to the sample infusion companies about their relationships and 

involvement with home infusion companies and their general perceptions of the 

industry. We chose to conduct a convenience subsample when it became apparent 

that most physicians had limited experience with home infusion companies.. 

We also interviewed, by phone or in person, 11 principals of professional and trade 

organizations such as the National Alliance for Infusion Therapy (NAIT), the 

Outpatient Intravenous Infusion Therapy Association (OPIVITA), the American 

Academy of Home Care Physicians and the National Association for Home Care. 

Lastly, we interviewed a staff person from each of 6 referring agencies which included 

a home health agency, several hospitals and a nursing home. We asked about their 

experiences and their insights into physician financial arrangements with home infusion 

companies. 

This inspection was conducted in accordance with the Quality Standards for 

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

7

FINDINGS


MEDICARE PAYMENTS FOR HOME INFUSION THERAPY ARE RISING 

RAPIDLY 

There has been a rapid increase in Medicare home infusion therapy reimbursement. 

The number of Medicare beneficiaries who receive infusion semices in the home horn 

infusion companies grew by 91 percent from 1990 to 1991 (see Table 1 below). From 

1990 to 1991, estimated total allowed Medicare charges for infusion therapy in the 

home leapt 213 percent, from $61 million to $191 million. 

The average allowed charges per Medicare beneficiary receiving infusion services in 

the home jumped 63 percent, from $4243 to $6923. One reason the average cost is 

growing so rapidly according to OTA is that “both the categories of drugs that-carriers 

are willing to cover and the number of claims for drugs in those categories appear to 

be rising.” 

TABLE 1: GROWTH OF INFUSION SERVICES UNDER MEDICARE PART B 

CY 1990 CY 1991 INCREASE 

INFUSION SERVICES IN 

THE HOME 

Estimated Number of 14,500 27,700 91% 

beneficiaries 

Estimated Total $ allowed $61 million $191 million 213% 

Estimated Average $ allowed $4243 $6923 63% 

CARRIERS ARE NOT UNIFORMLY COVERING HOME INFUSION THERAPY


Medicare carriers do not appear to be covering home infusion therapy in a uniform


manner. We initially identified this problem during our review of the earlier


mentioned OTA report and developed it further in discussions with OTA staff and


industry experts. We also reviewed some additional OTA coverage data not published


in the final report. Finally, comments volunteered by our study’s respondents and our


own data analysis further support the existence of this variable Medicare coverage.


The OTA study found great variability in coverage policy among Medicare carriers


(see Append~ C). The OTA surveyed 43 carriers and found all had policies to cover


the three drugs specified by HCFA in its Coverage Issues Manual: chemotherapy


drugs for certain cancers, deferoxamine for acute iron poisoning or overload, and


morphine for intractable cancer pain.


8

While 17 carriers had policies to cover only the drugs and conditions specified by


HCFA, the other carriers had policies to cover not only those drugs, but a wide variety


of other drugs as well. The OTA February 1991 data indicate, however, that many


carriers did not have policies to cover drugs and conditions other than those specified


by HCFA. Some examples of this disparity of coverage among the 43 carriers


surveyed by OTA include:


Twenty-five carriers cover cancer chemotherapy drugs for conditions other than 

those specified by HCFA. 

Thirteen carriers cover morphine for conditions other than those specified by 

HCFA. 

Fourteen carriers cover analgesics other than morphine if the patient is allergic 

to morphine; 10 cover other analgesics with few categorical restrictions. . 

Fifteen carriers cover antibiotics for various chronic infections; two cover 

antibiotics only as an adjunct to cancer therapy. 

Two carriers cover hydration for patients already receiving other covered 

infusion therapy. 

A few carriers even admitted covering certain drugs that are not administered through


infusion pumps. The OTA report also states that, “Some carriers, for example,


interpret the DME benefit to include even coverage for antibiotics administered by


gravity drip. Other carriers almost never pay for any drug through this benefit.”


The OTA found where carriers covered unspecified drugs and conditions, that


coverage was sometimes limited to patients already receiving other infusion therapies.


The OTA noted the present system promotes coverage for the sickest patients, while


those healthier patients needing only simple antibiotic therapy with a gravity drip must


remain hospitalized. Lastly, the OTA stated, “An interesting characteristic of current


coverage of home-infused drugs is that because changes are made incrementally at the


local level, and because two of the three drugs sanctioned by HCFA are for cancer


therapy, patients with severe cancer have the greatest coverage.”


In its response to the OTA report, HCFA did not take issue with the observation on


varying coverage of infusion services. Also, we were able to verifi this variation in


coverage through an analysis of payments made by all carriers in 1991 for infusion


drugs including antibiotics, immunosuppressives and a chemotherapeutic agent. We


noted wide differences in the total amounts paid by carriers for some infusion drugs.


Frequently these amounts paid were disproportionate to what could have been


expected considering the size of populations served by the carriers. One example is


six carriers made payments for IV immunosuppressive drugs in 1991 while 43 made no


payments at all. Another noticeable variation in payment occurs in two States with


multiple carriers. One State with three carriers had two carriers paying for IV”


9 
immune globulin, vancomycin, and FUDR while the third did not pay for any of them.


Comments from our sample infusion companies, and from professional organizations


and referring agencies combined also bear out OTA’S findings. Forty percent of each


group of respondents cite uneven and inadequate Medicare coverage of home infusion


as a major issue in the industry. Some believe drugs and biological are never


covered, while others do not know what is covered and under what circumstances.


One respondent reflects the view of many when she says, “Carriers only pay for certain


drugs with pumps, but they don’t pay for all, We never know.” Another says,


“Medicare does not pay for hydration and antibiotics. Patients must remain in the


hospital, so that triples the cost of therapy.” Still another respondent who has


experience with several carriers remarks that one carrier pays for antibiotics on a case-


by-case basis while another pays for no antibiotics at all. Therefore, the sense of these -


respondents and others is that patients with similar conditions receive different


benefits in different parts of the country. Some respondents mention that they would


like clearer direction from HCFA concerning coverage of drugs for home infusion.


PHYSICIAN OWNERSHIP AND OTHER FINANCIAL ARRANGEMENT’S ARE


COMMON


Physician OWneIShip 

Of the 30 infusion companies in our sample, five (17 percent) report having physician 

owners. The prior OIG inspection, “Financial Arrangements Between Physicians and 

Health Care Businesses” found physician ownership in 25 percent of independent 

clinical laboratories (ICL), 27 percent in independent physiological laboratories (IPL) 

and 8 percent in DME companies. Although the 17 percent ownership of infusion 

companies is somewhat lower than the percent for ICLS and IPLs found in the prior 

OIG study, it is a great deal higher than that for DME companies. This is significant 

since home infusion is covered under the DME benefit; therefore home infusion 

companies are a type of DME company. 

Among the five company respondents who report having physician owners, four 

provide all types of home infusion therapies, with the fifth offering only nutrition. All 

five companies serve patients in a variety of settings and range in size from one to 

seven locations. 

These five ownership arrangements differ and can be characterized as follows: 

o	 One physician owns ten percent of one company’s stock, serves as its medical 

director and is very active in its day-to-day management. 

o	 A physician group clinic with more than 100 physicians owns 15 percent of the 

second company; none of the physicians, however, allegedly have any major 

company responsibilities. 

10

o	 Six physicians own 90 percent of the third company and are responsible for its 

day-to-day management and all financial matters. They also serve on all 

company committees. 

o	 Five oncologists at a cancer center own 100 percent of the fourth company. 

They claim to provide the supplies and pharmaceuticals to just their own 

patients. 

o	 The fifth company has two physicians who each own one-third of the company’s 

stock and act as its medical directors. The company respondent claims that 

these physician owners make no referrals to their own company. 

In the subsample of 28 physicians, two claim to have less than one percent ownership 

interest in an infusion company. One of these firms is a publicly traded company. 

The remaining 26 do not report any ownership. . 

Many infusion company respondents report a recent “sentinel effect,” which has 

reportedly caused physician financial arrangements to plateau or to virtually disappear. 

This change reportedly resulted from awareness of investigative activities in the home 

infusion area. 

Nature of Other Firumcial Arrangements 

Ten (33 percent) of the sample infusion companies report having some other sort of 

financial ‘or business arrange-rnent with one or more physicians. This is more than 

double the 17 percent compensation arrangement figure found for ICLS, IPLs, and 

DMEs in the earlier OIG study. 

Seven of the ten companies employ physicians as medical directors or as advisory 

board members in order to acquire JCAHO approval. Respondents say that these 

physicians typically review the company’s policies and procedures, do quality assurance 

and utilization review, review protocols, write articles and generally advise the 

company. They are usually paid an annual salary or a flat amount, such as $200 per 

meeting plus $400 per year. 

The remaining three company respondents report having other kinds of financial 

arrangements. Two have financial arrangements with physicians to provide quality 

assurance and compliance and the ongoing clinical management of patients. Of these 

two, one pays the physicians on a case by case basis. The third company has 

consulting agreements with physicians to review the program’s efficiency. The 

physicians are paid a flat fee on a monthly basis. 

A review of the contracts submitted by some of these companies appears to support 

their statements about the types of arrangements they have. The contracts detail the 

physicians’ responsibilities and payments. Some contracts address Medicare 

involvement. One contract contains the clause, “Due to Medicare/Medicaid 

11 
restrictions, (physician) fees will not be paid under this Agreement on patients eligible 

for coverage by Medicare or Medicaid, regardless of whether the particular therapy 

being provided is a Medicare or Medicaid covered service.” Another contract talks 

about safe harbors, “The parties acknowledge that this Agreement and the business 

relationship created satisfies the requirements of ‘safe harbor’ provisions for personal 

services and management contracts set forth in 42 CFR Section 1001.952(d).” 

All 10 respondents say they do not bill the Medicare carrier for physician services 

although they do feel that physicians should be reimbursed for their ongoing 

management of the patient. Some respondents report that private insurers will, in 

fact, reimburse physicians for these monitoring services. 

While none of the physician respondents report any financial arrangements with 

infusion companies, six mention financial incentives they had been offered. These 

include a supervision fee, $100 a patient for referrals or some other fee for-referrals, a 

consulting fee, billing services, and an administration fee for each dialysis pati~nt that 

gets intradialytic parenteral nutrition. All physicians claimed to have turned down 

these offers. 

The majority of physician respondents report having no input concerning the infusion 

company used by their patients. Most say this decision is made by the hospital, 

nursing home, or home health agency with which the patient is associated. Those 

physicians who do make or influence the decision report hearing about infusion 

companies from sales people or choosing a company from prior positive experience. 

In regard to both the physician ownership and other financial arrangements discussed 

in this report, we did not have sufficient data to determine the effects that OBRA 

1993 would have on Medicare payment for services ordered by physicians with the 

financial arrangements we found. 

Con.t&g Perceptions of Financial Awangemenfi 

Perceptions of company, physician and other respondents as to the extent of physician 

arrangements differ from physicians’ and companies’ reported behavior, suggesting 

that the full nature and extent of such arrangements are unclear. 

Although 17 percent of infusion company respondents report having physician owners, 

a majority (53 percent) nevertheless believe physician ownership is either ve~ or 

somewhat common. In contrast, most physician respondents (64 percent) say either 

that physician ownership is not at all common or that they do not know how common 

it is. 

The perceptions of infusion company respondents and physician respondents also 

differ regarding other financial arrangements. Two-thirds of the company respondents 

believe such arrangements are very or somewhat common, though only one-th~d 

report having them. However, only four of the 28 physician respondents feel other 

12 
financial arrangements are common, 10 feel they are not common, and 14 do not 

know. 

Most of the 17 representatives of professional organizations and referring agencies 

believe that physician arrangements are very or somewhat common in the industry. 

About three-fourths say they know or have heard of specific cases of physician 

arrangements. Seven of the 17 report knowing of cases where physicians received fees 

for referrals. 

Two-thirds of all respondent types agree that if physician ownership or other financial 

arrangements does occur, it could lead to kickbacks and possibly, over-referral. 

Most respondent types, nevertheless, cite advantages to both physician ownership and 

other financial arrangements. The major advantage mentioned is profit for the 

physician, which is seen as having little if any benefit for the patient. Other. 

advantages cited include enhanced quality of care, availability of physician inptit and 

expertise, and better integration of care. However, disadvantages are offered more 

frequently than advantages. These disadvantages include a conflict of interest for the 

physician which might affect his or her judgement, reduced quality of care, high costs, 

and the patient’s lack of free choice. 

Company Character&tics 

In attempting to learn about physician financial arrangements with the 57 sample 

home infusion companies we found that most of the companies in our sample were 

small in size. This is in contrast to the industry at large which is dominated by a few 

very large companies. All but one of the top ten infusion companies have at least 70 

locations or more nationwide. 

Only one of these very large firms shows up in a list of the top ten of our 57 sample 

companies in terms of their market shares of Medicare patients served in the home. 

Its nine percent share of Medicare patients is not even the largest. The firm with the 

highest (13) percent of patients actually cares for a total of only 500 patients at a time, 

approximately 375 of which are on Medicare, and has but one location. Its patient 

load is much smaller than that of industry leaders which have several thousand 

patients each. Also, nine of the top ten Medicare companies in our sample have ten 

or fewer locations. And none of these nine sample companies shows up on an 

industry list of the 75 top infusion companies, based on sales and other criteria. Of 

the ten leading sample companies serving Medicare patients in the home, the top four 

provide nutrition and other therapies while the next six provide only nutrition. 

13

RECOMMENDATIONS


In light of our findings, we believe that HCFA should: 

1) Monitor spending to better track trends. One way this can be accomplished 

is to identify a unique series of codes for home infusion therapy similar to the 

approach used in this study. 

2) Provide more specific coverage guidelines and 

3) Collect ownership and compensation information on form HCFA - 192, use 

this information to monitor referral and utilization patterns, and refer suspected 

cases of abuse to the OIG. 

COMMENTS 

Written comments received from HCFA and verbal comments received from OTA 

concur with the recommendations of this report. The OTA is concprned that the costs 

of infusion therapy are underreported in this report because we did not include 

Medicare Part A services related to pump use. We agree that including Part A 

services would increase total costs. However, Part A data was not within the focus of 

this study. Suggestions for changes in the wording, clarifications of the text and any 

technical changes have for the most part been incorporated into the final report, The 

actual comments received from HCFA are in Appendix D. 

14

APPENDIX A


METHODOLOGY TO ESTIMATE MEDICARE REIMBURSEMENT 

To obtain Medicare reimbursement amounts the same method was used to gather 

1990 data and 1991 data. Beneficiaries were identified as infusion patients from the 

OIG Part B CWF one percent sample when an infusion pump (HCPCS B9000-B9006, 

E0781, E0791) was found in their Part B sefices. The place of service code for the 

pump identified beneficiaries receiving infusion services at home. Infusion services 

were defined for these beneficiaries as: 

BOOOOthrough B8999 Enteral and parenteral therapy


B9000 through B9006,


E0791 Enteral and parenteral pumps


E0781 Ambulatory infusion pump


E0776 IV pole


A4214 Sterile saline or water


J7050 through J7130 Various infused medications


J7501 Azathioprine, parenteral


J7503 Cyclosporine, parenteral


J7504 Lymphocyte immune globulin


J7505 Monoclinal antibodies


J9000 through J9999 Chemotherapy


J7190 through J7197 Anti-hemophiliac factor


J2270 Morphine


J0990 Demerol


J2175 Meperidine”


* Listed in HCFA’S September 1993 DMERC Supplier Manual as one of a list of 

drugs used with infusion pumps 

A -1

APPENDIX B


SAMPLING METHODOI.XIGY 

First, all beneficiaries who had received an infusion pump (HCPCS codes B9000-

B9006 or E0781, E0791) were extracted from the 1% 1991 Part B Common Working 

File (CWF). There were 1,178 of these beneficiaries with 5,210 pumps for a total 

allowed charge of $594,392.00. Second, the beneficiaries were matched by HICN back 

to the CWF to get all of their services in 1991 (131,343 line items). These 

beneficiaries were matched against HCFA’S Enrollment Data Base (EDB) to get their 

State of residence. These steps resulted in information about each of the 1,178 

beneficiaries. To obtain a workable sample, each State was given a weight in 

proportion to the number of pump beneficiaries living in that State. Random numbers 

were used to pick the 8 states (KS, NY, CA IL, CT, TX, TN, FL). Next, a-simple, 

random sample was performed to pick a maximum of 30 beneficiaries per State 

resulting in a total of 200 beneficiaries in the sample (CT and KS combined only have 

20). 

Table I below shows the number of pump beneficiaries in the sample States and their 

probability of selection. 

TABLE I 

NUMBER OF BENEFICIARIES WITH


ODDS OF STATES


PUMPS IN SAMPLE STATES AND 

BEING CHOSEN 

No. of No. of Probability of

Benes 

125 

97 

66 

80 

49 

43 

Percent of 

Total 

10.61 percent 

8.23 

5.60 

6.79 

4.16 

3.65 

CALIFORNIA


TEXAS


NEW YORK


FLORIDA


ILLINOIS


TENNESSEE


CONNECTICUT


KANSAS


SUBTOTAL


[ U.S. TOTAL


Chances 

107 

83 

57 

69 

43 

38 

I 11 

Selection 

10.22 percent 

7,93 

5.44 

6.59 

4.11 

3.63 I 

1.05 

I 

I 12 1.02 

I I 

8 .68 

480 40.74 

I 

\ 1178 

) I I 

8 .76 

416 

I 1047 I II 

B-1

OTA COVERAGE DATA ‘ 

Collected February, 1991 

HCFA-Sanctioned Coverage for Drugs Undkr the DME Be@ 

Policy in Medicare Carriers Manual if drug is delivered 

Drug through 

Morphine: Covered 

Cancer chemotherapy:	 Covered 

patients 

Deferoxamine: Covered 

Heparin:	 Covered 

disease 

an external infusion ~ump 

for intractable cancer pain 

for liver cancer and some colorectal cancer 

for acute iron poisoningor iron overload 

in institutional settings to treat thromboembolic 

and pulmonary embolism 

Variation ti Cawier Coverage Policti for Dregs Uhder the DME Be@ 

Results of an OTA Telephone Survey ** 

DRUG 

MORPHINE 

Cover only for HCFA-specified conditions 

Cover for above and some other conditions 

No claims yet 

CANCER CHEMOTHERAPY 

Cover only for HCFA-specified conditions 

Cover for other cancers/drugs as well 

No claims yet 

DEFEROXAMINE 

Cover only for HCFA-specified conditions 

Cover (rarely) for other indications 

No claims yet 

No response 

HEPARIN 

Responses not reliable - confused home/institutional 

c-1 

NUMBER (PERCENT) 

OF 43 CARRIERS 

29 (67%) 

13 (30%) 

1 ( 2%) 

17 (40%) 

25 (58%) 

1 ( 2%) 

33 (77%) 

3 ( 7%) 

6 (14%) 

1 ( 2%) 

settings 
NUMBER (PERCENT)


DRUG OF 43 CARRERS 

OTHER ANALGESICS BESIDES MORPHINE 

Cover if patient allergic to morphine 

or tried unsuccessfully 14 (33%) 

Cover with few categorical restrictions 10 (23%) 

No claims/do not cover 19 (44%) 

ANTIBIOTICS 

Cover for various chronic infections 15 (35%) 

Cover only as an adjunct to cancer therapy 2 ( 5%) 

No claims yet (but probably would cover) 1 ( 2%) 

Do not cover 25 (58%) 

ADJUNCT CANCER DRUGS (BESIDES CYTOTOXIC DRUGS) “ 

Cover when prescribed for patients already 

receiving infused cytotoxic drugs 4 ( 9%) 

Do not cover 39 (91%) 

DOBUTAMINE 

Cover for heart transplant candidates 2 ( 5%) 

No claims yet (but would probably cover) 1 ( 2%) 

Do not cover 40 (93%) 

HYDRATION 

Cover for patients already receiving other 

covered infusion therapy 2 ( 5%) 

Do not cover 41 (95%) 

AEROSOLIZED PENTAMIDINE *** 

Cover under DME benefit 2 ( 5%) 

Do not cover 41 (95%) 

* Not published in final report ** Telephone survey information was not verified in any way *** Not infused 

c-2 
APPENDIX D 

HCFA COMMENTS ON THE DRAFT REPORT 

D-1 
~ealth Csre 

~“ ut-1’ART,ME!NT OF HE.KLTH & Hu~~AN SERVICES Fkancinu Adminiatrotion 

a 

a 

� Jgg 

-“%-2“*”’ nsEP 3RU Memorandum 

From	 Bruce C, VladecSc 

Administrator 

Subject 

Office of Inspector General (OIG) Draft Report: %fedicare Home Infusion 

Therapy” (O EI-02-92-00420) 

To 

Bryan B. Mitchell . Pr;ncipal Deputy Inspector General 

We re~-icwed the above-referenced draft report which describes the Medjcare home 

infusion industxy. 

We coucur w-ith all of the recommendations contained in the reportt Based on our 

review of trade journals and discussions with i.ui%ion indus~ rcpreseutatives, we 

aIso agree with OIG*S findings regarding the rapid increase in e~cnditures for 

home infusion therapy. W’e expect continued growth in the future and suppom the 

monitoring of e.spenditures on home infusion therapy. 

Our de~~iled comments on the report findings and recommendations are attached 

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

this draft repom Ple~e advise us if you agree on our position on the report 

findings and recommendations at your earIiest c.ouvenience. 

Atr.achrnents 
Comments of the Health Care Financinq Administration (HCF.~)


on Office of Ins txctor General (OIG\ Draft Report:


,Medicare Home Infusion Therapy


(OE1-02-92-00420)


Recommendation I 

HCFA should monitor spending to better identify trends, perhaps by identitiing a 

unique series of cok for home infusion therapy. 

HCFA Response . 

W’e concur. Program expenditures for all durable medical equipment, prcsthetiw, 

orthotics, and supplies (DMEPOS), including home infusion therapy equipment, ­

shctid be monitored closely, especially given the precipitous growth in these 

expenditures. HCF.4 has put procedures in place to track trends in infusion 

the:opy. As OIG is aware, HCFA’S contract with four durable medical equipment 

regionai carriers (D.MERC) wi!l become operational on October 1. One DMERC, 

in addition to c\airns processing functions, will seine as a statistical analysis DMERC 

(SADMERC). The SADMERC will track spending and utilization trends. In order 

to uniquely identify claims for infusion thtrapy in the home, HCFA iS considering 

establishing a two-digit modifier to attach to existing codes. Establishing modifiers 

would prevent the need to create unique codes, which would essentially double the 

current number of infusion-related cedes. Utilizing the analysis of coc!es, HCFA 

will be able to track and correct aberrant trends. 

Recommendalicn 2 

15CF.A should provide more specific coverage guide~ines. 

HCFA Resuonse 

-> 

We concur. W’c are aware that the variability in caverage of home infusion therapy 

is due to a broad ccverage guideiine which allows contractors to make independent 

decisions regarding external infusion pumps. Therefore, we agree that rncre specific 

guidance is needed. 

In an~icipation of the tre.mendcus growth in the home infusion therapy indusv, 

HCFA requested an assessme:lt in September 19S6 of the safety and effectiveness 

of various dru g de~ive.r-ySystems, especially infusion pumps, from the Office of . 

Health TeChROlU&WAssessment [OHTA), Agency for Health Care Pcliey and 

Reseorch, Public Health Seiwice. \Ve recei~ d 01-!TA’s initial drafl rcpon on this 

issue in late Aucust and are curre:~t!y reviewing it. We wouid like to COCsi~cr 

O?-iTA’s advice-and recommendations befidrc revising national coverage of infusion 

pumps. 
, 

Page 2 

In the interim, the DME regiordization initiative, which involves developing 

medid review policies for the top 100 items of DME, should bring about a 

measure of consistency in current coverage, Each DMERC will implement regionwide medical review policy and guidelines. Additionally, the DMERC Medical 

Directors will continue to meet periodically to review and discuss their regiomd 

policies. Efforts will be made to make medical review policies as uniform as 

~ossible across regions (though in some cases, uniformity may not be poss]ible 

because of variations in medical practice from one region to another). 

. 

Recommendation 3 

HCFA should cokct ownership and compensation information cm form 

HCFA-192, use this infortmtion to monitor referral and utilization patterns, and 

refer suspected cases of abuse to OIG. 

HCFA Response 

We agree. Under the HCFA DhlERC initiative, the DNIERC servicing the 

National supplier clearinghouse (NSC) will collect information on ownership and 

management throu:h the use of (he supp!ier registration form (HCFA-1%1). The 

ownership data, along with utiiiz~ tiun ck;a ccllw~td by the S,%DMERC, will be 

analyzed by the D.MERCS to detect aberrant supplier patterns, ~nc information Cfi 

aberrant supplier trends will be prcvkkd to NSC for Mgjng suppliers Mr further 

review. If a supplier is sus~ected cf abuse, D\t ERCs will take appropriate acticr$ 

which t-nay include referral to OIC~. . 

The Omnibus Btidget Rtcol;ciliction .+ct of 1993 inc!udes a provision which expands 

the current ban on Fhysicizin ~efer~a!s ~eyo~d clil:ic~l iabs to othter sewices~ 

including DNfS and parenteral ar.d en[era! nutr~ents. equipment, and suppIies. ~,e ,. provision for the expansion in the ban on referrals will be effective after 

December 31, 1994. Since the D\[E and paxr.:e. !-”11 h and eriteral benefits ~it? the

mechanisms by whic!~ home infusicn t!-xmpy is Fravidec under current lw, OIG’S 

concerns wit!l res~ec; to c~vnership and cornpc:lsa:~oa arraagem.ents lm~e been 

ac!dresscd with enactm. dn: of this prmision. 

Technical Comments: 

On page 2, line 4 of the scccnci iwr:gr~?l: u[;der “\ledic3:c covcra~c Cf !+om.e 

Infusion Ser{ices,” we Stl:gJc S: c!c!d!ing :I:c wC:L1>“i]: arder,” Ixcause ;hey do cct 

aFFear in the imtructicll qua(ed (:0::1 Scctidfi ~ij LI0[ the \tedic2re C3rric:s 

Ntanual. 
1 ,, 

,, 

.,. Page 3 . 

If the data are available, it would be helpful to have the numbers in Table 1 on 

page 8, Growth of Infusion Services Under Medicare Part B, broken into categories 

by parenteral, enteral, and other. 

It is unckar in a number of instances throughout the report whether OIG is using 

fiscal v caIendar year data. For example, it would be helpful to indicate fiscal or 

calendar year in the tex~ and chart under the findings lissed on page 8. 

After revieving the first draft of the repor~ it was recommended that some of the 

HCPCS cod:s chosen to estimate Medicare reirn&.wsement amounts (Appendix A) 

not be incIuded. Specifically, OIG included codes J2175 (Meperidine) and J2180 

(Mepwidine and promethazine HCL). While it is possibIe to give these analgesics 

intravenously, it k more likely that they are being given intramuscularly in the home. 

The revised report still has these codes inciuc!ed. This may lead to an overestimate 

of home intravenous therapy. 

Appendix B gives the percent of total beneficiaries in eight States. TiIe p~rcent for 

the subtotal shouId be 40.75, not 40.13. AppendL~ B is still not clear. It would be 

helpful to cktrify how the Number of Chances calumn in table 1 was generated. 

Appendix C (pa~e C - ~) ]ists Aerosali~ed penta~-dine (J2545) as ~ d~g tht was 

included in an OHTA tekphone sut=my. Pentamidine, a drug given to MDS 

patients, can be given intravenously, but the aerosolized route is not intravenous. 
Depafiment of Health and Human Sefices 

OFFICE OF 

INSPECTOR GENERAL 

MED CARE HOME NFUSION - ‘HERAPY 

SEPTE~ER 1993 
OFFICE OF INSPECTOR GENE~ 

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

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

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

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

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

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

the Secretary of HHS of program and management problems and recommends courses to 

correct them. 

OFFICE OF AUDIT SERVICES 

The OIGS Office of Audit Services (OAS) provides all auditing services for HHS, either by 

conducting audits with its own audit resources or by overseeing audit work done by others. 

Audits examine the performance of HHS programs and/or its grantees and contrac~ors in 

carrying out their respective responsibilities and are intended to provide independent 

assessments of HHS programs and operations in order to reduce waste, abuse, and 

mismanagement and to promote economy and efficiency throughout the Department. 

OFFICE OF INVESTIGATIONS 

The OIGS Office of Investigations (01) conducts criminal, civil, and administrative 

investigations of allegations of wrongdoing in HHS programs or to HHS beneficiaries and of 

unjust enrichment by providers. The investigative efforts of 01 lead to criminal convictions, 

administrative sanctions, or civil money penalties. The 01 also oversees State Medicaid fraud 

control units which investigate and prosecute fraud and patient abuse in the Medicaid program. 

OFFICE OF EVALUATION AND INSPECI’IONS 

The OIGS Office of Evaluation and Inspections (OEI) conducts short-term management and 

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

the Congress, and the public. The findings and recommendations contained in these inspection 

reports generate rapid, accurate, and up-todate information on the efficiency, vulnerability, 

and effectiveness of departmental programs. 

This report was prepared in the New York Regional Office under the direction of Regional 

Inspector General Thomas F. Tully and Deputy Regional Inspector General Alan S. Meyer. 

Project Staff included: 

New York Headquarters 

Renee Dunn (Project Leader) Cathaleen (Kitty) Ahern 

Demetra Arapakos W. Mark Krushat 

Nancy Harrison Linda Moscoe 
Health Lare 

DEP.\ RT.VESTOF HE.ALTH& HU.~ANSERvlCES F,nancr; ~S~ r S“’3’ C­

—— —.. ——. — —.. . 

Memorandum 

Office of Inspector General (OIG) Draft Report: Inappropriate Payments for


Total Parenteral Nutrition (TPN) (OEI-12-92-W4@)


Bryan B. Mitchell


Principal Deputy Inspector General


We reviewed the above-referenced draft report which examined 

Medicare coverage of total parenteral nutrition (TPN), a “high tech” means of 

feeding patients who do not have a functioning intestinal tract. 

Our detailed comments on the report findings and recommendations are 

attached for your consideration. Thank you for the opportunity to review and 

comment on this draft report. Please advise us if you agree with our position 

at your earliest convenience. 

Attachment 
Comments of the Health Care Financing Administration (HCFAI 

on the Office of Ins~ector General [OIG\ Draft ReDort: 

Inamxomiate Pavments for Total Parenteral Nutrition (TPN) 

[OEI-12-92-00460) 

Recommendation 1 

HCFA should instruct carriers to adhere to a strict interpretation of the 

coverage guidelines for TPN. 

HCFA Resoonse 

We concur. We will issue a notice to remind the parenteral and enteral 

nutrition specialty carriers of the existing coverage guidelines (contained in 

sections 2130, 3329, and 4450 of the Medicare Carriers Manual) concerning 

this use of nutrition. We are particularly concerned about inappropriate 

coverage of intra-dialytic parenteral nutrition (IDPN), and will draw attention 

to section 3329.5 of the Medicare Carriers Manual, which addresses renal 

dialysis patients, in communication with the carriers. 

Recommendation 2 

HCFA should require the carriers to intensify review of certificates of medical 

necessity, discuss therapeutic options with physicians, and monitor the use of 

nutrients over time. 

HCFA Resuonse 

We concur with the intent of the recommendation. We plan to share copies of 

the final report with the Durable Medical Equipment Regional Carriers 

(DMERCS) to make them aware of the potential problem areas identified. 

The regionalization of the DMERCS is in the early phases of implementation. 

During the process of developing region-wide medical policies and screens. the 

DMERC Medical Directors will re-examine the clinical indications for TPN 

and examine the appropriateness of providing parenteral nutrition to endstage renal disease (ESRD) patients. The DMERCS will also be providing the 

Statistical Analysis Durable Medical Equipment Regional Carrier with claims 

history data, which will include certificates of medical necessity from which 

statistically valid samples can be drawn to conduct comprehensive reviews. 

This will provide more representative samples to serve as the bases for 

examining trends and patterns of inappropriate TPN payments. 
There are Medicaid coverage implications to TPN as well. Section l~2(a)(ss) 

of the Social Security Act requires the State to establish a plan for the review, 

by an appropriate health professional, of the appropriateness and quality of 

care and semices furnished to recipients of medical assistance. States are 

required to have procedures in place to review claims submitted by providers. 

Problems detected during these reviews are brought to the attention of the 

provider, We believe it would be valuable to alert State Medicaid Agency 

directors to the TPN coverage issues discussed in this report so that they can 

consider strengthening Medicaid safeguards as needed. When the report is 

issued in final, we recommend that OIG send a copy to each State Medicaid 

Agency director for this purpose. 

Recommendation 3 

HCFA should review research concerning the use of intra-dialytic parenteral 

nutrition (IDPN) (parenteral nutrition given to a patient who is being 

dialyzed). 

HCFA ResDonse 

We concur with the recommendation. HCFA has asked the Agency for Health 

Care Policy and Research’s Office of Health Technology Assessment (OHTA), 

PHS, to do a technical review of IDPN for patients with a partially functioning 

alimenta~ system. This includes a literature review, as well as contacting the 

American Society for Parenteral Nutrition for its advice. We will be happy to 

share the results of this review with OIG when they become available. 

Recommendation 4 

If IDPN is considered reasonable and necessary for the treatment of a subset 

of ESR~D patients, it should be paid for on a per capita basis, with discounts 

negotiated by each facility or the networks, or by using some other method 

that takes into account the efficiencies associated with facility administration of 

the nutrients. 

HCFA ResDo nse 

We defer comment on thk recommendation until the assessment by OHTA of 

IDPN is completed. Consideration will be given to the OIG’S recommendation 

at that time. 
Page 3 

Generalflechnical Comments: 

While OIG randomly sampled the standard 1 percent of the paid claims for 

parenteral setices for 1991, this sampie amounted to only 58 claims. It is 

difficult to assess whether the sample size was adequate for projecting an 

overpayment of $71 million. It would be helpful to indicate in the 

methodology section the confidence level achieved and the precision of the 

projection at that confidence level. 

While the review of claims data and the certificates of need often provide 

excellent information for certain purposes, a medical record review would 

enhance the value of the report’s analysis and findings. 

On page 4, it is noted that all hyperalimenation (high- and low-tech feeding


methods) claims are processed by one of two carriers: Transamerica


Occidental Life Insurance Company in Los Angeles processes claims West of


the Mississippi, and Blue Cross/Blue Shield of South Carolina processes claims


in the East. The first table in appendix B, however, indicates that South


Carolina Blue Shield handled 83 percent of the patients included in the


sample, In order to avoid the impression that there is a problem with the


sample, it would be helpful on page 4 to indicate that the vast majority of


claims are processed by South Carolina Blue Shield.