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DEPARTMENT OF HEALTH HUMAN SERVICES Office of Inspector General 

JAN 4 19 Memorandum 

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Richard P. Kusserow 

Inspector General 

Management Advisory Report: "Intraocular Lenses Purchased by Indian Health 

Servce Hospitals " OAI-07-89-01662 

Louis B. Hays 

Acting Admistrator 

Health Cae Financing Admistration 

The Offce of Inspector General (OIG) is currently examig prices for prosthetic 

devices paid by other organtions and in other countries' markets. Due to intense 

interest in Medicare reimbursement for intraocular lenses (IOLs), we are now 

releasing the study s fidings on IOLS purchased by Indian Health Servce (IHS) 

hospitals. 

BACKGROUND 

An IOL is used exclusively to replace the natural lens removed from the eye durig cataract surgery. Over 90 percent of all cataract surgery patients receive an IOL 

implant. 

The number of Medicare-funded cataract extractions with IOL implants increased 

from 819 788 in 1986 to 954 794 in 1987, a 16 percent increase. Data released by 

the Public Health Servce indicates this surgery has continued to increase into 1989 

with some moderation. Alowed charges for IOLs in ambulatory surgical centers average $350. Prices vary in other settings. 

Two previous OIG studies recommended that the Health Care Financing 

Adminstration (HCF A) establish a $200 reimbursement cap for IOLs. More 

recently, the OIG issued a Management Advisory Report (MA) focusing on IOLs 

purchased by the Veterans Administration and miltary hospitals on the open market 

and IOLs purchased through the Federal Supply Schedule (FSS). The 

recommended that the HCF A use the information presented in adjusting rates on 

July 1, 1990.

Page 2 - Lois B. Hays 

Manufactuers awarded FSS contracts, are required to provide Federal agencies with 

the best avaiable prices. Four manufacturers have negotiated contracts to offer 

several diferent tyes and styles of IOLs on the FSS. In addition to the many multipiece posterior chamber lenses offered, one-piece posterior chamber and anterior 

chamber lenses are also available. The FSS prices negotiated for these lenses are all 

under $200, rangig from $95 to $198. The FSS allows for the purchase of lenses in 

bulk or one at a tie. Agencies using the FSS contact suppliers directly. 

Procurement using the FSS is mandatory for most Government agencies (including 

the IHS), unless a waiver is granted. 

METODOLOGY 

Inormation regarding the purchase of IOLs by IHS hospitals was gathered from the 

only four IHS hospitals where cataract surgery is performed. These hospitals were 

identifed by the IHS Senior Surgeon for Ophthalmology. Telephone intervews were 

conducted with an ophthalmologist in each of the four hospitals. It was also 

necessary to contact a procurement specialst in three of the four hospitals for 

information the ophthalmologists were unable to provide. 

FINDINGS 

Th ms hols J1hae IOLs for an averge of $155. 

In Fiscal Year 1989, the IHS hospitas paid an average of $155 for a total of 466 

IOLs purchased from two well-known manufacturers. Neither manufacturer is 

currently listed on the FSS. The average price of an IOL in each of the IHS 

hospitals is listed below. 

Hospital #1 $134. 

Hospital #2 $166. 

Hospital #3 $168.31 

Hospital #4 $186. 

The IRS hospitals negotiated prices for IOLs ranging from $125 to $278 per lens. 

Only one hospital pays more than $200 for an IOL (see attachment). Overall 

average prices ranged from $150 for multi-piece posterior chamber lenses to $196 for 

anterior chamber lenses. Multi-piece posterior chamber lenses account for 416 (89 

percent) of the lenses purchased in these hospitals. Even though one IHS hospital 

has negotiated to purchase one-piece posterior lenses for $175, none were purchased 

in 1989. 
Page 3 - Louis B. Hay 

The IHS hospitals purchased 457 of their 466 (98 percent) IOLs for $200 or less. As 

shown in the followig chart, IHS hospitals purchased 47 percent of their IOLs for 

under $150, and 51 percent for prices rangig from $151 to $200. 

IOLs Purchased


by I HS Hasp i ta Is 

300 

250 238 

Under $150 (47%) 

$150 - $200 (51%) 

200 Over $200 (2%) 

150 

100 

IOL Price Categories


Th IOL maactuer are competie. 

Ophthalmologists intervewed in all four IHS hospitals indicated that IOL 

manufacturers are competitive and wig to lower prices to acquire more business. 

Ophthalologists in two of the four facilties indicated price was a deciding factor in 

the decisions to purchase IOLs outside the FSS. Comments by ophthalmologists 

included: 

We start with contract bid on the FSS, and ask other IOL companies to 

beat those prices. 

Lens companies will offer to meet or beat another company s price. 

We approached the IOL company and asked for lower prices or we would 

take our business elsewhere. The IOL company reduced their prices. 
Page 4 - Lois B. Hays 

On ms hopitl receies er it wi IOL J1haes. 

One IHS hospital has recently negotiated with a lens manufacturer to receive a 

complete surgical package with the purchase of each IOL. The surgical package was 

designed by hospital staff, and provided many essential items needed for cataract 

surgery. The package includes the IOL; a gown; towels; towel clips; eye, head and 

body drapes; chai cover; basin; eye dropper; syrnges; eye pads; medicine glass; gauze; instrument wipes; drugs used in cataract surgery; and a fiter needle. 

Even though the purchase price for the IOL with the surgical package increases by 

$60--from $125 to $185--the hospital pays less than $200 per lens. Hospital staff 

indicated that individually purchasing the IOL and the items included in the surgical 

package would cost the hospital in excess of $300 per patient. 

When a hospital buys an IOL with the surgical package, $10 of the amount paid is 

applied toward the purchase of a diamond kne used in cataract surgery. 

RECOMMENDATIONS 

The HCF A should consider the prices paid by IHS hospitals for IOLs in adjustig 

Medicare IOL reimbursement rates on July 1, 1990. 

We would appreciate your comments on this report withi 30 days. If you have any 

questions please contact me or have your staf contact Barr Steeley at Fr 646-3138. 

Attachment 
ATTACHMENT A


IOL Pres Negotite 

ms Hospitls 

Tota 

1989 1989 

Manufctrer Lens Stle Volume Prices 

Hospit #1 

Company A 

Company A 

Company A 

Posterior Multi-piec 

Posterior Multi-piec 

Posterior Multi-piec 

177 $125 

$185 

$170 

Company A Anterior $170 

Hospit #2 

Company B 

Company B 

Company B 

Posterior Multi-piec 

Posterior Multi-piec 

Posterior Multi-piec 

$169 

$158 

$143 

Company B Anterior $200 

Hospital #3 

Company B Posterior Multi-piec $143 

Company B Anterior $278 

Hospit #4 

Company A Posterior Multi-piece $186 

Company A Anterior $186