We have initiated a series of studies relating to carotid endarterectomy. First, we
examined the cost and estimated savings of the PRO preprocedure review process for
carotid endarterectomy. Second, we are comparing the criteria and diagnostic
indicators used by PROs and determining if denials are related to PRO criteria.
Third, we are comparing the levels of unnecessary surgery for carotid endarterectomy
identified by the PROs to levels reported in scientific studies.

We have not analyzed the deterrent or "sentinel effect" of preprocedure review since
HCFA is now doing longitudinal studies to evaluate the sentinel effect. The sentinel
effect causes physicians to recommend fewer unnecessary surgeries because they know
their recommendations face peer review.

This management advisory report focuses on the results of our inspection on the cost
and estimated savings of the PRO preprocedure review process for carotid
endarterectomy.

METHODOLOGY

We collected information from 47 PRO officials representing all 50 States, the District
of Columbia, Puerto Rico, and the Virgin Islands during March 1991. In this report,
we refer to these jurisdictions as 53 States.

The information requested from the PROs included the number of preprocedure
requests, reviews, and denials (see Appendix A).

In addition, we obtained a computed total cost per negotiated PRO review type from
HCFA. Our calculations use the ambulatory review classification which is a HCFA
negotiated reimbursement category. According to HCFA’s Health Care Standards and
Quality Bureau, an ambulatory review costs $26.22. This includes $9.02 in variable
cost and $17.20 in fixed cost. We also obtained the Medicare allowed reimbursements
for Parts A and B from HCFA data bases. We used this information, together with
data provided by the PROs, to analyze the cost of preprocedure reviews.


PRO for Number of Requests Number of Denials Percent

Denied
South Carolina 460 1 0.22
South Dakota 164 1 0.61
Tennessee 1,653 8 0.48
Texas 3,639 2 0.05
Utah 214 1 0.47
Vermont 55 2 3.64
Virginia 943 4 0.42
Virgin Islands te) te) 0.00
Washington 1,138 1 0.09
West Virginia 674 0 0.00
Wisconsin 935 0 0.00
Wyoming 46 e) 0.00
National Total 53,528 90 0.17

All data is directly from PRO interviews conducted during this
inspection. Some PROs were able to provide data for calendar year
1990 as requested; others choose to provide data for Third Scope of
Work contract year 1990.

* We use the designation n/a to indicate that data was not available
at the time of our interview.


-PREPROCEDURE REVIEW COSTS |

all NUMBER OF PROCESSING NUMBER OF DENIALS | MEDICARE AMOUNT NET

ge REQUESTS COSTS __(% OF REQUESTS) IF PERFORMED SAVINGS

| ARIZ | 542) $i4zt1| 81 (5.7) $273,048 $258,837
coLo. oad 7,446) 4 (1.41) 36,232 27,786
| 10m | 726 = 19,086; 6 (0.83) 52,848 | 33,812)
| NEBR, | ge7 | 17489) = 2(0.30) 17616 127
i s. DAK. 1644900, (0.61) 8,808 | 4,508
TENN. 1683 43,942, 8 (0.48) 70,464 | 27,122
uray 214 5,611 1 (0.47) 8.808 | 3,197
ivr | 55 | 14422 (3.64) 17,616 | 16,174
‘va. 943 24,725| 4 (0.42) 36,232 10,507
TOMIs | 5,248; $187,602 59 (1.12) | $519,672 | 922,070

> The PROs representing the other States did not achieve savings.

Each of the PROs representing the other States had a denial rate of less than
0.3 percent, the point at which preprocedure review costs equal savings from
denials. The 43 PROs denied a total of 31 requests. One PRO did not provide
denial information.

The State breakdown of denials by these PROs was very uneven. There were
no denials in 29 States. Nine States had one denial each. Two States had two
each. One State had seven, one State had six and another State had five.


FINDINGS

THE PRO PREPROCEDURE REVIEW RESULTS IN FEW DENIALS AND IS
COSTLY.

>

The PROs rarely deny preprocedure requests.

The PROs report 90 carotid endarterectomies were denied out of 53,528
preprocedure requests in 1990 (.17 percent). It is important to note that 29
States reported no denials. For more information on denials by State see
Appendix A.

The PROs spent $1.4 million to save an estimated $800,000 from surgery denials.

During 1990, the PROs processed 53,528 preprocedure review requests for
carotid endarterectomy. According to HCFA, each preprocedure review costs
$26.22. Thus, it cost $1,403,504 in 1990 to process all carotid endarterectomy
preprocedure review requests. If all 90 denials were upheld, the cost savings
from these unnecessary surgeries were $792,720. This is based on the cost
estimate of $8,808 representing the average allowed Medicare charges (Parts A
and B) using the HCFA 1989 Medical Provider Analysis and Review
(MEDPAR) file and the Part B Medicare Annual Data (BMAD) file.”

THE PROS IN NINE STATES ACHIEVED SAVINGS FOR MEDICARE.

>

In nine States, carotid endarterectomy preprocedure review saved an estimated
$382,000 in Medicare expenditures.

Because a carotid endarterectomy is so costly, denying a few unnecessary
procedures can quickly add up savings. If only 0.3 percent of requests are
found to be unnecessary and denied, the PRO preprocedure review breaks
even. In States with a low request volume, even one annual denial can produce
cost savings. In 1990 for example, two (of these nine) States denied only one
request yet demonstrated savings.

The chart on the next page demonstrates how PROs in 9 States avoided over
$500,000 in Medicare expenditures (with a net savings of about $382,000) by
denying only 59 of 5,248 requests during 1990.

Cost estimate prepared by OIG/OEI Technical Support Staff.


APPENDIX A

PRO Preprocedure Requests
and Denials for Carotid Endarterectomy
in 1990, by State

Number of Requests

PRO for

Alabama 1,074
Alaska 26
Arkansas 801
Arizona 542
California 5,043
Colorado 284
Connecticut 444
District of Columbia 98
Delaware 130
Florida 3,869
Georgia 2,941
Hawaii 102
Idaho 133
Illinois 2,230
Indiana 1,504
Iowa 726
Kansas 1,325
Kentucky 963
Louisiana 1,356
Maine 231
Massachusetts 762
Maryland 870
Michigan 2,598
Minnesota 364
Mississippi 658
Missouri 1,660
Montana 161
Nebraska 667
Nevada 289
New Hampshire 137
New Jersey 1,390
New Mexico 127
New York 1,604
North Carolina 1,304
North Dakota 127
Ohio 2,922
Oklahoma 552
Oregon 786
Pennsylvania 2,651
Puerto Rico 26
Rhode Island 130

Number of Denials

COCPFOUOFPHOOOCONONOOVNFHOPFOONODODOOHPOGCOOOR AHO os
»
*

Percent
Denied

n/a

0.00
0.00
5.72
0.12
1.41
0.00
0.00
0.00
0.00
0.03
0.00
0.00
0.00
0.00
0.83
0.00
0.00
0.07
0.00
0.13
0.11
0.27
0.00
0.00
0.12
0.00
0.30
0.00
0.00
0.00
0.00
0.06
0.08
0.00
0.17
0.00
0.13
0.00
0.00
0.00


Department of Health and Human Services

OFFICE OF
INSPECTOR GENERAL

PREPROCEDURE REVIEW COSTS FOR
CAROTID ENDARTERECTOMY

MANAGEMENT ADVISORY REPORT

7%
“ Richard P. Kusserow
| ( INSPECTOR GENERAL
%

"ena

oe

OEI-03-91-00152



CONCLUSION

As the PROs performed preprocedure reviews for carotid endarterectomies, their
costs exceeded estimated savings from denials. However, some PROs did achieve
savings. The HCFA’s decision to eliminate the across-the-board requirement for
preprocedure review for this surgery, while still allowing individual PROs to target
reviews, is consistent with these findings.

We are continuing our work on carotid endarterectomy. The low number of PRO
denials, which accounts for the lack of savings from preprocedure review, could be due
to poor performance by PROs or a low incidence of unnecessary surgery. The latter
could, in turn, result from the sentinel effect of PRO reviews. Future OIG reports will
examine the PROs’ review criteria as well as scientific studies on the need for and
efficacy of carotid endarterectomy. We will consider whether any kind of special
reviews, including perhaps more effective forms of PRO preprocedure review, are
warranted.

We look forward to the completion of HCFA’s studies regarding the sentinel effect.


INTRODUCTION

PURPOSE

To inform the Health Care Financing Administration on the status of current work
relating to carotid endarterectomy and to report the results of our review of the cost
and estimated savings of the Peer Review Organization (PRO) preprocedure review
process for carotid endarterectomy.

BACKGROUND

Carotid endarterectomy is a surgical procedure designed to reduce occlusion or
blockage of one or both internal carotid arteries which provide the primary blood
supply to the brain. The procedure involves dissecting the neck below the ears,
cutting the carotid arteries open lengthwise, and scooping out the accumulated plaque.
It entails considerable risks and side effects.

Carotid artery occlusion can also be treated non-surgically. The most common non-
surgical treatment is antiplatelet medication, usually aspirin.

Since its 1953 development, endarterectomy treatment of carotid arteriosclerotic
occlusive disease has become one of most common vascular surgery procedures.
There has been much debate about its efficacy, indications, and side effects. Some
studies find that carotid endarterectomy produces more favorable outcomes than
medical treatment, but others find no difference between surgical and non-surgical
therapy.

PRO Preprocedure Review

In each State, HCFA contracts with a Utilization and Quality Control Peer Review
Organization, commonly known as a PRO, to review the appropriateness and quality
of surgery performed on Medicare beneficiaries. The HCFA administers the
Medicare program and has regulatory oversight of PRO activities. For each covered
procedure, the PRO develops its own review criteria and diagnostic indicators.

A preprocedure review was required for all carotid endarterectomies covered by
Medicare prior to October 1, 1991. The HCFA has now eliminated required
preprocedure review for carotid endarterectomy.! The PROs retain the option to
review this procedure if they can prove to HCFA "the productivity measures (e.g.,
cost/benefit, reduction of number of quality problems) of the proposed additional work
exceeds the productivity measures of random review."

1The HCFA Directed Change Order 91.13: Cessation of Preadmission/
Preprocedure Review.


FINDINGS

> During 1990, PRO preprocedure review cost $1.4 million and saved an
estimated $800,000 from 90 surgery denials (of 53,528 requests) for carotid
endarterectomy.

> However, PROs in 9 States did achieve cost savings estimated at $382,000 for
Medicare through preprocedure review.

CONCLUSION

As the PROs performed preprocedure reviews for carotid endarterectomies, their
costs exceeded estimated savings from denials. However, some PROs did achieve
savings. The HCFA’s decision to eliminate the across-the-board requirement for
preprocedure review for this surgery, while still allowing individual PROs to target
reviews, is consistent with these findings.

We are continuing our work on carotid endarterectomy. The low number of PRO
denials, which accounts for the lack of savings from preprocedure review, could be due
to poor performance by PROs or a low incidence of unnecessary surgery. The latter
could, in turn, result from the sentinel effect of PRO reviews.

Future OIG reports will examine the PROs’ review criteria as well as scientific studies
on the need for and efficacy of carotid endarterectomy. We will consider whether any
kind of special reviews, including perhaps more effective forms of PRO preprocedure

review, are warranted.


EXECUTIVE SUMMARY

PURPOSE

To inform the Health Care Financing Administration on the status of current work
relating to carotid endarterectomy and to report the results of our review of the cost
and estimated savings of the Peer Review Organization (PRO) preprocedure review
for carotid endarterectomy.

BACKGROUND

Carotid endarterectomy is a surgical procedure designed to reduce occlusion or
blockage of one or both internal carotid arteries which provide the primary blood
supply to the brain. The procedure involves dissecting the neck below the ears,
cutting the carotid arteries open lengthwise, and scooping out the accumulated plaque.
It entails considerable risks and side effects.

Carotid artery occlusion can also be treated non-surgically. The most common non-
surgical treatment is antiplatelet medication, usually aspirin.

Since its 1953 development, endarterectomy treatment of carotid arteriosclerotic
occlusive disease has become one of the most common vascular surgery procedures.
There has been much debate about its efficacy, indications, and side effects.

In each State, the Health Care Financing Administration (HCFA) contracts with a
Utilization and Quality Control Peer Review Organization, commonly know as a PRO.
A PRO preprocedure review was required for all carotid endarterectomies covered by
Medicare prior to October 1, 1991.

The HCFA has now eliminated required preprocedure review for carotid
endarterectomy. The PROs retain the option to review this procedure if they can
prove to HCFA it will improve quality of care and be cost-effective.

This management advisory report informs HCFA of the status of our inspection on the
cost and estimated savings of the PRO preprocedure review process for carotid
endarterectomy.

METHODOLOGY

We collected information from 47 PRO officials representing all 50 States, the District
of Columbia, Puerto Rico, and the Virgin Islands during March 1991. This
information included the number of preprocedure reviews and denials. From HCFA,
we obtained a computation of total cost per negotiated PRO review type and the
Medicare allowed reimbursements for carotid endarterectomy.