, \

Department of Health and Human 
 Services 

OFFICE OF


INSPECTOR GENERAL


MEDICARE COVERAGE AND


REIMBURSEMENT FOR MONITORED


ANESTHESIA CARE


" StRVIC'S. 

Richard P. Kusserow 

INSPECTOR GENERAL 

'0 JANUARY 1991 

""d3a 
...

OFFICE OF INSPECTOR GENERAL


The mission of the Offce of Inspector Genera (OIG), as madated by Public Law 95-452 

as amended, is to protect the integrty of the Deparent of Health and Human Services 

(HHS) programs as well as the health and welfare of beneficiares served by those 

programs. This statutory mission is cared out through a nationwide network of audits 

investigations, and inspections conducted by three OIG operating components: the Office 

of Audit Services, 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 OIG' s 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 contractors in 

caring 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 effciency throughout the Deparment. 

OFFICE OF INVESTIGATIONS 

The OIG' s Office of Investigations (01) conducts crimial, civil, and admistrative 

investigations of allegations of wrngdoing in"HHS programs or to HHS beneficiares and 

of unjust enrchment by providers. The investigative effons of 01 lead to crinal 

convictions, admnistrative 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 INSPECTIONS 

The OIG' s Offce 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 

the inspections repons generate rapid, accurate, and up-to-date information on the 

efficiency, vulnerability, and effectiveness of deparmenta programs. This repon was 

prepared in New York under the direction of Regional Inspector General Thomas F. Tully 

and Deputy Regional Inspector General Alan Meyer. Project staff included: 

New York Headquarters 

Joseph M. Benkoski Project Leader W. Mark Krshat 

Willam J. Counihan Wayne Powell 

Raul K. Marynek 
. 

Deparment of Health and Human Services


OFFICE OF


INSPECTOR GENERAL


MEDICARE COVERAGE AND


REIMBURSEMENT FOR MONITORED


ANESTHESIA CARE


" StRVIC'S' 

Richard P. Kusserow 

INSPECTOR GENERAL 

'0 OEI -02-89-00050 

"Vd3a 
. . .................................................................................................................. ........................................................................................................... ........................................................................................... 

TABLE CONTENTS


EXECUTIVE SUMMARY 

INTRODUCTION.....................................................................................................


Purpose................................................................................................................ .


Background .... ...... .......... 


Scope and Methodology...................................... .............. ............ 


FINDINGS 

RECOMMENDATIONS 

APPENDIX A - I
EXECUTIVE SUMMARY


PURPOSE 

This repon reviews the adequacy and implementation of Medicare s coverage and 

reimbursement instrctions for monitored anesthesia care (MAC). 

BACKGROUND 

Modern medical technology has brought about vast improvements in surgical and other invasive 

techniques. This new technology allows more procedures to be done in hospital outpatient 

departments (OPDs), ambulatory surgical centers (ASCs) and doctors ' offces. 

This trend and advances in anesthesia techniques, have produced changes in the nature of 

anesthesia services. Traditionally, the most common form of surgical anesthesia involved the use 

of anesthetic drugs which rendered the patient unconscious. Curently, many patients receive 

local anesthesia during which they remain conscious. When an anesthetist takes par in the care 

of a patient under local anesthesia and renders cenan specified services, the service is referred to 

as "monitored anesthesia care" (MAC). 

The HCFA defines MAC as the introperative monitorig of the patient s vita physiological 

signs, in anticipation of the need for general anesthesia or of the development of adverse 

physiological patient reaction to the surgery. It also includes a pre-anesthetic evaluation 

administration of any necessar medications and provision of indicated post-operative anesthesia 

care. The HCFA stipulates that MAC is not automatically covered and "must be reasonable and 

medically necessar under the given circumstances. 

Medicare data for 1988 shows allowed charges for all anesthesia services of $1.1 billion. 

However, as claims for general or MAC ar not differentiated, the amount alowed for MAC is 

not known. There are, nevenheless, indications that MAC amounts are considerable. For 

example, alowed charges in 1988 for anesthesia associated with cataract surgery amounted to 

$144 million, about 90% of which was probably for MAC. 

SCOPE AND METHODOLOGY 

To assess implementation of HCFA' s coverage instrctions, Medicare caners ' documents were 

reviewed to determne the steps taen to adjudicate MAC clais. Also, Federal Employee 

Health Benefit plans and the private plans of Medicare caners wereprovided with HCFA' 

definition of MAC and we compared their coverage and reimbursement policies to Medicare. 

Finally, physicians under contract to the OIG reviewed a random sample of 1162 medical records 

to provide insights into operative events relating to the use of anesthesia services. The stratified 
sample, selected for a different OIG study, consisted of an equal number of procedures 

performed in OPDs and ASCs in 10 states. 

FINDINGS 

HCFA' s MAC Instruction Is Not Being Implemented By Carriers 

Caners have not implemented HCFA's instrctions that MAC "must be reasonable and 

necessar under the given circumstances. " Most caners have not informed the medical 

community of coverage limitations and have no method to distinguish MAC claims from other 

anesthesia claims, a prerequisite to the coverage determnation process. 

Actual Services Rendered Do Not Meet Coverage Guidelines 

The results of the medical review of records do not suppon the coverage instruction premise for 

MAC. General anesthesia was rarely administered and the need for anesthetists ' medical 

intervention was minimal. 

Reimbursement Was Inappropriate In Approximately I Of 
 Cataract Cases Based On Lack 

Of Documentation 

In 159 (25 percent) of 645 reviewed cataract procedures performed under MAC, payment was 

inappropriate because either pre-anesthesia evaluation and/or monitoring of vital signs were not 

documented as required for reimbursement. Projecting this error rate to the universe from which 

claims were sampled and assuming an equal distrbution in the error rate for the full year, an 

estimated $14.0 milion in inappropriate allowed charges was made in 1988 in ten States. 

Other Insurers Have More Restrictive MAC Coverage And Payment Standards 

A survey of other health insurers shows that ten (22 percent) Medicare caners ' private business 

health insurance plans and fIteen (68 percent) of 22 FEHB plans have more restrctive coverage 

and reimbursement policies than Medicar. 

A 1986 OIG study found that services provided during MAC diered substantially from those 

provided during general anesthesia. Based on this finding it was recommended that HCFA 

should reimburse MAC at a lower rate than general anesthesia. HCFA did not accept the OIG 

recommendation and currently pays for MAC and general anesthesia at the same amount. 
,

, 

RECOMMENDATIONS 

HCFA should: 

require carriers to develop and implement a claims review process to apply 

existing MAC coverage instructions, 

strengthen MAC guidelines by adding procedures for case-by-case coverage, as 

currently required for anesthesia claims related to transvenous pacemaker 

surgery and/or by providing objective criteria for MAC coverage such as the 

use of ASA' 
 physical status categories, and

study the appropriateness of paying the same amountfor MAC and general 

anesthesia in view of the fact that other insurers are more restrictive, 

The HCFA agrees with our recommendations regarding claims review and coverage but does not 

agree to study the appropriateness of the amount it pays for MAC. We continue to believe such 

a study is needed. The HCFA's comments and the OIG response appears as an appendix to the 

repon. 
INTRODUCTION


PURPOSE 

This repon reviews the adequacy and implementation of Medicare s coverage and 

reimbursement instrctions for monitored anesthesia care (MAC). 

BACKGROUND 

Trends in Anesthesia Services 

Modern medical technology has brought about vast improvements in surgical and other invasive 

therapeutic and diagnostic techniques. These advances have produced shifts from traditional 

incisional surgery to procedures utilizing laser technology, electrc shockwave and fiberoptic 

endoscopic instruments. Arthroscopic surgery, lithotrpsy and coronar balloon angioplasty are a 

few examples. New technology has also made it possible for invasive procedures to be done 

more frequently on an ambulatory basis in outpatient deparments, ambulatory surgical centers 

and doctors ' offices. 

The wide range of available advanced operative techniques as well as advances in anesthesia 

techniques have been instrumenta in producing changes in the natue of anesthesia services. 

Traditionally, the most common form of surgical anesthesia involved the use of anesthetic drgs 

which rendered the patient unconscious and insensible to pai. Under general anesthesia, these 

drugs often suppress patients ' ability to maintain their own life functions , thus making the 

anesthetist responsible for keeping the patient alive by monitoring vital physiological signs and 

diagnosing and trating any deviations which may arse. Currently, many patients receive forms 

of anesthesia which do not involve loss of consciousness, thus allowing the patients to maintain 

their own life functions. (For ease in reading, the generic term anesthetist is used thoughout this 

repon except where distinctions are necessar for the sake of accuracy. In practice, anesthesia 

services are rendered by anesthesiologists, other qualifed physicians, cenified registered nurse 

anesthetists (CRNA's) and anesthesiologist assistants (AA's). 

The use of local anesthesia has become a prevalent choice of physicians in an increasing number 

of surgical procedures. Local anesthesia is frequently admnistered by physicians performng the 

procedure rather than by an anesthetist. Ophthalmologists, cardiologists, gastroenterologists and 

surgeons are a few examples of specialists who often inject local anesthetics or apply topical 

agents to render the ara insensible to pain. In some of these instances the local anesthesia may 

be supplemented with a drg such as valium, taken orally or intravenously, to sedate the patient. 

In these situations the patient is conscious and mayor may not be attended by an anesthetist. 

When an anesthetist takes par in the care of the patient and cenain specified services are 

rendered, the service is referred to as "monitored anesthesia care" (MAC). 

page 1

. .. 

Medicare Coverage And Reimbursement For MAC 

In April 1986, the OIG issued a repon entitled "Medicare Reimbursement for Anesthesia 

Services" (OAI-02-0001O). The purpose of the study was to clarfy the nature and prevalence of 

local/standby anesthesia (currently referred to as MAC) and examine and evaluate related Health 

Care Financing Administration (HCFA) reimbursement policies and practices. Based on a 

review of medical records for over 1 000 beneficiares who underwent either cataact surgery, 

pacemaker implants or inguinal hernia repairs, the study found that the practice of substituting 

MAC for general or regional anesthesia was growing. Currently, reimbursement is the same 

amount for MAC and general anesthesia. 

That study s evaluation of anesthetists ' responsibilities in providing MAC , as compared to those 

responsibilities when general anesthesia is administered, led OIG to conclude that the nature of 

MAC services were suffciently different to warant a distinct definition of the service and that it 

should be reimbursed at a lower amount. In practice, eight Medicare caners were found to be 

reimbursing MAC at a lower amount and 41 caners were paying for MAC at the same level as 

general anesthesia. 

Differences in caner reimbursement policies, at that time , were attrbuted to a lack of national 

policy and to whether they adopted the American Society of Anesthesiologists' (ASA) guidelines 

for MAC (full general anesthesia value) or the California Relative Value Scale (CRVS) 

anesthesia ground rules" (charges based on extent of services rendered). 

In a final notice in the October 7, 1986 Federal Register, HCFA established special reasonable 

charge payment limits for all anesthesia services furnished during cataract surgery. But, it did 

not adopt the broader OIG recommendation to reduce payments for MAC irespective of the 

surgical procedure performed. Rather, HCFA indicated that it would funher study its overall 

policy regarding reduced reimbursement for MAC. 

The HCFA did respond favorably to the OIG recommendation regarding the need to better define 

the service by substituting the term "monitored anesthesia care" for local/standby anesthesia, 

defining the nature of MAC, and stipulating that MAC is 
 not automatically covered. Section 

83 1O. 1E of the Medicare Caners Manual (June 1987) specifies that MAC "must be reasonable 

and medically necessar under the given circumstances. " The instrction (underline emphasis 

added) states: 

Monitored anesthesia care involves the intraoperative monitoring by a physician, or by a 

qualified individual under the medical direction of a physician , of the patient s vital physiological signs, 
 in anticipation of the needfor administration of general anesthesia or of the 

development of adverse physiological patient reaction 
 to the surgical procedure. It also includes the performance of a pre-anesthetic examination and evaluation, prescription of the 

anesthesia care required, administration of any necessar oral or parenteral medications 

(e. , atropine, demerol, valium) and provision of indicated post-operative anesthesia care. 

The fact that the physician personally furnished or medically directed the monitored 

anesthesia care does not automatically mean the monitored anesthesia care is a covered 

page 2 
Part B service. The monitored anesthesia car service must be reasonable and medically 

necessar under the given circumstaces. 

In addition, HCFA instructed caners (Section 8312. 1F) to reimburse MAC in the same manner 

and amount as they pay for admnistration of general anesthesia when MAC is performed in its 

entirety. 

To date, MAC coverage policy has been supplemented only by a July 1988 HCFA instrction 

(MCM Coverage Issue 35-79) to caners containing coverage guidelines for MAC and general 

anesthesia, associated with transvenous pacemaker surgery. It instrcts caners to provide 

coverage "only if documentation of medical necessity is provided on a case-by-case basis, 

Medicare Reimbursement 

Medicare data for 1988 shows allowed charges for all anesthesia services of $1.1 billon. 

However, as claims for genera anesthesia or MAC are not differentiated, the amount allowed for 

MAC is not known. There ar, nevenheless , indications that MAC amounts are considerable. 

For example, allowed charges in 1988 for anesthesia associated with catarct surgery amounted 

to $144 milion, about 90% of which was probably for MAC. 

SCOPE AND METHODOLOGY 

To assess implementation of HCFA's coverage instrctions, Medicare caners were requested to 

provide copies of: (1) provider information bulletis conveying anesthesia coverage limtations 

for MAC and trans venous pacemaker claims, (2) related biling instrctions to providers, and (3) 

claims processing procedures and instructions used in makng coverage determnations on MAC 

claims. These documents were reviewed to


determne whether carers had taen the necessar steps to properly process anesthesia clais 

subject to coverage restrctions. 

Federa Employee Health Benefit plans and the private plans of Medicare caners were requested 

to provide information on their coverage and reimbursement for MAC, as defined by HCFA. 

Documents were reviewed to determne similarties and differences when compared to 

Medicare s coverage and reimbursement policies. 

To gai insights into how HCFA's MAC instrction relates to actual operative events, a stratifed 

random sample of 1162 Medicare beneficiar records (803 cataract procedures, 201 upper GI 

procedures and 158 colonoscopies) were reviewed by board-cenified physicians under contract 

to the OIG. These patients were evenly split between ASC and OPD settngs. The contractor 

reviewed and reponed on such activities as pre-anesthesia examnation and evaluation, 

intraoperative events and post -anesthesia care. 

The sample records represented an equal number of patients from hospital outpatient 

deparents (OPDs) and ambulatory surgical centers (ASCs) during the fIrst three months of 

1988 in ten States (AZ, CA, FL, IL, LA , MD, NC, OH, PA, TX) with large numbers of ASCs. 

page 3

The sample was designed for a another OIG study which had as its purpose the evaluation of the 

quality of care in ambulatory settings. The sample size was based on the number necessary to 

satisfy specific testing criteria (i.e., power confidence level and detectable difference) established 

for studies on medical outcome and necessity. 

page 4 
FINDINGS


HCFA' s MAC AND PACEMAKER INSTRUCTIONS HAVE NOT BEEN 

IMPLEMENTED BY MOST CARRIERS 

A review of documents provided by 45 carers representing 56 payment jurisdictions, coverig 

the period June 1987 through April 1989, indicates that they have not implemented the 

instrctions in MCM Section 831O. 1E (June 1987) which specify that MAC "must be reasonable 

and necessar under the given circumstances" and is not automaticaly covered. 

Only 15 (33 percent) caners informed the medical community of these coverage 

provisions. 

Only seven (16 percent) caners established spycial billing instrctions requirg identification on the claim form that the biled anesthesia service was for MAC; 
 but 

only two of these caners use this information in adjudicating MAC claims. Such 

identification is necessar in order to apply MAC coverage limitations. 

Caner implementation of pacemaker instruction (MCM Coverage Issue 35-79) has been 

somewhat better. 

Twenty-six (58 percent) of the caners have medical review procedures to determne 

coverage for pacemaker implant anesthesia claims. 

Caners with procedures to make coverage detennnations for transvenous pacemaker 

procedures var in their approaches. For example, one caner has detennned that 

anesthesia services associated with these procedures are medically necessary in all 

cases. In contrast, another requires claims for this procedure to contain the ASA 

physical status ranng which classifies patients into six levels based upon health 

condition. The physical status level is used to help make coverage detennnations. 

ACTUAL SERVICES RENDERED DO NOT MEET COVERAGE GUIDELINES 

The results of an OIG medical review do not suppon the coverage premise for MAC servces 

contained in MCM Section 831O. IE. In this section, HCFA describes MAC services as involving 

intraoperative monitoring of the patient's vital physiological signs in anticipation of the need for 

administration of general anesthesia or of the development of adverse physiological patient 

reaction to the surgical procedure. 

The medical review determations on 1162 patients ' medical records (803 cataract extractions 

and 359 upper and lower GI endoscopies) found, in those cases where MAC was biled, that the 

need for anesthetists ' medical intervention was minimal. 

page 5

Only 3 of 760 medical records for planned MAC cataract procedures (43 began under 

general anesthesia) contained notes indicating an anticipated need for general 

anesthesia and only one 
 procedure was actually convened from local to general 

anesthesia. 

There were no adverse physiologic reactions documented in any cataract procedure 

performed with MAC. Two planned procedures were cancelled preoperatively due to 

hemorrhaging caused by the injection of local anesthesia. 

Of the 359 endoscopy procedures, two colonoscopies were done under general 

anesthesia and 20 (11 upper GI and 9 colonoscopy) had associated claims for MAC. 

In its report, the medical review contractor noted that "patients undergoing 

endoscopies do not require monitored anesthesia care by anesthesiologists or CRNAs, 

although they do need monitoring by registered nurses or other personnel trained in 

monitoring and resuscitation techniques. 

Additionally, during the course of the inspection, it was leared that one carer conducted a 

special 1989 utilization review study of MAC services provided during cataract surgery, 

including an in-depth review of four anesthesiologists who frequently biled for MAC in 

cataract surgeries. Its anesthesia consultant determined medical necessity for MAC using such 

factors as age of patient, anticipated duration of the procedure, serious medical problems such as 

chronic obstrctive pulmonar disease, and other factors. The study found that 65 percent of the 

sample reviewed lacked documented medical necessity. 

REIMBURSEMENT WAS INAPPROPRIATE IN APPROXIMTELY 1 OF 4 

CATARACT CASES BASED ON LACK OF DOCUMENTATION 

The medical record review showed that 44 of the 803 cataract extractions were 

performed under general anesthesia and 759 under local anesthesia. Caner claims 

payment data shows that 645 (85 percent) of the 759 procedures had associated 

anesthesia bils (299 hospital outpatient deparent (OPDJ and 345 ambulatOry 

surgical center (ASe) bils) and among these: 

/n /48 cases (23 percent), there was no documentation that pre-anesthetic 

examinations and evaluations were performed. 

/n /09 cases (/7 percent), there was no documentation of monitoring of 

patients' vital physiological signs. 

/n /76 cases (27 percent), there was no postoperative anesthesia note. 

page 6 
In 159 cases (25 percent), because either pre-anesthesia evaluation and/or monitoring 

of vital signs (two key MAC services) were not documented as having been provided 

as required for reimbursement, payment was found to be inappropriate. This finding 

should not be interpreted to imply that services were not actually provided. Of these 

inappropriately paid claims, 67 (22 percent error rate) of the MAC cases were 

perfonned in OPDs and 92 (27 percent error rate) were performed in ASCs. 

Projecting these error rates to the universe from which claims were sampled, an 

estimated $3.5 millon was inappropriately reimbursed for the three month period in 

the ten states. Assuming an equal distrbution in the error rate for the full year, this 

annualizes to $14. 0 millon in 1988. 

Failure to document the provision of one expected service was frequently 

accompanied by failure to document others; 129 medical records lacked notes that 

showed any of the three expected services were provided. 

OTHER INSURERS HAVE MORE RESTRICTIVE MAC COVERAGE AND PAYMENT 

STANDARDS 

A 1986 OIG study found that services provided during MAC difered substantially from those 

provided durng general anesthesia. Based on this finding it was recommended that HCFA 

should reimburse MAC at a lower rate than general anesthesia. HCFA did not accept the OIG 

recommendation and currently pays for MAC and general anesthesia at the same amount. 

However, other insurers were often found to be more restrctive than Medicare. 

Medicare Carriers' Private Business Plans 

Ten (22 percent) Medicar caners ' private business health insurance plans have more restrctive 

coverage and reimbursement policies than Medicare. 

Four do not provide coverage for MAC 

Four pay a lower amount for MAC than for general anesthesia 

One limits coverage to patients with a concurent "hazardous" medical condition. 

One limits coverage to five surgical procedures or any procedure requirg IV 

sedation. Coverage is also provided for patients with severe systemic diseases which 

are a constant threat to life (ASA physical status P-4). 

A caner private business plan, which also is an FEHB insurance plan, has identified over 700 

procedures for which the services of an anesthetist are not customarly required. Claims for 

these procedures are denied unless documentation is provided to suppon the medical necessity 

for an anesthetist. 

page 7 
Federal Employee Health Benefit Plans 

Fifteen (68 percent) of 22 FEHB plans ar more strngent. 

Six do not cover MAC. 

Six cover only if IV medication is administered by an anesthesiologist. 

Three pay for distinct identified services rather than global anesthesia services. 

page 8

RECOMMENDATIONS


HCFA SHOULD REQUIRE CARRIERS TO IMPLEMENT EXISTING MAC 

INSTRUCTIONS INCLUDING:


Informing the medical community as to what is required to qualify as MAC, and that 

coverage is not automatic but must be reasonable and necessar under the given 

circumstances. 

Requirng that MAC is specifically identified on the claim form as the anesthesia 

service rendered. 

Establishing medical review procedures and policies for MAC claims. 

HCFA SHOULD STRENGTHEN EXISTING MAC GUIDELINES BY: 

adding procedures, upon consultation with medical specialty societies, for 

case-by-case coverage, as currently required for anesthesia claims related to 

transvenous pacemaker surgery; 

and/or 

providing objective criteria for MAC coverage such as the use of ASA' s physical 

status categories. 

HCFA SHOULD STUDY THE APPROPRIATENESS OF PAYING THE SAME AMOUNT 

FOR MAC AND GENERAL ANESTHESIA IN VIEW OF THE FACT THAT OTHER 

INSURERS ARE MORE RESTRICTIVE. 

page 9

APPENDIX


Comments of the Health Care Financing Administration on the OIG Draft Report and the OIG 

Response to the HCFA' s Comments 

RECOMMENDATION I 

HCFA should require caners to implement existing MAC instructions including: 

Informing the medical community as to what is required to qualify as MAC, and 

that coverage is not automatic but must be reasonable and necessary under 

given circumstances. 

Requiring that MAC is specifically identifed on the claim form as the anesthesia 

service rendered. 

Establishing medical review procedures and policies for MAC claims. 

HCFA Comment 

We agree in par with this recommendation. HCFA wil bring the issue of MAC to the attention 

of the caner medical directors who formulate the medical review procedures and policies for all 

claims. We wil follow up on the development and implementation of more strngent review 

policies in this area. As the OIG study shows , some caners currently have specific medical 

review policies regarding standby anesthesia for pacemaker inserton. Such policies would 

provide a useful model for other procedures. 

However, we do not agree, at this tie, that MAC care should be identied on the clai form. 

HCFA wil consider such action only after the caner medical diectors have completed their 

proposed course of action. 

OIG Response 

We are pleased to note that HCFA wil follow up on development and implementation of more 

strngent review policies for MAC. -However, we do have concerns about the dificulty of implementing review policies without having clais for MAC services specifically identified. 

Therefore, we wil withhold funher judgment until we have been apprised of the results of 

HCFA' s consultation with its medical directors. 
RECOMMENDATION II 

HCFA should strngthen existing MAC guidelines by: 

adding procedures, upon consultation with medical specialty societies,for 

co.se-by-case coverage, as currently required for anesthesia claims related to 

transvenous pacemaker surgery; and/or 

providing objective criteria for MAC coverage such as the use of American 

Society of Anesthesiologists ' physical status categories. 

HCFA Comment


We agree with the intent of this recommendation and plan to explore ways to strengthen MAC 

guidelines. We wil consult our CoveragelPayment.Technical Advisory Group about requiring 

case-by-case determinations for cataact extractions and endoscopies, as well as for other 

procedures. It would be helpful if OIG would supply us with the list of 700 procedures that a 

private plan identified as not customarly requirng the services of an anesthetist, and for which 

claims were denied unless medical necessity was documented. 

OIG Response 

We are pleased to provide HCFA with a copy of the requested list of procedures identified by a 

private plan.


RECOMMENDATION il


HCFA should study the appropriateness of paying the same amount for MAC and general 

anesthesia in view of the fact that other insurers are more restrctive. 

HCFA Comment


We do nOt concur with this recommendation. We believe that it is not supported by the findings 

in this repon. The repon compars the MAC policies of Medcare to the policies of the Federal 

Employee Health Benefits Plans (FHBPs) and the Medicare Caners ' Prvate Business Plans 

(MCPBPs) and concludes that the other plans have more restrctive coverage and reimbursement 

policies. However, the comparson would only be vald if the FEHBPs and MCPBPs define 

MAC in the same way as Medicare. Although the presentation in the repon suggests that all 

FEHBPs and at least ten MCPBPs define MAC identically, there is no evidence in the repon to 

support this. In addition we have reservations about adoptig a recommendation that is based 

solely on the payment policies of Other plans. We believe it is more imponant to establish that 

MAC is, indeed, a less resource-intensive surgical procedure than general anesthesia. 
It woul!i also have made comparsons more meaningful to know whether these other plans 

lowered catarct anesthesia base units as Medicare did in Januar 1987. If these other plans 

recognize tie units only, but have a higher conversion factor and a higher base unit for cataact 

anesthesia than Medicare, this would likely result in a higher payment allowance than Medicare 

even though it appears that these plans have a more restrctive policy. We suggest that OIG 

address these concerns and also provide additional detals on how these plans generally ensure 

lower or no payment for monitored anesthesia care. Specifically, the study should cover what 

special codes, modifiers or other administrative processes these plans use to allow them to pay at 

a lower level. 

OIG Response

The HCFA has voiced several concerns about adopting this recommendation. We believe, 

nevertheless, that there is sufficient evidence and information available to suppon it. The 

evidence and information includes, but is not limited to , our comparative analysis of other 

insurers policies , HCFA's previous position to differentiate payment for MAC; and , lastly, 

statutory provisions requiring HCFA to develop a physician fee schedule based on resource 

costs. 

The HCFA's first concern with accepting our finding is that the comparson of private plans with 

Medicare would only be valid if the private plans define MAC in the same way as Medicare. 


response, we wish to note that our methodology in soliciting responses from FEHBPs and 

MCPBPs was designed to assure valid comparsons based on identical definitions. In gathering 

the information from FEHBPs we provided them with HCFA' s definition to assure common 

understanding of the definition of MAC. Similarly, we aranged for Medicare caner staff who 

are knowledgeable of HCFA's definition to obtain the related coverage and reimbursement 

information from their private business plans. In those instances where responses were not 

definitive, we held discussions with respondents to assure that the identical definition was used. 

The HCFA also expressed reservations about accepting a recommendation based solely on the 

payment policies of other plans. We had only recommended conducting a study, not actually 

changing policy unless the study indicated the appropriateness of the need for a change. More 

imponantly, in this regard, we wish to point out that in HCFA's response to our 1986 inspection 

repon (OAI-85- 01O), HCFA concurred with our recommendations that general anesthesia and 

MAC would be reimbursed at different rates. The HCFA indicated that it was considering a 

proposed regulatory change that would accomplish the intent of the OIG recommendations. 

Additionally, HCFA had committed itself to studying this payment issue in the October 7, 1986 

issue of the Federal Register in response to our April 1986 OIG repon. 

The HCFA believes it is imponant to establish that MAC is , indeed, a less intensive-resource 

procedure than general anesthesia. We assume that this position is based on the provisions of 

OBRA 89 which require DHHS to develop a fee schedule for physician services based on 

resource costs. As we understand that HCFA has adopted the ASA Uniform Relative Value 

Guide which does not distinguish between resource costs for MAC and general anesthesia, we 

are uncertain of HCFA' s intent. 
With respect to HCFA's comments regarding cataract anesthesia base units and how other plans 

administer their coverage and payment policies, we wil provide HCFA with our list of the 

MCPBPs and FEHBPs with more restrctive coverage and payment standards. 

HCFA' S General Comments 

Scope 

The stated purpose of this report was to review the adequacy and 

implementations of Medicare s coverage and reimbursement instructions for 

MAC. However, the report only covered MAC associated with cataract surgery 

and endoscopic procedures. Of the medical records reviewed 69 percent were 

associated with cataract anesthesia and the remaining 31 percent were

associated with anesthesia related to endoscopic procedures. Further, only 6 

percent of the endoscopic procedures involved MAC. . We recommend that GIG 

either retitle and rewrite the report to indicate that this report is a study of MAC

for cataract services or expand the report to cover all other procedures using 

MAC. 

OIG Response

As stated in the Scope And Methodology section of this report, our inclusion of 

medical review findings of cataract procedures, Upper GI procedures and

colonoscopies was designed to gain insights into actual operative events in 

assessing the adequacy of HCF A' s coverage instruction for MAC. The choice 

of these procedures does not mean that our study of the adequacy and 

implementation of Medicare coverage and reimbursement for MAC was 

limited to these procedures. 

HCF A correctly notes that only a small percentage of the endoscopic 

procedures performed involved MAC. We have revised the report to indicate 

that 20 of the 359 endoscopy procedures had associated claims for anesthesia. 

Discussions with several gastroenterologists revealed that they provide, or 

direct the provision of, MAC for almost all these procedures. In these instances 

MAC services of the physician endoscopist, registered nurse or other personnel 

trained in monitoring and resuscitation techniques are not usually biled by 

physicians as a separate service. 

Documentation 

The report indicates that the payment was inappropriate in approximately in 4 

cataract cases based on lack of documentation. However, the report should 

make it clear that this finding does not necessarily imply that anesthesia 

providers did not furnish claimed MAC services. Rather, the absence of 
O/G Response 

Detail 

OIG Response

documentation ma reflect afailure to docw:ent services actually provided or a 

failure to include this documentation with the medical record reviewed by the 

O/G contractor. This lack of precision in distinguishing the reasonfor the 

absence of documentation also calls into question the accuracy of O/G' 


projection of $/4 milion in inappropriate payment for MAC, such payments 

cannot be directly translated into projected future savings; a more stringent 

review process for MAC might rather improve the anesthesia documentation, 

We have revised the report to assure that the finding does not imply that 

services were not actually rendered, However, lack of documentation is 

suffcient cause to examine the case further. 

We would recommend that the report include more detail on such items as the 

number of outpatient departments (OPDs) and ambulatory surgical centers 

(ASCs) that were sampled and whether inadequate documentation was a 

problem for certain OPDs/ASCs, or was it representative across all 

OPDs/ASCs. It would also be helpful to include the method the medical record 

contractor used to identif anesthesia activities. These items could be 

incorporated into the appendix or incorporated into the body of the report itself 

We are happy to make our work papers containing information on OPDs, ASCs 

and contractor methodology available to HCFA. 

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