Department of Health and Human Services 

OFFICE OF 

INSPECTOR GENERAL 

JUNE GIBBS BROWN 

Inspector General 

NOVEMBER 1999 

OEI-04-97-00496 

Utilization Parameters for Chiropractic 

Treatments 
OFFICE OF INSPECTOR GENERAL 

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

amended by Public Law 100-504, is to protect the integrity of the Department of Health and Human 

Services programs as well as the health and welfare of beneficiaries served by them. This statutory 

mission is carried out through a nationwide program of audits, investigations, inspections, sanctions, and 

fraud alerts. The Inspector General informs the Secretary of program and management problems and 

recommends legislative, regulatory, and operational approaches to correct them. 

Office of Evaluation and Inspections 

The Office of Evaluation and Inspections (OEI) is one of several components of the Office of Inspector 

General. It conducts short-term management and program evaluations (called inspections) that focus 

on issues of concern to the Department, the Congress, and the public. The inspection reports provide 

findings and recommendations on the efficiency, vulnerability, and effectiveness of departmental 

programs. 

OEI's Atlanta Regional Office prepared this report under the direction of Jesse J. Flowers, Regional 

Inspector General and Christopher Koehler, Deputy Regional Inspector General. Principal OEI staff 

included: 

ATLANTA REGION 

Graham D. Rawsthorn, Team Leader 

Greg Jones, Program Analyst 

SAN FRANCISCO REGION 

Robert Gibbons, Program Analyst 

HEADQUARTERS 

Tricia Davis, Program Specialist 

Brian Ritchie, Program Analyst 

To obtain copies of this report, please call the Atlanta Regional Office at (404) 562-7723. 

Reports are also available on the World Wide Web at our home page address: 

http://www.dhhs.gov/progorg/oei 
June Gibbs Brown

Inspector General

OIG Final Report: “Utilization Parameters for Chiropractic Treatments,” OEI-04-97-00496 

Nancy-Ann Min DeParle

Administrator

Health Care Financing Administration

This report identifies potential impacts of implementing a chiropractic utilization review parameter of

either 18 or 12 chiropractic treatments (manual manipulations of the spine) per year. 

Dr. Grant Bagley, Director, Coverage and Analysis Group, Office of Clinical Standards and Quality,

Health Care Financing Administration; and Dr. Grant Steffin, Chair, Chiropractic Medical Directors,

Chiropractic Work Group requested this analysis following our presentation on chiropractic controls at a

meeting of the Chiropractic Work Group.

The Health Care Financing Administration (HCFA) convened the Chiropractic Work Group to assist in

developing new chiropractic policies required by the 1997 Balanced Budget Act. The Chiropractic

Work Group considered two options, a utilization review parameter of 18 treatments per year and one

of 12 treatments per year.

Dr. Bagley asked us to assist the Chiropractic Work Group by compiling 1997 chiropractic utilization

data. Additionally, he asked that we quantify the potential impacts of implementing the two options --

utilization review parameters of 18 or 12 treatments per year.

Implementing either option would ensure that Medicare pays for all chiropractic services that Medicare

beneficiaries are entitled to and would help prevent payments for services not authorized under the

program. By requiring carriers with high chiropractic utilization review parameters to implement lower

review parameters, Medicare outlays would be reduced. One carrier has demonstrated the effect of

reducing chiropractic utilization parameters. That carrier cut its chiropractic parameter in half and saved

almost $3 million with virtually no change in program administrative costs. By establishing utilization

review parameters at 18 or 12 beginning in 2000, we estimate annual Medicare outlays would be

reduced by about $19.4 or $30.2 million respectively. We, however, recommend a parameter of 12. 

This is the most commonly used parameter (29 of 55 carriers), and it would require the least

administrative change for carriers overall.

The 18 or 12 treatments per year would be a maximum review parameter that carriers would be

allowed to use. Therefore, carriers with lower existing review parameters could remain unchanged. 

However, some carriers may choose to increase their existing parameters up to the new maximum

review parameter. To the extent that this happens, our savings estimates would be reduced. The

HCFA commented that they are using the information in this report in their effort to establish chiropractic

utilization guidelines. The full text of their comments is attached.
Page 2 

BACKGROUND 

A utilization review parameter is not a “hard” cap but rather a “soft” cap. That is, it does not establish a 

threshold above which Medicare payments will not be made. Instead, a utilization review parameter 

establishes a point at which a carrier will review each additional claim for medical necessity. The carriers, 

however, can review any and all claims if they so choose. The HCFA allows each carrier to establish its 

own utilization review parameter for chiropractic treatments. In 1997, carrier utilization review parameters 

ranged from 11 to 52 treatments per year.1 Three carriers did not have chiropractic utilization review 

parameters. Table 1 shows the various utilization review parameters and the number of carriers with each 

parameter. 

TABLE 1 

MEDICARE CHIROPRACTIC UTILIZATION REVIEW PARAMETERS - 1997 

Parameters 11 12 18 22 24 28 29 30 40 46 48 51 52 0 

# of Carriers 1 29 3 1 4 3 1 1 2 1 2 1 3 3 

SCOPE AND METHODOLOGY 

This report is based on calendar year 1997 data collected as part of our chiropractic controls study,2 and 

data extracted from a 1 percent sample of HCFA’s 1997 National Claims History file. 

Our analysis covers Medicare Part B carriers for all 50 States and the District of Columbia. California and 

Missouri were serviced by two carriers and New York was serviced by three carriers. Therefore, we have 

information from 55 carriers. Our analysis covers about 1.4 million Medicare beneficiaries receiving almost 

12.2 million chiropractic treatments at a cost of over $310 million. 

To estimate the potential Calendar Year 2000 savings, we used HCFA’s Part B Extract and Summary 

System data and calculated the growth in Medicare chiropractic payments from 1994 through 1997. 

During this time period, the chiropractic benefit grew at an average of 6.87 percent per year. We applied 

this growth rate to our calculated 1997 savings to estimate potential Calendar Year 2000 savings. 

We did not collect parameter information for the Railroad Retirement Board nor Puerto Rico. Therefore, 

we excluded them from our analysis. Additionally, we excluded six carriers whose contracts were 

terminated part way through 1997, prior to our data collection efforts. We included parameter and 

utilization data for the carriers that took over for the six terminated carriers. 

1 Seven Medicare utilization parameters are based on time periods other than one year. For such carriers, 

we annualized their parameters accordingly. For example, one carrier reported a parameter of 76 treatments in 540 

days. Annualized, the parameter is 51. 

2 CHIROPRACTIC CARE: Controls Used by Medicare, Medicaid, and Other Payers 

(OEI-04-97-00490) 
Page 3 

Additionally, we analyzed utilization data for Florida Blue Cross, spanning October 1, 1991 to September 

30, 1993. We used 1 percent samples of HCFA’s 1991 - 1993 National Claims History files for this 

analysis. 

REDUCING PARAMETERS WILL PROBABLY RESULT IN REDUCED UTILIZATION 

Reducing chiropractic review parameters is likely to result in a reduction in actual utilization and the 

corresponding cost to Medicare. To test this premise, we analyzed the results achieved by Florida Blue 

Cross. 

Reduced Utilization Review Parameters Equates to Program Savings 

Beginning in Fiscal Year 1993, Florida Blue Cross cut its chiropractic utilization review parameter in half.3 

To test our assumption, we analyzed chiropractic utilization data, one year before and after Florida Blue 

Cross reduced its parameter. Table 2 displays the number of beneficiaries and treatments processed 

through Florida Blue Cross. 

TABLE 2 

FLORIDA BLUE CROSS BENEFICIARIES 

AND TREATMENTS 

Fiscal Year Beneficiaries Treatments 

FY 92 1,245 10,516 

FY 93 1,253 9,215 

Source: 1 percent sample of HCFA’s National Claims History File. 

The number of beneficiaries receiving chiropractic treatments grew by less than 1 percent (0.64) from FY 

92 to FY 93. Had Florida Blue Cross not reduced its utilization review parameter, we estimate that they 

would have paid for 10,584 chiropractic treatments in FY 93 - a 0.64% increase over FY 92. 

As a result of the parameter reduction, Florida Blue Cross actually paid for 9,215 chiropractic treatments. 

Multiplying the 1,369 saved treatments (10,584-9,215) by the FY 93 treatment rate ($21.50) results in 

estimated savings of $29,434. As our data is from a 1 percent sample, projected to the population, Florida 

Blue Cross saved the Medicare Trust Fund over $2.9 million by reducing its chiropractic utilization review 

parameter. 

3 HCFA considers utilization parameters to be confidential information. Therefore, we do not enumerate the 

Florida BCBS parameters. 
Page 4 

Reduced Utilization Review Parameters Does Not Significantly Increase Administrative Costs 

All claims that exceed a utilization review parameter should be reviewed for medical necessity. Therefore,

reducing the chiropractic utilization review parameter would result in an increase in

the number of requests for services that would require medical review and an associated increase in carrier

medical review administrative costs.

However, based on the experience of Florida Blue Cross, the increased medical review workload will be

short lived. To illustrate, during the 6 months prior to the utilization review parameter reduction, the claims

denials, as a percent of total claims submitted, averaged 23 percent per month. During the 6 months

immediately following the utilization review parameter reduction, the claims denials, as a percent of total

claims submitted, increased to an average of 27 percent per month. Over the next 6 months, the percent of

claims denied decreased to essentially what it was before the Florida carrier reduced its utilization

parameter - 24 percent per month. In the last month of this period, the percent of claims denied had

dropped to slightly below 23 percent. 

POTENTIAL IMPLICATIONS OF ESTABLISHING A MAXIMUM UTILIZATION REVIEW 

PARAMETER OF 18 CHIROPRACTIC TREATMENTS PER YEAR 

If HCFA implemented a maximum utilization review parameter of 18 chiropractic treatments per year 

beginning in 2000, it could save the Medicare Trust Fund over $19.4 million. 

Implementing a parameter of 18 treatments per year would directly impact 22 of the 55 carriers. The 

remaining 33 carriers would not be directly impacted by a maximum review parameter of 18 as they 

already have parameters of 18 or less. Table 3 displays chiropractic utilization grouped by carrier utilization 

review parameters. 

TABLE 3 

CHIROPRACTIC UTILIZATION IN EXCESS OF 18 TREATMENTS 

Parameter <= 18 Parameter >18 

# Carriers 33 22 

Total Beneficiaries 7,923 6,209 

# Beneficiaries Who Exceed 18 Treatments 337 867 

% Beneficiaries Who Exceed 18 Treatments 4.25% 13.96% 

Total Treatments 60,301 61,518 

# Treatments in Excess of 18 3,147 9,448 

% Treatments in Excess of 18 5.22% 15.36% 

To quantify the impact, we compared utilization in carriers with parameters equal to or less than 18 

treatments and those with parameters greater than 18 treatments per year. We included the three carriers 

with no set parameters in the group that had parameters greater than 18. 
Page 5 

We used the 33 carriers with existing parameters of 18 or less treatments as our baseline population. 

Based on our assumption, if the 22 high-end carriers reduced their parameters to 18 treatments per year, 

their actual utilization should fall in line with the baseline population. Therefore, the high-end carriers, as 

shown in Table 3, would see their treatments, in excess of 18, fall from over 15 percent to about 5 percent. 

This reduction within the 22 high-end carriers would equal 6,237 fewer treatments in excess of 18. The 

average 1997 reimbursement rate was $25.49 per treatment.4 Therefore, had the 22 high-end carriers 

imposed utilization review parameters of 18 treatments in 1997, they would have saved the Medicare Trust 

Fund $159,011. Our analysis is based on a 1 percent sample. If we project to the population, the 1997 

Medicare Trust Fund savings would have exceeded $15.9 million. 

Further, assuming a continued growth rate of 6.87 percent per year, we estimate that implementing a 

maximum utilization review parameter of 12 treatments per year beginning Calendar Year 2000 could result 

in Medicare Trust Fund savings of over $19.4 million. 

POTENTIAL IMPLICATIONS OF ESTABLISHING A MAXIMUM UTILIZATION REVIEW 

PARAMETER OF 12 CHIROPRACTIC TREATMENTS PER YEAR 

If HCFA implemented a maximum utilization review parameter of 12 chiropractic treatments per year 

beginning in 2000, it could save the Medicare Trust Fund almost $30.2 million. 

Implementing a parameter of 12 treatments per year would directly impact 25 of the 55 carriers. The 

remaining 30 carriers would not be directly impacted by a maximum review parameter of 12 as they 

already have parameters of 12 or less. Table 4 displays chiropractic utilization grouped by carrier utilization 

review parameters. 

TABLE 4 

CHIROPRACTIC UTILIZATION IN EXCESS OF 12 TREATMENTS 

Parameter <= 12 Parameter >12 

# Carriers 30 25 

Total Beneficiaries 7,592 6,540 

# Beneficiaries Who Exceed 12 Treatments 335 869 

% Beneficiaries Who Exceed 12 Treatments 4.41% 13.29% 

Total Treatments 58,455 63,364 

# Treatments in Excess of 12 6,921 17,225 

% Treatments in Excess of 12 11.84% 27.18% 

4 We calculated the average reimbursement rate from our 1997 data, based on the total allowed charges and 

the total number of treatments for the 55 carriers. 
Page 6 

To quantify the impact, we compared utilization in carriers with parameters equal to or less than 12 

treatments and those with parameters greater than 12 treatments per year. We included the three carriers 

with no set parameters in the group that had parameters greater than 12. 

We used the 30 carriers with existing parameters of 12 or less treatments as our baseline population. 

Based on our assumption, if the 25 high-end carriers reduced their parameters to 12 treatments per year, 

their actual utilization should fall in line with the baseline population. Therefore, as shown in Table 4, the 

high-end carriers would see their treatments, in excess of 12, fall from over 27 percent to about 12 percent. 

This reduction within the 25 high-end carriers would equal 9,723 fewer treatments in excess of 12. The 

average 1997 reimbursement rate was $25.49 per treatment. Therefore, had the 25 high-end carriers 

imposed utilization review parameters of 12 treatments in 1997, they would have saved the Medicare Trust 

Fund $247,862. Our analysis is based on a 1 percent sample. If we project to the population, the 1997 

Medicare Trust Fund savings would have exceeded $24.7 million. 

Further, assuming a continued growth rate of 6.87 percent per year, we estimate that implementing a 

maximum utilization review parameter of 12 treatments per year beginning Calendar Year 2000 could result 

in Medicare Trust Fund savings of over $30.2 million. 

RECOMMENDATIONS 

In requesting this analysis, Dr. Bagley and Dr. Steffin did not ask us to make recommendations. However, 

in light of our current and our previous analysis, we believe that it would be appropriate for us to do so. 

It is important to emphasize up front that we view the goal of establishing controls on Medicare payments 

for chiropractic benefits as twofold: to ensure that Medicare pays for all chiropractic services that Medicare 

beneficiaries are entitled to; and to prevent making payments for services not authorized under the program. 

In our earlier report, "Chiropractic Care: Controls Used by Medicare, Medicaid, and Other Payers (OEI04-97-00490), we showed that use of utilization review parameters alone was not enabling Medicare 

carriers to detect and prevent payments for maintenance treatments, which are not authorized under the 

Medicare program. Hence, we recommended that additional measures be taken, such as requiring 

chiropractic physicians to use modifiers to distinguish the categories of spinal joint problems and requiring 

all Medicare contractors to implement system utilization frequency edits to identify beneficiaries receiving 

consecutive months of minimal therapy. 

We did not make any recommendations regarding utilization review parameters, also referred to as 

utilization caps. However, we do not wish that omission to be interpreted as a lack of support for utilization 

caps. Our intention was to offer additional measures that could be used, in conjunction with utilization caps, 

to safeguard against payments for unauthorized maintenance payments. Thus, we wish to take this 

opportunity to clarify that we do recommend that utilization caps be used. 

With regard to the type of cap, we recommend that they be the "soft" caps, which are the subject of this 

report. These caps do not automatically disallow payments for services above the cap. Rather they trigger 

a more intensive review of claims to ensure that the billed services are necessary and covered. Such soft 

caps are consistent with the twofold goal described in the opening paragraphs of our recommendations. 
Page 7 

With regard to the number of services specified by the cap, we recommend that the maximum be 12. Our 

analysis in this report clearly demonstrates that Medicare savings would be higher with a cap of 12 rather 

than 18 treatments per year. This is the number most commonly used by Medicare carriers; 29 of the 55 

carriers already have chiropractic utilization parameters set at 12 treatments per year. Therefore, 

implementing a utilization parameter of 12 will result in the least administrative change for carriers overall. 

It is important to restate that the goal of utilization parameters is to ensure that carriers pay for all valid 

claims, and only valid claims. Our recommendation of a cap of 12 rather than a cap of 18 in no way 

implies that chiropractic services should be limited to a specific number. 

It does, however, imply a tradeoff in terms of resources and potential vulnerabilities. The lower cap of 12 

potentially increases the number of claims that need to be reviewed for medical necessity, thereby 

increasing administrative costs. Adopting a higher cap of 18 could reduce the administrative costs, but 

increase the potential of invalid claims paid and thereby increase the costs associated with improper 

payments. 

At present, we have no reliable data about the costs on both sides of this trade off--e.g., we do not know 

the cost of increased reviews associated with utilization caps at either 12 or 18 treatments per year. 

However, we believe that the approaches we recommended in our prior report, when used in connection 

with a standardized utilization cap, would increase the chances of avoiding improper payments while not 

increasing administrative costs. The Florida Blue Cross experience supports this expectation. 

No matter which level of services is chosen for the utilization caps, we recommend that data about the cost 

of administering them, related edits and frequency screens, and medical reviews be collected and analyzed 

with a view to finding the best mix of these controls and re-calibrating them after 1 or 2 years of experience. 

COMMENTS 

The HCFA commented that they are using the information in this report in their effort to establish 

chiropractic utilization guidelines. The full text of their comments is attached. 
Page 8