. 

Department of Health and Human Servces


OFFICE OF


INSPECTOR GENERAL


. OUTPATIENT SURGERY: 

MEDICAR' E PAYMENTS FOR UNNgCESSARY 

AND POOR QUALITY CATARACT SURGERIES 

MANAGEMENT ADVISORY REPORT 
, , . 

. , . .. . . , . . . ,. , . .. . , , , ,. .. , ,; , . , , , , \(

OFFICE OF INSPECfOR GENERA


The mission of the Office of Inspector General (GIG), ,as man(:ated by Public Law 95-452, as 

amended, is to protect the integrity of the Department of Healtband HUJ1an 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, investiMtjbhS, and 

inspections conducted by thieeOIG operating cOJ1poneO,ts: the Office of Audit Services, the 

Office ofInvestigation$, and the Office of Evaluation and Inspections- The OIGalso informs 

the Secretary of HHS of program and management problems and recommeildscburses t6 

correct them. 

ICE OF AlJlT SER.VlCE

The OIG's Office of Audit Servi es (OAS) proyjdesallatiditing servces for HH$, eith7rby 

condticting audits with its own audit resourc sor by, overseeing audit work done by others, 

Audits examine the peiformanceofHHS prograInS' alld/orits gfimtees ' and contractors)n 

carryingo1Jt their respective responsibilitiesand: areintended to provide ind~penden! 

assessments cifHHS programsandoperatioQs in Ofqer to reduce waste, apuse aI)d ' 

mismanagement and to promote ,economY, and effcienCY throughout the' DepartmeDt. 

OFFIcE OPINTIGATIONS 

The 0 IG's OfficeoL Inyestigations (01) conducts Griminal, , civil ' anqadIIinistrative:jIlvestigations' 

of allegCitjons of wrongdoing in HHSpr6graInsbrto IIHS herieficia sand of llnjpst . 

enrichment byprovidets. jnvestigativeeffortsofOl lead tocriWinalconvictigns 

administrative sanctions, or eiVIlInoriey' penalties. The 01also oversees State Medicaid fraud 

control units whichinvestigateaf.d prosecute fraud and patient abllse in the Medicaid progranL 

OFFICEOFEVALUATIONANINSPECTONS 

1'l1eQIG' s Offce6(E\l9Iu ti()l1andlnspectioris(OEI)c9ndUc;tsshort rm l1an IT2nt and 

program ev()luations' (c~Uedinspe~tions)' ' that focuspnissuesofcbncerIltolpeD rth1erlt the 

Congress, and thepllblic; ;1Pefindingsand' nscQritainedinth lnspecti()p 

teport& , generate rapid curate ancluIHo te iI1,fqrn1()tionon' tbeeffcienc.y;.v,Jn~r lJIitYj: anq' 

effectivenessQfdyparlInent lpI'ograms. 

OEI-09- 88- 01005

EXECUTIVE SUMMAR 


PUROSE 

Ths report estimates the amount Medicare paid for beneficiaries who underwent 

cataract surgery with intraocular lens implant (1) that was deemed to be medically 

unnecessary or (2) whose quality did not meet professionally recogned standards of 

care. This report also estimates the amount Medicare paid for preoperative tests 

that were medically unnecessary.


BACKGROUN 

Section 1862(a)(1)(A) of the Social Security Act states that Medicare wil not pay for 

servces that are not reasonable and necessary under Part A or Part B. We recently 

completed an inspection in which we examined 802 Medicare outpatient cataract 

surgeries performed in ambulatory surgical centers (ASCs) and hospital outpatient 

departments (OPDs). For the sampled cataract surgeries with adequate 

documentation, the independent medical review contractor found that 1.7 percent of 

the surgeries were unnecessary and 1.8 percent of the beneficiaries received poor 

quality care. By reviewing the beneficiary histories and claims obtained from the 

Medicare carrers and fiscal intermediaries, we determined the payments for the 

unnecessary and poor quality cataract surgeries. 

FIINGS 

MEDICA SPENT: 

$29.4 millon in 1988 for medically unnecessary cataract surgeries 

$41.7 millon in 1988 for poor care rendered to cataract patients, and 

approxiately $245 700 in 1988 for medicaly unnecessary B-scans and 

endothelial cell counts. 

RECOMMNDATIONS 

THE HEATH CA FINANCING ADMINSTRTION SHOUL: 

reduce the incidence of payments for medically unnecessary and poor quality 

cataract surgeries and 

reemphasize medical and postpayment review of cataract providers who 

routinely bil for B-scans and endothelial cell counts and postpayment review. 
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

TABLE OF CONTENTS


EXECUTIV SUMY 

BACKGROUND. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 

FININGS . . . . . . . . . . . . . . . . 4 

Medicare spent $29.4 milion in 1988 for medically unncessary


cataract surgery.


Medicare spent $41.7 milion in 1988 for poor care rendered to


cataract patients.


Medicare spent approxiately $245 700 in 1988 for medically


unnecessary B-scans and endothelial cell counts. 

RECOMMNDATIONS . . . . . . 5 

APPENDIX 
OUTATINT SURGERY: 

MEDICAR PAYMNT FOR UNCEARY AN POOR QUALIT CATARCf SURGERI 

OEI-09-881005 

PUROSE 

Ths report estimates the amount Medicare paid for beneficiaries who underwent 

cataract surgery with intraocular lens implant (1) that was deemed to be medically 

unnecessary or (2) whose quality did not meet professionally recogned standards of 

care. This report also estimates the amount Medicare paid for preoperative tests 

that were medically unnecessary.


BACKGROUN 

Medicare regulations do not specifically define medical necessity or quality of care. 

The concepts are characterized by the practices in local medical communities. 

Section 1862(a)(1)(A) of the Social Security Act states that Medicare will not pay for 

servces that are not reasonable and necessary under Part A or Part B. In recent


years, many professional organizations, such as the American Academy of 

Ophthalmology, have issued guidelines to their members outlining medical necessity 

criteria and suggesting standards of care. 

PRO Responsibilties 

Prior to 1985, the peer review organizations (PROs) were not responsible for 

reviewig outpatient quality of care. Since then, several legislative bils, including the 

Consolidated Omnibus Reconciliation Act (COBRA) of 1985 and the Sixh Omnibus 

Budget Reconcilation Act (SOBRA) of 1986, expanded the PRO authority. The 

COBRA authorized PROs to deny payment for questionable care whie SOBRA 

mandated PROs to review quality of care in postacute and ambulatory care settings. 

In April 1989, PROs implemented 100 percent preprocedure review of at least 

10 nonemergency inpatient or outpatient surgical procedures. The PROs were given 

this authority under Section 9401 of Public Law 99-272. Currently, cataract 

extraction is one of two mandatory PRO review procedures. The PROs 

retrospectively review 5 percent of their preprocedure approvals on a quarterly basis. 

They can deny payment based on this review. Under the upcoming scope of work 

the Health Care Financing Administration (HCFA) has eliminated mandatory review 

of non emergency inpatient or outpatient surgical procedures. The PROs would be 

authorized to focus their resources on surgical or nonsurgical procedures and other 

servces which appear to be overutilzed or substandard. The PROs will 

retrospectively review 3 percent of their preprocedure approvals. 
Medicare Carrier Responsibilities 

In addition to processing Medicare claims for payment, Section 1842(a)(2)(B) of the 

Social Security Act requires Medicare carriers to apply "safeguards against 

unnecessary utilization of servces furnished by providers." Carrer responsibilities are 

detailed in the Medicare Carrer s Manual (MCM). The carrers are responsible for 

identifyng providers, by locality and specialty, whose utiliation patterns are different 

from medically recognized community standards and norms. The carrers are 

required to monitor claims data to develop profies on providers and their specialty 

groups. The carriers also conduct studies to identify areas of special concern. 

The RCF A periodically alerts Medicare fiscal agents of current abusive practices 

through intermediary letters or carrer bulletins. In this way, the carriers can refocus 

their monitoring activities while the MCM is updated. 

Prior Office of Inspector General Studies 

We recently completed an inspection in which we examined Medicare outpatient 

surgery performed in ambulatory surgical centers (ASCs) and hospital outpatient 

departments (OPDs). In February 1991, we released the medical outcome analysis in 

a final report entitled "Outpatient Surgery--Medical Necessity and Quality of Care 

(OEI-09-88-01000). The independent medical review contractor found that 

1. 7 percent of cataract surgeries were medically unnecessary and 1.8 percent of the 

beneficiaries received poor quality care. The medical outcome report discusses the 

most common reasons why the cases were deemed medically unnecessary or the 

beneficiaries received poor care. 

Ths management advisory report is limited to a discussion of the costs associated 

with the medically unnecessary cataract surgeries and poor care rendered to 

Medicare beneficiaries. The sampled surgeries were completed before the national 

implementation of PRO preprocedure review. 

MEllODOLOGY 

Our random sample of 1 170 Medicare beneficiaries included 802 cataract surgeries. 

Half of the surgeries were completed in ASCs, half in OPDs. The surgeries were 

performed in the 10 States with the highest number of Medicare-certifed ASCs in 

February 1988: Arzona, California, Florida, Illois, Louisiana, Maryland, North 

Carolina, Ohio, Pennsylvania, and Texas. The surgeries were completed durig the 

fist quarter of calendar year 1988. 

Mter collecting the medical records from the ophthalmologists, ASCs, and OPDs, we 

used an independent medical review contractor to examine the records. The 

contractor used physician specialists to develop the procedure-specifc criteria. The 

physicians then reviewed each record for medical necessity, appropriateness of the 
outpatient setting, and quality of care. In addition, we intervewed representatives of 

the American Academy of Ophthalmology and a sample of ASC and OPD 

ophthalmologists to identify currently acceptable standards for medical necessity and 

quality of care.


We determed OPD and ASC payments by reviewig the beneficiary histories and 

claims obtained from the Medicare carriers and fiscal intermediaries. For OPDs, the 

payments represent the interi payments. These interi payments are subject to 

adjustment based on the intermediary s audit of the hospital cost report for the fiscal 

year in which the servces were rendered. For cataract surgeries, our analysis 

included the ophthalmologist's surgical fees, ASC and OPD facility payments 

preoperative tests (e. , A-scans, B-scans, and endothelial cell counts), offce visits 

within 90 days after surgery, and IOL payments. 

In order to gain a national perspective, we made two nonstatistical projections for 

the data. First, we projected the 10 States' quarterly costs to annual costs. Second 

since the number of procedures in our sample represents 49 percent of the Medicare 

procedures performed nationally, we calculated the national costs by dividing the 

sampled costs by 0.49. Ths methodology assumes the 10 sampled States are 

representative of the nation as a whole. 
FIINGS 

MEDICAR SPENT $29.4 MION IN 1988 FOR MEDICALY UNCEARY CATARCT SURGERI. 

The medical review contractor found that (a) 96.9 percent of our sample (777 of 

802 cases) had documentation for determining medical necessity and (b) 1.7 percent 

of these (13 of 777) were not medically necessary. Table 1 in the appendix details 

the $29.4 milion national cost projection for these medically unnecessary cataract 

surgeries. 

MEDICAR SPEN $41.7 MION IN 1988 FOR POOR CAR REERD TO CATARCT PATI. 

The medical review contractor found that 92.8 percent of our sample (744 of 

802 cases) had adequate documentation to determine quality of care. Of these 

1.8 percent of the cataract beneficiaries (13 of 744) received poor care. Table 2 in 

the appendix details the $41.7 milion cost projection for poor quality care. 

MEDICAR SPENT APPROXITELY $245 700 IN 1988 FOR MEDICALY 

UNCEARY B-CANS AN ENDOTHLI CEIL COUN. 

Ophthalmologists intervewed as part of our study indicated that B-scans and 

endothelial cell counts are rarely necessary for cataract surgery. Whe these tests 

are not routine, physicians administer them if a patient s condition warrants it. 

A physician may perform an ophthalmic ultrasound, called a B-scan, when the 

density of the cataract precludes him from viewing the back of the patient' s eye. 

The B-scan will rule out serious conditions, such as tumors or a partially or totally 

detached retina. Endothelial cells, which line the inside of the cornea, keep the 

cornea clear and healthy by preventing eye fluid from entering the area. Once the 

cells are lost, the cornea does not easily generate new cells to repair itself. The 

endothelial cell count can determine the corneal health and predict how well it 

tolerate cataract surgery. If the cell count is low, the physician can take precautions 

durig surgery to lessen endothelial cell loss. 

In our sample, Medicare paid $13 729 for the optional tests-- 746 for 32 B-scans 

and $9 983 for 133 endothelial cell counts. (Some patients received more than one 

test.) Projected nationally, Medicare paid $14.4 milion for these tests-­

$4.4 million for B-scans and $10.0 millon for endothelial cell counts. Since the 

medical reviewers determed that 1.7 percent of the cataract surgeries were 

medically unnecessary, Medicare could have saved approxiately $245 748 for the 

tests--$75 337 for B-scans and $170 411 for endothelial cell counts. Tables 3 and 4 in 

the appendix show the cost projections. 
Questions about physicians' practice patterns may arise if they routinely submit 

claims for additional tests. Some sampled providers biled routinely for B-scans and 

endothelial cell counts. We found that 86 percent of the physicians who biled for 

endothelial cell counts did so for 
 all of their sampled patients. The other 14 percent 

performed these tests on most of their patients (e. , 13 of 14 sampled patients). In 

addition, we found that one physician accounted for almost 16 percent of all B-scans 

in our sample. This evidence suggests that practice patterns, not medical exigencies 

may account for the additional tests. 

RECOMMNDATIONS 

TI HCFA SHOUL: 

(1)	 REDUCE TI INCIDENCE OF PAYM FOR MEDICALY UNCEARY AN POOR QUALIT CATARCf SURGERI. 

This recommendation could be accomplished through a combination of efforts 

by both the PROs and carriers who can target their reviews on providers 

whose practice profies indicate a higher than average likeliood of 

unnecessary or poor quality care. In this way, HCFA could save as much as 

$71.1 millon in medically unnecessary and poor quality cataract surgeries. 

(2)	 REMPHAIZ MEICAL AN POSTPAYM REVIW 

CATARCf PROVIERS WHO ROUTY BIL FOR B-CANS 

ENDOTILI CEIL COUN AN POSTPAYMNT REVIW. 

The HCFA could issue a carrer bulletin to reemphasize the need for 

Medicare carrers to follow MCM Sections 7500-7514 regarding medical review 

controls and postpayment review. The postpayment alert list in 

MCM Section 7514(E) states that carrers should monitor excessive cataract 

preoperative visual acuity tests such as B-scans and endothelial cell counts. 

The HCFA could save as much as $247 500 for unnecessary preoperative 

tests. 
APPENDIX: METHODOLOGY 

The tables on the following pages represent the cost savings for medically 

unnecessary cataract surgeries (table 1), poor care (table 2), unnecessary B-scans 

(table 3) and unnecessary endothelial cell counts (table 4). 
TABLE 1: ESTIMATED ANNUAL SAVINGS FOR MEDICALLY U NECESSARY CATARACT SURGERIES 

MED I CALL Y PERCENT AVERAGE 

ST ATE SiTE SAMPLE UNNECESSARY MED I CAlly QUARTERLY 

CASES CASES UNNECESSARY PAYMENTS 

Ar i lona	 OPD 00% $0. 

ASC qO% $0. 

California	 OPD 0 . 00% $0. 

ASC 76% 385. 

Florida	 opb 0 . 00% $0. 

ASC	 19% 361. 

I II i no i s	 OPO 00% $0. 

ASC 00% $0. 

Louisiana	 OPO 0 . 00% $0. 

ASC 0 . 00% to. 00 

Maryland	 OPD 00% $0. 

ASC	 O. 00% $0. 

Nor th Caro l i na OPD 0 . 00% $0. 

ASC 00% $0. 

ohio	 OPO 00% $0. 

ASC 67% 593. 

pennsyl vanl a	 OPD 0 . 00% $0. 

ASC 0 . 00% $0. 

AVERAGE 

ANNUAL ADJUSTED 

PAYMENTS UN I VERSE 

$0. $0. $0. 

$13 540. 

$0.


$9, 445.


$0. $0. to. 

$0. 00 ' $0. $0. $0. 

$0. 

$0. 

$10; 375. 

to. $0. 

Texas	 OPD 2 . 60% 190. 73 * $12 762. 

ASC 11% 912. $11 , 648 . 84 

TOTALS: 777	 NfA $14 443. $57 773. 

* One case did not have adequate paid tn/ormatton to be


included in calculations.


1468 

2197 5228 8280 

15470 

7334 3262 3262 3904 

880 

1759 

2633 

1530 

7388 

978 

8034 

971 

13260 

6514 

94419 

ESTIMATED


ANNUAL


SAVI NGS


$0. 

$0. 

$0. 

575 551. 

$0. 

tB24 652. 

$0. 

$0. 

$0. $0. to. 

$0. $0. $0. $0. 

$676 496. 

$0. $0. 

$2, 197, 874. 

118 378. 

$14 392 953. 

ESTiMAtED NAtioNAL 

ANNUAL SAViNGS: 

$29 373 373. 
TABLE 2: ESTIMATED ANNUAL SAVINGS FOR POOR QUALITY CATARACT SURGERIES 

POOR PERCENT AVERAGE AVERAGE ESTIMATED 

STATE SITE SAMPLE QUAL ITY POOR QUARTERLY ANNUAL ADJUSTED ANNUAL 

CASES CASES QUALITY PAYMENTS PAYMENTS UN IVERSE SAVINGS 

Arizona	 OPD 00% $0. to. 1468 $0. 

ASC 00% $0. $0. 2197 $0. 00, 

California	 OPD ' O. 00% $0. $0. 5228 $0. 

ASC 94% 441.13 $13 764. 8280 352 065. 

Florida	 OPD 1.23% 935. $11 741. 15470 242 454. 

ASC 00% $0. $0. 7334 $0. 

I II I no I s	 OPO 00% $0. $0. 3262 $0. 

ASC 70% 401. $13 607. 3262 643 932. 

Loul s I ana	 OPO 0 . 00% $0. $0. 3904 $0. 

ASC 0 . 00% $0. $0. 880 $0. 

Maryland	 OPO 0 . 00% $0. $0. 1759 $0. 

ASC 00% $0. $0. $0. 

North Carolina OPO 00% $0. $0. 2633 $0. 

ASC 00% $0. $0. 1530 $0. 

Ohio	 OPO 0 . 00% $0. $0. 7388 $0. 

ASC 41% 593. $1 0 , 375 . 72 978 $751 663. 

pennsyl vanl a	 OPD 00% $0. to. 8034 $0. 

ASC 00% $0 . 00 $0. 971 $0. 

Texas	 OPO 33% $3 , 316. 19 $13, 264. 13260 380 838. 

ASC 23% 792. $11 , 170. 12 6514 074 457. 

TOTALS: 744	 N/A $18 480. $73, 923. 94419 $20 445 411 . 

ESTIMATED NATIONAL


ANNUAL SA V r NGS: 

$41 725 329. 
TABLE 3: ESTIMATED ANNUAL SAVINGS FOR B-SCANS 

PERCENT AVERAGE AVERAGE ESTIMATED
 STATE SITE SAMPLE P-SCANS B-SCANS QUARTERLY ANNUAL ADJUSTED ANNUAL


CASES PA YMENTS PAYMENTS UN I VERSE PAYMENTS


Ar i zona OPD 0 . 00% $0. $0. 1468 $0.
 ASC 00% $0. $0. 2197 $0.


Cal ifornja OPD 1.33% $131.36 $525. 5228 $36 626.
 ASC 70% $95. $383. 8280 $85 727.


Florida OPD 10. 84% $75. $300. 15470 $504 650.
 ASC 38% $113. $454. 7334 $79 437.


III i no i s	 OPD 00% $0. $0. 3262 $0. ASC 20. 69% $177. $710. 92, 3262 $479 797. 

Louisiana	 OPD 0 . 00% $0. $0. 3904 $0. ASC 00% $0. $0. 880 $0. 

Maryland	 OPD 10. 00% $111.67 $446. 1759 $78 571. ASC 00% $0. $0. $0. 

North Carol ina OPD 0 . 00% $0. $0. 2633 $0. ASC 0 . 00% $0. $0. 1530 $0. 

Ohio	 OPD 45% $53. $215. 7388 $54 946. 

ASC	 00% $0. $0. 978 $0. 

pennsyl vani a	 OPD 12. 90% $133. $533. 8034 $552 739. ASC 38% $129. 11 $516. 971 $47 012. Texas	 OPD 90% $121. 93 $487. 13260 $251, 967. ASC 00% $0. $0. 6514 $0. 

TOTALS: 777	 N/A $1 , 143. 574. 94419 171 475. 

171, 475. 24 / 0. 49 = 

ESTIMATED NATIONAL ANNUAL PAYMENTS: 431,582. 

7% x $4 431 582. 12 = 

ESTIMATED NATIONAL ANNUAL SAVINGS: $75 336. 
TABLE 4: ESTfMATEP ANNUAL SAVINGS FOR ENDOTHELIAL CELL COUNTS 

AVERAGE AVERAGE EST! MATED


STATE SJTE SAMPLE CELL COUNTS PERCENT QUARTERLY ANNUAL ADJUSTED ANNUAL


CASES	 CELL COUNTS PAYMENTS PAYMENTS UN I VERSE ' SAVINGS 

Ar i zona	 OPO 00% $0. $0. 1468 $0. 

ASC 11. 76% $1 04 . 01 $416. 2197 $107 534. 

California	 OPO 00% $0. $0. 5228 $0. 

ASC 25 . 68% $53. 84 * $215. 8280 $433 746. 

Florida	 OPO 18. 07" $71. $286. 15470 $800 600. 

ASC 16. 67" $60. 10 $240. 7334 $293 848. 

Illf no ,S OPO 10. 34% $87. $349. 3262 $117 , 944.
 ASC 34. 48% $93. $373. 3262 $419 875.


loui s i ana OPO 26. 67% $92. 12 $368. 3904 $383 612.


ASC 18. 75% $76. $305. 880 $50 457.


Maryland	 OPD 00% $0. $0. 1759 $0. 

ASC 30. 00% $35 . 63 $142. 864. 

North Carol ina OPD 17. 39% $37. $150. 2633 $68 870. 

ASC 69. 5 $47. $190. 1530 $202 736. 

ohio	 OPO 27. 59% $76. $304. 7388 $621, 121. 90 ASC 20. 00% $72. $291. 978 $57 060. Pennsylvania OPO 68% $52. $208. 8034 $161, 996. ASC	 00% $0. $0. 00 971 $0. Texas	 OPO 49% $98. $394. 13260 $339 249. ASC 24 . 66% $132. $529. 6514 $850 317 . 93 

TOTALS:	 777 133 N/A 191. 72 766. 94419 $4, 911, 837. 

* One case did not have	 $4 , 911 , 837. 88 / o. 49 = adequate paid information 

to be included ESTIMATED NATIONAL ANNUAL PAYMENTS: $10 024 158. ca l cua l t ions. 

1. 7" x $10 024	 158. 94 = 

ESTIMATED NATIONAL ANNUAL SAVINGS: $170 , 4 1 0 . 70