Report to Congressional Committees 

United States General Accounting Office

GAO 

October 2002 MEDICARE 

PHYSICIAN 

PAYMENTS 

Medical Settings and 

Safety of Endoscopic 

Procedures 

GAO-03-179 
Page i GAO-03-179 Medical Settings and Safety of Endoscopy 

Letter 1

Results in Brief 3

Background 5

Level of Safety of Endoscopy Does Not Appear to Differ by Medical 

Setting 9

Payment Differential Has Increased but Proportion of Office 

Procedures Has Not Increased 11

If Office Procedures Were Not Reimbursed by Medicare, Access to 

Endoscopy Might Be Most Affected in the New York City Area 14

Concluding Observations 15

Agency Comments 15

Appendix I Scope and Methodology 17 

Appendix II Medical Settings for Endoscopic Procedures in 

GAO Sample 21 

Appendix III Comments from the Department of Health and 

Human Services 23 

Appendix IV GAO Contact and Staff Acknowledgments 24 

Tables 

Table 1: GAO Sample of Gastroenterological Endoscopic 

Procedures for Medicare Beneficiaries, 2001 18

Table 2: GAO Sample of Urological Endoscopic Procedures for 

Medicare Beneficiaries, 2001 19

Table 3: Medical Setting Usage Trends for 12 Gastroenterological 

and 8 Urological Procedures, Nationwide, Calendar Years 

1996-2001 21

Table 4: Medical Setting Usage Trends for 12 Gastroenterological 

and 8 Urological Procedures, New York City Area and the 

Remainder of the United States, Calendar Years 1996-2001 22

Contents 
Page ii GAO-03-179 Medical Settings and Safety of Endoscopy 

Figures 

Figure 1: Average Physician Practice Expense Reimbursements for 

12 Gastroenterological Procedures for Medicare 

Beneficiaries by Medical Setting, Nationwide 12

Figure 2: Percentage of 12 Common Gastroenterological and 8 

Urological Endoscopic Procedures Provided in 

Physicians’ Offices, Nationwide 13

Abbreviations 

ASC ambulatory surgical center 

BIPA Medicare, Medicaid, and SCHIP Benefits Improvement and 

 Protection Act of 2000 

CMS Centers for Medicare & Medicaid Services 

CON certificate of need 

CPT Current Procedural Terminology 

HCFA Health Care Financing Administration 
Page 1 GAO-03-179 Medical Settings and Safety of Endoscopy 

October 18, 2002 

The Honorable Max Baucus 

Chairman 

The Honorable Charles E. Grassley 

Ranking Minority Member 

Committee on Finance 

United States Senate 

The Honorable William M. Thomas 

Chairman 

The Honorable Charles B. Rangel 

Ranking Minority Member 

Committee on Ways and Means 

House of Representatives 

The Honorable W.J. (Billy) Tauzin 

Chairman 

The Honorable John D. Dingell 

Ranking Minority Member 

Committee on Energy and Commerce 

House of Representatives 

Every year millions of Americans covered by Medicare1

 undergo 

endoscopic medical procedures in a variety of health care settings ranging 

from physicians’ offices to hospitals. These invasive procedures call for 

the use of a lighted, flexible instrument and are used for screening and 

treating disease. Although some of these endoscopic procedures, such as 

the sigmoidoscopic examination of the large bowel, can be performed 

while the patient is fully awake, most require some form of sedation and 

are usually provided in health care facilities such as hospitals or 

ambulatory surgical centers (ASC). Some physician specialty societies 

have expressed concern that Medicare’s reimbursement policies may offer 

a financial incentive to physicians to perform endoscopic procedures in 

 1

The Medicare program is administered by the Centers for Medicare & Medicaid Services 

(CMS), a federal agency within the U.S. Department of Health and Human Services. On 

July 1, 2001, the Secretary of Health and Human Services changed the name of the Health 

Care Financing Administration (HCFA) to CMS. This report refers to the agency as CMS 

when discussing actions taken since the name change and as HCFA when discussing 

actions taken before the name change. 

United States General Accounting Office

Washington, DC 20548 
Page 2 GAO-03-179 Medical Settings and Safety of Endoscopy 

their offices and that these procedures may be less safe because 

physicians’ offices are less closely regulated and therefore there is less 

oversight of the quality of care.2

Medicare provides higher payments for medical procedures performed in 

physicians’ offices than if they were performed in hospitals or ambulatory 

surgical centers. These differences are based on relative resources used in 

the delivery of medical services. Physicians conducting procedures in their 

offices are responsible for providing clinical staff, supplies, and 

equipment. However, physicians who conduct procedures in hospitals or 

ASCs have fewer expenses, since these facilities provide many of the 

necessary services.3

 As a result, Medicare payments for procedures in 

physicians’ offices are higher to account for the increased practice 

expenses. These differences in Medicare reimbursements based on the 

setting are known as “site-of-service payment differentials.” The payment 

differentials have been phased in since 1999, and were fully implemented 

in 2002. During this time, the site-of-service payment differentials have 

increased for most endoscopic procedures. 

Section 411 of the Medicare, Medicaid, and SCHIP Benefits Improvement 

and Protection Act of 2000 (BIPA)4

 directed us to examine the practice of 

providing physician services that are ordinarily performed in health care 

facilities—such as gastroenterological and urological endoscopic 

procedures—in physicians’ offices. We were directed to (1) review safety 

evidence regarding medical settings, (2) assess whether the practice 

expense site-of-service payment differential has served as an incentive for 

physicians to perform such procedures in their offices rather than in other 

medical settings, and (3) assess whether access to care by Medicare 

beneficiaries would be affected if these procedures were no longer 

reimbursed by Medicare when conducted in physicians’ offices. 

For our study, we selected 12 gastroenterological and 8 urological 

procedures that are ordinarily performed in health care facilities for 

 2

The specialty societies’ concerns are outlined in 65 Fed. Reg. 65,400 (Nov. 1, 2000). 

3

Medicare provides a facility fee to hospitals and ASCs to reimburse their expenses for 

clinical staff, supplies, and equipment. 

4

Pub. L. No. 106-554, App. F, 114 Stat. 2763, 2763A-508. 
Page 3 GAO-03-179 Medical Settings and Safety of Endoscopy 

Medicare beneficiaries.5 In 2001, there were about 4.8 million of these 

gastroenterological procedures performed, of which about 156,000 

(3.3 percent) were conducted in physicians’ offices. During this same year, 

there were about 306,000 of these urological procedures performed, of 

which about 12,000 (3.8 percent) were conducted in physicians’ offices. To 

determine the relative safety of these procedures conducted in different 

medical settings in the 50 states and the District of Columbia, we reviewed 

the scientific literature maintained by the National Library of Medicine and 

interviewed physicians; medical directors at Medicare carriers, which are 

the CMS contractors that process and review Medicare claims; and a 

representative of a trade association that represents the medical 

malpractice insurance industry. We also attempted to obtain Medicare 

claims data to determine whether patients who had endoscopic 

procedures later encountered medical complications. However, such data 

are not readily available. To assess whether the practice expense site-ofservice differential has served as an incentive for physicians to conduct 

office-based procedures, we analyzed CMS data on the percentage of 

endoscopic procedures performed in physicians’ offices, hospitals, and 

ASCs from 1996 through 2001. To determine whether access to care by 

Medicare beneficiaries would be affected if these procedures were no 

longer reimbursed by Medicare when conducted in physicians’ offices, we 

analyzed CMS data on a geographic basis, leading to a focus on the New 

York City area, which has a high utilization rate of physician office-based 

endoscopic procedures. For this metropolitan area, we analyzed CMS 

medical setting data and interviewed Medicare carrier directors and New 

York state officials. We conducted our work from February 2001 through 

October 2002 in accordance with generally accepted government auditing 

standards. (See app. I for more information on our scope and 

methodology.) 

For the 20 procedures we reviewed, we found no evidence to suggest that 

there is any difference in the level of safety of gastroenterological and 

urological endoscopic procedures performed on Medicare beneficiaries in 

either physicians’ offices or health care facilities, such as hospitals and 

ASCs. We also found no indication in the literature that physician office-

 5

We defined “ordinarily performed” in health care facilities as procedures performed at 

least 90 percent of the time in health care facilities and less than 10 percent of the time in 

physicians’ offices. We have included all gastroenterological and urological procedures that 

have been ordinarily performed in health care facilities. See app. I for a list of these 

procedures. 

Results in Brief 
Page 4 GAO-03-179 Medical Settings and Safety of Endoscopy 

based gastroenterological or urological procedures are less safe than those 

provided in health care facilities. In addition, Medicare carrier directors, 

physicians, and physician specialty society representatives told us that 

there is no indication that physician office-based endoscopy is unsafe. 

According to a major trade association that represents the malpractice 

insurance industry, office-based endoscopy is not considered riskier than 

endoscopy conducted in medical facilities. For example, the two largest 

malpractice insurance companies in the New York City area—a locality 

with a high proportion of physician office-based procedures—do not 

impose a surcharge on physicians who perform any type of endoscopy in 

the office. 

We also found no evidence to suggest that the resource-based site-ofservice payment differential has caused physicians to conduct a greater 

proportion of gastroenterological or urological endoscopic procedures in 

their offices for Medicare beneficiaries. Since 1996, the proportion of these 

endoscopic procedures performed in physicians’ offices for Medicare 

beneficiaries has not increased. At the same time, practice expense 

payments in 2002 for these office-based endoscopic procedures have 

increased to five times greater than payments for the procedures 

performed in a health care facility. However, because full implementation 

of the practice expense component did not occur until 2002, it is too early 

to tell whether that the percentage of these procedures performed in 

physicians’ offices will increase in the future. 

If Medicare coverage for the office procedures in our study were 

terminated, few access problems would occur in most of the country 

because physicians perform the vast majority of the procedures that we 

studied in health care facilities. However, our analysis of CMS data 

demonstrated that the New York City area has a much higher rate of 

utilization of physicians’ offices for these procedures than the rest of the 

nation. As noted by state Medicare carrier directors, health care facility 

capacity in the New York City area might be initially inadequate because 

about 35 percent of the gastroenterological procedures in our study were 

performed in physicians’ offices in this region. If these gastroenterological 

procedures could no longer be provided in offices, medical facilities in the 

area might not be able to absorb all the displaced patients in the short 

term. The effect on patient access of such a change might be mitigated 

somewhat over time, however, by a March 1998 New York State 

Department of Health rule change that is causing the numbers of ASCs in 

the state to increase. Relatively few of the urological procedures in our 

study (about 8 percent) are performed in physicians’ offices in the New 
Page 5 GAO-03-179 Medical Settings and Safety of Endoscopy 

York City area, so if Medicare coverage for office-based procedures was 

eliminated, the impact for these procedures would likely be minimal. 

CMS provided written comments on a draft of this report, and concurred 

with the general findings of the study. 

In 2001, there were about 4.8 million gastroenterological procedures and 

about 306,000 urological procedures performed on Medicare beneficiaries 

nationwide that were conducted at least 90 percent of the time in health 

care facilities and less than 10 percent of the time in physicians’ offices. 

About 3.3 percent (or about 156,000) of these gastroenterological 

procedures and 3.8 percent (or about 12,000) of these urological 

procedures were conducted in physicians’ offices. About 35 percent of all 

office-based gastroenterological endoscopic procedures were conducted 

in the New York City metropolitan area.6

Medicare regulates ASCs and other health care facilities that conduct 

endoscopic procedures by requiring that they satisfy conditions related to 

safety, facility design, staff expertise, and other factors in order to treat 

Medicare beneficiaries. 7

 If an ASC is accredited by a national accrediting 

body or licensed by a state agency that provides reasonable assurances 

that the conditions are met, CMS may deem it to comply with most 

requirements. These conditions include, for example, the following: 

• Compliance with state licensure requirements. 

• An effective procedure for immediate transfer to hospitals of patients 

needing emergency medical care beyond the capabilities of the ASC. 

• Safe performance of surgical procedures by qualified physicians granted 

clinical privileges by the ASC under Medicare-approved policies and 

procedures. 

• Ongoing comprehensive self-assessment of the quality of care with active 

participation of the medical staff. 

• Use of a safe and sanitary environment, properly constructed, equipped, 

and maintained to protect the health and safety of patients. 

 6

This pattern does not exist for the urological procedures. Only about 8 percent of the 

office-based procedures were conducted in the New York City area. 

7

42 C.F.R. §§ 416.40 – 416.48 (2001). 

Background 

Regulations and 

Guidelines for Endoscopic 

Procedures 
Page 6 GAO-03-179 Medical Settings and Safety of Endoscopy 

• Provision of adequate management and staffing of nursing services to 

ensure that nursing needs of all patients are met. 

• Maintenance of complete, comprehensive, and accurate medical records 

to ensure adequate patient care. 

• Safe and effective provision of drugs and biologicals under the direction of 

a responsible individual. 

According to the American College of Surgeons, nine states have 

guidelines or regulations8

 pertaining to the safety of office-based surgical 

procedures (including endoscopy) that address issues of Medicare 

certification, state licensure, accreditation,9

 and inspection of physicians’ 

offices: 

• In California, state licensure, Medicare certification, or accreditation is 

required for all outpatient settings where anesthesia is used. 

• In Connecticut, state regulations require any office or facility operated by 

a licensed health care practitioner or practitioner group to be accredited 

by a nationally recognized body if sedation or anesthesia is used. 

• In Florida, the state is required to inspect a physician’s office where 

certain levels of surgery (including endoscopy) are performed, unless a 

nationally recognized accrediting agency or another accrediting 

organization approved by the Board of Medicine accredits the office. 

• In Illinois, state regulations allow the delivery of anesthesia services by a 

certified registered nurse anesthetist in the office only if the physician has 

training and experience in these services. 

• In Mississippi, physicians conducting office procedures must register with 

the state, maintain logs of surgical procedures conducted, follow federal 

standards for sterilization of surgical instruments, and report any surgical 

complications to a state board. 

• In New Jersey, state regulations have been developed to establish training 

programs for physicians who utilize anesthesia in their office practices. 

• In Rhode Island, state regulations require licensure for offices in which 

surgery, other than minor procedures, is performed. Accreditation by a 

nationally recognized agency or organization is also required. 

 8

These state guidelines and regulations cover a wide range of office-based procedures, of 

which gastroenterological and urological endoscopy are only a portion. 

9

The application of safety and quality standards to offices that conduct surgery may result 

from their seeking accreditation by the Accreditation Association for Ambulatory Health 

Care, American Association for Accreditation of Ambulatory Surgery Facilities, or the Joint 

Commission on Accreditation of Healthcare Organizations. 
Page 7 GAO-03-179 Medical Settings and Safety of Endoscopy 

• In South Carolina, guidelines address the safe delivery of anesthesia, the 

presence of emergency equipment, procedures to transfer emergency 

cases to hospitals, and physician training. 

• In Texas, regulations govern physicians in outpatient settings providing 

general or regional anesthesia. 

In addition, organizations such as the American Society for 

Gastrointestinal Endoscopy and the Society of American Gastrointestinal 

Endoscopic Surgeons publish safety guidelines that are similar to the 

Medicare guidelines for ASCs. These guidelines are designed to ensure 

that endoscopies are conducted safely regardless of whether they are 

conducted in health care facilities or physicians’ offices. However, the 

Medicare program does not regulate physicians’ offices and does not make 

judgments about the safety of procedures conducted there. 

In 1992, the Health Care Financing Administration (HCFA) began the 

implementation of a resource-based physician fee schedule for the 

Medicare program. The physician fee schedule is applicable to procedures 

conducted in a variety of health care settings, including hospitals, ASCs, 

and physicians’ offices.10 Under this fee schedule, physician payments are 

based on relative amounts of resources needed to provide procedures 

regardless of the health care setting.11 The physician fee schedule includes 

three components. The physician work component (implemented in 1992) 

provides payment for the physician’s time, effort, skill, and judgment 

necessary to provide a service. The malpractice insurance component 

reimburses physicians for the expense of their professional liability 

insurance. The practice expense component compensates physicians for 

direct expenses, such as clinical staff salaries, medical supplies, and 

medical equipment and indirect expenses, such as administrative staff 

salaries and other office expenses incurred in providing services. 

 1042 U.S.C. § 1395w-4 (2000). 

11Prior to 1992, fees were based on charges physicians billed for their services. 

Medicare’s Practice 

Expense Payments and 

Site-of-Service 

Differentials 
Page 8 GAO-03-179 Medical Settings and Safety of Endoscopy 

Unlike the other two components, physician practice expenses can differ 

depending on where the procedure is performed.12 In the office setting, the 

physician is responsible for providing clinical staff, supplies, and 

equipment needed to perform a service. In the facility setting, such as a 

hospital or ASC, these are the responsibility of the facility. Medicare’s 

practice expense payments to physicians can differ depending upon the 

medical setting to reflect these differences. For medical facilities, practice 

expense payments to physicians are generally lower, because Medicare 

pays for nursing support, equipment, and supplies needed with a separate 

facility fee. However, when these procedures are performed in an office, 

Medicare pays physicians for these expenses in the practice expense 

portion of the physician fee schedule.13 The differences in practice expense 

payments for the same procedure are referred to as the site-of-service 

differential.14 In 1999, HCFA began a now completed 3-year phase-in of the 

site-of-service payment differential, as a part of the resource-based 

practice expense system. In previous work, we found that HCFA used 

acceptable methodology and relied on the best data available to develop 

the practice expense component of its Medicare payment system of which 

 12HCFA convened clinical practice expense panels composed of physicians, non physician 

clinicians, and practice administrators to review the types and quantities of practice 

expense components used for medical procedures. A contractor used the resulting data to 

develop dollar cost estimates. These estimates resulted in practice expense amounts 

assigned to different medical settings. There has been an ongoing multi specialty panel 

review of these estimates since 1999. According to CMS, this review has changed the 

estimates for more than 1,000 procedure codes. See 66 Fed. Reg. 55,245 (Nov. 1, 2001) for 

the most recent Medicare physician fee schedule. 

13The payment schedule for diagnostic colonoscopy, a common gastroenterological 

procedure, illustrates how payments to physicians differ by medical setting. In 2002, the 

practice expense payment to physicians who provide the procedure in an office, $318, is 

about five times greater than the practice expense payment of $64 to physicians who 

conduct the procedure in a medical facility, such as a hospital or an ASC. However, when 

this procedure is conducted in a hospital or ASC, Medicare also pays a facility fee of $372 

to hospital outpatient departments and $433 to ASCs. These are national reimbursement 

rates. The rates differ for specific geographic areas. 

14App. I lists the practice expense relative value units for each procedure included in our 

sample listing those for health care facilities and the physicians’ offices separately. The 

Medicare program translates the relative value units for practice expense (as well as those 

for physician work and malpractice insurance) into dollars by multiplying them by a single 

conversion factor. Since the practice expense relative value units are higher for physicians’ 

offices than for health care facilities, they result in higher reimbursement amounts for the 

physicians’ offices, hence a payment differential. 
Page 9 GAO-03-179 Medical Settings and Safety of Endoscopy 

this payment differential is a result.15 Medicare’s higher payment for officebased procedures reflects the higher expenses to the physicians of 

providing those procedures, but this payment may not cover all of their 

expenses.16

We found no evidence to suggest that the level of safety of 

gastroenterological or urological endoscopy conducted on Medicare 

beneficiaries differs by medical setting. In our search of the relevant 

scientific literature maintained by the National Library of Medicine and in 

discussions with Medicare carrier medical directors, physicians, and 

physician specialty societies, we found no evidence of a higher occurrence 

of medical complications from office-based gastroenterological and 

urological endoscopic procedures relative to other medical settings.17

Furthermore, according to a major trade association representing medical 

malpractice insurance companies, the pricing policies of insurance 

companies indicate that those companies do not believe that office-based 

endoscopy poses additional safety risks. 

Our search of relevant scientific literature maintained by the National 

Library of Medicine and discussions with physicians revealed little 

evidence of complications associated with office-based endoscopy for 

gastrointestinal and urological procedures. The scientific literature on the 

safety of office endoscopy is sparse; we were able to locate only one 

published study. This study of upper gastrointestinal procedures 

conducted in France showed very few complications over the course of 

nearly 18,000 endoscopic procedures.18 In this study, there was one death 

(the patient had previously diagnosed heart disease), one case of breathing 

 15See U.S. General Accounting Office, Medicare Physician Payments: Need to Refine 

Practice Expense Values During Transition and Long Term, GAO/HEHS-99-30

(Washington, D.C.: Feb. 24, 1999). 

16See U.S. General Accounting Office, Medicare Physician Fee Schedule: Practice Expense 

Payments to Oncologists Indicate Need for Overall Refinements, GAO-02-53 (Washington, 

D.C.: Oct. 31, 2001). 

17The Medicare program does not routinely collect safety data for endoscopic procedures 

performed in offices or other medical settings. 

18B. Maroy and P. Moullot, “Safety of Upper Gastrointestinal Endoscopy with Intravenous 

Sedation by the Endoscopist at Office: 17,963 Examinations Performed in a Community 

Center by Two Endoscopists over 17 Years,” Journal of Clinical Gastroenterology, vol. 27, 

no. 4 (1998): 368-69. 

Level of Safety of 

Endoscopy Does Not 

Appear to Differ by 

Medical Setting 

Available Evidence 

Suggests Complications 

Are Few with Office-Based 

Endoscopy 
Page 10 GAO-03-179 Medical Settings and Safety of Endoscopy 

difficulty (considered avoidable by the authors), and five other minor 

incidents. During the 10,000 exams performed over the last 12 years of this 

17-year study, no clinically significant incidents occurred. 

We discussed the safety of office-based endoscopy with physicians, 

including representatives of three organizations critical of the CMS 

practice expense site-of-service differential policy. We also discussed inoffice safety issues with four Medicare carrier medical directors, including 

those in New York where there is a relatively high proportion of office 

procedures conducted. All of these officials, including the critics of the 

policy, emphasized that the procedures as currently conducted are safe 

and that complications are extremely rare. 

According to the Physician Insurers Association of America, a trade 

association that represents the malpractice insurance industry, officebased endoscopy is not riskier than endoscopy conducted in health care 

facilities. For example, two large New York malpractice insurance 

companies do not levy a surcharge on physicians who conduct officebased surgery, including the endoscopic procedures included in our study. 

One of these New York companies, which has the largest market share 

nationwide (and 57 percent of the malpractice insurance market in New 

York) does not consider office-based surgery an issue when setting rates 

for its clients. The other New York company requires physicians who 

conduct surgery in their offices to follow its company standards for 

equipment and safety backup procedures, and it reserves the right to 

conduct unannounced inspections of their offices. It does not, however, 

impose a surcharge on physicians for office-based procedures. It does 

require a surcharge for endoscopic procedures, but the amount does not 

differ by medical setting. 

Major Malpractice 

Insurance Companies Do 

Not Levy Surcharge on 

Physicians Who Conduct 

Office-Based Endoscopy 
Page 11 GAO-03-179 Medical Settings and Safety of Endoscopy 

Although the site-of-service Medicare payment differential for the 

12 common gastroenterological endoscopic procedures in our study has 

increased since the practice expense component of the resource-based fee 

schedule began to be implemented in 1999, the percentage of these 

procedures performed in the office has not increased. The average 

Medicare practice expense payments for the 12 gastroenterological 

endoscopic procedures are presented in figure 1.19 The figure shows that 

the payment differential has increased both because the average practice 

expense payments for procedures performed in health care facilities have 

decreased substantially (from $133 in 1998 to $59 in 2002) and because the 

payment for office-based procedures has nearly doubled (from $143 in 

1998 to $277 in 2002). The payment differential for urological procedures 

has similarly increased since the average practice expense payments for 

such procedures performed in health care facilities have decreased by 

more than half (from $218 in 1998 to $83 in 2002) and because the average 

payments for office-based procedures have more than doubled (from $218 

in 1998 to $448 in 2002.) 

 19These calculations are based on practice expense reimbursement data for 12 

gastroenterological endoscopic procedures as detailed in app. I. Each procedure is 

assigned a specific dollar payment amount by CMS for practice expense reimbursement. 

The payment amounts reported reflect national reimbursement rates; the rates differ for 

specific geographic areas. 

Payment Differential 

Has Increased but 

Proportion of Office 

Procedures Has Not 

Increased 
Page 12 GAO-03-179 Medical Settings and Safety of Endoscopy 

Figure 1: Average Physician Practice Expense Reimbursements for 12 

Gastroenterological Procedures for Medicare Beneficiaries by Medical Setting, 

Nationwide 

Note: See app. I for a list of included procedures. 

a

Practice expense site-of-service differential phase-in begins. 

b

Practice expense site-of-service differential phase-in completed. 

Source: GAO analysis of CMS data. 

The nationwide percentage of common office-based gastroenterological 

and urological endoscopic procedures conducted on Medicare 

beneficiaries has not increased (see fig. 2).20 For example, the percentage 

of the gastroenterological procedures in our study conducted in the office 

nationwide declined from about 4.8 percent in 1996 to 3.9 percent in 1998, 

the last year of the old practice expense payment system, and to 3.3 

percent in 2001 as the phase-in of the new practice expense system 

approached completion. Similarly, the percentage of the urological 

 20See app. II for more information on site-of-service usage from 1996 through 2001 for the 

endoscopic procedures in our study. 
Page 13 GAO-03-179 Medical Settings and Safety of Endoscopy 

procedures in our study declined from about 5.7 percent in 1996 to 4.7 

percent in 1998 to 3.8 percent in 2001. 

From 1996 through 2001 in the New York City metropolitan area, where 

about 35 percent of the nationwide Medicare-covered office procedures 

were conducted, the proportion of office-based endoscopic procedures for 

gastroenterology has remained fairly constant at slightly less than 30 

percent. During the same period, the proportion of office-based urological 

procedures in our study has declined from 11 percent to 8 percent. 

However, regardless of geographic area, these findings must be 

interpreted with caution. It is too early to determine the full effects of the 

new practice expense system’s payment differential, as it was not fully 

implemented until 2002. 

Figure 2: Percentage of 12 Common Gastroenterological and 8 Urological 

Endoscopic Procedures Provided in Physicians’ Offices, Nationwide 

Note: See app. I for a list of included procedures. 

a

Practice expense site-of-service differential begins phase-in. 

Source: GAO analysis of CMS data. 
Page 14 GAO-03-179 Medical Settings and Safety of Endoscopy 

We were directed by BIPA to assess whether the access to care by 

Medicare beneficiaries would be adversely affected if gastroenterological 

procedures conducted in physicians’ offices were no longer reimbursed by 

Medicare. If this occurred, patients in most of the nation would not likely 

experience access problems for the procedures in our study, given that 

relatively few procedures are performed in the office setting. However, 

some New York City metropolitan area Medicare patients might have 

initial difficulty obtaining care. In 2001, 28 percent, or about 54,000, of the 

gastroenterological procedures for Medicare patients in the New York City 

area were conducted in physicians’ offices, accounting for about 35 

percent of these office procedures nationwide. According to CMS data, the 

New York City area has the largest proportion and total number of officebased gastroenterological procedures of any geographic area in the nation. 

In our review of CMS data on the geographic dispersion of office 

procedures, we have been unable to locate other areas of the country with 

such a major reliance on the availability of office-based 

gastroenterological endoscopy. If Medicare coverage for the common 

endoscopic office procedures included in our study were withdrawn, 

medical facilities might not have the capacity to absorb the displaced 

patients in the short term, according to a New York State Department of 

Health official and Medicare carrier directors. 

However, in 1998, New York State eased requirements for approval of new 

ASCs, and, as a result, medical facility capacity has recently begun to 

increase in the state and in the New York City area. New York requires an 

approved certificate of need (CON) in order to approve a new ASC. To 

obtain a CON, the need for the services of a proposed ASC must be 

demonstrated for specific geographic areas. According to a New York 

State Department of Health official, the rules for CON approval were 

relaxed significantly in March 1998, and nearly all applications are 

currently being approved. Since March 1998, there has been an increase of 

almost 200 percent in the number of ASCs in New York, including major 

increases in the New York City area. CON approvals can be obtained in the 

New York City area because most area hospitals are operating at capacity. 

In the future, if ASCs are equipped to offer the gastroenterological 

procedures included in our study, it is possible that they could 

accommodate displaced patients, if they are located in areas accessible to 

these patients. In contrast, only about 8 percent of the urological 

procedures in the New York City area were conducted in offices, so the 

elimination of Medicare reimbursement would likely have a minimal effect 

on the delivery of these procedures. 

If Office Procedures 

Were Not Reimbursed 

by Medicare, Access 

to Endoscopy Might 

Be Most Affected in 

the New York City 

Area 
Page 15 GAO-03-179 Medical Settings and Safety of Endoscopy 

Some critics of the Medicare site-of-service payment differential for 

endoscopic procedures have questioned the practice of conducting them 

as office procedures because of concerns about patient safety. They have 

suggested that the differential provides an incentive to the physician to 

provide endoscopic procedures in a setting—the physician’s office—that 

is less safe than another setting, such as a hospital or an ASC. But in our 

review of common gastroenterological and urological endoscopic 

procedures, we found no evidence that safety problems are greater for 

these procedures conducted in physicians’ offices. Furthermore, we found 

that the proportion of common office-based gastroenterological and 

urological endoscopic procedures included in our study has not increased 

as the site-of-service differential has been phased in. However, because the 

payment differential has been in effect only since 1999 and was not fully 

implemented until 2002, it is too early to tell whether it will affect the 

percentage of procedures conducted in the office in the future. If the 

common office-based endoscopic procedures included in our study were 

no longer reimbursed by Medicare, most areas of the country would not 

develop patient access problems. However, the initial effects in the New 

York City metropolitan area—where there is a predominance of officebased procedures—could be problematic, although the increase in ASCs in 

the New York City area could mitigate patient access problems in the 

future. 

CMS provided written comments on a draft of this report, and concurred 

with the general findings in the study (see app. III). The agency provided 

technical comments, which we have addressed where appropriate. 

We are sending this report to the CMS Administrator and interested 

congressional committees. We will also make copies available to other 

interested parties on request. In addition, the report available at no charge 

on the GAO Web site at http://www.gao.gov.

Concluding 

Observations 

Agency Comments 
Page 16 GAO-03-179 Medical Settings and Safety of Endoscopy 

If you or your staffs have any questions, please contact me at (202) 512-

7101. Major contributors to this report are listed in appendix IV. 

Marjorie Kanof 

Director, Health Care—-Clinical 

 and Military Health Care Issues 
Appendix I: Scope and Methodology 

Page 17 GAO-03-179 Medical Settings and Safety of Endoscopy 

This appendix provides detailed information on the gastroenterological 

and urological procedures that we selected for our study. It also describes 

the methods that we used to address the study’s main objectives. 

We selected the 12 gastroenterological and 8 urological endoscopic 

procedures that are ordinarily performed in health care facilities and that 

we defined as being conducted at least 90 percent of the time in health 

care facilities and less than 10 percent of the time in offices. These 

gastroenterological and urological procedures are common types of 

endoscopy. These procedures have a practice expense site-of-service 

differential. The procedures included in our study accounted for about 

30 percent of the total number of gastroenterological and urological 

endoscopic procedures conducted for Medicare beneficiaries in 2001; 

about 3.5 percent of the procedures in our study were conducted in 

offices. Many of these procedures require the use of sedation and entail 

some risks for patients. Our results are not generalizable to other 

endoscopic procedures. Tables 1 and 2 provide detailed information on the 

20 procedures included in our study. 

Appendix I: Scope and Methodology 
Appendix I: Scope and Methodology 

Page 18 GAO-03-179 Medical Settings and Safety of Endoscopy 

Table 1: GAO Sample of Gastroenterological Endoscopic Procedures for Medicare Beneficiaries, 2001 

Practice expense reimbursementb Procedure name 

(Current Procedural Terminology 

[CPT] codea

) Total performed Percentage in office Health care facility Physician’s office

Esophagus endoscopy 

(43200) 16,636 5.96 $52 $215

Esophagus endoscopy with biopsy 

(43202) 6,573 2.40 54 179

Upper GI—examination 

(43234) 3,492 2.21 53 132

Upper GI—diagnostic 

(43235) 507,438 2.50 61 169

Upper GI—biopsy 

(43239) 1,246,051 3.09 67 178

Change gastronomy tube 

(43760) 73,779 7.59 20 46

Diagnostic colonoscopy 

(45378) 1,211,962 3.59 91 232

Colonoscopy and biopsy 

(45380) 572,206 3.09 98 244

Colonoscopy and control bleeding 

(45382) 20,037 1.62 125 289

Colonoscopy and lesion removal 

(45383) 66,250 2.97 133 286

Colonoscopy and lesion removal—

with forceps or bipolar cautery 

(45384) 337,139 2.62 113 266

Colonoscopy and lesion removal—

with snare technique 

(45385) 694,714 3.46 126 286

Total 4,756,277 3.25 

a

CPT codes, which are maintained and copyrighted by the American Medical Association, are 

descriptive terms and identifying codes for reporting physician services and other medical services, 

including outpatient hospital procedures. CPT codes are used by health care providers to bill 

Medicare for covered services. 

b

These are national reimbursement rates. The rates differ for specific geographic areas. 

Source: GAO analysis of CMS data. 
Appendix I: Scope and Methodology 

Page 19 GAO-03-179 Medical Settings and Safety of Endoscopy 

Table 2: GAO Sample of Urological Endoscopic Procedures for Medicare Beneficiaries, 2001 

Practice expense reimbursementb

Procedure name 

(CPT codea) Total performed Percentage in office Health care facility Physician’s office

Kidney stone fragmentation 

(50590) 

40,666 2.86 $248 $397

Cystoscopy with ureteral catherization 

(52005) 

69,293 7.84 46 162

Cystoscopy with fulguration and/or 

resection of small bladder tumor(s) 

(52234) 

34,522 5.96 93 241

Cystoscopy with fulguration and/or 

resection of medium bladder tumor(s) 

(52235) 

33,230 1.67 114 263

Cystoscopy with fulguration and/or 

resection of large bladder tumor(s) 

(52240) 

25,419 1.38 204 352

Cystoscopy with direct vision internal 

urethrotomy 

(52276) 

14,817 6.60 95 246

Remove bladder stone 

(52317) 

6,832 4.00 129 792

Cystoscopy with insertion of stent 

(52332) 

80,925 1.13 60 841

Total 305,704 3.84 

a

CPT codes, which are maintained and copyrighted by the American Medical Association, are 

descriptive terms and identifying codes for reporting physician services and other medical services, 

including outpatient hospital procedures. CPT codes are used by health care providers to bill 

Medicare for covered services. 

b

These are national reimbursement rates. The rates differ for specific geographic areas. 

Source: GAO analysis of CMS data. 

To assess the safety of office-based endoscopy, we reviewed the scientific 

literature and interviewed physicians; four Medicare carrier medical 

directors in the New York City area; North Dakota; and Wyoming; a 

representative of Physicians Insurance Association of America; an official 

from a trade association that represents the medical malpractice insurance 

industry; and representatives of two large New York malpractice insurance 

companies. We also interviewed interest group representatives, including 

members of the American College of Gastroenterology, American Society 

for Gastrointestinal Endoscopy, American College of Surgeons, American 

Gastroenterology Association, and American Urological Association. We 

also reviewed regulations and guidelines on physician office-based 

endoscopy in the nine states that have such regulations and guidelines. 
Appendix I: Scope and Methodology 

Page 20 GAO-03-179 Medical Settings and Safety of Endoscopy 

These states are California, Connecticut, Florida, Illinois, Mississippi, New 

Jersey, Rhode Island, South Carolina, and Texas. 

To assess whether the practice expense site-of-service payment 

differential acts as an incentive for physicians to conduct 

gastroenterological and urological endoscopic procedures in their offices, 

we analyzed data from the Centers for Medicare & Medicaid Services 

(CMS) using the Part B Extract and Summary System on the medical 

settings (office, inpatient hospital, outpatient hospital, and ambulatory 

surgical center) for relevant procedures for 1996 through 2001. For the 

gastroenterological and urological procedures in our analysis, we 

developed averages of practice expense reimbursements for health care 

facilities and offices for each year from 1998 through 2002. 

To determine whether access to care by Medicare beneficiaries would be 

affected if endoscopic procedures in physicians’ offices were no longer 

reimbursed by Medicare, we analyzed CMS data (using the Part B Extract 

and Summary System) on office-based endoscopy for the nation as a 

whole and for the New York City area, which has the highest proportion of 

office-based procedures in the nation. We interviewed Medicare carrier 

medical directors in several locales with a range of population size and 

density, including the New York City area, North Dakota, and Wyoming. 
Appendix II: Medical Settings for Endoscopic 

Procedures in GAO Sample 

Page 21 GAO-03-179 Medical Settings and Safety of Endoscopy 

Tables 3 and 4 summarize the percentages of gastroenterological and 

urological endoscopic procedures in our sample performed in physicians’ 

offices, hospitals (both inpatient and outpatient), and ASCs for 1996 

through 2001. In the data provided to us by CMS, there was another 

medical setting category (“other”) that captured a broad variety of medical 

settings, including nursing facilities, rural health clinics, and military 

treatment facilities. The proportion of procedures conducted in these 

settings was very low, about 1 percent or less. In 1999, some of the claims 

data were coded incorrectly, and the Health Care Financing 

Administration inaccurately assigned larger proportions to the “other” 

category (from 5 to 9 percent). Because of this confusion, we have 

eliminated the “other” category from the analysis for 1999 and the other 

years to ensure consistency in comparisons. Our reanalysis affects the 

results for 1999 because it is unclear where the claims categorized as 

“other” should have been categorized. However, because of the relatively 

few cases affected, we do not believe that this error affects our analyses or 

conclusions. 

Table 3: Medical Setting Usage Trends for 12 Gastroenterological and 8 Urological 

Procedures, Nationwide, Calendar Years 1996-2001 

Year 

1996 1997 1998 1999 2000 2001

Gastroenterological 

proceduresa

 Percentages 

Office 4.76 4.30 3.87 3.55 3.37 3.25

Inpatient hospital 26.63 25.97 24.35 23.02 21.35 19.93

Outpatient hospital 49.49 48.94 49.33 48.89 48.73 47.15

ASC 19.11 20.79 22.45 24.54 26.54 29.64

Urological proceduresb Percentages

Office 5.70 5.17 4.70 4.44 4.05 3.84

Inpatient hospital 32.74 31.32 29.19 27.48 26.33 25.76

Outpatient hospital 54.52 56.06 57.48 58.80 59.33 59.16

ASC 7.04 7.46 8.63 9.28 10.29 11.24

a

Includes 12 procedures. See app. I for complete list. 

b

Includes 8 procedures. See app. I for complete list. 

Source: HCFA Part B Extract and Summary System (1996-2001). 

Appendix II: Medical Settings for Endoscopic 

Procedures in GAO Sample 
Appendix II: Medical Settings for Endoscopic 

Procedures in GAO Sample 

Page 22 GAO-03-179 Medical Settings and Safety of Endoscopy 

Table 4: Medical Setting Usage Trends for 12 Gastroenterological and 8 Urological 

Procedures, New York City Area and the Remainder of the United States, Calendar 

Years 1996-2001 

Year 

1996 1997 1998 1999 2000 2001 

New York City metropolitan area 

Gastroenterological proceduresa Percentages

Office 29.19 28.45 29.22 28.70 27.87 28.11 

Inpatient hospital 33.45 32.49 30.15 27.38 24.56 22.72 

Outpatient hospital 28.63 30.39 32.21 34.37 36.82 38.08 

ASC 8.73 8.67 8.42 9.55 10.75 11.09 

Urological proceduresb

Office 11.49 9.28 9.36 9.71 8.61 8.05 

Inpatient hospital 62.40 62.04 57.70 53.69 48.26 45.17 

Outpatient hospital 21.80 24.37 28.86 31.84 38.19 42.08 

ASC 4.30 4.30 4.08 4.76 4.94 4.70 

Rest of United States 

Gastroenterological proceduresa

Percentages 

Office 3.63 3.21 2.74 2.47 2.28 2.22 

Inpatient hospital 26.32 25.67 24.10 22.84 21.21 19.82 

Outpatient hospital 50.46 49.78 50.09 49.51 49.26 47.53 

ASC 19.59 21.33 23.07 25.18 27.25 30.43 

Urological proceduresb

Office 5.45 4.99 4.51 4.23 3.85 3.66 

Inpatient hospital 31.45 29.99 28.01 26.45 25.40 24.96 

Outpatient hospital 55.95 57.43 58.67 59.86 60.23 59.86 

ASC 7.16 7.60 8.81 9.46 10.52 11.51 

a

Includes 12 procedures. See app. I for complete list. 

b

Includes 8 procedures. See app. I for complete list. 

Source: HCFA Part B Extract and Summary System (1996-2001). 
Appendix III: Comments from the Department 

of Health and Human Services 

Page 23 GAO-03-179 Medical Settings and Safety of Endoscopy 

Appendix III: Comments from the 

Department of Health and Human Services 
Appendix IV: GAO Contact and Staff 

Acknowledgments 

Page 24 GAO-03-179 Medical Settings and Safety of Endoscopy 

Marjorie Kanof, (202) 512-7101 

Lawrence S. Solomon, Martin T. Gahart, Vanessa Taylor, Wayne Turowski, 

Roseanne Price, and Mike Thomas made major contributions to this 

report. 

Appendix IV: GAO Contact and Staff 

Acknowledgments 

GAO Contact 

Acknowledgments 

(290020) 
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