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claims without any certification of medical necessity or prescription. To correct the situation, we have encouraged the carriers to request a copy of the certification of need for the oxygen equipment with annotation of the need for the drug or other physician prescription of need. This has reportedly greatly reduced the number of such claims.


There is bound to be a continuing development of technologies with potential for overcharging Medicare, such as we have seen with pocket rockets, TENS units, and seat-life chairs.

Question. Do you have a routine assessment

program to identify these devices as they come on the market?

Answer. No, the FDA approves devices for marketing. We can only determine that abuse has occurred after the fact.

Question. Might there be another 10 or 15 medical devices out there abusing the Medicare reimbursement system?

Answer. We cannot say how many other devices may be contributing to Medicare abuses. Our policy is to pay only for items that are reasonable and necessary. When Medicare Contractor postpayment medical review indicates potential abuse, we investigate and institute appropriate corrective actions.


Question. Why do you have to wait for Inspector General's reports to identify problems before you move in, when the problems often were developing for years, wasting considerable amounts of money?

Answer. We do not wait for reports from the Inspector General to identify problems. Normally, corrective action plans are already designed to correct problems, long before any report is made by the Inspector General. In the case of seat lift chairs, HCFA was first to inform the Inspector General about suspected abuses. In some cases, even though our carriers and regional offices have already identified problems, we are restrained by the Congress from addressing them, such as in the Congressional moratorium on inherent reasonableness pricing for durable medical equipment or in the

Congressional mandate that fees paid for parenteral and enteral nutrients not be lowered.


The Inspector General's Office found that Medicare payments for certain surgical procedures were higher for hospital outpatient departments than for ambulatory surgery centers. An estimated $141.5 million in payments annually would be saved by decreasing reimbursement of hospital outpatient departments to levels paid ambulatory surgery centers.

Question. Why should there be a difference in Medicare payments for identical procedures performed in various outpatient facilities?

Answer. The reason for different payment methodologies for procedures performed in different settings is historical. When payment for services provided in ambulatory surgical centers and other centers was developed, hospitals were still being paid based on reasonable costs. The statute has since been modified to specify a blended payment methodology for most surgical, radiology, and diagnostic procedures performed in a hospital outpatient department based in part on the hospital's reasonable costs and in part on rates that would be paid if the procedure were performed outside of a hospital. The FY 1992 budget proposal would eliminate the variation in payment across settings and create uniform prospective rates for surgical, radiology, and diagnostic procedures.

Question. Would your "uniform payment"

legislative proposal, estimated to save $50 million, achieve parity in Medicare payments between hospital outpatient departments and ambulatory surgery centers?

Answer. Yes. The FY 1992 budget proposes to create prospective rates for surgical procedures based on the lower of average hospital costs and ASC rates. These new prospective rates would apply in both the hospital outpatient and ASC setting.

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Question. Do you have any evidence that doctors who self-refer are ordering an unnecessary amount of imaging tests?

Answer. At present, HCFA has only anecdotal evidence that doctors who self-refer are ordering an unnecessary amount of imaging tests. However, we have been mandated by Congress to conduct a study regarding the incidence of self-referral of imaging tests and will provide a statistical summary by April 30, 1992.

This statistical profile will compare service utilization rates for beneficiaries that receive care from entities in which referring physicians have some financial interest to rates for those whose physicians have no financial interest. It is therefore somewhat broader than the question of self-referral, looking at situations of any physician financial interest.

We are required to survey a minimum of ten states and six types of service providers, such as diagnostic imaging services. We are considering focusing somewhat on the high cost services like magnetic resonance imaging (MRIs) and ultrasound, and on those services with a high potential for being furnished by other than the ordering physician. This should capture information beyond the more limited question of self-referral.


Question. Concerning self-referrals of patients by a physician who performs his or her own imaging examinations, isn't such self-referral a potential conflict of interest?

Answer. Diagnostic imaging tests that are being performed by the medical community today include a wide assortment of studies such as x-rays (primarily skull and bone examinations), ultrasound, computerized tomography (CT) scans, and magnetic resonance imaging (MRI). Based on information available to us, we believe that most non-radiologist physicians participating under the Medicare program have been limiting their own use of imaging equipment to the least expensive x-ray and ultrasound equipment, if for no other reason than the cost of purchasing or leasing other items is very expensive.

While the potential for a "conflict-of-interest" exists with respect to physicians who self-refer, there are limitations in our authority for dealing with it.

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Section 1877 of the Social Security Act imposes restrictions on physical ownership or investment interest in entities that furnish clinical laboratory services. However, the statute does not authorize us to apply these restrictions to other Medicare providers or suppliers.

Section 1877 (f) of the Act sets forth reporting
requirements for ownership arrangements.
section requires the Secretary to collect
ownership information for selected entities in at
least 10 States. In the States that are chosen,
entities that furnish diagnostic imaging of any
type are required to provide us with a list of
the covered items and services that are furnished
by the entity and the names and unique physician
identification numbers of all physicians with an
ownership or investment interest in the entity,
or whose immediate relatives have an ownership or
investment interest.

Section 6204 (f) of OBRA 89, as amended by Section 4207 (e) of OBRA 90, requires HCFA to submit to Congress a statistical profile comparing utilization of items and services by Medicare beneficiaries served by entities in which the referring physician has a direct or indirect financial interest and by Medicare beneficiaries served by other entities. This report is to due Congress on June 30, 1992.

Question. How much does Medicare pay out for imaging tests, and how much do you think is unnecessary overutilization?

Answer. We do not have specific figures regarding how much is paid for imaging services. Medicare contractors, as part of their Medical Review activities, have edits designed to reject claims for further development when over-utilization is



Question. Can Medicare Contractors identify and audit physicians who submit an extraordinary high number of reimbursement claims for imaging studies?

Answer. Yes. Medicare Contractors currently conduct a program of postpayment medical review to identify and audit physicians who submit unexplainably high numbers of claims for all types of services. If a physician submits a large number of claims for imaging tests, a carrier draws a sample of claims and patient records to verify the medical necessity of the service, and visits the site of service to verify the type of equipment used. If the physician billed for an inflated level of service using more sophisticated equipment than he or she actually had, the carrier would recover any overpayment.


The Inspector General's office has developed a computer data base system that permits States to identify individuals, pharmacies, and physicians who use and prescribe excessive amounts of abusable drugs under Medicaid. According to the Inspector General, over half a billion dollars of Medicaid funds are spent annually on "street" drugs in vogue with addicts.

Question. How many States are using computer programs such as the one developed by the Inspector General to zero in on most likely cases of fraud and abuse?

Answer. According to the Office of the Inspector General (OIG), eight States are implementing the software, and another twenty-two are reviewing the documentation. All States with a Medicaid Management Information System (MMIS) conduct postpayment reviews of patterns of provider practice and recipient use of Medicaid services. The only States without an MMIS are Nevada and Rhode Island. Prescription drugs are reviewed from three perspectives: 1) physician prescribing patterns; 2) pharmacy dispensing

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