Medicare Physician Payments: Medical Settings and Safety of	 
Endoscopic Procedures (18-OCT-02, GAO-03-179).			 
                                                                 
Every year millions of Americans covered by Medicare 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 procedures 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 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. For the 20 procedures reviewed, there was no evidence to	 
suggest that there in 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 ASC's. There was
also no evidence found to suggest that the resource-based	 
site-of-service payment differential has caused physicians to	 
conduct a greater proportion of gastroenterological or urological
endoscopic procedures in their offices for Medicare		 
beneficiaries. If Medicare coverage for the office procedures in 
the study were terminated, few access problems would occur in	 
most of the country because physicians perform the vast majority 
of the procedures that were studied in health care facilities.	 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-03-179 					        
    ACCNO:   A05308						        
  TITLE:     Medicare Physician Payments: Medical Settings and Safety 
of Endoscopic Procedures					 
     DATE:   10/18/2002 
  SUBJECT:   Beneficiaries					 
	     Health care facilities				 
	     Health care services				 
	     Hospital care services				 
	     Managed health care				 
	     Medical fees					 
	     Physicians 					 
	     Safety regulation					 
	     Medicare Program					 

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GAO-03-179

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 Medicare 1 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. S:S: 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 regulations 8 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.

10 42 U. S. C. S: 1395w- 4 (2000). 11 Prior 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

12 HCFA 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.

13 The 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. 14 App. 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

15 See 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). 16 See 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).

17 The Medicare program does not routinely collect safety data for
endoscopic procedures performed in offices or other medical settings. 18
B. 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.)

19 These 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

20 See 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 reimbursement b Procedure
name

(Current Procedural Terminology

[CPT] code a ) 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 reimbursement b Procedure name (CPT
code a ) 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 procedures a
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 procedures b 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 procedures a 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 procedures b 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 procedures a 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 procedures b 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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