Medicare Dialysis Patients: Widely Varying Lab Test Rates Suggest Need
for Greater HCFA Scrutiny (Letter Report, 09/26/97, GAO/HEHS-97-202).

Medicare is the leading payer for dialysis and other medical treatments
for end-stage renal disease.   Medicare enrollment by kidney patients
more than doubled between 1984 and 1994, while expenditures more than
trebled--to $8.4 billion.  Medicare does not scrutinize the level of
laboratory tests for patients on dialysis, and GAO found that similar
patients received laboratory tests at widely different rates.  At one
extreme, Medicare may be paying for excessive tests, while at the other,
patients may not be receiving the tests needed to monitor their
condition.  Fee-for-service reimbursement does not give physicians
adequate incentives to order tests judiciously, and neither Medicare nor
its claims processing contractors routinely analyze the kind of claims
data that GAO reviewed when it found anomalies.  GAO recommends that
Medicare profile doctors ordering laboratory tests for Medicare dialysis
patients and notify contractors of unusual test rates.  In addition,
Congress should consider holding physicians liable when they order
excessive tests.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  HEHS-97-202
     TITLE:  Medicare Dialysis Patients: Widely Varying Lab Test Rates 
             Suggest Need for Greater HCFA Scrutiny
      DATE:  09/26/97
   SUBJECT:  Urologic diseases
             Disease detection or diagnosis
             Health care services
             Medical examinations
             Comparative analysis
             Patient care services
             Medical expense claims
             Health care cost control
IDENTIFIER:  Medicare End Stage Renal Disease Program
             
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Cover
================================================================ COVER


Report to the Chairman, Subcommittee on Health, Committee on Ways and
Means, House of Representatives

September 1997

MEDICARE DIALYSIS PATIENTS -
WIDELY VARYING LAB TEST RATES
SUGGEST NEED FOR GREATER
HCFA SCRUTINY

GAO/HEHS-97-202

Dialysis Patients' Lab-Testing Rates

(106433)


Abbreviations
=============================================================== ABBREV

  ESRD - end-stage renal disease
  HCFA - Health Care Financing Administration
  HHS - Department of Health and Human Services
  NIH - National Institutes of Health
  NRAA - National Renal Administrators Association
  PMMIS - Program Medical Management and Information System
  RPA - Renal Physicians Association

Letter
=============================================================== LETTER


B-271865

September 26, 1997

The Honorable William M.  Thomas
Chairman, Subcommittee on Health
Committee on Ways and Means
House of Representatives

Dear Mr.  Chairman: 

Dialysis treatments annually extend the lives of the more than
200,000 people with permanent and irreversible loss of kidney
function.  For these end-stage renal disease (ESRD) patients, the
predominant payer for dialysis and other medical services is
Medicare.  Medicare's ESRD program is rapidly growing; between 1984
and 1994, enrollment more than doubled to about 279,000, while
expenditures more than trebled to $8.4 billion. 

We reported to you in 1995 on enrollment patterns and payment
practices for dialysis patients.\1 During the review leading to the
report, we also observed that patients of some renal dialysis
facilities received many more laboratory tests than other patients. 
Medicare deems 16 laboratory tests as routine for dialysis patients
and includes them in the bundle of services for which it pays a lump
sum.\2 For any of the roughly 1,350 other procedure codes for
laboratory tests that physicians can order, Medicare pays the
performing clinical laboratory separate amounts according to a fee
schedule.\3

After discussions with your office about the anomalous patterns of
test rates we observed for dialysis patients, you asked us to explore
this matter further.  Specifically, you asked us to determine (1) the
extent to which the rates for providing laboratory tests to Medicare
patients varied among dialysis facilities; (2) the appropriateness of
these rates; (3) reasons for the variation; and (4) the adequacy of
the reviews that the Health Care Financing Administration (HCFA), the
agency administering Medicare, performs to examine laboratory test
claims. 

To do this work, we reviewed HCFA's 1994 and 1995 billing data (the
latest data available) for Medicare patients who received dialysis
treatments at freestanding facilities.  We did not conduct a formal
reliability assessment of the data, but we did check them against
other published data to ensure that they contained the correct number
of facilities and patients. 

We included only renal dialysis facilities with at least 50 patients
and patients who used one dialysis facility in a given year.  We then
determined how many tests each patient received while attending the
dialysis facility and identified the laboratories where the tests
were performed.  In the absence of explicit practice guidelines or
specific standards, we assessed the medical necessity and appropriate
frequency of laboratory tests on the basis of discussions with renal
disease experts, including officials from the National Institutes of
Health (NIH), the National Renal Administrators Association (NRAA),
and the Renal Physicians Association (RPA).  (See app.  I for a
complete description of our scope and methodology.)


--------------------
\1 Medicare:  Enrollment Growth and Payment Practices for Kidney
Dialysis Services (GAO/HEHS-96-33, Nov.  22, 1995). 

\2 Under Medicare's billing system, approximately 50 different
procedure codes are used to bill for the 16 laboratory tests. 

\3 Throughout this report, "laboratory tests" and "tests" refer to
tests not bundled into the dialysis rate and therefore separately
billable.  In some circumstances, tests included in the bundled rate
can also be billed separately, but these tests were not included in
our study. 


   RESULTS IN BRIEF
------------------------------------------------------------ Letter :1

Despite the large volume of laboratory services provided to ESRD
patients, HCFA does not scrutinize the level of laboratory tests
ordered for patients receiving dialysis.  Our study of 2.8 million
laboratory services for patients treated at 766 freestanding dialysis
facilities in 1994 showed that clinically similar patients received
laboratory tests at widely disparate rates.  Compared to the median
facility's average of 56 tests per patient per year, patients of one
facility averaged 224 tests for the year, whereas patients of another
averaged 9 tests that year. 

This variation suggests that, at one extreme, Medicare may be paying
for an excessive number of tests; at the other, patients may not be
receiving the tests needed to adequately monitor their condition. 
Renal disease experts we consulted found questionable usage rates for
20 of 34 individual laboratory tests identified in two data samples. 
They determined that many of these tests provided to patients at the
100 facilities with the highest average number of tests ordered per
patient were either provided too often or ordered for an implausibly
large proportion of patients.  In contrast, low rates of laboratory
tests for patients of some facilities were also found.  For example,
although laboratory tests need to be conducted for a variety of
factors relating to renal desease, the experts whom we interviewed
suggested the need for a minimum of eight tests yearly just to check
blood iron levels.  Nevertheless, patients of some facilities we
reviewed received an average of only nine tests in total, indicating
that they are not being adequately tested for all conditions. 

The nature of fee-for-service reimbursement does not give physicians
adequate incentives to be judicious in ordering tests.  In addition,
the likelihood of excessive testing may increase when a company owns
both a dialysis facility and a laboratory and includes unnecessary
tests in standing orders--a list of tests to be ordered for most
patients treated at that facility.  These and other physician-related
factors, such as the physician's knowledge of the latest testing
techniques and medical practice differences, help explain the wide
variation in laboratory test rates for dialysis patients, including
the low rates of tests ordered. 

Neither HCFA nor its claims-processing contractors analyze claims
data that would reveal the dramatic variation in test rates found in
our study.  As a result, neither knows if Medicare is paying for
unnecessary tests for some patients or if other patients receive too
few tests to ensure high-quality treatment.  Furthermore, because
claims for tests are submitted by the laboratories performing the
tests, contractors' reviews of claims data would likely identify the
laboratories and not the test rate patterns found when the data are
arrayed by the patient's ordering physician or dialysis facility. 
Without knowledge of these patterns, HCFA has no indication of
whether laboratory claims made on behalf of ESRD patients receiving
dialysis are for an appropriate level of tests. 

Without a process for identifying the physicians who order tests for
dialysis patients and for notifying contractors of providers whose
test order rates are aberrant, HCFA is unable to identify physicians
who order unneeded or inadequate numbers of tests.  In addition, the
Congress may wish to consider making the ordering physician liable
for recovery of payments made to laboratories when the physician has
been notified of a pattern of inappropriately high testing rates. 


   BACKGROUND
------------------------------------------------------------ Letter :2

Medicare covers dialysis and related services for patients suffering
from ESRD, the stage of kidney impairment that is considered
irreversible and requires either regular dialysis or a kidney
transplant to maintain life.  Dialysis is the process of cleansing
excess fluid and toxins from the blood of patients whose kidneys do
not function.  Renal failure can result not only directly from
specific kidney disease, such as nephritis, but also indirectly from
other diseases, such as diabetes and hypertension. 

Virtually all persons with ESRD are eligible for the Medicare program
and for all Medicare-covered services, not just dialysis services.\4
In 1994, about 222,000 patients received dialysis services, while
about 10,000 patients received a kidney transplant.  In that year,
there were 1,795 freestanding dialysis facilities and 731
hospital-based dialysis facilities. 

The two general modes of dialysis treatment, hemodialysis and
peritoneal dialysis, can be performed at a renal facility or at home. 
In hemodialysis, blood is cycled from the patient's body through a
dialysis machine that filters out body waste before returning the
blood to the patient.  Peritoneal dialysis uses the lining of the
patient's abdomen (the peritoneal membrane) to filter blood. 
Eighty-two percent of patients on dialysis receive hemodialysis
treatments at a renal facility. 

Generally, an ESRD patient receives three hemodialysis treatments a
week, and Medicare pays freestanding dialysis facilities a flat
payment, or composite rate, that averages $126 for each treatment.\5
This rate covers a bundle of services and supplies, including
dialysis and 16 laboratory tests, that are routinely provided to each
patient.  All laboratory tests not included in the bundle are
separately billed by the laboratories performing the tests, with
payment based on a HCFA fee schedule.\6

To date, attention on laboratory tests for dialysis patients has
focused on laboratory tests included in the composite rate.  In
October 1996, the Department of Health and Human Services (HHS)
Inspector General found duplicate payments for routine laboratory
tests that were paid both as part of the composite rate and as a
separately billed claim.\7 Given a sample of 800 claims for
laboratory tests, the Inspector General estimated that $6.3 million
of $12.8 million that Medicare paid for these tests should not have
been separately reimbursed.  In effect, Medicare paid twice for these
tests. 


--------------------
\4 To be eligible for ESRD coverage, a patient generally must have
been on dialysis for 3 months and must be (1) entitled to a monthly
insurance benefit under title II of the Social Security Act (or an
annuity under the Railroad Retirement Act), (2) fully or currently
insured under Social Security, or (3) the spouse or dependent child
of a person who meets at least one of the first two requirements. 

\5 The average dialysis payment rate for freestanding facilities is
$126.  The rate can range from a minimum of $117 to a maximum of $139
per facility depending on regional wage variations. 

\6 In addition to the 16 routine laboratory tests included in the
composite rate, HCFA considers 5 other laboratory tests routine but
separately billable.  Medicare will pay for these tests, outside the
composite rate, at frequencies cited in HCFA's manuals.  Our data
exclude all these tests. 

\7 Department of Health and Human Services, Office of Inspector
General, Review of Separately Billable End Stage Renal Disease
Laboratory Tests, A-01-96-00513 (Oct.  1996). 


   LABORATORY TEST RATES VARY
   MARKEDLY FOR PATIENTS IN
   DIFFERENT DIALYSIS FACILITIES
------------------------------------------------------------ Letter :3

Our examination of 766 freestanding facilities showed that, despite
the similarity of their patient populations, patients of some
facilities received on average many more laboratory tests per year
than others.  Table 1 shows the distribution of various test rates
among the facilities in our study.\8 At the extremes were patients of
a dialysis facility who received tests an average of 224 times per
year and those of a facility who averaged only 9 tests per year.  In
the middle were patients of a facility who averaged 56 tests per
year.\9



                          Table 1
          
           Distribution of Laboratory Test Rates
           for Patients of Freestanding Dialysis
                      Facilities, 1994

                                                  Ratio of
                                     Average         tests
Facility ranked by average         number of   provided to
number of tests provided               tests        median
annually per patient                provided      facility
------------------------------  ------------  ------------
Top                                      224           4:1
100th (87th percentile)                   86         1.5:1
383rd (median)                            56           1:1
666th (13th percentile)                   29          .5:1
Bottom                                     9         .16:1
----------------------------------------------------------
Notably, patients of facilities averaging the largest numbers of
tests annually and those averaging around the median number of tests
had characteristics that were similar both demographically and
clinically.  Using a June 1996 version of HCFA's ESRD Program Medical
Management and Information System (PMMIS), we examined the
characteristics of patients of the 100 highest ranking facilities and
of the 100 facilities that ranked around the middle.\10 In the top
100 facilities and the middle 100 facilities, patients shared the
characteristics shown in table 2. 



                          Table 2
          
             Patient Characteristics in Top and
                Middle 100 Facilities, 1994

                                  Facilities    Facilities
Patient characteristic                 1-100       336-435
------------------------------  ------------  ------------
Mean age in years                       63.7          62.9
% male                                    60          58.9
% white                                   51          49.3
% patients with diabetes as               32            32
 primary reason for dialysis
% patients with kidney failure            15            16
 as primary reason for
 dialysis
% patients with hypertension              33            32
Mortality rates (%) January             42.2          41.7
 1994 through June 1996
% patients with at least one            11.3          11.3
 kidney transplant received
 January 1994 through June
 1996
----------------------------------------------------------
Despite the similarity in patient characteristics, our data showed
that compared to patients in the middle 100 facilities, many patients
in the top 100 facilities received certain individual laboratory
tests nine times as frequently. 


--------------------
\8 To determine patient testing levels, we grouped patients by the
facility where they received dialysis and calculated how many tests a
facility's patients received on average.  We used HCFA's billing data
to determine how many laboratory tests all patients of each facility
received while they were attending the facility.  We divided this
total by the number of weeks the patients attended the facility to
get the average number of tests received per patient per dialysis
week.  Multiplying this result by 52, we arrived at the average
yearly number of tests each patient would have received if he or she
had attended the facility for an entire year. 

\9 HCFA's billing data for 1995 showed similar testing rate patterns. 
At the extremes were patients of a facility who averaged 161 tests
per year and those who averaged 8 tests per year.  In the middle were
patients of facilities averaging 69 tests per year. 

\10 We found demographic and clinical information in PMMIS for about
70 percent of the patients in the top and middle 100 facilities (see
app.  I). 


   TEST RATE DISPARITIES INDICATE
   INAPPROPRIATE LEVELS OF TEST
   ORDERING
------------------------------------------------------------ Letter :4

The large differences in the rates of tests ordered suggest that
there may be both excessive use, with some patients receiving tests
too often or receiving tests that may not be necessary at all, and
underuse, with patients receiving too few tests to ensure appropriate
monitoring of their condition.  In the absence of formal criteria or
guidelines on proper testing levels for laboratory tests, we asked
several renal disease experts to examine our test rate data in
detail.\11

The experts reviewed usage rates for 34 individual laboratory tests
from two data samples and questioned the usage rates for 20 tests. 
The first sample included the average yearly number of tests provided
to patients across the 100 highest ranking facilities; for another
perspective, the second sample included average yearly tests provided
to patients of 6 randomly selected facilities.\12 For a complete list
of tests that the experts reviewed, see appendix II.  For a list of
the tests the experts found questionable, see appendix III. 


--------------------
\11 The National Kidney Foundation is developing treatment guidelines
for ESRD patients.  The draft guidelines address improving patient
survival, reducing patient morbidity, increasing efficiency of care,
and improving quality of life for dialysis patients.  However, the
guidelines do not specify levels for laboratory tests. 

\12 The first sample consisted of 13 individual laboratory tests that
at least 100 patients of the top 100 facilities received at least
twice as often as patients of the middle 100 facilities.  The second
sample included 26 high-frequency tests provided to patients of six
dialysis facilities that we selected at random.  Because 5 tests
appeared in both samples, the total of individual tests reviewed was
34. 


      EXCESSIVE RATES COMPOSED OF
      TESTS RARELY NEEDED OR
      ORDERED TOO FREQUENTLY
---------------------------------------------------------- Letter :4.1

The experts found that many of the tests reviewed appeared to be
either rarely necessary or ordered too frequently.  Table 3 shows a
few examples of tests the experts deemed to have been provided
inappropriately.




                          Table 3
          
          Examples of Tests Experts Found Ordered
                      Inappropriately

Procedure                                     Experts'
code          Name          Use rate          comments
------------  ------------  ----------------  ------------
Tests deemed rarely medically necessary
----------------------------------------------------------
82307         Calciferol    Provided to 3%    Rarely, if
              (vitamin D)   of patients       ever,
                            (247) in our      needed.
                            top-100 facility
                            sample.

82652         Dihydrozy     Provided to 5%    Rarely, if
              vitamin D,    of patients       ever,
              1, 25-        (384) in our      needed.
                            top-100 facility
                            sample.

83937         Osteocalcin   Provided to 20%   No value for
              (bone g1a     of patients       dialysis
              protein)      (1,738) in our    patients.
                            top-100 facility
                            sample.

84134         Prealbumin    Provided to 96%   Rarely, if
                            of patients at    ever,
                            one facility and  needed.
                            88% of patients   Provided to
                            at another in     implausibly
                            our 6-facility    large
                            sample.           proportion
                                              of patient
                                              population.


Tests provided too frequently
----------------------------------------------------------
82746         Folic acid,   Provided to 40%   Should be
              serum         of patients in    given to a
                            the top-100       maximum of
                            facility sample.  15 percent
                                              of patients.

83970         Parathormone  Provided 10       Test should
              (parathyroid  times to 92% of   be given
              hormone)      patients at one   about 4
                            facility in our   times a
                            6-facility        year.
                            sample.

85730         Thromboplast  Provided 11.5     Should be
              in time,      times to 87% of   provided, at
              partial       patients at one   most, 4
              (PTT);        facility in our   times a
              plasma or     6-facility        year.
              whole blood   sample.

86296         Hepatitis A   Provided over 3   Test should
              antibody      times to 3% of    be given a
              (HAAb); IgG   patients (280)    maximum of
              and IgM       in the top-100    once a year.
                            sample.
----------------------------------------------------------
The experts noted that, although any test might be valid for any one
individual, they could find no plausible reason for giving certain
tests to the large numbers of patients we identified.  For example,
some of the experts had never ordered a test that measures the
absorption of calcium in bone.  Nevertheless, this test, 83937,
osteocalcin (bone g1a protein), was provided three times per patient
per year to 20 percent of the patients in the top-ranked 100
facilities.  Several experts questioned the test's value for dialysis
patients, noting that its appropriateness for them was uncertain. 

The experts also found the value of vitamin D tests, 82307,
calciferol vitamin D, and 82652, dihydrozy vitamin D, 1, 25-, to be
dubious.  Because dialysis patients do not produce vitamin D, their
physicians provide it to them, therefore making the monitoring of
vitamin D levels unnecessary.  In our data samples, one of these
tests was provided to 5 percent of the patients in the top 100
facilities about 8 times a year, and the other test was provided to 3
percent of the patients about 10 times a year.  One expert had rarely
ordered these tests in his 18-year career, and a second, who had been
practicing for more than 16 years, believed he may have ordered these
tests twice.  A third expert said that most of the physicians at
facilities where he is the medical director would not give the test
at any time. 

Several experts noted that they had never ordered 85730,
thromboplastin time, partial (PTT); plasma or whole blood, a test to
determine the effect of the drug heparin, which is given to dialysis
patients to prevent blood clotting.  Nonetheless, 87 percent of the
patients at one dialysis facility received this test 11 times a year. 
In comparison, 30 percent of the patients at another facility and 25
percent of the patients at a third facility received it twice a year,
while 44 percent of the patients at a fourth facility received it 2.5
times a year. 

Finally, with respect to 84134, prealbumin, a test that indicates
malnourishment, three experts said it was rarely needed and should be
provided to few patients.  Nevertheless, in our six-facility sample,
96 percent of patients of one facility and 88 percent of patients of
a second facility received this test 11 times a year.  These rates
compare with 16 percent of patients of the middle-ranked 100
facilities averaging five tests per year. 

The experts also identified tests that are not unusual for dialysis
patients to receive but were nevertheless given too often.  Two
experts, for instance, believed that the number of patients who
received the 82746, folic acid, serum, test was very high.  Forty
percent of the patients in the top 100 facilities received this test
four times per year.  One expert said that fewer than 15 percent of
all patients should receive this test ever or that often, and another
believed it was needed only rarely. 

Two experts also identified a problem with the ordering of 86296,
hepatitis A antibody (HAAb); IgG and IgM.  This test was provided to
about 3 percent of the patients in the top 100 facilities who
received it an average of three times per year.  One expert said the
test was rarely needed and was certainly not needed three times per
year per patient. 

Two experts found that 83970, parathormone (parathyroid hormone), a
test to check for a hormone that regulates calcium and phosphorus
metabolism, was given much too often.  One expert noted that the test
should be given about twice a year, and the other observed that the
medical condition for which this test is performed would not change
for 2 to 3 months after a change in therapy, so that testing before
that time would not be useful.  At one facility, however, 92 percent
of the patients received the test an average of 11 times a
year--nearly once a month. 


      LOW TEST RATES APPEAR TO BE
      INCONSISTENT WITH COMMON
      MEDICAL PRACTICE
---------------------------------------------------------- Letter :4.2

The data also show that some patients received tests not covered
under the composite rate at rates dramatically below the median. 
Some, for example, received on average 9 tests in total for the year,
compared with patients of the median facility, who averaged 56 per
year.  An RPA official and other experts noted that, to monitor the
blood levels of just one substance--iron--dialysis patients should
receive at least eight tests yearly (two different tests provided
quarterly).\13 In affirming the importance of iron-level testing, one
expert suggested these iron tests be included in the routine test
bundle reimbursed through the composite rate. 


--------------------
\13 Iron and iron-binding capacity tests, identified by HCFA Common
Procedure Codes 83540 and 83550, respectively.  A third test, serum
ferritin (82728), was also identified as necessary but is not
included in our example because it is a test not requiring specific
medical justification under the ESRD program. 


   FINANCIAL INCENTIVES AND OTHER
   PHYSICIAN-RELATED FACTORS MAY
   EXPLAIN WIDE VARIATION IN TEST
   RATES
------------------------------------------------------------ Letter :5

Financial incentives as well as lack of knowledge and differences in
medical practices may help explain the wide variation we found in the
rates of laboratory tests provided.  The experts we consulted cited
these factors as possible reasons for inappropriate test levels. 

The financial incentive to bill for as many tests as possible is
inherent in the fee-for-service payment arrangement for laboratory
tests, making laboratory ownership an important factor.  For example,
when a single company owns one or more dialysis facilities and a
laboratory, there is an opportunity to increase overall revenues by
directing more laboratory tests to the company-owned laboratory.  As
the experts pointed out, facilities can influence the tests
physicians order through the development of "standing orders," which
are a list of tests periodically performed on all patients unless the
ordering physician overrides them. 

Former hospital billing practices illustrate the potential to use
standing orders to pad claims for laboratory services.  Before
Medicare and other insurers implemented prospective payment systems
for inpatient hospital care--namely, the payment of flat fees for
certain diagnoses regardless of the volume of services provided--many
problems were identified with hospitals' standing orders for
laboratory tests given to patients upon admission.  The standing
orders often included tests that were not medically necessary for
most patients, but all patients received them, and their insurers
were billed for those excess tests. 

The use of standing orders could account for the presence, in our
1994 data sample, of more than 40 percent of a chain's facilities in
the top-ranked 100 facilities in terms of tests ordered.\14 It may
also explain our study's finding that about 90 percent, on average,
of the patients of at least 23 facilities in this chain received a
prealbumin test from 11 to 12 times per year--a test that experts
considered to be needed plausibly for only a small fraction of
patients.  The medical director of one of these facilities confirmed
that prealbumin was in the facility's standing order. 

The potential for overordering tests inherent in the joint ownership
arrangement is consistent with information provided to us by a
facility's former medical director.  He told of a company official
who once cautioned him that unless the company's profits from
laboratory tests increased (the company owned both the facility and
the laboratory), a reduction in the facility's nursing staff would be
necessary. 

The experts we interviewed attributed most of the unneeded tests, as
well as the underprovision of tests, to a lack of knowledge on the
part of the ordering physicians.  They believed that the physicians
were either not keeping abreast of current scientific knowledge or
misguided about the frequency at which a test should be ordered.  As
a result, physicians could fail to order the tests needed or not be
in a position to challenge the inclusion of tests in standing orders
that might not be appropriate. 

The experts also believed that some of the unneeded tests they
identified could have resulted from differences among physicians in
professional judgment regarding which tests are needed and how often
they are needed.  Divergent opinions could be the product of
differences in medical school training or continuing education.  For
example, an NIH nephrologist indicated that, contrary to the views of
the experts we interviewed, he believes that the prealbumin test
(code 84134) should not be limited to very few patients.  In
contrast, he agreed that it is not necessary to receive this test
nearly once a month as did patients of some facilities in our sample. 
In addition, legitimate medical practice differences could be
reflected in standing orders developed by different medical
directors. 


--------------------
\14 Likewise, in our 1995 sample, a substantial portion of this
chain's facilities reappeared in the top-ranked 100 facilities. 


   CURRENT PAYMENT PROCEDURES MAKE
   IT DIFFICULT TO HOLD
   APPROPRIATE PROVIDERS
   ACCOUNTABLE FOR OVERORDERING
------------------------------------------------------------ Letter :6

HCFA officials informed us that neither HCFA nor its
claims-processing contractors perform the analyses necessary to
determine the rates at which dialysis patients receive laboratory
tests.  As a result, neither knows if Medicare is paying for
unnecessary tests for patients who receive numerous tests or if
patients who receive few tests are receiving high-quality treatment. 
HCFA relies largely on its contractors to monitor claims data for
inappropriate, erroneous, or otherwise unnecessary payments.  The
contractors' reviews of paid claims (postpayment review) generally
are conducted in accordance with a HCFA policy known as focused
medical review, under which contractors are instructed to examine
claims to identify either services likely to be overused or providers
likely to be overbilling. 

Normally, the provider that bills Medicare is also the one that
orders or controls the provision of the service.  With laboratory
tests, however, this is often not so.  While a physician must always
order tests, they are frequently performed by an independent clinical
laboratory.  Under Medicare rules, physicians bill for their personal
services (such as the office visit when the test was ordered), and
the laboratory bills for the test itself.  Under the normal analysis
methods carriers use, if anyone is identified for excessive test
usage rates, it would likely be the laboratory and not the physician
ordering the tests. 

Our study identifies patients' test rates by the facility at which
they have been dialyzed, by test types, and by test frequencies. 
Arraying the data by facility allowed us to observe test rates in
conjunction with ownership ties, recognizing that laboratories and
facilities can have a common owner and that ordering physicians are
often a dialysis facility's medical director.  To replicate such an
analysis, HCFA could examine contractor data for laboratory claims. 
These claims identify the ordering (or referring) physician.  Using
these claims data, HCFA could profile (or identify) physicians who
order many more tests than their peers.  Profiling would allow HCFA
to observe usage rates nationwide, single out facilities or
physicians (or both) whose test order rates are aberrant, and notify
the contractors who process these providers' claims.  The
contractor's health professionals could then review the provider's
practices and, if excessive or insufficient testing were identified,
notify the provider of this fact through educational letters. 

With regard to physicians' ordering excessive tests, as discussed
above, they do not have a financial incentive to scrutinize the
necessity of tests they order when the testing is done at independent
clinical laboratories.  In addition, if the laboratory actually
performs the tests a physician orders, Medicare will pay for
unnecessary tests because the laboratory is only complying with the
physicians' orders.\15 One way to give physicians an incentive to
review their test-ordering practices more closely would be to hold
them financially responsible for unnecessary tests (done by
independent laboratories) that they order after having been notified
that individual tests are inappropriate, perhaps through the
educational letters mentioned above. 


--------------------
\15 However, if common ownership, kickbacks, or conspiracies are
involved, the laboratory could be subject to civil or criminal
penalties. 


   CONCLUSIONS
------------------------------------------------------------ Letter :7

Insufficient use of the proper tests can compromise the quality of
ESRD patients' care, while the excessive or inappropriate use of
tests can result in unnecessary Medicare payments.  The seriousness
of both extremes calls for HCFA to monitor laboratory test rates for
patients receiving dialysis treatments.  Although the data are
available, HCFA does not examine them in a way that would reveal
relative test usage rates. 

Our analysis of these data, in consultation with renal disease
experts, reinforces concerns that both excessive and insufficient
testing are occurring.  The distribution of test rates across
facilities included in our study suggests that financial incentives
and differences in individual physicians' professional judgment could
account for the wide variation.  The experts noted that our study's
testing patterns warrant further investigation.  Therefore, we
believe that HCFA should perform the data analyses needed to examine
test rate variation and identify physicians whose rates of test
orders are out of line with average rates. 

Because independent laboratories that perform the excessive tests
doctors order are generally not held liable for repayment, Medicare
does not have a way to recover the costs of such tests.  Making
ordering physicians financially responsible in such cases after they
have been notified of the inappropriateness of particular tests would
be a way to induce physicians to review more closely the necessity of
the tests they order, including those ordered through standing
orders. 


   MATTER FOR CONGRESSIONAL
   CONSIDERATION
------------------------------------------------------------ Letter :8

The Congress may wish to consider making the ordering physician
liable for the recovery of payments made to laboratories when the
physician continues to order tests that are not medically necessary
or are provided too frequently, after having been notified of a
pattern of such inappropriately high testing rates. 


   RECOMMENDATION TO THE
   ADMINISTRATOR OF HCFA
------------------------------------------------------------ Letter :9

We recommend that, to assist contractors in their efforts to
determine the appropriateness of laboratory tests ordered for
Medicare dialysis patients, the HCFA Administrator profile physicians
ordering laboratory tests for dialysis patients and notify the
contractors of the providers whose test order rates are aberrant. 
The Administrator should instruct the contractors to review these
cases and carefully scrutinize ordering physicians who order too many
or too few tests. 


   AGENCY COMMENTS
----------------------------------------------------------- Letter :10

We requested comments from HCFA but none were received.  However,
HCFA staff provided technical corrections, which we incorporated. 


--------------------------------------------------------- Letter :10.1

As arranged with your office, unless you publicly announce the
contents of this report earlier, we plan no further dissemination
until 30 days after its issue date.  At that time, we will send
copies of this report to the Secretary of Health and Human Services,
the Administrator of HCFA, appropriate congressional committees, and
other interested parties.  We will also make copies available to
others upon request. 

If you or your staff have any questions, please call me at (202)
512-6806 or William Scanlon, Director of the Health Financing and
Systems issue area, at (202) 512-7114.  Other contributors to this
report include Scott Berger, Jack Brennan, Tom Dowdal, Hannah Fein,
Jonathan Ratner, Don Snyder, and Vanessa Taylor. 

Sincerely yours,

Richard L.  Hembra
Assistant Comptroller General


OBJECTIVES, SCOPE, AND METHODOLOGY
=========================================================== Appendix I

Our objective was to determine whether patients of some dialysis
facilities receive many more than the average number of laboratory
tests and, if so, to determine what the Health Care Financing
Administration (HCFA) should do to help ensure that dialysis patients
receive only necessary tests.  We limited our analysis to end-stage
renal disease (ESRD) outpatients who attended only one freestanding
facility and to facilities having at least 50 patients.  Our
resulting sample included 766 facilities with 67,767 patients in 1994
and 819 facilities with 72,100 patients in 1995.  Medicare paid $35.9
million for laboratory tests for these patients in 1994 and $40.6
million in 1995.  We eliminated hospital-based facilities from our
study after learning that many hospital-based laboratories do not
submit bills to Medicare for dialysis patients, making it impossible
for us to determine how many tests patients of these facilities
received. 

We used HCFA data to determine how many laboratory tests patients of
each facility received during the period they received dialysis.  We
included only tests from the 80000 series of services as shown in
HCFA's Common Procedure Coding System.  We excluded approximately 50
procedure codes from the 80000 series for the 16 laboratory tests
that are included in the composite rate (that is, tests provided to
every dialysis patient at a frequency cited in HCFA's manuals), and 5
tests (7 procedure codes) that are provided at a stated frequency but
are reimbursed in addition to the composite rate.  We reviewed HCFA
manuals and met with a HCFA official to identify the tests and their
related procedure codes included in these two categories. 

We used a June 1996 version of HCFA's Program Medical Management and
Information System (PMMIS) file to compare patient demographic
characteristics.  We were able to match about 70 percent of our
claims sample with PMMIS.  Thus, demographic information discussed in
this report is based on the smaller number of patients.  We
calculated facility average percentage of patients by age, race,
gender, initial medical reason for being placed on dialysis,
mortality rates, and transplant rates. 

We interviewed HCFA officials responsible for ESRD policy development
and implementation for laboratory testing, as well as research and
analysis and information systems management; officials at several
HCFA carriers and regional offices and an intermediary; officials at
one end-stage renal disease network office; an official at a state
health department; and representatives of national renal
organizations of administrators and nurses.  We also visited two
freestanding dialysis facilities. 

We met with four renal disease experts to review the testing rates
and comment on their reasonableness and to obtain their views on the
causes of the variation in rates.  We also discussed our results with
officials, including nephrologists, from the National Institutes of
Health (NIH), National Renal Administrators Association (NRAA), and
Renal Physicians Association (RPA). 

We conducted our work in accordance with generally accepted
government auditing standards except that we did not verify the
accuracy of HCFA's computerized files.  However, we did check the
data that HCFA provided against other published HCFA data to ensure
that they contained the correct number of facilities and patients. 

Appendix II THIRTY-FOUR TESTS THE EXPERTS REVIEWED

Procedure
code          Description
------------  --------------------------------------------
80002         Profile on automated multichannel equipment,
              2 clinical chemistry tests\a

80003         Profile on automated multichannel equipment,
              3 clinical chemistry tests\a

80007         Profile on automated multichannel equipment,
              7 clinical chemistry tests

80009         Profile on automated multichannel equipment,
              9 clinical chemistry tests\a

80019         Automated multichannel tests, 19 or more
              clinical chemistry tests\a

80061         Lipid panel, which must include cholesterol,
              serum, total (82465); lipoprotein, direct
              measurement, high-density cholesterol (HDL
              cholesterol) (83718); triglycerides (84478)

80162         Digoxin

82307         Calciferol (vitamin D)\a

82465         Cholesterol, serum, total\a

82607         Cyanocobalamin (vitamin B-12)\a

82652         Dihydrozy vitamin D, 1, 25-\a

82746         Folic acid, serum\a

83540         Iron\a

83550         Iron-binding capacity\a

83718         Lippoprotein, direct measurement; high-
              density cholesterol (HDL cholesterol)\a

83937         Osteocalcin (bone g1a protein)\a

83970         Parathormone (parathyroid hormone)\a

84134         Prealbumin\a

84460         Transferase; alanine amino (ALT) (SGPT)\a

84466         Transferrin

84478         Triglycerides

85007         Blood count; manual differential WBC count
              (includes RBC morphology and platelet
              estimation)

85027         Hemogram and platelet count, automated

85029         Additional automated hemogram indexes (e.g.,
              red cell distribution width (RDW), mean
              platelet volume (MPV), red blood cell
              histogram, platelet histogram, white blood
              cell histogram); one to three indexes\

85044         Reticulocyte count, manual

85045         Reticulocyte count, flow cytometry

85730         Thromboplastin time, partial (PTT); plasma
              or whole blood\a

86296         Hepatitis A antibody (HAAb); IgG and IgM\a

86302         Hepatitis C antibody\a

86317         Immunoassay for infectious agent antibody,
              quantitative, not elsewhere specified

87040         Culture, bacterial, definitive; blood
              (includes anaerobic screen)

87070         Culture, bacterial, definitive; any other
              source

88305         Surgical pathology, gross and microscopic
              examination\a

89051         Cell count, miscellaneous body fluids (e.g.,
              CSF, joint fluid, except blood)
----------------------------------------------------------
\a Tests experts found to have been provided too often or of
questionable value for ESRD patients.  See app.  III for additional
details. 

Appendix III TWENTY TESTS EXPERTS REVIEWED AND FOUND PROVIDED TOO
OFTEN OR OF QUESTIONABLE VALUE

Procedure code     Name                    Use rate\a              Experts' comments
-----------------  ----------------------  ----------------------  ----------------------
80002              Profile on automated    Provided to 93% of      Three-fourths of the
                   multichannel            patients at one         patients receiving
                   equipment, 2 clinical   facility and 76% at     this test at one
                   chemistry tests         another in our 6-       facility is far too
                                           facility sample.        many.

80003              Profile on automated    Provided to 33% of      Not consistent with
                   multichannel            patients (2,826) 10     expert's medical
                   equipment, 3 clinical   times per year in our   practice.
                   chemistry tests         top-100 facility
                                           sample.

80009              Profile on automated    Provided to 13% of      Not consistent with
                   multichannel            patients (1,127) 4      expert's medical
                   equipment, 9 clinical   times per year in our   practice.
                   chemistry tests         top-100 facility
                                           sample.

80019              Automated multichannel  Provided to 52% of      Because 12 of these
                   tests, 19 or more       patients (4,432) in     tests are included in
                   clinical chemistry      our top-100 facility    the bundle, it was
                   tests                   sample.                 ordered for an
                                                                   unlikely number of
                                                                   patients.

82307              Calciferol (vitamin D)  Provided to 3% of       Rarely, if ever,
                                           patients (247) in our   needed.
                                           top-100 facility
                                           sample.

82465              Cholesterol, serum,     Provided to 71% of      Reasonable for only a
                   total                   patients at one         few patients, not for
                                           facility in our 6-      almost three-fourths
                                           facility sample.        of patients at one
                                                                   facility.

82607              Cyanocobalamin          Provided to 39% of      Should be provided
                   (vitamin B-12)          patients (3,307) 3.5    once a year to less
                                           times per year in our   than 15 percent of
                                           top-100 facility        patients.
                                           sample.

82652              Dihydrozy vitamin D,    Provided to 5% of       Rarely, if ever,
                   1, 25-                  patients (384) in our   needed.
                                           top-100 facility
                                           sample.

82746              Folic acid, serum       Provided to 42% of      Indicated for a
                                           patients in our top-    maximum of 15% of
                                           100 facility sample.    patients.

83540              Iron                    In our 6-facility       Provided too
                                           sample, provided to     frequently. Need one
                                           96% and 88% of          test every 3 months
                                           patients at 2           for stable patients--
                                           facilities 11.4 times,  about 75% of
                                           88% of patients at a    population.
                                           third facility 7
                                           times, and 82% of
                                           patients at a fourth
                                           facility 10.4 times.

83550              Iron-binding capacity   In our 6-facility       Provided too
                                           sample, provided to     frequently. Need one
                                           92% of patients at one  test every 3 months
                                           facility 11 times and   for stable patients--
                                           82% of patients at      about 75% of
                                           each of 2 other         population.
                                           facilities 8 and 12
                                           times.

83718              Lipoprotein, direct     Provided 11.4 times     Provided to
                   measurement; high-      per year to 96% of      implausibly large
                   density cholesterol     patients at one         proportion of patient
                   (HDL cholesterol)       facility and 88% at     population. About 5%
                                           another in our 6-       of patients may need
                                           facility sample.        this test once a
                                                                   month.

83937              Osteocalcin (bone g1a   Provided to 20% of      No value for dialysis
                   protein)                patients (1,738) in     patients.
                                           our top-100 facility
                                           sample.

83970              Parathormone            Provided 10.5 times to  Should be given once
                   (parathyroid hormone)   92% of patients at one  or twice a year at
                                           facility in our 6-      most.
                                           facility sample.

84134              Prealbumin              Provided to 96% of      Provided to
                                           patients at one         implausibly large
                                           facility and 88% of     proportion of patient
                                           patients at another     population.
                                           facility in our 6-
                                           facility sample.

84460              Transferase; alanine    Provided 9 times a      Should be part of a
                   amino (ALT) (SGPT)      year to 4% of patients  multichannel panel,
                                           (321) in the top-100    not given separately.
                                           facility sample.        Too many patients
                                                                   received this test.

85730              Thromboplastin time,    Provided 11.5 times to  Should be provided, at
                   partial (PTT); plasma   87% of patients at one  most, 4 times a year.
                   or whole blood          facility in our 6-
                                           facility sample.

86296              Hepatitis A antibody    Provided 3 times a      Should be given a
                   (HAAb); IgG and IgM     year to 3% of patients  maximum of once a
                                           (280) in the top-100    year.
                                           facility sample.

86302              Hepatitis C antibody    Provided to 83% of      Provided to far too
                                           patients at one         many patients.
                                           facility in our 6-
                                           facility sample.

88305              Surgical pathology,     Provided 2 times a      Provided to an
                   gross and microscopic   year to 28% of          implausibly large
                   examination             patients at one         proportion of patient
                                           facility in our 6-      population. Needed
                                           facility sample.        very rarely--perhaps
                                                                   once a year for 2% or
                                                                   3% of all patients.
-----------------------------------------------------------------------------------------
\a 8,526 patients in the top 100 facilities. 


*** End of document. ***