Medicare: Impact of Changing Transportation Policy For Portable Equipment
Is Uncertain (Letter Report, 05/18/98, GAO/HEHS-98-82).
Pursuant to a congressional request, GAO reviewed how the Health Care
Financing Administration's (HCFA) revised payment policies would affect
Medicare beneficiaries and program costs, focusing on the: (1) Medicare
recipients, places of service, and providers who might be affected most;
(2) number of services that would be affected by the changed policy; and
(3) effect on Medicare's program costs.
GAO noted that: (1) only a fraction of the electrocardiogram (EKG) and
ultrasound tests paid for by Medicare are performed outside of
physicians' offices or hospital settings and, thus, are potentially
affected by the payment policy changes; (2) in 1995, Medicare paid
approximately $597 million for 14 million EKGs and about $976 million
for 5 million ultrasound tests in various settings; (3) only 290,000 of
the EKGs and only 37,000 of the ultrasound tests were done in locations
such as nursing homes or beneficiaries' residences where the provider
needed to transport the diagnostic equipment; (4) nearly 90 percent of
the services that required transporting equipment were provided to
residents of nursing homes; (5) they were usually provided by portable
x-ray and ultrasound providers; (6) some states appear to have a higher
concentration of these services, with a small number of providers
accounting for a large portion of each state's total portable EKG and
ultrasound services; (7) many EKGs and ultrasound services provided in
nursing homes would be unaffected if transportation payments were
eliminated; (8) given the experience of 1995, about 56 percent of the
EKGs and 89 percent of the ultrasound services provided in nursing homes
would be unaffected by transportation payment changes and presumably
would continue to be provided in those settings; (9) in July 1998,
nursing homes will receive an inclusive per diem payment for all
services provided to beneficiaries receiving Medicare-covered skilled
nursing care; (10) a decision to eliminate or retain separate
transportation payments for other beneficiaries will not affect the per
diem payment; (11) another reason is that many nursing home EKGs and
most ultrasound services in 1995 were performed by providers who did not
receive a transportation payment; (12) the effect of eliminating
transportation payments on the remaining 44 percent of the EKG and 11
percent of the ultrasound services is unknown because it depends on how
providers respond; (13) because relatively few services would be
affected, eliminating transportation payments would likely have a
nominal effect on Medicare spending; (14) Medicare could save $11
million if mobile providers continue to supply services; (15) however,
if mobile providers stopped bringing portable EKG equipment to
beneficiaries, then some people would travel in Medicare-paid ambulances
to obtain these tests; (16) eliminating transportation payments for
ultrasound services would have a smaller effect; and (17) GAO estimates
the effect on Medicare spending might range from $400,000 in savings to
$125,000 in increased costs.
--------------------------- Indexing Terms -----------------------------
REPORTNUM: HEHS-98-82
TITLE: Medicare: Impact of Changing Transportation Policy For
Portable Equipment Is Uncertain
DATE: 05/18/98
SUBJECT: Health care programs
Medical equipment
Health services administration
Home health care services
Nursing homes
Health care cost control
Transportation costs
Statistical data
IDENTIFIER: Medicare Program
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Cover
================================================================ COVER
Report to Congressional Requesters
May 1998
MEDICARE - IMPACT OF CHANGING
TRANSPORTATION POLICY FOR PORTABLE
EQUIPMENT IS UNCERTAIN
GAO/HEHS-98-82
Portable Equipment Transporation
(101530)
Abbreviations
=============================================================== ABBREV
BBA - Balanced Budget Act of 1997
EKG - electrocardiogram
HCFA - Health Care Financing Administration
IPL - independent physiological laboratory
Letter
=============================================================== LETTER
B-276094
May 18, 1998
The Honorable Bill Archer
Chairman, Ways and Means Committee
House of Representatives
The Honorable Thomas J. Bliley, Jr.
Chairman, Committee on Commerce
House of Representatives
The Honorable Bill Thomas
Chairman, Subcommittee on Health
Committee on Ways and Means
House of Representatives
The Honorable Michael Bilirakis
Chairman, Subcommittee on Health
and Environment
Committee on Commerce
House of Representatives
The Honorable James C. Greenwood
House of Representatives
The Health Care Financing Administration (HCFA)--the agency that
administers the Medicare program--reduced payments to certain
providers who perform electrocardiogram (EKG) and ultrasound
examinations in nursing homes and beneficiaries' residences. In the
past, Medicare had permitted these providers of these portable
diagnostic tests to receive, in addition to the fee for performing
the test, a separate payment for transporting the necessary
equipment. However, HCFA eliminated separate transportation payments
for ultrasound services effective January 1, 1996. HCFA eliminated
separate transportation payments for EKG services effective January
1, 1997, but these payments were temporarily restored by the Balanced
Budget Act of 1997 (BBA).
Some claim that eliminating separate transportation payments could
ultimately increase Medicare outlays and adversely affect
beneficiaries. They argue that providers will be less willing to
provide EKG and ultrasound services without a separate transportation
payment. As a consequence, Medicare could incur ambulance charges
for homebound beneficiaries or those in nursing facilities to travel
to hospitals for EKG and ultrasound diagnostic tests.
Concerned over the possible adverse effect of the revised payment
policies, you asked us to study how HCFA's change would affect
Medicare beneficiaries and program costs. To address your concerns,
we identified and analyzed (1) the Medicare recipients, places of
service, and providers who might be affected most; (2) the number of
services that would be affected by the changed policy; and (3) the
effect on Medicare's program costs.
We analyzed a national sample of Medicare claims data for 1995--the
last year in which carriers could pay separate transportation fees
for both ultrasound and EKG equipment. Because relatively few of
these diagnostic tests were performed in beneficiaries' residences,
we focused our attention on tests conducted in nursing homes. With
help from appropriate medical personnel, we reviewed medical records
of nursing home residents in two states who had received either
ultrasound or EKG services in the home during 1995. In addition, we
discussed HCFA's policy with HCFA officials and industry
representatives and sought the opinions of several medical
associations and health care associations. We performed our work
between April 1997 and February 1998 in accordance with generally
accepted government auditing standards except that we did not verify
HCFA's data. We note, however, that this database, consisting of all
Medicare Part B claims for a 5-percent sample of beneficiaries, is
often used by researchers investigating important issues in health
economics and policy. (See app. I for the scope and methodology.)
RESULTS IN BRIEF
------------------------------------------------------------ Letter :1
Only a fraction of the EKG and ultrasound tests paid for by Medicare
are performed outside of physicians' offices or hospital settings
and, thus, are potentially affected by the payment policy changes.
In 1995, Medicare paid approximately $597 million for 14 million EKGs
and about $976 million for 5 million ultrasound tests in various
settings. Only 290,000 of the EKGs and only 37,000 of the ultrasound
tests were done in locations such as nursing homes or beneficiaries'
residences where the provider needed to transport the diagnostic
equipment. Nearly 90 percent of the services that required
transporting equipment were provided to residents of nursing homes.
They were usually provided by portable x-ray and ultrasound
providers. Some states appear to have a higher concentration of
these services, with a small number of providers accounting for a
large portion of each state's total portable EKG and ultrasound
services.
Many EKGs and ultrasound services provided in nursing homes would be
unaffected if transportation payments were eliminated. Given the
experience of 1995, about 56 percent (142,400) of the EKGs and 89
percent (26,900) of the ultrasound services provided in nursing homes
would be unaffected by transportation payment changes and presumably
would continue to be provided in those settings. One reason some
tests would be unaffected is that, beginning in July 1998, nursing
homes will receive an inclusive per diem payment for all services
provided to beneficiaries receiving Medicare-covered skilled nursing
care. A decision to eliminate or retain separate transportation
payments for other beneficiaries will not affect the per diem
payment. Another reason is that many nursing home EKGs and most
ultrasound services in 1995 were performed by providers who did not
receive a transportation payment.
The effect of eliminating transportation payments on the remaining 44
percent of the EKG and 11 percent of the ultrasound services is
unknown because it depends on how providers respond. If mobile
providers are less willing to transport equipment, then services for
homebound beneficiaries and nursing home residents may decline.
Alternatively, providers may continue to supply services or,
especially in the case of EKGs, nursing homes may decide to purchase
the equipment and provide the tests themselves.
Because relatively few services would be affected, eliminating
transportation payments would likely have a nominal effect on
Medicare spending. Medicare could save $11 million if mobile
providers continue to supply services. However, if mobile providers
stopped bringing portable EKG equipment to beneficiaries, then some
people would travel in Medicare-paid ambulances to obtain these
tests. If that happened, the annual net cost to Medicare could be as
much as $9.7 million. Eliminating transportation payments for
ultrasound services would have a smaller effect. We estimate the
effect on Medicare spending might range from $400,000 in savings to
$125,000 in increased costs.
BACKGROUND
------------------------------------------------------------ Letter :2
Generally, HCFA considers transportation costs to be part of
physicians' practice expense for a service under Medicare's physician
fee schedule. For example, physicians do not receive separate
transportation payments when they visit Medicare beneficiaries in
nursing homes. However, this policy is not followed when it comes to
the transportation of equipment used to do diagnostic tests. HCFA
established specific guidance for carriers to follow regarding
portable x-ray and EKG services. Because HCFA did not issue specific
instructions for other diagnostic tests, such as ultrasound, each
Medicare carrier developed its own policies.
Section 1861(s)(3) of the Social Security Act provides the basis for
the coverage of diagnostic x-rays furnished in a Medicare
beneficiary's residence. HCFA believes that because of the increased
costs associated with transporting x-ray equipment to the
beneficiary, the Congress intended for HCFA to pay an additional
amount for the transportation service furnished by an approved
portable x-ray supplier. Thus, HCFA has established specific
procedure codes to pay for the transportation of x-ray equipment.
HCFA added EKG services allowed in homes to the established list of
approved services that suppliers may provide and established a code
to pay for the transportation of EKG equipment. Many Medicare
carriers limited payment of transportation costs for EKG services to
portable x-ray suppliers. However, others had allowed it for other
types of providers such as independent physiological laboratories
(IPL).
HCFA never established a national policy for transportation costs
related to ultrasound services. Each carrier developed its own
policy. Medical directors for each of the carriers decided whether
to reimburse for transportation costs separately. In 15 states,
carriers had a policy to reimburse separately for transportation
costs associated with ultrasound services.
Beginning January 1, 1996, carriers could allow transportation
payments for only the following services: (1) x-ray and standard EKG
services furnished by an approved portable x-ray supplier and (2)
standard EKG services furnished by an IPL under special conditions.
For all other types of diagnostic tests payable under the physician
fee schedule, travel expenses were considered "bundled" into the
procedure payment. For example, carriers could no longer make
separate transportation payments associated with ultrasound services.
After further review, HCFA again revised its policy. HCFA concluded
that the statute authorized carriers to make separate transportation
payments only for portable x-ray services. Therefore, HCFA published
a final regulation providing that effective January 1, 1997, carriers
would no longer make separate transportation payments associated with
EKG services.
The enactment of the Balanced Budget Act in August 1997 caused
additional changes in Medicare's transportation payment policy.
First, BBA temporarily restored separate payments for transporting
EKG equipment but not ultrasound equipment during 1998. The law
requires the Secretary of Health and Human Services to make a
recommendation by July 1, 1998, to the Committees on Commerce and
Ways and Means of the House of Representatives and the Committee on
Finance of the Senate on whether there should be a separate Medicare
transportation fee for portable EKGs starting in 1999.
Second, BBA phases in a prospective payment system for skilled
nursing care that will pay an all-inclusive per diem rate for covered
services. Beneficiaries needing skilled care after being discharged
from the hospital are covered under Part A for 100 days of care
during a benefit period. Part A coverage includes room and board,
skilled nursing and rehabilitative services, and other services and
supplies. Thus, the per diem rate paid to nursing facilities would
include all services during the period the beneficiary is receiving
posthospital extended care.\1 For example, services such as EKGs and
ultrasound will no longer be paid for separately but will be included
in the per diem rate. The prospective payment provision begins July
1, 1998.
Third, BBA establishes an ambulance service fee schedule beginning in
2000. This provision is designed to help contain Medicare spending
on ambulance service.
--------------------
\1 The prospective rates will not include transportation payments for
EKG equipment during 1998, so separate payments will be made during
this year.
NEARLY 90 PERCENT OF PORTABLE
EKGS AND ULTRASOUND TESTS ARE
DONE IN NURSING HOMES
------------------------------------------------------------ Letter :3
Medicare paid for more than 14 million EKG and 5 million ultrasound
services in 1995 at a cost to the Medicare program of about $597 and
$976 million, respectively. Most EKG and ultrasound services were
performed in physicians' offices or hospitals. In 1995, about 2
percent of the EKG and less than 1 percent of the ultrasound services
were provided in beneficiaries' homes or nursing homes, costing the
Medicare program about $12 million for the EKGs and $8 million for
the ultrasound services. Of these services, about 88 percent of the
EKG and 82 percent of the ultrasound services were done in a nursing
home. These services were usually provided by portable x-ray
suppliers and IPLs. Table 1 compares these services in these
settings.
Table 1
EKG and Ultrasound Services in
Residences, 1995
Setting EKG Ultrasound
------------------------------ ------------ ------------
Nursing facility 255,180 30,120
Home 34,500 6,720
==========================================================
Total 289,680 36,840
----------------------------------------------------------
Because HCFA regulations allowed EKG service transportation payments
to be paid only to portable x-ray providers and certain IPLs for EKG
services done in a beneficiary's residence, it is not surprising that
these providers accounted for 83 percent of all Medicare EKG services
performed in nursing homes. Likewise, these two types of providers
accounted for a high portion of the Medicare ultrasound services
provided in nursing homes. General practitioners, cardiologists, and
internists also provided EKG and ultrasound services.
In 1995, 1,317 providers were doing EKGs and 337 were doing
ultrasound services in nursing homes.\2 Of the total EKG providers,
676 were portable x-ray suppliers and 75 were IPLs. Of the total
ultrasound providers, 51 were portable x-ray suppliers and 83 were
IPLs, and combined they accounted for more than half of the
ultrasound services done in nursing homes.
--------------------
\2 These numbers were based on a national database consisting of all
Medicare Part B claims from a 5-percent sample of beneficiaries that
we believe identified most of the providers in 1995.
NURSING HOME EKGS AND
ULTRASOUND WERE CONCENTRATED IN
CERTAIN STATES
------------------------------------------------------------ Letter :4
About one-fifth of the states accounted for a disproportionately high
concentration of EKG and ultrasound services in 1995, compared with
these states' nursing home populations.\3 In addition, it appears
that these services were generally provided by a few large providers.
Thus, this change in transportation policy will have a larger effect
on Medicare spending in some geographic areas.
Eleven states accounted for nearly three-fourths of the 255,000 EKGs
done in nursing homes. This appears to be disproportionately high
when compared with the nursing home population in the 11 states.
Figure 1 shows the use rates in each state per 100 Medicare nursing
home residents.
Figure 1: EKG Use Rates Per
100 Medicare Nursing Home
Residents, 1995
(See figure in printed
edition.)
Furthermore, a handful of providers in each of these states accounted
for most of the services. For example, in New York 7 percent of the
providers accounted for 77 percent of the services. (See table 2.)
Table 2
Providers Performing Portable EKG
Services in 11 States, 1995
High-volume provider\a
--------------------------
Percentage
of total
Total number service
State of providers Number supplied
---------------- ------------ ------------ ------------
Connecticut 54 6 74%
Delaware 11 2 70
Florida 88 6 65
Maryland 35 2 50
Massachusetts 54 5 76
Michigan 46 8 88
New Jersey 56 11 77
New York 204 14 77
Ohio 60 6 60
Pennsylvania 75 7 68
Rhode Island 14 1 64
----------------------------------------------------------
\a High-volume providers provided 500 or more services in the state
in 1995.
Similarly, the data show that 10 states accounted for more than 84
percent of the ultrasound services done in nursing homes in 1995.\4
The use rate in these 10 states appears to be somewhat higher than in
the 40 other states. Figure 2 shows the ultrasound use rates in each
state.
Figure 2: Ultrasound Use Rates
per 100 Medicare Nursing Home
Residents, 1995
(See figure in printed
edition.)
Less than half of the portable x-ray suppliers and IPLs did most of
the ultrasound services for which separate transportation payments
were made, and only a handful of them did more than half of these
services. Data show that 54 portable x-ray suppliers and IPLs did 89
percent of these services. Further, 11 of these 54 providers
accounted for 52 percent of the transportation claims. Similar to
what we found in the EKG data, there were a few high-volume providers
in the 10 states, as shown in table 3.
Table 3
Providers Performing Portable Ultrasound
Services in 10 States, 1995
High-volume provider\a
--------------------------
Percentage
of total
Total number service
State of providers Number supplied
---------------- ------------ ------------ ------------
Alabama 5 1 93%
California 19 4 73
Connecticut 13 3 53
Florida 25 2 28
Maryland 19 3 71
Michigan 16 3 75
New Jersey 24 1 35
New York 65 2 24
Pennsylvania 30 2 35
Texas 22 4 60
----------------------------------------------------------
\a High-volume providers accounted for more than 10 percent of the
services in the state in 1995.
--------------------
\3 Connecticut, Delaware, Florida, Maryland, Massachusetts, Michigan,
New Jersey, New York, Ohio, Pennsylvania, Rhode Island.
\4 Alabama, California, Connecticut, Florida, Maryland, Michigan, New
Jersey, New York, Pennsylvania, and Texas.
EKG AND ULTRASOUND SERVICES ARE
LIKELY TO BE AVAILABLE IN
NURSING HOMES AFTER REVISED
PAYMENT POLICY
------------------------------------------------------------ Letter :5
About 19 percent of the EKGs and 21 percent of the ultrasound tests
done in nursing homes in 1995 would be unaffected by any change in
the transportation payment policy because BBA eliminates separate
payments for services provided to beneficiaries in skilled facilities
while their stay is covered under posthospital extended care. An
additional 37 percent of the portable EKGs and 68 percent of the
ultrasound tests were done without the providers' receiving
additional payments for transporting the equipment. Consequently, 56
percent of the EKG services and 89 percent of the ultrasound tests
provided to beneficiaries in their place of residence would be
unaffected by the elimination of separate transportation payments.
There is some uncertainty, however, as to whether (and to what
extent) providers will cut back on services for which they previously
received a transportation payment. Nonetheless, it is reasonable to
assume that at least some of these services would also continue under
a revised payment policy. If providers reduced services in nursing
homes, some residents would be inconvenienced by having to travel to
obtain these tests. In some instances, the nursing home may need to
provide transportation or staff to accompany a resident to a test
site. Consequently, nursing homes could be affected as well.
EKG AND ULTRASOUND SERVICES
FOR SOME NURSING HOME
RESIDENTS ARE COVERED UNDER
PROSPECTIVE PAYMENT
---------------------------------------------------------- Letter :5.1
In the future, all services provided to Medicare beneficiaries in
skilled facilities who are under posthospital extended care will be
included under a per diem prospective payment rate. Nursing
facilities will receive a per diem rate for routine services such as
room and board and all other services such as EKGs and ultrasound.
Based on the 1995 data, 19 percent (48,000) of the EKG services and
21 percent (6,520) of the ultrasound services will be incorporated
under the prospective rates.
NEARLY HALF OF ALL NURSING
HOME EKGS ARE DONE WITHOUT
SEPARATE TRANSPORTATION
PAYMENTS
---------------------------------------------------------- Letter :5.2
In 1995, only portable x-ray suppliers and certain IPLs received
separate transportation payments. Therefore, any EKG services done
in nursing homes by other medical providers such as general
practitioners, internists, and cardiologists did not include separate
transportation payments. Data for 1995 show that 55,580 of the EKG
services done in nursing homes did not include a separate
transportation payment. (See table 4.)
Table 4
EKG and Ultrasound Services Performed in
Nursing Facilities in 1995
EKG Ultrasound
------------------------------ ------------ ------------
Total services 255,180 30,120
Less services
----------------------------------------------------------
Affected by BBA 48,000 6,520
Without transportation fee 55,580 20,200
Services with x-ray 38,820 180
==========================================================
Services unaffected 142,400 26,900
Percentage 56% 89%
----------------------------------------------------------
When an EKG or ultrasound service is done in conjunction with an
x-ray, the provider receives a transportation fee for the x-ray
service but not the EKG or ultrasound. The 1995 data covering EKG
services with separate transportation payments show that 38,820 of
the beneficiaries who received an EKG service also had an x-ray
service done during the same visit. Thus, any provider doing an EKG
and an x-ray service would continue to receive a separate
transportation payment for the x-ray service.
MOST NURSING HOME ULTRASOUND
SERVICES ARE DONE WITHOUT
SEPARATE TRANSPORTATION
PAYMENTS
---------------------------------------------------------- Letter :5.3
Before HCFA issued regulations in December 1995, Medicare providers
in less than a third of the states were paid for transporting
ultrasound equipment to beneficiaries' residences. Each carrier had
its own policy regarding reimbursement for ultrasound equipment
transportation costs. Carrier representatives responsible for
Medicare Part B program payments in only 14 states and part of
another told us that they had a policy to make transportation
payments when billed for ultrasound services.\5 See figure 3.
Figure 3: States Where
Providers Could Receive
Transportation Payments for
Providing Ultrasound Services
(See figure in printed
edition.)
Because carriers responsible for fewer than one-third of the states
allowed separate transportation payments, most ultrasound services
performed in nursing homes were done without such payment. Only
3,220 (15 percent) of the 23,600 ultrasound services done in nursing
homes in 1995 had claims for separate transportation payments. The
remainder, approximately 20,380, were done without a separate
transportation payment. (See table 4.)
Even in states where carriers had a policy to pay separate
transportation payments, there were many instances in which providers
performed ultrasound services in nursing homes but did not receive a
separate transportation payment. For example, in Maryland and
Pennsylvania, where carriers had policies to make separate
transportation payments, 79 and 55 percent, respectively, of the
ultrasound services done in nursing homes by providers did not
involve separate transportation payments.
The average frequency of ultrasound tests per nursing home resident
varied among states but did not vary systematically with carriers'
transportation payment policies. That is, there is no indication
from the 1995 data that nursing home residents systematically
received fewer services in states that did not make separate
transportation payments compared with residents in states that did
pay. For example, Michigan and New York--states where separate
transportation payments were generally not made--had high ultrasound
use rates, while Massachusetts--where separate transportation
payments were made--had a low rate.
--------------------
\5 The two carriers responsible for California had different policies
concerning transportation fees relating to ultrasound. The carrier
responsible for claims in the northern part of the state reimbursed
transportation costs whereas the carrier responsible for claims in
the southern part of the state did not.
POTENTIAL EFFECT ON MEDICARE
BENEFICIARIES IS NOT CLEAR
---------------------------------------------------------- Letter :5.4
Advocacy groups gave contradictory opinions as to the possible
effects HCFA's changed policy would have on Medicare beneficiaries.
Generally, officials representing medical groups believed that EKG
and ultrasound services would continue to be available and thus did
not see an adverse effect on the availability of care for patients.
In contrast, representatives from nursing homes and EKG provider
associations expressed concern about potential decreases in quality
of care, especially for frail elderly beneficiaries who would be most
affected by being transported away from their homes. In addition,
officials at several nursing homes we visited said that sending
beneficiaries out also imposes additional costs and burdens on the
nursing home because often these beneficiaries have to be accompanied
by a nursing home representative.
POTENTIAL PROGRAM SAVINGS
DEPENDS ON PROVIDER RESPONSE TO
REVISED TRANSPORTATION PAYMENT
POLICY
------------------------------------------------------------ Letter :6
We cannot predict whether the revised payment policy will decrease or
increase Medicare spending because we do not know the extent to which
providers will continue to supply portable EKG and ultrasound
services without separate transportation payments. Because of these
uncertainties, we developed a range estimate of potential savings and
costs associated with the revised payment policy.
MEDICARE SAVINGS ARE
POSSIBLE IF EKGS AND
ULTRASOUND TESTS REMAIN
AVAILABLE IN NURSING HOMES
---------------------------------------------------------- Letter :6.1
In 1995, if the prospective payment system for skilled nursing care
and the policy of not making transportation payments had been in
effect, Medicare outlays would have been lower by as much as $11
million on EKGs and $400,600 on ultrasound services. However, these
savings would have materialized only to the extent that homebound
beneficiaries and nursing home residents did not travel outside in
Medicare-paid ambulances to receive these tests. We cannot predict
the likelihood that savings will be realized because they depend upon
the future actions of portable equipment providers and nursing home
operators.
Providers of portable equipment may continue to provide EKG and
ultrasound services even if they no longer receive the separate
transportation payments. Many mobile providers have established
private business relationships with the nursing homes they serve and
may be eager to maintain those relationships. In addition, many also
provide other services to nursing homes, such as x-ray services.
Therefore, they would be likely to continue EKG services to some
degree.
Prospective payment may change the way nursing facilities provide
services. Some nursing homes may purchase the equipment to provide
diagnostic tests in house. Representatives from two of the seven
nursing homes we visited told us that they were considering
purchasing EKG equipment and having nursing home staff perform the
tests.\6 The representatives noted that this would be feasible
because EKG equipment is relatively inexpensive and staff need only
limited training to perform the tests (no certification is needed).
They also noted that residents needing EKGs would receive quicker
service if the equipment were always on the premises.
Because nursing homes may have additional transportation or staff
costs for each test, the revised payment policy may produce Medicare
savings by reducing the use of EKG and ultrasound services. During
our review of case files at selected nursing homes, we observed a
number of instances in which beneficiaries entering the nursing home
were receiving EKG tests, although there were no indications that
these beneficiaries were experiencing any problems to warrant such
tests. In many of these situations, nursing home officials said that
the tests provided baseline information. To the extent that
eliminating the transportation payment would reduce inappropriate
screening tests billed to Medicare, it would produce savings.
--------------------
\6 We did not explicitly ask nursing home representatives whether
they were considering this course of action. Consequently, it is
possible that some of the other nursing homes were also considering
purchasing and using EKG equipment.
MEDICARE COSTS COULD
INCREASE IF MANY
BENEFICIARIES TRAVEL BY
AMBULANCE TO OBTAIN TESTS
---------------------------------------------------------- Letter :6.2
Eliminating separate transportation payments could increase Medicare
spending if beneficiaries travel to hospitals or physicians' offices
to be tested. Some very sick or frail beneficiaries would need to
travel by ambulance. We found that the costs for the service itself
are about the same whether the service is delivered in a hospital, a
physician's office, or a nursing home. However, the cost of
transporting a beneficiary by ambulance is substantially greater than
the amount paid to mobile providers for transporting equipment to a
beneficiary's residence.
We estimate that the potential annual net costs to Medicare from
eliminating transportation payments could be as much as $9.7 million
for EKGs and $125,000 for ultrasound tests. These estimates, based
on 1995 data, represent an upper limit that would be reached only if
equipment providers stopped providing all services for which they
previously received a transportation payment and the beneficiaries
were transported by ambulance to receive the services. Our net cost
estimates are based on (1) the number of beneficiaries who would be
likely to need transporting by ambulance to receive EKG and
ultrasound services, (2) the cost of ambulance transportation, and
(3) the costs of EKGs and ultrasound tests in other settings.
NUMBER OF BENEFICIARIES
WHO WOULD LIKELY NEED
AMBULANCE TRANSPORTATION
-------------------------------------------------------- Letter :6.2.1
We estimate that about half of the beneficiaries who received an EKG
and more than one-third of the beneficiaries who received an
ultrasound service in 1995 would likely have been transported by
ambulance had the equipment not been brought to them. Our estimates
are based on our review of beneficiary case files from several
nursing homes in two states. (See appendix I for more detail.)
COST OF AMBULANCE
TRANSPORTATION
-------------------------------------------------------- Letter :6.2.2
The transportation payments by Medicare for ambulance services are
significantly greater than the transportation payments made to
providers of portable EKG and ultrasound equipment.\7 In 1995, the
average ambulance transportation payment for beneficiaries in skilled
nursing facilities who were transported for an EKG test ranged from
$164 (for an average trip in North Carolina) to $471 (for an average
trip in Connecticut). For the same period, the average payment made
for transporting EKG equipment to a nursing home ranged from about
$26 (in Illinois) to $145 (in Hawaii, Maine, Massachusetts, New
Hampshire, and Rhode Island).
--------------------
\7 The growth in ambulance payments may be better contained in the
future because BBA requires HCFA to establish a fee schedule for
ambulance charges beginning in 2000.
COST OF DIAGNOSTIC TESTS
IN OTHER SETTINGS
-------------------------------------------------------- Letter :6.2.3
The cost for EKG or ultrasound services is about the same in every
setting. Anywhere other than a hospital outpatient setting, the
Medicare payment for the service is determined by the physician fee
schedule. In a hospital outpatient setting, Medicare payments for
services such as EKGs and ultrasound tests are limited to the lesser
of reasonable costs, customary charges, or a "blended amount" that
relates a percentage of the hospital's costs to a percentage of the
prevailing charges that would apply if the services had been
performed in a physician's office.\8 Our analysis of 1995 hospital
cost reports does not suggest that Medicare would pay more for the
services if they were performed at a hospital.
--------------------
\8 The blended amount is based on 50 percent of the hospital's cost
or charges and 50 percent based on 42 percent of the global
prevailing charges that would be paid for the same procedures if
performed in a physician's office.
CONCLUSIONS
------------------------------------------------------------ Letter :7
While millions of EKG and ultrasound tests are provided yearly to
Medicare beneficiaries, only a small percentage of these tests are
performed in a beneficiary's home or nursing home. Many of the EKGs
and most of the ultrasound tests performed in those settings would be
unaffected by the elimination of separate transportation payments.
We cannot predict how providers of portable EKG and ultrasound
equipment will react over the long term to the elimination of
transportation payments or what actions nursing homes might take to
provide services if they were not delivered. Also, we cannot predict
what actions skilled facilities may take as a result of the
prospective payment system that will be implemented. Consequently,
our estimate of the effect of a revised payment policy ranges from a
savings of $11 million to a cost of $9.7 million for EKG tests and a
savings of $400,000 to a cost of $125,000 for ultrasound tests.
Because providers' reactions are uncertain, HCFA would have to
eliminate transportation payments to reliably gauge the revised
policy's effect on Medicare spending. By carefully monitoring the
revised policy over a sufficient period of time, HCFA could determine
whether the revised payment policy caused a net decrease in Medicare
spending or a net increase. In the absence of such hard data,
however, we cannot recommend a specific course of action regarding
the retention or elimination of separate Medicare transportation
payments for portable EKG and ultrasound tests.
AGENCY COMMENTS AND OUR
EVALUATION
------------------------------------------------------------ Letter :8
HCFA officials stated that our methodology was appropriate and that
they generally agreed with the results of our review. Furthermore,
they agreed that precisely estimating the potential cost of the
revised payment policy is difficult. However, HCFA officials believe
that the upper limit of our potential Medicare spending estimate is
based on very conservative assumptions and that this amount of
additional Medicare spending is unlikely to occur if separate
transportation payments are eliminated. We agree that our approach
was conservative so as not to understate the potential for additional
Medicare spending. However, as we state in the report, if providers
continue to supply these services for business reasons, then Medicare
might save money or incur additional costs below our estimated upper
limit because fewer beneficiaries would need transporting by
ambulance for the services. This would also be true, especially in
the case of EKGs, if nursing homes purchase the necessary equipment
and keep it on site.
HCFA officials were also concerned over what appears to be a
disproportionate amount of EKG and ultrasound services by a few
providers in selected states. HCFA officials thought this pattern
may indicate potential abuse. We did not attempt to determine
appropriate use rates for these services and thus cannot conclude
whether the rates are too high or too low in some areas. Our purpose
in showing the concentration of EKG and ultrasound services was to
provide some perspective on the beneficiaries likely to be most
affected by HCFA's changed payment policy.
We incorporated other HCFA comments in the final report where
appropriate.
---------------------------------------------------------- Letter :8.1
As agreed with your office, unless you publicly announce the contents
earlier, we plan no further distribution of this report until 30 days
from the date of this letter. We will then send copies to the
Secretary of the Department of Health and Human Services, the
Administrator of HCFA, interested congressional committees, and
others who are interested. We will also make copies available to
others on request.
Please call James Cosgrove, Assistant Director, at (202) 512-7029 if
you or your staffs have any questions about this report. Other major
contributors include Cam Zola and Bob DeRoy.
William J. Scanlon
Director, Health Financing
and Systems Issues
SCOPE AND METHODOLOGY
=========================================================== Appendix I
To obtain information on electrocardiogram (EKG) and ultrasound tests
done in 1995, we extracted pertinent use data from a national
database consisting of all Medicare Part B claims from a 5-percent
sample of beneficiaries.\9 We used valid 1995 EKG and ultrasound
procedure codes for the diagnostic procedure itself. We eliminated
all codes that represented only a physician's interpretation or
report and codes for procedures that were delivered in settings other
than nursing homes. We used 1995 data because it was the last year
in which both EKG and ultrasound transportation costs could have been
reimbursed under Medicare. In addition, we obtained data on
outpatient costs for radiological and other diagnostic tests for all
hospitals reporting such data to the Health Care Financing
Administration (HCFA) in 1995. Because paying transportation costs
relating to ultrasound services was a "local" decision, we contacted
all the Medicare Part B carriers to determine the reimbursement
practices in effect in every state in 1995.
We visited 12 judgmentally chosen nursing homes in Florida and
Pennsylvania and randomly selected 176 cases of beneficiaries who had
an EKG or ultrasound test done in the home during 1995. We discussed
the reasons for the test and the general condition of the beneficiary
at the time of the test with an appropriate nursing home official,
usually a nurse. We asked the nurses to provide us with their
opinion as to how each beneficiary would have been transported if he
or she had to travel away from the home for the test. These
beneficiaries may better reflect the need for ambulance services by
most nursing home beneficiaries. From our sample, we determined that
about 50 percent of the beneficiaries who received an EKG test and 40
percent of the beneficiaries who received an ultrasound test would
most likely have been transported by ambulance if the tests had been
done outside the nursing home. Most of the beneficiaries who the
nurses believed would have needed an ambulance were totally
bedridden. The concern generating the order for the test had been
either that an episode developed late at night or that a condition
was serious enough to border on a call to 911. Beneficiaries whom
the nurses believed could be transported by means other than an
ambulance were usually ambulatory and their medical situations
generally involved a scheduled service done 1 or 2 days after the
order or a baseline test requested upon entering the home.\10
We discussed HCFA's policy with HCFA officials, representatives of
organizations representing portable x-ray suppliers, independent
physiological laboratory providers, and several individual providers
of EKG and ultrasound services. Also, we sought the opinions of
several medical associations, including the American College of
Cardiology, the American College of Physicians, and the American
College of Radiology. In addition, we solicited comments from 11
health care associations.
In estimating the potential net cost to Medicare from eliminating
transportation payments, we did the following: (1) identified, from
the sample 5-percent national claims data file, the Medicare
beneficiary population that received an EKG or ultrasound service
from a provider that was paid a transportation fee for delivering the
service; (2) reduced this count by the beneficiaries who also had an
x-ray service (since the provider would continue to get
transportation fees for the x-ray), the beneficiaries who had the
service delivered by a provider who could not be paid transportation
expenses, and beneficiaries receiving the services while covered
under posthospital extended care; (3) estimated the percentage of
beneficiaries who would have been transported by ambulance (using our
observations from case files in two states); (4) developed an average
ambulance fee paid in each state (using data on the skilled nursing
home beneficiaries who went by ambulance in 1995 to an outpatient
facility for a diagnostic test); and (5) determined the
transportation fee paid to mobile providers in each state.
--------------------
\9 We were unable to verify whether the place of service coded on
each claim was reported correctly. For example, we found a number of
claims coded as being performed in an independent laboratory setting
with transportation payments being made. In 1995, the data show that
86,420 EKG and 60,320 ultrasound services were done in this setting,
of which about 4,300 and 3,200 transportation payments were made,
respectively. Either these claims were improperly coded (should have
been coded as nursing facilities) or the transportation payments
should not have been made. Even if all these claims were improperly
coded and should have been shown as being done in a nursing home, it
would only increase the range between savings and costs and it would
not affect our conclusion.
\10 There is a question as to whether Medicare would pay for a test
that is performed only to establish a baseline reading, without there
being some indication of medical necessity.
*** End of document. ***