HHS I.G. Audit: 'Medicare-Allowed Charges for Noninvasive Ventilators are Substantially Higher Than Payment Rates of Select Non-Medicare Payers'
Report in Brief
What OIG Found
For CYs 2016 through 2018, we estimated that Medicare and beneficiaries could have saved
What OIG Recommends and CMS Comments
We recommend that CMS review Medicare-allowed charges for noninvasive ventilators HCPCS code E0466, for which Medicare and beneficiaries could have potentially saved an estimated
In written comments on our draft report, CMS confirmed that it had been evaluating noninvasive ventilators for potential inclusion in the competitive bidding program. CMS also confirmed that noninvasive ventilators had initially been included in Round 2021 of the program. However, the product category was removed on
Why OIG Did This Audit
Medicare-allowed charges for noninvasive ventilators increased from
How OIG Did
This Audit Our audit covered
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TABLE OF CONTENTS:
INTRODUCTION ... 1
* Why We Did This Audit ... 1
* Objective ... 1
* Background ... 1
- The Medicare Program ... 1
- Noninvasive Ventilator Definition and Billing Codes ... 2
- Payment Methodology for Noninvasive Ventilators ... 2
- CMS's Authority To Adjust Medicare-Allowed Charges Under Competitive Bidding ... 3
* How We Conducted This Audit ... 4
FINDING ... 5
* Medicare and Beneficiaries Could Have Saved
* Conclusion ... 7
RECOMMENDATIONS ... 7
CMS COMMENTS ... 7
APPENDICES
A: Audit Scope and Methodology ... 9
B: Federal Laws and Regulations ... 11
C: Mathematical Calculation Methodology of Payment Differences ... 13
D: Total Estimated Payment Differences by Calendar Year ... 15
E: CMS Comments ... 16
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INTRODUCTION
WHY WE DID THIS AUDIT
Medicare-allowed charges for noninvasive ventilators increased from
We are concerned about the relationship of these increased Medicare costs to industry prices for noninvasive ventilators and whether the allowed charges are comparable with payment rates of select non-Medicare payers. For this report, "select non-Medicare payers" refers to private insurance companies that gave us pricing data for calendar years (CYs) 2016 through 2018 in a format that was comparable with the Medicare fee schedules./2
OBJECTIVE
Our objective was to determine whether the Medicare-allowed charges for noninvasive ventilators during CYs 2016 through 2018 were comparable with payment rates of select nonMedicare payers.
BACKGROUND
The Medicare Program
The Medicare program provides health insurance for people aged 65 and older, people with disabilities, and people with permanent kidney disease. Medicare Part A provides inpatient hospital insurance benefits and coverage of extended care services for patients after hospital discharge, and Medicare Part B provides supplementary medical insurance for medical and other health services, including durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS)./3
Medicare beneficiaries are responsible for certain out-of-pocket costs, such as deductibles and coinsurance, for both Part A and Part B services.
The
Suppliers must submit claims to the DME MAC that services the State or territory in which a Medicare beneficiary permanently resides.
Figure 1: Total Invasive and Noninvasive Ventilator Allowed Charges During CYs 2016 through 2018
Figure omitted: https://oig.hhs.gov/oas/reports/region5/52000008.pdf
Noninvasive Ventilator Definition and Billing Codes
Ventilators are machines that supply oxygen, or a mixture of oxygen and air, and that are used in artificial respiration to control or assist breathing. Noninvasive ventilators are ventilators in which the interface, such as a mask or chest shell, does not enter the body./4
A ventilator is categorized as an item requiring frequent and substantial servicing to avoid risk to a beneficiary's health./5
Rental payments for items requiring frequent and substantial servicing are made monthly and continue until the medical necessity ends. During CYs
2016 through 2018, ventilators were billed using two HCPCS codes: one for invasive ventilators (E0465) and one for noninvasive ventilators (E0466). This audit focused solely on noninvasive ventilators because they account for 86 percent of the total
Payment Methodology for Noninvasive Ventilators
Noninvasive ventilators are eligible for Part B coverage, and Federal law generally requires the use of a fee schedule to determine payment./6
CMS established and implemented the DMEPOS fee schedules in 1989 and has adjusted them yearly in accordance with provisions in the Act.
For CYs 2016 through 2018, CMS established the Medicare-allowed charges for the noninvasive ventilator HCPCS code by updating the prior year's DMEPOS fee schedule amount using an annual economic adjustment factor (such as an adjusted consumer price index)./7
In 2016, CMS was required to adjust certain DMEPOS fee schedule amounts using information from the competitive bidding program,/8 but this change did not affect the fee schedule amount for noninvasive ventilator HCPCS code E0466.
When processing noninvasive ventilator claims, DME MACs determine the allowed charge, which is the lower of the billed charge for the item or the applicable fee schedule amount. In most instances, the fee schedule amount for the billed HCPCS code is the allowed charge. Once the allowed charge is determined, the beneficiary's deductible is subtracted from the allowed charge. Typically, Medicare's responsibility is 80 percent and the beneficiary's responsibility is 20 percent of the allowed charge./9
CMS's Authority To Adjust Medicare-Allowed Charges Under Competitive Bidding CMS has legislative authority to adjust Medicare-allowed charges for ventilator HCPCS codes under the competitive bidding program. The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA)/10 directed CMS to phase in a Medicare competitive bidding program under which prices for certain DMEPOS items would not be determined by a fee schedule. The Act includes durable medical equipment (DME), including DME items requiring frequent and substantial servicing, such as ventilators, as one of the categories of items subject to competitive bidding./11
However, the Act authorized CMS to first phase into the competitive bidding program those items and services that have the highest cost and highest volume, or that the Secretary of
The Medicare Improvements for Patients and Providers Act of 2008 (MIPPA)/13 temporarily delayed the implementation of the DMEPOS competitive bidding program. As a result, the first round of the competitive bidding program, referred to as the "Round 1 Rebid," did not become effective until
Noninvasive ventilators were scheduled to be included in the next round of competitive bidding beginning in
HOW WE CONDUCTED THIS AUDIT
Our audit covered
For each CY, we calculated a nonstatistical estimate of the difference between the Medicare-allowed charge and the median payment rate of select non-Medicare payers. Of the estimated payment differences, we calculated the 80 percent that Medicare would pay and the 20 percent that beneficiaries would pay. We analyzed the payment differences for E0466 in each CY to identify the noninvasive ventilator Medicare-allowed charge that CMS could adjust under the competitive bidding program to determine whether Medicare payments were comparable with payment rates of select non-Medicare payers. Our analysis included noninvasive ventilators paid for under Medicare fee schedules for all 50 States, the
We conducted this performance audit in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.
Appendix A contains the details of our audit scope and methodology, Appendix B contains the Federal laws and regulations related to Medicare payments for ventilators, Appendix C contains our mathematical calculation methodology of payment differences, and Appendix D contains the total estimated payment differences by CY for our audit period.
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Medicare-allowed charges for noninvasive ventilators are not comparable with payment rates of select non-Medicare payers. Specifically, Medicare and beneficiaries paid millions of dollars more than non-Medicare payers for ventilators billed under HCPCS code E0466 during CYs 2016 through 2018. Medicare and beneficiaries paid more than select non-Medicare payers for noninvasive ventilators because CMS did not routinely evaluate pricing trends for ventilators or payment rates of select non-Medicare payers for the same devices. For the HCPCS code reviewed, we determined that the Medicare-allowed charges could be adjusted under the competitive bidding program.
MEDICARE AND BENEFICIARIES COULD HAVE SAVED
We estimated that Medicare and beneficiaries could have saved
We received 50 responses from 40 private insurance companies covering 33 States, the
Figure 2: Range of Select Non-Medicare Payment Rates for HCPCS Code E0466
Figure omitted: https://oig.hhs.gov/oas/reports/region5/52000008.pdf
Medicare fee schedule-allowed charges for E0466 were
Figure 3: Comparison of Medicare Fee Schedule to Median Non-Medicare Payment Rates
Figure omitted: https://oig.hhs.gov/oas/reports/region5/52000008.pdf
Figure 4 shows the estimated annual Medicare and beneficiary savings if Medicare-allowed charges had been comparable with payment rates of select non-Medicare payers for noninvasive ventilators during CYs 2016 through 2018.
Figure 4: Estimated Annual Medicare Program and Beneficiary Savings for Noninvasive Ventilators
Figure omitted: https://oig.hhs.gov/oas/reports/region5/52000008.pdf
Medicare and beneficiaries paid more than select non-Medicare payers for noninvasive ventilators because CMS did not routinely evaluate pricing trends for ventilators or payment rates of select non-Medicare payers for the same devices. CMS used mandated fee schedule amounts that it adjusted by annually applying a general economic update factor as required by the Act. However, the general economic update factors in the Act are not specific to any type of DME, including noninvasive ventilators, or to trends in ventilator prices set by non-Medicare payers.
For the HCPCS code reviewed, we determined that the Medicare-allowed charges could have been adjusted using competitive bidding. Assuming that CMS established annual rates comparable to the payment rates of select non-Medicare payers, the estimated payment differences for CYs 2016 through 2018 could have been significantly reduced.
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CONCLUSION
A strategic goal for CMS is to improve Medicare services and make them affordable./16
CMS bases Medicare fee schedules for noninvasive ventilators on historical data updated annually using general economic factors, such as an adjusted consumer price index, as prescribed in the Act. Over time, the difference between the fee schedule amounts and the payment rates of select non-Medicare payers may widen because the general economic adjustment factor does not account for trends in prices for noninvasive ventilators. CMS, under its existing authority, may adjust Medicare-allowed charges for noninvasive ventilators using its competitive bidding process. We identified Medicare and beneficiary payment differences totaling
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RECOMMENDATIONS
We recommend that the
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CMS COMMENTS
In written comments on our draft report, CMS confirmed that it had been evaluating noninvasive ventilators for potential inclusion in the competitive bidding program. CMS also confirmed that noninvasive ventilators had initially been included in Round 2021 of the program. However, the product category was removed on
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Footnotes:
1 Total allowed charges were as of
2 We contacted 94 private insurance companies that provided coverage in all 50 States, the
3 The Social Security Act (the Act) Sec.Sec. 1832(a)(1) and 1861(s)(6), (s)(8), and (s)(9).
4 A chest shell fits snugly to the outside of the chest. A machine creates a vacuum between the shell and the chest wall, causing the chest to expand and air to be sucked into the lungs.
5 42 CFR Sec. 414.222.
6 The Act Sec. 1834(a)(1).
7 The Act Sec. 1834(a)(3)(B)(iv).
8 42 CFR Sec. 414.210(g).
9 The Budget Control Act of 2011 (P.L. No. 112-25) required mandatory, across-the-board reductions in Federal spending, also known as sequestration. The American Taxpayer Relief Act of 2012 (P.L. No. 112-240) postponed sequestration for 2 months. As required by law,
10 P.L. No.108-173 Sec. 302(b)(1), amending the Act Sec. 1847, 42 U.S.C. Sec. 1395w-3.
11 The Act Sec.Sec. 1847(a)(1)(A) and (a)(2)(A), 42 U.S.C. Sec.Sec. 1395w-3(a)(1)(A) and (a)(2)(A).
12 The Act Sec. 1847(a)(1)(B)(ii), 42 U.S.C. Sec. 1395w-3(a)(1)(B)(ii).
13 P.L. No. 110-275 Sec. 154(a)(1).
14 As of
15 We contacted 94 private insurance companies that provided coverage in all 50 States, the
16 CMS Strategic Planning Documents and Reports. Available online at https://www.cms.gov/Medicare/QualityInitiatives-Patient-Assessment-Instruments/MMS/Strategic-Planning-Documents-Reports.html. Accessed on
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Full report: https://oig.hhs.gov/oas/reports/region5/52000008.pdf
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