oversight

Ways To Reduce Payments for Physician and X-Ray Services to Nursing-Home Patients Under Medicare and Medicaid

Published by the Government Accountability Office on 1971-02-02.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

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    Ways To Reduce Payments
/
    For Physician And X-Ray Services
    To Nursing-Home Patients
    Under Medicare And Medicaid                   5.164031         (3)



    Department   of Health, Education,   and Welfare         ’ ’




    BY THE COMPTROLLER    GENtifiiL                                      ’
    OF THE UNITED  STATES
             COMPTROLLER     GENERAL    OF_THE       UNITED   STATES
                           WASHINGTON    DC      20548




B- 164031(3)




To the     President    of the Senate     and the
Speaker      of the House    of Represent’atlves

         This     1s our report       on ways to reduce           payments     for physl-
clan and X- ray services              to nursing=+ home patients           under    Medl-
care and Medxald               These     programs        are admlmstered          at the
Federal      level   by the Social       Security      Admmlstratlon         (Medlcare)
and the Social        and Rehabllltatlon          Service      (Medlcald),     Depart-
ment     of Health,     Education,       and Welfare           Our review      was made
pursuant       to the Budget       and Accounting         Act,     1921 (31 U S C 53),
and the Accounting          and Auditing         Act of 1950 (31 U S C 67)

          Copies     of this report   are being   sent to the Director,
Office     of Management        and Budget,    and to the Secretary     of
Health,     Education,      and Welfare




                                                 Comptroller           General
                                                 of the United         States
                                Contents
                                                                           Page

    DIGEST                                                                   1

    CHAPTER

           1   INTRODUCTION                                                  4
                   Administration       of Medicare     and Medicaid
                     programs                                                5

           2   NEED FOR IMPROVED CONTROLS OVER PAYMRNTS FOR
               PHYSICIAN AND PORTABLE X-RAY SERVICES PRO-
               VIDED NURSING-HOME PATIENTS                                   9
                   Payments to physicians         for patient     visits    11
                   Physician     payment profiles     incorrectly
                      developed                                             15
                   Payment for portable       X-ray services                18
                   Conclusions                                              19
                   Recommendation to the Secretary            of Health,
                      Education,    and Welfare                            20
                   Agency comments and actions                             20

       3       PAYMENT POLICIES FOLLOWED IN OTHER STATES
               FOR MULTIPLE-PATIENT      NURSING-HOME VISITS               22
                   Conclusions                                             23
                   Recommendations     to the Secretary   of
                     Health,   Education,    and Welfare                    24
                   Agency comments and actions                              24

V
           4   SCOPE OF REVIEW                                              26

    APPENDIX

           I   Number and amount of overpayments           during
                 February    1969, for single-patient        visits
                 and portable     X-ray claims                              29

      II       Letter     dated December 11, 1970, from the As-
                  sistant     Secretary,    Comptroller,      Department
                  of Health,     Educatxon,      and Welfare,    to the
                  General Accounting        Office                          30
                                                                       Page
APPENDIX

 III       Comments of Calrfornra            Department of Health
             Care Services   dated          July 30, 1970               35

   IV      Prlnclpal   offlclals    of the Department of
              Health,  Education,     and Welfare respon-
              sible for the administration       of actlvi-
              ties discussed     rn this report                        37

                               ABBREVIATIONS

CPS        Callfornla      Physlclans       Service

GAO        General      Accounting      Offrce

HEW        Department      of Health,       Education,   and Welfare
COMPTROLLERGENERAL'S                       WAYSTO REDUCE PAYMENTSFOR PHYSICIAN
REPORTTO THE CONGRESS                      AND X-RAY SERVICES TO NURSING-HOME
                                           PATIENTS UNDER MEDICARE AND MEDICAID
                                           Department of Health, Education, and
                                           Welfare   B-164031(3)


DIGEST
------

WHYz1IEl??ZvI%wWASMADE
     Medicaid 1s a grant-In-aid   program under which the Federal Government
     pays from 50 to 83 percent of costs incurred    by States ln provldlng
     medical care to lndlviduals   who are unable to pay. Medicare is a
     Federal program providing   hospital and medical insurance to persons
     aged 65 and over

     States having a Medicaid program can purchase the medical Insurance
     benefits  of Medicare (covering      physician services and a number of
     other health services)    for persons ln the Medicaid program who also
     meet Medicare eligibility     requirements

     In Callfornla,     where this review was made, payments under the MedIcare
     and Medicaid programs during fiscal year 1969 amounted to about
     $1 7 bllllon,     of which $489 mllllon    represented   payments to physlclans
     and other providers      of medlcal services       About $377 mllllon, or 77
     percent,    of the $489 mllllon    was Federal funds

     The General Accounting Office (GAO) examined claims made by physlclans
     and other providers    of medical services     not only because of the large
     amount of Federal funds involved       but also because GAO noted in its
     reviews of other nursing-home      activities   that providers  of medical
     services were overpaid    for vlslts     made to more than one patient   on
     the same day ln the same nursing home

FINDINGS AND CONCLUSIONS

     Although a reduced fee was to be paid for vlslts            made on the same day
     to a number of patients      in the same nursing home (multiple-patlent
     visits),    physicians   and providers    of X-ray services    billed,   and were
     paid, the higher single-patient        visit  fee.   For example, a physician
     who visited    29 patients   during a single nursing-home       call billed,    and
     was paid, as though 29 separate visits          were made That resulted       ln
     an overpayment to the physician        of $142.

     GAO estimates that, in California       during 1969, overpayments   of about
     $426,400 were made for multiple-patient        visits.  The Federal share of
     those overpayments was about $343,500.         (See pp. 9 to 21 )



                                       1
     The overpayments    occurred    because

       --physicians   and prove ders of X-ray services had not been made
          aware of the correct way to bill for multiple-patient   vls~ts
         bee   pa 12 )

       --the claims-processing       and payment system did not contain adequate
           controls to identify     multiple-patient  vlslts (see p 13), and

       --physicIan       payment proflles  (histones   of past bllllngs    used to
          determlne the reasonableness        of the physicians'   char es) for
          multiple-patlent      v~slts were developed improperly        9See p 75 )
     Department of Health, Education,        and Welfare (HEW) regulations    did
     not provide guidelines    to the Medl care and Medl cald pay-ing agents on
     payment pollcles   for multiple-patlent      visits.     For example, in Call-
     fornla,   Oregon, Nevada, and Washington, 10 different         pollc~es existed
     for making payments for multiple-patient          v~slts under the programs.

     The Soc7al Security Admlnlstratlon     made a natlonwlde    study on the
     dlverslty    of payment policies  and the feasibility    of prescnblng   unl-
     form guidelines    for use under the Medlcare program       No such study
     had been made for MedlcaTd       (See pp 22 to 25 )


RECOMMENDATIONS
              ORSUGGESTIONS
     The Secretary   of Health,     Education,   and Welfare,   should   require
       --HEW to provide measures for determlnlng        compliance with those
          Medlca-rd and Medicare payment policies     that currently   require
          paying reduced fees for multiple-patlent       vls7t.s and to take
          corrective  actlon where warranted     {see p 20),

       --HEW to make a study slmllar      to the one on Medicare to determine
          the dlverslty   of payment pollcles      under the Medicaid program for
          physlclans'   multiple-patTent    vlslts   and to ensure that guidelines
          for Medicaid and Medlcare are coordinated,        and
       --the Administrator     of the Social and Rehabllltatlon      Service and the
           Commlssloner of the Social Security Admlnlstratlon         to provide ways
           to measure the implementation    of HEW guidelines    developed as a
           result of the stud-fes and to obtain corrective      action where war-
           ranted    (See p 24 )


AGENCYACTIONS AND UNRESOLlrEDISSWS
    HEW has Informed GAO that lt IS developing      instructions       to all MedIcare
    carriers  containing uniform guidelines    for national      appllcatlon   to as-
    s?st in 7dentifylng  multiple-patlent   nursTng-home v7sits and in


                                         2
     ensunng proper reimbursement      for such services          Under the lnstruc-
     tions, all MedIcare paying agents (carriers)       will      be required  to pay
     reduced fees for multiple-patlent     v1slt.s.

    HEWhas informed GAO that the Social Security Administration         will
    verify   that such a policy has been establlshed     by the earners     and
    that it 1s being effectively     implemented      Compliance with policies
    that have been established   by the States under the Medicaid program
    will be deternnned by regional     offices   of the Social and Rehabllltatlon
    Service.     (See pp 20 and 21.)
    HEW has stated that the Social and Rehabllltatlon         Service will study
    the diversity    of exlstlng   payment policies    under Medicaid preparatory
    to the Issuance of national      guldellnes     The Medicaid study will be
    coordinated   with the parallel    study in the Medicare area, and the IS-
    suance of guIdelines      will be coordtnated   with those for Medicare
    HEW's monitoring     of the Medicare program ~117 Include the placement of
    systems technicians     in each Social Security Adm7nlstratlon     regional
    office    to assist HEW representatives    assigned to the larger Medicare
    carriers    and other regional   office staff in continuing   evaluation    of
    carriers'    claims and data processing    systems.

    HEW said that primary responslblllty       for reviewing   State Medicaid
    programs had recently   been delegated from the HEW central office         to
    HEW regIona     offices  HEW expects that, as a result,        State Medicaid
    actlvltles  will be monitored more frequently        and more thoroughly   than
    in the past and that corrective      action will be lnltl ated promptly.
    (See ppD 24 and 25 )
    GAO believes    that adnnnistratlve     actions     taken or promised by HEW
    should, if implemented effectively,          tend   to bring about uniform
    pollcles    for the payment of reduced fees         for multiple-patient   visits
    and appropriate     monitoring    and appraisal     of compliance by the car-
    rlers,   the States, or their fiscal       agents


MATTERS FOR CONSIDERATION BY 131E CONGRESS
    This report IS being issued to the Congress because of expressed
    congressional  concern over the rising costs under the Medicaid and
    Medicare programs and the signlfl cant amounts of Federal funds ex-
    pended under the programs




                                        3
                                 CHAPTER 1

                               INTRODUCTION

         The General Accounting     Office      (GAO) has reviewed the
procedures     and practices     of HEW and agencies of the State
of Calrfornia      covering    payments to physicians        and other
providers     of medical services        to patients     in nursing   homes
in Calrfornia      under titles    XVIII     (Medicare)    and XIX (Medi-
caid) of the Social Security          Act (42 U.S.C. 1395 and 1396).
Our review did not include         payments made on behalf          of mdi-
viduals     who were covered only under Medicare            (see pe 8 for
discussion     of Medicare benefits        available    to Medicaid    eli-
gibles).

        The Medicare program-- enacted in July 1965--provides
two forms of health        care insurance    to persons aged 65 and
over,     One form, designated       as Hospital    Insurance   Benefits
for the Aged (part A), primarily          covers inpatient      hospital
services    and is financed,principally          by a special   socral
security    tax paid by employees and their           employers and by
self-employed     persons.

       The second form of protection          is a voluntary        program,
designated      as the Supplementary      Medical   Insurance       Benefits
for the Aged (part B), which covers physician                 services     and
a number of other medical and health            benefits.       Part B is
financed     by a monthly premium collected        from each benefi-
ciary    who elects    to be covered under this part of the pro-
gram.     From April     1968 through June 1970, the monthly pre-
mium was $4.00.        Effective    July 1, 1970, the monthly pre-
mium increased       to $5.30.    This amount is matched by an equal
amount by the Federal Government.            The beneficzary         pays the
first    $50 of covered services        in each year, and part B of
Medicare     pays 80 percent     of the reasonable        charges for
covered services       m excess of $50,

       The Medicaid   program --also   enacted in July 1965--is       a
grant-m-aid     program under which the Federal Government pays
from 50 to 83 percent --depending       upon the per capita      income
m each State--of      the costs incurred      by the States in pro-
viding   medical assistance    to individuals      who are unable to
pay for such care.       As of December 1970, 48 States,      the

                                      4
District    of Columbia,      Guam, Puerto RICO, and the Virgin              Is-
lands had adopted a Medicaid            program,    Since its inception,
State Medlcaid      programs have been required           to provide     in-
patient    hospital    services,     outpatient    hospital    services,
laboratory     and X-ray services,         skilled  nursing-home      ser-
vices , and physician        services.       Other services,    such as
prescribed     drugs and dental        care, may be provided       for in a
State's    Medicaid    program if it so chooses.

        Our review was undertaken           in California       because of the
large expenditures          made to physicians        and other providers
of medical      services      to nursing-home      patients.       During cal-
endar year 1969, total            payments for care for these patients
under the Medicare and Medicaid               programs in California
amounted to about $1.7 billion,                Of this amount, about
$488.5 million        represented      payments to physicians          and other
providers     of medical services;          about 77 percent,        or
$376.5 million,         represented     Federal funds,         Data is not
available     to show a breakdown of the expenditures                  for phy-
sician    services      among patients      in nursing       homes, hospitals,
or elsewhere.

       The scope of our review          is described       in chapter     4.

ADMINISTRATION OF MEDICARE
AND MEDICAID PROGRAMS

        The Medicare and Medicaid          programs are administered              at
the Federal     level   by the Department           of Health,     Education,
and Welfare,,      At the time of our fieldwork,                the HEW regional
office    in San Francisco,      California--one           of 10 regional       of-
fices administering        the field     activities        of the Medicare and
Medicaid    programs--provided        general       administrative      direction
for these programs m Alaska,             Arizona,      California,      Guam,
Hawaii,    Nevada, Oregon, and Washington.

      The HEW Audit Agency          is responsible    for departmental
audit activities   including          audits  of State Medicaid    pro-
grams and audits   of costs         of administering     the Medicare and
Medicaid  programs by fiscal     intermediaries,     carriers,1     and
State agencies.      The Audit Agency has made--and IS contmnu-
Ing to make-- reviews of Medicare       and Medicaid   activltles.
Although  the HEW Audit Agency and State auditors            have re-
viewed various    aspects of the Medicare and/or Medicaid           pro-
grams in California,     they have not reported      on the matters
covered in chapters     2 or 3 of this report.

Medicare     program

       The Secretary          of Health,   Education,  and Welfare has
delegated      responsiblllty        for admlnisterrng   the Medicare pro-
gram to the Commissioner             of the Social Security      Administra-
tion.     Field actrvlties         of the Medicare program are carried
out by regional        representatives       of the AdminIstration's
Bureau of Health         Insurance,

         To admlnlster     the benefits     under part B, the Secretary
of Health,      Education,     and Welfare 1s authorized        under the
act to enter into contracts            with carriers    who (1) determine
the rates and amounts of Payments for physician                 services     on
a reasonable-charge          basis and (2) receive,      disburse,     and
account for funds expended In making such payments,                    Also,
to the extent possible,           the Secretary     is to enter into con-
tracts     with a sufficient        number of carriers,     selected     on a
regional      or other geographical        basis,  to permit comparative
analysis      of their   performance      by the Social Security       Admin-
istration.

        The Administration          has certain         systems to provide      sur-
veillance    over the carriers'             actlvitles.        In addition    to the
HEW Audit Agency's         actlvltles,         Social Security       Admmistra-
tlon contract-performance              review teams make perlodlc           onsite
vrslts    to observe and analyze the carriers'                   claims-
processing    procedures        and the application            of the reasonable-
charge criteria.


1Fiscal   lntermedlarles        and carriers   are private     organiza-
 tlons  (generally       insurance   companies) under contract         with
 HEW to process and pay claims for services              provided     under
 the Medlcare      program.


                                         6
Medicaid     program

         The Secretary       of Health,       Education,    and Welfare has
delegated      the responsibility           for the administration       of the
Medicaid      program to the Administrator               of the Social and Re-
habilitation        Service.      Authority      to approve grants for
State Medicaid          programs has been further           delegated  to Re-
gional      Commissioners      of the Servrce who are responsible             for
the field      activities      of the program.

        Under the act, the States have the primary responsi-
billty     for initiating      and administering          their Medicaid        pro-
grams.       The nature and scope of a State's               Medicaid     program
is contained        in a State plan which, after             approval     by a
Regional      Commissioner,     provides      the basis for Federal grants
to the State.          The Regional     Commissioners        are also respon-
sible for determining         whether the State programs are being
administered        in accordance with existing             Federal require-
ments and the provrsions            of the States'        approved plans,
HEW's Handbook of Public Assistance                 Administration        provides
the States with Federal policy              and instructions          on the ad-
mlnlstration       of the several       public     assistance      programs.
Supplement D of the handbook and the Service's                      program reg-
ulations      prescribe    the policies,        requirements,        mterpreta-
tions,     and instructions      relating       to the Medicaid        program,

       The Medicaid     program in California      became effective
March 1, 1966, and is known as Medi-Cal,              In California    the
Department    of Health Care Services administers          the program,
The department      is responsible      for making State policy     de-
terminations,     establishing     fiscal   and management controls,
and reviewing     Medn-Cal program activities.

         Since the inception          of the Medi-Cal        program, the State
has contracted         with private        organizations,       such as the Cal-
 ifornia      Physicians    Service,       the Hospital      Servrce of Call-
fornia,       and the Hospital        Service of Southern California,              to
assist      the Department       of Health Care Services            in its admin-
istration       of the program.           These private      organizations--
acting      as fiscal     agents-- coordinate         the program operations
between the State and the institutions                     or persons that pro-
vide medical services,              In addition,        the fiscal     agents re-
view, process,         and pay providers'          claims for services        ren-
dered to Medi-Cal          beneflciarles.

                                          7
      Persons    elrgrble    for     Medicaid

        Persons receiving       public    assrstance     payments under
other titles       of the Social Security         Act1 are entitled      to
benefits     under the Medicaid        program,      Persons whose income
or other financial         resources    exceed standards        set by the
States to qualify        for public     assistance,      but are not suffi-
cient to meet the costs of necessary medical care, may also
be entltled      to benefits      under the Medicald        program at the
option    of the State,

      Supplementary      insurance       benefits
      for ellgrble      persons

        States having a Medicaid       program can enter into a buy-
 m agreement with HEW to obtain the supplementary                insurance
benefits     under part B of the Medicare program for those
persons eligible         for both Medicaid    and Medicare,     The State
 is responsible       for paying the monthly premium, the annual
$50 deductible,        and 20 percent    of the cost of services
covered under part B. The remaining             80 percent of the cost
of services      is paid by the Medicare program.           As of January
1970, California         had over 371,000 persons enrolled        under
the Medicaid       program for supplementary      insurance    benefits
provided     under part B of the Medicare program.



      A listing    of principal       HEW officials    responsible   for
the adminrstratlon      of activities      discussed     in this report
is included     as appendix     IV.


1Title    I, old-age     assistance;      title IV, aid to families     with
 dependent     children,     title    X, aid to the blind;   title   XIV,
 aid to the permanently            and totally  disabled;  and title    XVI,
 optional    combined plan for other titles.




                                        8
                                    CHAPTER2

               NEED FOR IMPROVED CONTROLS OVER PAmNTS

               FOR PHYSICIAN     AND PORTABLE X-RAY SERVICES

                      PROVIDED NURSING-HOME PATIENTS

       At the inception       of the Medicare and Medi-Cal              programs
in Callfornxa,      the Social Security           Administration       and the
Department     of Health Care Services            contracted      with Califor-
nia Physicians      Services      (CPS) to assist        in administering
these programs.        CPS was given the authority               and responsi-
bility   to establish      policies      for payment of medical,           dental,
and drug claims.        CPS--as a carrier          for Medicare and as a
fiscal   agent for Medi-Cal--also            reviewed,      processed,     and
paid claims for services           provided     by phyflclans        and other
medical providers       for most of the State.

         CPS's payment policy        requires     that amounts paid to
physicians      be reduced when vlslts          are made on the same day
to patients        in the same nursing home (multiple-patient
visits).       CPS's payment policy         also allows      only one por-
table X-ray equipment          setup fee, although        several      patients
might be X-rayed during the same nursing-home                   visit.       Al-
though these policies          were put into effect        in early 1968,
multiple     visits     by physicians      and X-ray setup fees were
billed     and paid on the basis of single visits               or separate
services.        For these medical servzces,           we estimate      that
about $426,000 in overpayments--of               which about $260,000
were Medicare and about $166,000 were Medicaid                    funds--were
made by CPS during calendar             year 1969.

           The overpayments     occurred       because
I
           --physicians      and providers       of X-ray services   had not
              been advised by CPS as to the correct             way to bill
              for multiple-patient       visits,


1Medicare
               claims for Los Angeles and Orange Counties were
    paid   by Occidental  Life Insurance Company of California.


                                           9
       --the claims-processing          and payment      system did not      con-
           taln adequate controls        to rdentlfy      multiple-patrent
          vlslt  claims,  and

       --physicIan     payment proflles    (a history          of past bill-
          ings to determlne    the reasonableness            of the physi-
          clan's   charges) for multiple-patlent             visits   were lm-
          properly   developed

       From an examlnatlon    of claims paid by CPS durrng Feb-
ruary 1969 under three medical procedure            codes used by pro-
vlders    In billing for multiple-patient        services,    we estl-
mated the amount of overpayments          made during    February and,
on the basis of this estimate,         projected    the amount of over-
payments made during the entlre         year, as shown in the fol-
lowing table

                                                                    Estimated
                                       Estrmated     Estimated       Federal
                                        February        over-       share of
          Basis for                        over-       payment        over-
         overpayment                    payment      for 1969        payment

Multiple-patlent           visits
  paid as routrne            slngle-
  patlent       visit                   $27,300        $327,600     $256,000
Payment for addltlonal
  patients        seen during
  routine       vrslt     based on
  defective        profiles                  6,370       70,000a       63,000
Multiple-patrent           portable
  X-ray unit setup paid as
  single-patient            setup            2,400       28,800       24,500

     Total                              $36,070      $426,400       $343,500

aThese overpayments  were projected    for 11 months only, be-
 cause in December 1969, as a result      of our work, CPS took
 correctrve  actlon whrch resulted   in reducing      physlclan
 fees on those claims rdentlfred    as multiple-patlent         visits




                                        10
        Because of the manner in which CPS maintained                 and filed
its claims data, It was not practicable               for us to obtain
and analyze a sample from all claims paid during                   1969.       We
selected     the month of February       for examination        because, on
the basis of monthly claim volume (number and amount) and
discussions      with CPS officials,       this month appeared to be
representative        of monthly transactions        during    1969.     Since
the claims-processing         procedures     did not change during           the
year )   annual   overpayments     of  about    $426,400    could    have    oc-
curred.      We believe    that our estimate       of overpayments         for
the entire      year-- on the basis of tests of February              claims--
IS reasonable

       The details     of the    findings    and weaknesses       noted    are
presented   below

PAYMENTS TO PHYSICIANS          FOR PATIENT VISITS

         Procedures    established      by CPS to implement the policy
that amounts paid to physicians               be reduced for multiple
visits      on the same day to patients          in the same nursing     home
require      the physician      making multiple-patient        visits to
identify       in his billings      the first    patient  seen by use of
procedure        code 9014 (single-patient         visit) and other pa-
tients      by use of procedure        code 9018 (multiple-patient
visit)

     Our examination    of records at 10 nursing      homes in Ala-
meda, Fresno, Los Angeles,       and Santa Clara Counties,     showed
that physicians    were generally    visiting   their patients   once
a month and that more than one patient        was being seen by
the physicran   during each nursing-home      visit.

        Our review of the payment records at CPS for those
physicians      identified    as having seen more than one patient
during their       visit   showed that many claims were billed       and
paid as though single-patient            visits   had been made    The
following     table illustrates       the overpayments    made to one
physician     as a result     of his having used the single-visit
procedure     code in billing      for multiple-patient     visits




                                        11
                       Number of                             Total
                       patlents                             amount
                        visited                              that
                       durmg    a                           should
                        single            Total              have
   Date of             nursing-           El.IIl0U.llt       been            Cver-
   servl ce            home call             pald            pald           payment

Jan.     7,    1969          29            $        342     $   200           $142
Feb      3,    1969          44                     504a        318            186a
Mar.    10,    1969          26                     286         198             88
APr      2,    1969          44                     502a        374            128a

       Total                              $1,634            $1,090            $543

aThe difference   In amounts paid and estimated       overpayments
 for the same number of patients       visited  on February 3 and
 April   2, 1969, resulted    from a different   combsnatlon   of
 Medlcare and Medl-Cal     patients  visited   on these dates.

         To ascertain       the extent    of the overpayments         resulting
from Improperly         bllled   multiple-patient         visits,    we analyzed
a sample of claims paid by CPS during February 1969                           We
found that about 60 percent of the single-patlent                      vlsrt
claims should have been identified                  by thephyslclanand           paid
by CPS under the multiple-patient                 vlslt   code (see app. I
for sample results)             Using CPS's Medl-Cal           and Medicare
criteria      for claiming      payment for multiple-patrent             visits,
we estimated       that the February claims paid under the slngle-
patient     vlslt    code were overpaid         by about $27,300           On a
yearly     basss this would be about $327,600

        We contacted          several   physlclans     who had used the
single-patient          visit      code in lieu of the multrple-patient
visit     code in therr billings             to CPS for payment.     These
physlclans       informed       us that they had not received        written
lnstructlons         from either       CPS or their     local medical socl-
etles on how to brll               for nursing-home     visits and that they
were not aware of CPS's policy                  of paying reduced fees for
multiple-patient           visits.

      CPS offlclals    conflrmed  that written               billing   instruc-
tions had not been Issued to physlclans                      They stated that
the correct    billing  procedure   1s explained               In the California

                                          12
Medical Associatson's          Relative     Value Studies1 whrch they
assumed would be used by physicians                In preparing        their
claims       CPS offlclals      told us that special           lectures      on thrs
matter had been presented             to county medical socletles.                We
were also told that the county medical socletles                       had a CFS
payment policy      manual and physicians            could call their          local
societies      for information        on a particular     billing        procedure.
CPS officials      explained      that,   although     it was not a general
practice     to provide     physlclans      with special       billing      gulde-
lines,    they acknowledged         that nursing-home       services        possibly
required     the issuance of such guldellnes

        Our review showed that CPS has no prepayment               procedures
to identify      claims for multiple-patient        vlslts       CPS acknowl-
edged that It was possible           for improperly    billed    claims to
be processed and paid unless claims examiners                 compared each
single-patlent       visit     claim with all other claims for ser-
vices rendered        on the same day and at the same location.
Neither     HEW nor the State had evaluated         the adequacy of CPS's
claims-processing          system to ensure that the policy         of paying
reduced fees was being followed

         Cur review showed also that Improperly                 paid claims
could not be easily             detected      or identified    after  payment.
The basis for CPS' postpayment                   reviews are patient     and pro-
vzder payment records.                Neither      of these records    show the
place where the service               was performed.        We were told by CPS
offlcrals       that,    to determine         if a paid claim was for a
multiple-patient          visit,      the place of service        had to be man-
ually     researched       from the billing           document and then compared
with a microfilm           copy of other claims with the same date of
service.       Even after        going through this time-consuming            pro-
cess, there 1s no assurance that improperly                      pald claims will
be detected,         because paid claims frequently              do not show the
place of service.


1
 The Relative   Value Studies is a catalogue-type            index which
 assigns procedure      numbers to particular       medical    services  as
 well as a relative-value        number indicating     the degree of
 skill  and time required      in provldlng      such services



                                          13
       CPS offrcrals     agreed that,     if the place of service
were shown on the provider          payment record,      an effective
postpayment     review of multiple-patient         services    could be
made. CPS has taken steps to ensure that (1) the place
where a servrce is rendered          is recorded    on both the Medi-
care and Nedi-Cal       claim before payment is made and (2) guide-
lines explarning      the correct      way to bill   for nursing home
visits   would be furnished       to physicians.




                                  14
PHYSICIAN PAYMENT PROFILES
INCORRECTLY DEVELOPED

        As a Medicare carrier,        CPS 1s responsrble        for determln-
rng whether the rates and amounts of payments to physrclans
and other medical providers           under part B of Medicare          are
reasonable.       CPS's procedures      for processing       part B claims
provide     for an evaluation      for reasonableness        on the basis of
the customary charge made by the physician               for his services
as well as on the basis of the prevailing              charges in the lo-
cality    for similar    services.      We estimated,     however,      that
overpayments      of about $70,000 had been made during 1969 be-
cause CPS erroneously         used single-patient      visit      charges to
develop the reasonable-payment            level   for multiple-patient
visit    charges.

        At CPS the customary and the prevailing          charges for
particular      medical procedures     have been developed     and are
maintained      in a computerized     system    The computer-stored
history    of past billings      for each physician    is called    a pro-
vider payment profile          If the amount billed      does not exceed
 (1) the provider's      customary charge or (2) the prevailrng
charge In the locality,        then the claim is paid without        being
reduced.      If the charge exceeds the customary or prevalllng
charges,    the computer will reduce the amount to be paid to
the customary or prevailing          charge, whichever    is lower

        The following  examples illustrate     how the      general    crite-
rla on customary and prevailing        charges are to       be applied      In
reviewing     claims and rn making payments under          part B of the
Medicare program       Assume that the prevailing          charge for a
specific    medical procedure   is $10 In a certain          locality    and
that Doctor A customarily      charges $8 for this         procedure     and
that Doctor B customarily      charges $12 50

      1   If Doctor A's bill       is $7    50, the reasonable   charge
          would be limited      to $7.50,      since under the law the
          reasonable     charge cannot      exceed the actual charge,
          even if it 1s lower than          his customary charge and
          the prevailing      charge for     the locality




                                      15
      2   If Doctor A's bill    1s $8.50, the reasonable   charge
          would be llmlted   to $8 becaluse that IS his custom-
          ary charge     Even though his actual charge of $8 50
          1s less than the prevalllng     charge, the reasonable
          charge cannot exceed his customary charge

      3   If Doctor A's bill  1s $8, the reasonable  charge
          would be $8 because 1-t 1s his customary charge and
          it does not exceed the prevalllng   charge for that
          locality

      4   Doctor B's customary charge 1s $12 50 and he bills
          $12 50    The reasonable charge for Doctor B could
          not be more than $10, the prevalllng  charge In the
          area

        In December 1968 the Secretary           of Health,   Education,
and Welfare considered         the adequacy of the premium of $4 for
part B of the Medlcare program               This premium was continued
sn effect       for the period July 1, 1969, to June 30, 1970, on
the assumption        that the level      of reimbursement    for physl-
clans'     fees would remain approximately            at the December 1968
level        To ensure this,     HEW Instructed      Medlcare carriers      not
to update a physlclan's          profile    beyond his establlshed       pro-
file    In effect     during December 1968, except In very unusual
situations          Therefore,   profile    payment data used by CPS to
evaluate      the reasonableness        of 1969 MedIcare part B claims
was complied from claims submltted              before 1969.

        Prior to December 1968, CPS Instructed              Its claim exam-
iners to change single-patlent              vnslt procedure      code 9014 to
the multiple-patlent          visit    procedure     code 9018 whenever ev-
idence rndlcated        that a physlclan         had seen more than one
patlent      during the same vlslt         even though the amount shown
on the claim-- based on code 9014--was greater                 than the physl-
clan's     customary charge for a multiple-patlent               vlslt--based
on code 9018          In these lnstapces,         however, the claim exam-
iners were directed          not to reduce the amount charged by the
physlclan          CPS d1.d not return      such claims to the physl-
clans requesting        that they correct         the charges.      CPS ex-
plained      that the dollar        amount was not changed because It
was expected that,         through the use of the computer,               the



                                       16
    amounts to be pard would be reduced.                     Under the computer
    system, however,         the physicians'        profiles      were established
    and updated on the basis of amounts billed                      rather      than on
     the basis of amounts pard, the effect                   of whrch caused the
    physrclans'     multiple-patlent         visit     profiles       to be based on
    single-patient       visit    fees rather       than multiple-patient
    visit    fees.    Since single-patlent           visits     were generally
    billed     and paid for at a higher            amount than multiple-patlent
    visits     and because some physicians             billed     the higher        amount
    for single-patient          as well as multiple-patlent               vrsits,     the
    input of such billing          data into the computer system increased
    the maximum amount at which claims for the multiple-patrent
    visrts    were paid.

            In commenting on this matter      (see app. II, p. 341,
    HEW agreed that the use of erroneous           charges drstorted        the
    carriers    charge data for multrple-patlent         visits.     They
    pointed    out, however,   that the higher fees would not be er-
    roneous In those instance where physicians             had intended       to
    increase    their  charges for multiple-patlent         visits   or had
    decided to charge the same fee for multiple-patient               visits
    as for single-patient      visits.

            In all instances     which we examined, physlclans        had cus-
    tomarily      charged less for multiple-patient     visits    than they
    had charged for single-patient         visits.  We doubt that a phy-
    sician wishing       to raise his charge for a multiple-patient
    visit     would do so by billing    his new charge to a slngle-
    patient     visit   code with the expectation   that a claims exam-
    iner would change the code to a multiple-patient            visit.
,           We discussed           this matter with CPS officials,               and in De+
    ember 1969--after              CPS had determined        that multiple-patlent
    visrt     profiles       contained        the same payment levels          as the
    single-patient           visit     profiles   --CPS acted to stop the overpay-
    ments.       Until     a new multiple-patient            visit profile        could be
    correctly        establlshed,         CPS replaced     the multiple-patlent
    visit     proflles       with the profile         data charges for routine           of-
    fice visits         which CPS believed           more nearly   reflected         the
    fees that should be paid for multiple-patient                        visits.

           CPS offlclals   informed us that the input of incorrect
    charges into physicians'       multiple-patlent      visit  profiles
    would no longer happen because claims changed manually               were
    beingcoded     so that the amount billed        did not enter the pro-
    files.
                                              17
PAYMENT FOR PORTABLE X-RAY SERVICES

       In accordance with CPS policy,              payments for portable
X-ray services1        are  lImited      to   one equipment   setup fee, al-
though several       patients     might be X-rayed during the same
nursing-home     visit.       We estimated,       however,  that overpay-
ments of about $28,800 had been made during calendar year
1969 because CPS's claims-processing                system was not adequate
for detecting      instances      in which setup fees were charged
for each patient        X-rayed     during multiple-patient        visits.
We were told by CPS officials               that the setup fee payment
policy    had never been communicated to providers                of X-ray
services.

        Claims-processing         procedures      applicable    to portable
X-ray services          are slmllar      to those for processing         physlclan
claims (see p. 13), that IS, CPS has no effective                       means for
routinely      identifying--      either    prior    to or after payment--
X-ray claims which relate              to multiple-patient       visits        CPS
can detect multiple-equipment               setup fees prior       to payment
only if all claims from & provider                 are received      at CPS at
the same time and are reviewed by the same claims examiner.

       Our review of        a random sample of 100 X-ray claims paid
by CPS In February          1969 indicated       that overpayments  of about
$2,400 were made            We estimate    that,     on an annual basis, the
overpayments     would      be about $28,800.         An example of an over-
payment follows

          Over a lo-month    period, a provider      submitted   57 sepa-
          rate claims showing charges of $24 for equipment             setup
          and $15 for the patients'     X-ray.     He was paid $39 for
          each claim submitted--a    total     of $2,223.     We found
          that charges for 35 of these setupsrepresented            setups
          for patients   X-rayed on the same date at the same nurs-
          ing home. Our analysis     showed that this provider          had
          been overpald   $840

          In June 1970,     we were Informed   by CPS offlclals that
they      had submltted     a proposal   to the Department of Health


 Under Medl-Cal,          X-ray   services    are payable    only    to physl-
 clans.


                                         18
Care Services   to install  a new claims-processing        system
which would give CPS the capability       to Identify    providers                           of
portable  X-ray services   who were billing     for multlple-
equipment setup charges.

CONCLUSIONS

         The cost of physician           and other related             provider       ser-
vices represents         a significant         portion      of all Federal and
State expenditures          for the Medicaid            and Medicare         programs        In
California         Therefore,        weaknesses in the procedures                   for
paying providers         for services        rendered       to patients          under
these programs can result              in substantial          amounts of Federal,
State,     and local funds--which            could be used for other worthy
purposes under these programs--being                      spent unnecessarily.
                                                      .
        The overpayments          for 1969, which we estimated                   to be
about Q426,400, occurred              because (1) physicians               and provid-
ers of X-ray services             had not been advised by CPS as to the
correct     way to bill       for multiple-patrent             visits,        (2) CPS's
processing     and payment system was not adequate to routinely
identify     multiple-patient          visit    claims,       and (3) the Medicare
physician     payment profiles           for multiple-patient              vlsrts       were
improperly     developed        from single-patient            visit      charges.
Because of the manner in which CPS maintained                            and filed       Its
claims data, it was not practicable                     to identify         lndlvldual
cases involving         overpayments.          For this reason we drd not
ask CPS to attempt to identify                 instances       of overpayment            and
to seek recovery.
        CPS has taken action to (1) instruct                physlclans       as to
the correct way to bill             for nursing-home      visits,       (2) assure
that only correct-charge              data are included        in physicians
multiple-patient         visit    profiles,    and (3) develop          a clalms-
processing       system capable of allowing           identification         of
multiple      equipment      setup charges.       These actions will,            in
all likelihood,        reduce the rncidence         of future        overpayments,
however,      the weaknesses which we noted can be partly                    attrlb-
uted to HEW because it has not evaluated                     the adequacy of
CPS's claims-processing             system to ensure that the policy                 of
paying reduced fees is being effectrvely                  followed




                                              19
RECOMMENDATION TO THE SECRETARY OF
HEALTH, EDUCATION, AND WELFARE

        In those Instances       in whrch       the States,   their     agents,
or Medicare     carrrers   have pollcres           for paying reduced fees
for multrple-patlent       visits,    we      recommend that HEW, in Its
program for monltorlng        Medrcaid        and Medicare    actlvitres,
provide    measures for determining             compliance with such pay-
ment polrcles      and take corrective            action where warranted.

AGENCY COMMENTSAND ACTIONS

        By letter     dated December 11, 1970, the Asslstant        Secre-
tary,    Comptroller,      HEW,  furnished    us with HEW and   the Call-
fornla    Department      of Health Care Servrces comments on our
findings     and recommendations           (See apps. II and III.)

        HEW informed      us that It concurred with our recommenda-
tion and was developing           instructions        to all Medicare       carri-
ers containrng       uniform     guldelrnes       for national     applrcation
to assist      in rdentlfylng       multiple-patlent        nursing-home       vrs-
Its and in ensuring          proper reimbursement          for such services.
Under these Instructions,            which wrll be Issued shortly,               it
will    be mandatory      for all Medrcare carrrers            to have a pol-
ICY that provides         for paying reduced fees for multlple-
patient    vlslts       HEW also informed           us that It would provide
for appropriate       monltorlng       and appraisal       by the Social Secu-
rity Admlnlstratron          to verify      that such a policy        had been
establlshed,      that It was being effectively               Implemented,       and
that It conformed to natlonal               guldellnes.

       HEW informed us that compliance               with policies    estab-
lished   under the MedIcaid          program by the States would be
determined    by regional       offices     of the Social and Rehabilrta-
tion Service.      HEW pointed        out that primary responsibility
for reviewing     State Medicaid         programs had recently        been
given to the Service's          regional     offices     in order to faclli-
tate monitoring      activities       and to promote faster        corrective
actions      HEW stated that the scope of its new monitoring
program required      a closer relationship             with State agencies
and more frequent       visits     and reviews of State operations.

        The Callfornla     Department of Health           Care Servrces       ad-
vised    HEW that It     had issued lnstructlons           which should

                                         20
effectively       cope with the problem of payments              to physlclans
for multiple-patlent           vlslts     under the MedIcaid      program.
?i'he State expressed        the view that,         because the controls        In
the Medicare       and Medicaid       programs were inherently          dlffer-
ent, they became virtually              IneffectIve      when blended     together
with Joint       Medlcaze/Medlcald         coverage.      The State urged that
actlon      be taken at the Federal           level    to permit  uniform      pol-
lcles     and procedures       for beneflclarles         covered under both
of these programs.




                                        21
                                                                                     CHAPTER3

                       PAY&ENT POLICIES                                               FOLLOWED IN OTHER
                                                                                                   ---- STATES
                       FOR MU&TIPLE-PATIENT                                                      NURSING-HOME VISITS

        We asked HEW offlclals         about the payment pollcles           ap-
plxable       to pwslclans'      claims for multiple-patlent          visits
followed      by other fiscal      agents and carriers      within    HEW
Region IX.       These officials       Informed us that,      In Callfornla,
Oregon, Nevada, and Washington,              there were 10 different         pol-
lcles for the payment of such claims.                 Each policy   and Its
applscabillty       to the Medicare       and/or Medicaid     programswlthln
each of the four States 1s discussed               below.
                                                                                                                                                              Medical      program
                                                                                                                                                                     to whxch
                                       Payfng          agent                                   Description           of policy                                policy     applies

  California                                                             Reimbursement        is nade            at the       rate      for a home
        (horthem                                                            visit     for the first              patient        and     at a re-
      Cal1fomia)                                                            duced    rate   for each             additional           patient    seen
       (note      a)     CPS                                                during      the same visit                                                      Medicare/Medicaid
  Callfornla             Occidental                  Life      In-
       (Southern             surance            Company                 ReGnbursenent        1s made at the smw                        rate       for
      California)               of      California                         each patient        seen dur,ng      multiple                   visits           Medicare
  Nevada                 Blue          Shield                           Reinburscment        is made at the rote                       for a home
                                                                           visit      for the first     patient       and              at the rate
                                                                           for    an office     visit   for additional                      patients
                                                                              seen                                                                          Medicaid
  Nevada    and         Aetna   Insurance                      Com-     If    three   or more patients                   are seen during              the
     Oregon                P.=Y                                             same wslt,          rhyslclans             are reunbursed               at a
                                                                            reduced     rate      for each patient                  seen                    Medicare
                         state                                          Fee schedules           are used              The sare fee is paid
                                                                           for all     routine          nursng           home v1slts           and-no
                                                                           reduction        is made for nultiole                     visrts                 Medxaid
  Washington            State           and     Blue        Shield      Washzngton       Physlcions              Servxe'(Blue               Shzeld)
                                                                           consists       of 20 bureaus               that     follow        the
                                                                           var~ou      policies           llsted         below                              Medicare/Medicaid

                                                                        Wethod      1 (11 bureaus)                 Relnbursunent              is nade at the rate          for an
                                                                             untie1       off ce vlslt           for the first              patient.      seen  All    others
                                                                             are treltcd        ds follow          up office          vxslts
                                                                        Kethod      2 (five       bureaus)             Rennbursement              is made at the sinple-
                                                                            visit     rate    for each patient
                                                                        Yethod      J (two bureaus)                  Rcunbursemenc              is made at one half of
                                                                             the sl?gle-visit            rate      for each additional                  patient during       the
                                                                            sane visit
                                                                        Method      4 (one bureau)                 ReImbursemew              is made at the rate           al-
                                                                            lowed     for subsequent            hospital         calls
                                                                        Method      5 (one bureau)                Method       1 is used for so-called               extended-
                                                                            care facility          or nursing-home               doctors,           and method  2 is used
                                                                            for doctors        making        occasional          visits

  aCPS    processes    and      pays       Medicaid            claims   for     the   entire       State




                                                                                           22
      HEW officials        were of the opinion    that         the same degree
of divergence      existed     nationwide as exlsted           rn therr region.

        Existing     Medrcare and Medlcard         regulations     do not pro-
vide any speclfrc         criteria    or guldellnes        which can be fol-
loweduniformly        by States'    fiscal      agents and carriers          rn es-
tabllshlng       payment pollcles       for multiple-patlent         vlslts.
As shown above, HEW's allowing               these States and paylngagents
to establish       their   own pollcles        has resulted     in higher pay-
ments of multiple-patients            visits     rn some areas than In
others.

      HEW officials         have told us that they do not generally
Issue specific       payment guldellnes        because of the various
ways In which medicine          is practiced       throughout      the country
and the effect       that such guidelines         would have on the prac-
tice of medicine.           HEW offlcrals     stated,     however, that the
circumstances      relating     to medical services         provided    nursing
home patients      might require         that special     gudrellnes    be is-
sued.

        HEW offncrals      told us that they were looking                 into the
need for establlshrng           speclfrc      reimbursement       guidelines       un-
der Medrcare for physlclans              visits    and had completed           a study
to determine      (1) the dlversrty           of pol~cles      that were used by
carriers    throughout       the nation       and (2) the feaslbllrty            of
lssulng   uniform guldelrnes           for national        appllcatlon       in lden-
tlfylng   multiple-patlent         nursing-home        visits      and proper pay-
ment for such services.            Conversely,        no such study had been
made for Medicaid.

CONCLUSIONS

        We believe that the concept of paying a reduced fee for
multiple-patient     vlslts  at a nursing    home 1s sound and that
It can be applied      on a nationwide   basis.

       HEW should study the payment pollcles         of the 52 States
and jurlsdlctlons     that have Medlcald      programs to determine
whether there 1s a need for HEW to issue speclflc              guldellnes
to States regarding      payment for physicians'      nursing-home
vlslts   under Medicaid.     HEW should also coordinate         the ISSU-
ante of such guldellnes      with appropriate      Medicare    and


                                        23
Medicaid    officials    within  HEW to ensure that payment              p'ol-
icies established       under these programs do not conflict                with
each other.

RECOMMENDATIONS TO THE SECRETARY OF
HEALTH. EDUCATION, AND WELFARE
       We recommend that HEW make a study similar        to the one
completed under the Medicare        program to determine     the diver-
sity of payment policies      under the Medicaid    program for
physicians'    visits  and to ensure that guidelines       for Medl-
cald and Medicare     are coordinated.

      We recommend also that the Administrator,                   Social    and
Rehabilitation      Service,     and the CornmissIoner,          Social Secu-
rity Administration,         provide,      in HEW's program       for monitor-
ing Medlcald     and Medicare       activities,        ways to   measure the
implementation      of HEW guidelines           developed   as   a result    of
the studies    and obtain corrective             action where     warranted.

AGENCY COMMENTSAND ACTIONS

        In commenting on the above recommendations           (see app.
II),    HEW stated that the Social and Rehabilltatlon           Service
would initiate       a study of the diversity     of existing    payment
policies    under Medicaid      with a view toward the issuance of
national    guidelines,     that the study would be coordinated
with the parallel       study in the Medicare     area, and likewise
that the issuance of guidelines           would be coordinated    between
the Medicare      and Medicaid     programs.

        In connection      with its monitoring          activities,       HEW ex-
pressed the opinion         that,   in   view   of   the   actions     already
taken by the Social Security             Administration          and the Social
and Rehabilitation         Service,    these    agencies       had  effective
surveillance       systems which could and would be used to as-
sure compliance        with guidelines       governing       payments for mul-
tiple     visits.

       HEW outlined     the methods that it had taken and those
that It intended      to employ in monitoring     the Medicare pro-
gr=b including      the placement of systems technicians       in each
Social Security     Administration    (Bureau of Health Insurance)
regional   office   to assist HEW representatives      assigned to

                                        24
the larger     Medlcare carriers       and other reglonal    offlce staffs
in evaluating,      on an ongolng      basis,  carriers'  claims and data
processing     systems.

        As previously     noted (see p. 201, HEW also Informed us
that the responsrblllty        for revlewrng      State Medlcald         programs
was recently      redelegated    from the HEW central          office    to So-
cral and Rehabllrtatlon        Service   reglonal     offrces       and, as a
result,    HEW expected that State MedicaId           actlvltles        would be
monitored     more frequently      and more thoroughly         than In the
past and that correctrve         action would be lnrtlated            promptly.

       We belleve     that the admlnlstratlve         actions     taken or
promised by HEW should,          if effectively     Implemented,       tend to
bring about uniform pollcles           for the payment of reduced fees
for multiple-pat-lent       vlslts    and appropriate       monltorlng     and
appraisal     of compliance      with such pollcles        by the carriers,
the States,     or their    fiscal    agents.




                                       25
                                   CHAPTER 4

                               SCOPE OF REVIEW

       Our review of payments to physlclans                 and certain       other
providers    vrsltlng     patients      In nursing homes under the Medl-
care and Medlcald        programs In Callfornla           was directed        toward
evaluating     the controls       established      by HEW, the State,           and
CPS In maklng payment for medlcal services.                      Our review
conslsted    prlnclpally       of examlnlng      Into such controls           In
connection    with the pollcles           and practices      followed      by CPS
In making payment for medlcal services                 provided      nurslng-
home patients          We revlewed the enabling           legrslatlon       and
examined procedures,         records,      and documents relating           to the
Medicare and Medl-Cal programs

       Our work, lncludlng          dlscusslons    with offlclals      respon-
sable for the various           levels   of admlnlstratlon       of the pro-
grams, was done at HEW headquarters              In Washlngton,       D.C.,
and Baltimore,       Maryland,      HEW's reglonal      office   in San Fran-
ClSCO,   Callfornla,       State headquarters       of the Department of
Health Care Services          in Sacramento,     Callfornla,       and CPS In
San Francisco

        Also, we vlslted     10 nursing      homes located      In Alameda,
Fresno, Los Angeles,        and  Santa    Clara    Counties       These coun-
ties were selected        because they account for a slgnlflcant
portlon     of Medlcald    expenditures         Factors which we consld-
ered In selecting       the nursing      homes were their       bed capacity
and the number of Medlcald          patients      served      We also re-
viewed records at each nursing            home vlslted         For the most
part,    the case flies     of Medlcald      patients      were selected
from among those who were resldlng              In the home at the time
of our vlslt     and covered transactlons            during calendar years
1968 and 1969




                                         26
APPENDIXES




   27
                                                                   APPENDIX I


                 NUMBER AND AMOUNT OF OVERPAYMENTS

                      DURING FEBRUARY 1969 FOR

                      SINGLE-PATIENT       VISITS    AND

                         PORTABlE X-RAY CLAIMS (note          a)



                                      Single-patient       Portable          X-ray
                                       visit    claims             claims
                                         (procedure           (procedure
                                         code 9014)           code 7477)

NUMBER OF CLAIMS PAID                       14,716                     781

NUMBER OF CLAIMS OVERPAID:
   Estimate                                  8,958                     109
    Sampling error                           1,198                          50

AMOUNT OF OVERPAYMEWTS:
    Estimate                               $27,326                 $2,413
    Sampling error                          $5,672                 $1,135

aGAO's estimates     were developed        from random samples of
 claims paid under these procedure             codes during    February
 1969.    The number of sample claims were as follows:                 pro-
 cedure code 9014--138        claims--and      procedure   code 7477--
 100 claims.     Sampling errors        are stated at the 95-percent
 confidence   level.     Thus, there is only a 1 in 20 chance
 that the estimates      derived     from the sample would differ           by
 more than the amount shown from an examination                of all
 claims.




                                      29
APPENDIX         I I
         Page 1


                       DEPARTMENT     3F    HEALTH             EDUCATION       AND      WELFARE
                                        OFFICE    OF     THE    SECRE’TARY

                                            WASHINGTON           DC    20201




                                                 DEC 11 1970




  Mr. John D. Heller
  Assistant      Director,     Civrl   Division
  United    States     General    Accounting              Office
  WashIngton,       D. C. 20548

  Dear     Mr.    Heller:

  The Secretary     has asked me to,respond         to the draft     report    on
  GAO’s review     of Overpayments     By The Medicare        and Medicaid
  Programs   For Physlclan     and X-ray Services        Provided    To Patients
  In Nursing    Homes In Callfornla.        Enclosed     are the Department’s
  comments   on the findings       and recommendations        in your report.
  We have also enclosed       a copy of comments       submitted     by the
  Department    of Health    Care Services,     State of California.

  We appreciate             this  opportun>ty       to cormnent prior    to issuance
  of the final            report.     We also      appreciate   your continuing
  interest        in    helping    us Improve       Medicare   and Medicaid
  admlnlstration.

                                                               Sincerely       yours,



                                                                               u
                                                               James B. Cardwell
                                                               AssIstant Secretary,               Comptroller

  Enclosures




                                                         30
                                                                      APPENDIX II
                                                                           Page 2

                           OVERPAYMENTSBY THE MEDICARE
                      AND MEDICAID PROGRAMSFOR PHYSICIAN
                         AID X-RAY SEFWICES PROVIDED TO
                      PATIENTS IN NURSING HOMES IN CALIFORNIA
                    (GAO Draft Report Transmitted June 22, 1970)



The draft audit report presents a factual        pplctrlre of overpayments
by the California     Physlclans Service (CPS) under both the Medicare
and Medlcald programs for physlclan       and x-ray services provided
to patients    In nursing homes. It 1s generally         consistent with
flndlngs    of the Social Security Admlnlstratlon        (SSA) and the
Social and Rehabilitation       Service (SRS) on these points.
Comments submitted by the Department of Health Care Services,
State of Callfornla   lndlcate that the State has issued In-
structlons  to CPS, In its capacity as Medlcald fiscal   agent,
to cope with the problems discussed by GAO

Coordination    between the Medlcare and Medlcald programs' payment
pollcles    and guldellnes,      to the full extent feasible,         1s highly
desirable    and 1s being undertaken.          As lndlcated     In our response
below to recommendation         2, provlslon     has been made for ongoing
llalson    and coordlnatlon      between SSA and SRS. However, there
are fundamental     differences      between the Title XVIII and Title
XIX programs, and the provisions            of law under which they operate
These differences       have an impact, for example, on the extent to
which the Federal government          may exercise direct centralized
control    over the methods used to establish            levels of benefit
payments under the two programs.             The differences      also lunlt
to some degree the extent to which uniform guidelInes,                 policies,
and approaches to the resolution            of problems may be developed.
Our posltlon    In response to the GAO recommendatlonstherefore
cannot be entirely       uniform with respect to actlons taken or
planned under Title XVIII and Title XIX by SSA and SRS.

Our comments on the three       recommendations      are as follows

1.   Recommendation     In those instances where the States, their
     agents, or Medicare carriers    have established      pollcles   for
     paring reduced fees for multiple
     _”    -
                                          patient
                                          -    .
                                                   visits,     we recom-
                                                                ,




     mend that, in HEW's program for monltorlng       Medicaid and Medicare
     activities,  the Secretary,   HEW, provide measures designed to
     determine compliance with such Dament Dollcles           and to effect
     corrective  actlon when warranted.




                                        31
                                                                                    n   I
APPENDIX II
    Page 3
We concur In thus proposal.             SSA 1s In the process of developing
lnstructlons       to all Me&care caxrlers              contalnlng     uniform guldellnes
for national      appllcatlon      In lderltlfylng        multiple-patlent         nursxng
home vlslts      and relmburslrlg     properly        for such services           Under these
xx7Jxuctlons,        It will be mandatory for all Medxare carriers                      to have
a polxy      for paying reduced fees for multiple                  patlent vxxts.          SSA
will provide       for appropriate      qonltoring        and appraisal       to verify     that
such a policy h%s been establlshed,                 that It 1s being effectively
Implemented,       and that It conforms to the national                  guldellnes     mentioned
above, which ~111 be Issued shortly.                    (As lndlcated       In response to
recommendation 2, SRS 1s lnltlatlng                 a study which will include the
feaslblllty      of uniform guldellnes           for MedIcaid.)

SRS has implemented a new monltorlng           and llalson     program with the
State agencies by each of the SRS/MSA Regional Offlees with the
cooperation      of the Washlngton Central Office.          Under this new
program, primary responslblllty         for revlewlng      the State program
has been given to SRS Regional Offxes            in order to facilitate
monltorlng      actlvltles and promote faster corrective           actions.      The
scope of the new programs requires          a closer relatlonshlp         with the
State agencies along with more frequent            vlslts    and detalled     reviews
of State operations.       The monxtorlng reviews wLL           tend -to be com-
prehensive      m the beglnnlng    phases but ~111 later develop into more
intensive     reviews of troublesotie     axeas such as those noted in this
report.     In addltlon,   SRS wxll follow through on all deflclencles
reported    by GAO and the HEW Audit Agency. Concerning the deflclency
commented on In this recommendation,           SRS ~111, of course, give special
follow-up     review of corrective    actions promised by the State.

2.   Recommendation       That a study be undertaken to determme the
     diversity    of payment pollcles  under MedIcaid for physicians'
     visits    and that issuance of guldellnes    In this area be coordinated
     between the Medlcald and Medlcare programs.

We agree with      this   recommendation        and SRS will      undertake     such a study

We have made provisions   for ongolng liaison                and coordlnatlon      between
SRS and SSA Thus, the SK3 study will be                    coordlnatedI1ylth     the parallel
study In the Medicare area which, as noted                  on page 29 uf GAO's report,
had already been undertaken by SSA and 1s                  now complete.      Llkewlse,
issuance of guldellnes   will be coordinated                between the Medicare and
Medicaid programs.

3.   Recommendation    That the Secretary direct the Admmlstrator,     SRS,
     and Commlssloner,  SSA, to provide,  in HEW's program for monltorlng


GAO note    The page numbers referred to m these comments are apphcable to GAO’s draft report




                                               32
                                                                           APPENDIX II
                                                                                 Page 4

     MedIcaId and Medicare actlvltles,     steps deslanated to measure the
     extent to which EEFTguldellnes    have been implemented and to obtain
     corrective action where warranted.

 In view of actions already taken by SSA and SRS, we do not think such
 a dlrectlve      1s necessary.      SSA has been continually       assessing the
 effectlvencss       of Its surveillance      actlvltles    and seeklng ways to make
 them more effective.           As an outgrowth of this contlnulng        evaluation,
 SSA has placed onslte representatives               at all of the larger Medicare
 ca.rrlers    and lntermedlarles.        It 1s the responslblllty       of the onslte
 representative        to study In depth all facets of the carrier's           claims
 processing      ac-tlvltles    and to evaluate compliance with SSA regulations
 and dlrectlves.           This 1s accomplished through case review at various
  stages of the process as well as lntervlewlng              personnel,   evaluating
 training     guides and oral directions         given to personnel,     and analyzing
 written     procedures and policies.

 In addition,   a systems technlclan   has been placed m each SSA Bureau
 of Health Insurance (BHI) regional     office.     These technlclans   will
 assist onslte representatives     and other regional    offlee   staff In
 evaluating   on an ongoing basis carriers'     claims and data processing
 systems

 The above techniques     employed by SSA for the surveillance      of carrier
 actlvltles   are in addition     to contract performance reviews by specially
 trained SSA teams, the use of quantitative         operating standards and
 required   perlodlc  reports from carriers    to measure performance,      in-
 troduction    of test claims into caSrler systems, and other measures
 to monitor carrier     performance.

 With regard to the review of Medlcald adminlstratlon,            primary
 responsibility      for revlewlng    State programs was recently     shlfted,
 as mentioned in our comments on recommendation number 1 above, to
 SE&Sregional    offices.      As a result  of this change, SRS expects to
 be able to monitor State MedicaId actlvltles          more frequently      and
 more thoroughly       than In the past and to initiate    corrective      actlon
 promptly.

  In summary, both of the responsible      admlnlstratlve agencies have
  effective  surveillance   systems, which can and will be used to assure
  compliance with guldellnes     governing payments for multiple   vlslts.



  In addition  to our comments on the recommendations, SSA had a comment
  on the audit flndlngs  on pages 21 and 22%f the draft report which


GAO note   The page numbers referred to m these comments are applicable to GAO’s draft report


                                              33
APPENDIX      II
       Page 5
 we want to xncludp         'Ifhese flndxngs relate to the way the CalLfornla
 Physx1ans'    Servxe      (CPS) recorded data for developing          computer records
 of customary and prevalllng          chiLges by physxlans.         (Under the pro-
 vlsxons of law goselnl'lg        Medxare ~dmlnxtration,         the reasonableness
 of a physlclan's     cllarge 1s screened and evaluated          on the basis of
 the customary charge made by the physlclan            for the service and pre-
 valllng  charges In the locality          for similar   services.)

The report lndlcates        that the carrier's       Medxare reasonable       charge
screens for procedure code #go18 (routine               home vlslt,  multiple
vlslt)   were distorted.         This occurred where physicians reported
services rendered in multi-patxent            situations    under code #9014
(routine    follow-up    home visit,    single patient)      and also charged
higher fees than their customary charges for multiple                vxxts.
The carrier      dxd correct erroneous codlngs on such claims, but
falled   to ascertain     whether the higher than customary charges
made by the physicians         in the multiple      vxsit sltuatlons   were
also erroneous.       SSA agrees that the use of these charges, where
they were erroneous,        did distort    the carrier's     charge data for
procedure #9018.

However, the higher than customary charges were not necessarily
 always erroneous.     There were no doubt instances where the higher
fees were the charges the physicians            actually    intended to make,
 e.g., where physicians     had decided to Increase their charges for
procedure #9018 above the previously            established     customary level
or where they had decided to begin charging the same fee for pro-
cedure #9018 (multiple      vlslt)    as for procedure #go14 (single vxlt).
Under Medicare regulatlonb         on the development of reasonable charge
screens, carriers    are expected to use data on the actual charges
made for a servxe,      regardless      of whether the charges were higher
or lower than the prevloubly         establlshed     customary and prevallmg
levels

As SSA sees it, therefore,              the problem In regard to reasonable
charges under Medicare for nursing home visits                       1s not simply one
or proper data recordatlon.                There 1s a need to supermpose upon
screens which reflect           actual chasges, other lxmltations               based on
a concept of inherent reasonableness.                    Thus, even if many physlclans
became accustomed under Medicare to make the same charges in single
and multiple      nursing home visit           situations,       the proposed gLzldellnes
SSA 1s about to issue will nevertheless                    provide for a differential
In the allowable        charges under Medicare.               The screens to determxne
reasonable     charges will not depend on the charges physicians                      have
made for nursing home visits,               but rather,       on their charges for house
calls and routine        follow-up       office vlslts.          This deviation    from screens
based on the actual charges made for the services in question will be
Justified     because it is inherently             reasonable to relate single patlent
nursing home vx.lCs to house calls, and multiple                       vxsxt situations    to
routine   follow-up      office     visits.
                                                                                                           APPENDIX III
.                                                                                                               Page 1
    STATE OF t.ALIFORNIA-HUMAN           RELATIONS   AGENCY                                                        RONALD   REAGAN    Governor


    DEPARTMENT             OF HEALTH                 CARE     SERVICES
    714 P STREET
    SACRAMENTO     CALIFORNIA    95814


                                                                         July   30, 1970




                        Mrss Gene Beach
                        Associate   Reglonal Commlssloner
                        Medical Services     Admlnlstratlon
                        Social and Rehabxlltatlon         Services
                        Department     of Health,     Education and Welfare
                        50 Fulton Street
                        San Francisco,     Callfornla     94102

                         Dear Miss           Beach

                         Thank you for provldlng       an opportunity     to review and comment on the
                         draft report    by the Unlted States General Accountrng          Office on over-
                         payments by the Medicare and Medicaid prograns             for physrclan and X-ray
                         servxces  provided    to patients    in Callfornla     nursing  homes.

                         Concerning    payment to physzcians            for multiple     nursing    home visits,       we have
                         issued fiscal     intermediary      instructions          (see attachments     1 and 2) [See
                         GAO note ] which should effectively                  cope with this problem          Our latest       fis-
                         cal lntermedzary       lnstructlon      limits       payment for routine     nursing     home vlslts
                         to the value of a routine          office      visit    unless   the physlclan     Indicates       on
                         the billing    form that the claxm is for the fxst                   or only patlent       vlsxted

                         As for portable       X-ray services,     clariflcatlon       is needed       Under the Medi-Cal
                         program, portable        X-ray services     in nursing     homes are payable only as phy-
                         sicians'     services    (see attachment      3)      [See GAO note ] Independent         X-ray
                         laboratories       or X-ray technologists        do not qualify       as Medl-Cal providers
                         However,     they do qualify     under Medlcare          Accordingly,     Medi-Cal participates
                         in payment      (by coinsurance,      and deductible      when applicable)       for their ser-
                         vxces to benefxclaries         covered by both programs

                         This dlsparlty,        and confusing       overlapping      of payments and program rules,
                         illustrates      the need for better          coordlnatron      of the two programs             In
                         addrtlon,     the controls       1.n these programs are inherently             different,       and become
                         virtually     ineffective       when blended together         rn cases with Joint Title XVIII
                         and Title XIX coverage.            Title XVIII relies         to a conslderable          degree on Its
                         coinsurance      and deductrble        features,     to help control     utlllzatlon         and costs.
                         Thus significant         feature    1s not operative        when Title XIX adds Its coverage;
                         conversely,      Calrfornla's       Title XIX controls        such as prior        authorlzatlon     and
                         payment celllngs         become generally        lnoperatlve     when services        are provided      to
                         beneflclarles       covered by both programs.


                          GAO note              These attachments have been considered    in preparation              of our
                                                final report but have not been reproduced    here.



                                                                                35
APPENDIX III
     Page 2
   Miss   Gene Beach                      -i!-                                July   30, 1970.



   Accordingly,      we urge that action be taken at the Federal level to permit
   single admlnlstratron        of bolt1 Mcdlcare and Medxald       p'rograms, with uniform
   pollcles     and procedures,    fol beneflclarles     covered by both of these programs.
   We believe     this would result     rn more effective     admlnlstratlon,   better   controls,
   and lower costs for both prograns

   We will  be pleased     to discuss this concept in greater detarl           wrth you and
   other representatives      of the Department of Health, Education           and Welfare.




                                           Director
   Attachments




                                                 36
                                                         APPENDIX IV

                        PRINCIPAL OFFICIALS OF
          THE DEPARTMENTOF HEALTH, EDUCATION, AND WELFARE
          RESPONSIBLEFOR THE ADMINISTRATION OF ACTIVITIES
                        DISCUSSEDIN THIS REPORT

                                             Tenure of office
                                             From           -To
SECRETARYOF HEALTH, EDUCATION,
  AND WELFARE:
    Elliot L. Richardson                 June    1970      Present
    Robert H, Finch                      Jan.    1969      June 1970
    Wilbur J. Cohen                      Mar.    1968      Jan. 1969
    John W. Gardner                      Aug.    1965      Mar. 1968


ADMINISTRATOR, SOCIAL AND REHABIL-
  ITATION SERVICE:
    John D. Twiname                Mar.           1970     Present
    Mary E. Switzer                Au&            1967     Mar. 1970


COMMISSIONEROF SOCIAL SECURITY:
   Robert M. Ball                         Apr.    1962     Present




U S GAO   Wash,   D C

                                   37