oversight

Medicare Dialysis Patients: Widely Varying Lab Test Rates Suggest Need for Greater HCFA Scrutiny

Published by the Government Accountability Office on 1997-09-26.

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

                  United States General Accounting Office

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


September 1997
                  MEDICARE DIALYSIS
                  PATIENTS
                  Widely Varying Lab
                  Test Rates Suggest
                  Need for Greater
                  HCFA Scrutiny




GAO/HEHS-97-202
      United States
GAO   General Accounting Office
      Washington, D.C. 20548

      Health, Education, and
      Human Services Division

      B-271865

      September 26, 1997

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

      Dear Mr. Chairman:

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

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

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



      1
      Medicare: Enrollment Growth and Payment Practices for Kidney Dialysis Services (GAO/HEHS-96-33,
      Nov. 22, 1995).
      2
       Under Medicare’s billing system, approximately 50 different procedure codes are used to bill for the
      16 laboratory tests.
      3
       Throughout this report, “laboratory tests” and “tests” refer to tests not bundled into the dialysis rate
      and therefore separately billable. In some circumstances, tests included in the bundled rate can also be
      billed separately, but these tests were not included in our study.



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

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


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

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




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             of only nine tests in total, indicating that they are not being adequately
             tested for all conditions.

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

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

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


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




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

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

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

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


4
 To be eligible for ESRD coverage, a patient generally must have been on dialysis for 3 months and
must be (1) entitled to a monthly insurance benefit under title II of the Social Security Act (or an
annuity under the Railroad Retirement Act), (2) fully or currently insured under Social Security, or
(3) the spouse or dependent child of a person who meets at least one of the first two requirements.
5
The average dialysis payment rate for freestanding facilities is $126. The rate can range from a
minimum of $117 to a maximum of $139 per facility depending on regional wage variations.
6
 In addition to the 16 routine laboratory tests included in the composite rate, HCFA considers 5 other
laboratory tests routine but separately billable. Medicare will pay for these tests, outside the
composite rate, at frequencies cited in HCFA’s manuals. Our data exclude all these tests.
7
Department of Health and Human Services, Office of Inspector General, Review of Separately Billable
End Stage Renal Disease Laboratory Tests, A-01-96-00513 (Oct. 1996).



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

Table 1: Distribution of Laboratory
Test Rates for Patients of Freestanding                                                                                          Ratio of tests
Dialysis Facilities, 1994                 Facility ranked by average number of tests                 Average number               provided to
                                          provided annually per patient                              of tests provided          median facility
                                          Top                                                                        224                      4:1
                                          100th (87th percentile)                                                      86                   1.5:1
                                          383rd (median)                                                               56                     1:1
                                          666th (13th percentile)                                                      29                     .5:1
                                          Bottom                                                                        9                   .16:1

                                          Notably, patients of facilities averaging the largest numbers of tests
                                          annually and those averaging around the median number of tests had
                                          characteristics that were similar both demographically and clinically.
                                          Using a June 1996 version of HCFA’s ESRD Program Medical Management
                                          and Information System (PMMIS), we examined the characteristics of
                                          patients of the 100 highest ranking facilities and of the 100 facilities that
                                          ranked around the middle.10 In the top 100 facilities and the middle 100
                                          facilities, patients shared the characteristics shown in table 2.




                                          8
                                           To determine patient testing levels, we grouped patients by the facility where they received dialysis
                                          and calculated how many tests a facility’s patients received on average. We used HCFA’s billing data to
                                          determine how many laboratory tests all patients of each facility received while they were attending
                                          the facility. We divided this total by the number of weeks the patients attended the facility to get the
                                          average number of tests received per patient per dialysis week. Multiplying this result by 52, we
                                          arrived at the average yearly number of tests each patient would have received if he or she had
                                          attended the facility for an entire year.
                                          9
                                           HCFA’s billing data for 1995 showed similar testing rate patterns. At the extremes were patients of a
                                          facility who averaged 161 tests per year and those who averaged 8 tests per year. In the middle were
                                          patients of facilities averaging 69 tests per year.
                                          10
                                            We found demographic and clinical information in PMMIS for about 70 percent of the patients in the
                                          top and middle 100 facilities (see app. I).



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Table 2: Patient Characteristics in Top
and Middle 100 Facilities, 1994           Patient characteristic                                         Facilities 1-100      Facilities 336-435
                                          Mean age in years                                                            63.7                     62.9
                                          % male                                                                         60                     58.9
                                          % white                                                                        51                     49.3
                                          % patients with diabetes as primary reason for
                                          dialysis                                                                       32                          32
                                          % patients with kidney failure as primary
                                          reason for dialysis                                                            15                          16
                                          % patients with hypertension                                                   33                          32
                                          Mortality rates (%) January 1994 through June
                                          1996                                                                         42.2                     41.7
                                          % patients with at least one kidney transplant
                                          received January 1994 through June 1996                                      11.3                     11.3

                                          Despite the similarity in patient characteristics, our data showed that
                                          compared to patients in the middle 100 facilities, many patients in the top
                                          100 facilities received certain individual laboratory tests nine times as
                                          frequently.


                                          The large differences in the rates of tests ordered suggest that there may
Test Rate Disparities                     be both excessive use, with some patients receiving tests too often or
Indicate Inappropriate                    receiving tests that may not be necessary at all, and underuse, with
Levels of Test                            patients receiving too few tests to ensure appropriate monitoring of their
                                          condition. In the absence of formal criteria or guidelines on proper testing
Ordering                                  levels for laboratory tests, we asked several renal disease experts to
                                          examine our test rate data in detail.11 The experts reviewed usage rates for
                                          34 individual laboratory tests from two data samples and questioned the
                                          usage rates for 20 tests. The first sample included the average yearly
                                          number of tests provided to patients across the 100 highest ranking
                                          facilities; for another perspective, the second sample included average
                                          yearly tests provided to patients of 6 randomly selected facilities.12 For a
                                          complete list of tests that the experts reviewed, see appendix II. For a list
                                          of the tests the experts found questionable, see appendix III.


                                          11
                                            The National Kidney Foundation is developing treatment guidelines for ESRD patients. The draft
                                          guidelines address improving patient survival, reducing patient morbidity, increasing efficiency of
                                          care, and improving quality of life for dialysis patients. However, the guidelines do not specify levels
                                          for laboratory tests.
                                          12
                                            The first sample consisted of 13 individual laboratory tests that at least 100 patients of the top 100
                                          facilities received at least twice as often as patients of the middle 100 facilities. The second sample
                                          included 26 high-frequency tests provided to patients of six dialysis facilities that we selected at
                                          random. Because 5 tests appeared in both samples, the total of individual tests reviewed was 34.



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Excessive Rates                      The experts found that many of the tests reviewed appeared to be either
Composed of Tests Rarely             rarely necessary or ordered too frequently. Table 3 shows a few examples
Needed or Ordered Too                of tests the experts deemed to have been provided inappropriately.
Frequently

Table 3: Examples of Tests Experts
Found Ordered Inappropriately                                                                                Experts’
                                     Procedure code      Name                   Use rate                     comments
                                     Tests deemed rarely medically necessary
                                     82307               Calciferol (vitamin    Provided to 3% of            Rarely, if ever,
                                                         D)                     patients (247) in our        needed.
                                                                                top-100 facility sample.
                                     82652               Dihydrozy vitamin      Provided to 5% of            Rarely, if ever,
                                                         D, 1, 25-              patients (384) in our        needed.
                                                                                top-100 facility sample.
                                     83937               Osteocalcin (bone      Provided to 20% of           No value for
                                                         g1a protein)           patients (1,738) in our      dialysis patients.
                                                                                top-100 facility sample.
                                     84134               Prealbumin             Provided to 96% of           Rarely, if ever,
                                                                                patients at one facility     needed. Provided
                                                                                and 88% of patients at       to implausibly
                                                                                another in our 6-facility    large proportion of
                                                                                sample.                      patient population.
                                     Tests provided too frequently
                                     82746               Folic acid, serum      Provided to 40% of           Should be given to
                                                                                patients in the top-100      a maximum of 15
                                                                                facility sample.             percent of patients.
                                     83970               Parathormone           Provided 10 times to         Test should be
                                                         (parathyroid           92% of patients at one       given about 4
                                                         hormone)               facility in our 6-facility   times a year.
                                                                                sample.
                                     85730               Thromboplastin         Provided 11.5 times to       Should be
                                                         time, partial (PTT);   87% of patients at one       provided, at most,
                                                         plasma or whole        facility in our 6-facility   4 times a year.
                                                         blood                  sample.
                                     86296               Hepatitis A            Provided over 3 times to     Test should be
                                                         antibody (HAAb);       3% of patients (280) in      given a maximum
                                                         IgG and IgM            the top-100 sample.          of once a year.

                                     The experts noted that, although any test might be valid for any one
                                     individual, they could find no plausible reason for giving certain tests to
                                     the large numbers of patients we identified. For example, some of the
                                     experts had never ordered a test that measures the absorption of calcium
                                     in bone. Nevertheless, this test, 83937, osteocalcin (bone g1a protein), was
                                     provided three times per patient per year to 20 percent of the patients in




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the top-ranked 100 facilities. Several experts questioned the test’s value for
dialysis patients, noting that its appropriateness for them was uncertain.

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

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

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

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




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

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


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


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

Factors May Explain        The financial incentive to bill for as many tests as possible is inherent in
Wide Variation in Test     the fee-for-service payment arrangement for laboratory tests, making
                           laboratory ownership an important factor. For example, when a single
Rates                      company owns one or more dialysis facilities and a laboratory, there is an
                           opportunity to increase overall revenues by directing more laboratory
                           tests to the company-owned laboratory. As the experts pointed out,
                           facilities can influence the tests physicians order through the development


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



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of “standing orders,” which are a list of tests periodically performed on all
patients unless the ordering physician overrides them.

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

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

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

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

The experts also believed that some of the unneeded tests they identified
could have resulted from differences among physicians in professional
judgment regarding which tests are needed and how often they are

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



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                        needed. Divergent opinions could be the product of differences in medical
                        school training or continuing education. For example, an NIH nephrologist
                        indicated that, contrary to the views of the experts we interviewed, he
                        believes that the prealbumin test (code 84134) should not be limited to
                        very few patients. In contrast, he agreed that it is not necessary to receive
                        this test nearly once a month as did patients of some facilities in our
                        sample. In addition, legitimate medical practice differences could be
                        reflected in standing orders developed by different medical directors.


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

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

                        Our study identifies patients’ test rates by the facility at which they have
                        been dialyzed, by test types, and by test frequencies. Arraying the data by
                        facility allowed us to observe test rates in conjunction with ownership
                        ties, recognizing that laboratories and facilities can have a common owner
                        and that ordering physicians are often a dialysis facility’s medical director.
                        To replicate such an analysis, HCFA could examine contractor data for
                        laboratory claims. These claims identify the ordering (or referring)
                        physician. Using these claims data, HCFA could profile (or identify)
                        physicians who order many more tests than their peers. Profiling would



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              allow HCFA to observe usage rates nationwide, single out facilities or
              physicians (or both) whose test order rates are aberrant, and notify the
              contractors who process these providers’ claims. The contractor’s health
              professionals could then review the provider’s practices and, if excessive
              or insufficient testing were identified, notify the provider of this fact
              through educational letters.

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


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

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

              Because independent laboratories that perform the excessive tests doctors
              order are generally not held liable for repayment, Medicare does not have
              a way to recover the costs of such tests. Making ordering physicians

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



              Page 12                                 GAO/HEHS-97-202 Dialysis Patients’ Lab-Testing Rates
                       B-271865




                       financially responsible in such cases after they have been notified of the
                       inappropriateness of particular tests would be a way to induce physicians
                       to review more closely the necessity of the tests they order, including
                       those ordered through standing orders.


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


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


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



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




                       Page 13                        GAO/HEHS-97-202 Dialysis Patients’ Lab-Testing Rates
B-271865




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

Sincerely yours,




Richard L. Hembra
Assistant Comptroller General




Page 14                         GAO/HEHS-97-202 Dialysis Patients’ Lab-Testing Rates
Page 15   GAO/HEHS-97-202 Dialysis Patients’ Lab-Testing Rates
Contents



Letter                                                                                                   1


Appendix I                                                                                              18

Objectives, Scope,
and Methodology
Appendix II                                                                                             20

Thirty-Four Tests the
Experts Reviewed
Appendix III                                                                                            22

Twenty Tests Experts
Reviewed and Found
Provided Too Often or
of Questionable Value
Tables                  Table 1: Distribution of Laboratory Test Rates for Patients of                   5
                          Freestanding Dialysis Facilities, 1994
                        Table 2: Patient Characteristics in Top and Middle 100 Facilities,               6
                          1994
                        Table 3: Examples of Tests Experts Found Ordered                                 7
                          Inappropriately




                        Abbreviations

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


                        Page 16                        GAO/HEHS-97-202 Dialysis Patients’ Lab-Testing Rates
Page 17   GAO/HEHS-97-202 Dialysis Patients’ Lab-Testing Rates
Appendix I

Objectives, Scope, and Methodology


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

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

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

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




              Page 18                        GAO/HEHS-97-202 Dialysis Patients’ Lab-Testing Rates
Appendix I
Objectives, Scope, and Methodology




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

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




Page 19                              GAO/HEHS-97-202 Dialysis Patients’ Lab-Testing Rates
Appendix II

Thirty-Four Tests the Experts Reviewed



               Procedure code   Description
               80002            Profile on automated multichannel equipment, 2 clinical chemistry
                                testsa
               80003            Profile on automated multichannel equipment, 3 clinical chemistry
                                testsa
               80007            Profile on automated multichannel equipment, 7 clinical chemistry
                                tests
               80009            Profile on automated multichannel equipment, 9 clinical chemistry
                                testsa
               80019            Automated multichannel tests, 19 or more clinical chemistry testsa
               80061            Lipid panel, which must include cholesterol, serum, total (82465);
                                lipoprotein, direct measurement, high-density cholesterol (HDL
                                cholesterol) (83718); triglycerides (84478)
               80162            Digoxin
               82307            Calciferol (vitamin D)a
               82465            Cholesterol, serum, totala
               82607            Cyanocobalamin (vitamin B-12)a
               82652            Dihydrozy vitamin D, 1, 25-a
               82746            Folic acid, seruma
               83540            Irona
               83550            Iron-binding capacitya
               83718            Lippoprotein, direct measurement; high-density cholesterol (HDL
                                cholesterol)a
               83937            Osteocalcin (bone g1a protein)a
               83970            Parathormone (parathyroid hormone)a
               84134            Prealbumina
               84460            Transferase; alanine amino (ALT) (SGPT)a
               84466            Transferrin
               84478            Triglycerides
               85007            Blood count; manual differential WBC count (includes RBC
                                morphology and platelet estimation)
               85027            Hemogram and platelet count, automated
               85029            Additional automated hemogram indexes (e.g., red cell distribution
                                width (RDW), mean platelet volume (MPV), red blood cell
                                histogram, platelet histogram, white blood cell histogram); one to
                                three indexes
               85044            Reticulocyte count, manual
               85045            Reticulocyte count, flow cytometry
               85730            Thromboplastin time, partial (PTT); plasma or whole blooda
               86296            Hepatitis A antibody (HAAb); IgG and IgMa
               86302            Hepatitis C antibodya
                                                                                        (continued)




               Page 20                          GAO/HEHS-97-202 Dialysis Patients’ Lab-Testing Rates
Appendix II
Thirty-Four Tests the Experts Reviewed




Procedure code          Description
86317                   Immunoassay for infectious agent antibody, quantitative, not
                        elsewhere specified
87040                   Culture, bacterial, definitive; blood (includes anaerobic screen)
87070                   Culture, bacterial, definitive; any other source
88305                   Surgical pathology, gross and microscopic examinationa
89051                   Cell count, miscellaneous body fluids (e.g., CSF, joint fluid, except
                        blood)

a
 Tests experts found to have been provided too often or of questionable value for ESRD patients.
See app. III for additional details.




Page 21                                 GAO/HEHS-97-202 Dialysis Patients’ Lab-Testing Rates
Appendix III

Twenty Tests Experts Reviewed and Found
Provided Too Often or of Questionable Value


Procedure code   Name                               Use ratea                               Experts’ comments
80002            Profile on automated multichannel Provided to 93% of patients at           Three-fourths of the patients
                 equipment, 2 clinical chemistry   one facility and 76% at another in       receiving this test at one facility is
                 tests                             our 6-facility sample.                   far too many.
80003            Profile on automated multichannel Provided to 33% of patients              Not consistent with expert’s
                 equipment, 3 clinical chemistry   (2,826) 10 times per year in our         medical practice.
                 tests                             top-100 facility sample.
80009            Profile on automated multichannel Provided to 13% of patients              Not consistent with expert’s
                 equipment, 9 clinical chemistry   (1,127) 4 times per year in our          medical practice.
                 tests                             top-100 facility sample.
80019            Automated multichannel tests, 19   Provided to 52% of patients             Because 12 of these tests are
                 or more clinical chemistry tests   (4,432) in our top-100 facility         included in the bundle, it was
                                                    sample.                                 ordered for an unlikely number of
                                                                                            patients.
82307            Calciferol (vitamin D)             Provided to 3% of patients (247)        Rarely, if ever, needed.
                                                    in our top-100 facility sample.
82465            Cholesterol, serum, total          Provided to 71% of patients at         Reasonable for only a few
                                                    one facility in our 6-facility sample. patients, not for almost
                                                                                           three-fourths of patients at one
                                                                                           facility.
82607            Cyanocobalamin (vitamin B-12)      Provided to 39% of patients             Should be provided once a year
                                                    (3,307) 3.5 times per year in our       to less than 15 percent of patients.
                                                    top-100 facility sample.
82652            Dihydrozy vitamin D, 1, 25-        Provided to 5% of patients (384)        Rarely, if ever, needed.
                                                    in our top-100 facility sample.
82746            Folic acid, serum                  Provided to 42% of patients in our Indicated for a maximum of 15%
                                                    top-100 facility sample.           of patients.
83540            Iron                               In our 6-facility sample, provided      Provided too frequently. Need
                                                    to 96% and 88% of patients at 2         one test every 3 months for stable
                                                    facilities 11.4 times, 88% of           patients—about 75% of
                                                    patients at a third facility 7 times,   population.
                                                    and 82% of patients at a fourth
                                                    facility 10.4 times.
83550            Iron-binding capacity              In our 6-facility sample, provided      Provided too frequently. Need
                                                    to 92% of patients at one facility      one test every 3 months for stable
                                                    11 times and 82% of patients at         patients—about 75% of
                                                    each of 2 other facilities 8 and 12     population.
                                                    times.
83718            Lipoprotein, direct measurement;   Provided 11.4 times per year to         Provided to implausibly large
                 high-density cholesterol (HDL      96% of patients at one facility and     proportion of patient population.
                 cholesterol)                       88% at another in our 6-facility        About 5% of patients may need
                                                    sample.                                 this test once a month.
83937            Osteocalcin (bone g1a protein)     Provided to 20% of patients             No value for dialysis patients.
                                                    (1,738) in our top-100 facility
                                                    sample.
83970            Parathormone (parathyroid          Provided 10.5 times to 92% of           Should be given once or twice a
                 hormone)                           patients at one facility in our         year at most.
                                                    6-facility sample.
                                                                                                                     (continued)


                                  Page 22                              GAO/HEHS-97-202 Dialysis Patients’ Lab-Testing Rates
                                 Appendix III
                                 Twenty Tests Experts Reviewed and Found
                                 Provided Too Often or of Questionable
                                 Value




Procedure code   Name                                  Use ratea                               Experts’ comments
84134            Prealbumin                            Provided to 96% of patients at      Provided to implausibly large
                                                       one facility and 88% of patients at proportion of patient population.
                                                       another facility in our 6-facility
                                                       sample.
84460            Transferase; alanine amino (ALT)      Provided 9 times a year to 4% of        Should be part of a multichannel
                 (SGPT)                                patients (321) in the top-100           panel, not given separately. Too
                                                       facility sample.                        many patients received this test.
85730            Thromboplastin time, partial          Provided 11.5 times to 87% of           Should be provided, at most, 4
                 (PTT); plasma or whole blood          patients at one facility in our         times a year.
                                                       6-facility sample.
86296            Hepatitis A antibody (HAAb); IgG      Provided 3 times a year to 3% of        Should be given a maximum of
                 and IgM                               patients (280) in the top-100           once a year.
                                                       facility sample.
86302            Hepatitis C antibody                  Provided to 83% of patients at         Provided to far too many patients.
                                                       one facility in our 6-facility sample.
88305            Surgical pathology, gross and         Provided 2 times a year to 28% of Provided to an implausibly large
                 microscopic examination               patients at one facility in our   proportion of patient population.
                                                       6-facility sample.                Needed very rarely—perhaps
                                                                                         once a year for 2% or 3% of all
                                                                                         patients.

                                 a
                                 8,526 patients in the top 100 facilities.




(106433)                         Page 23                                     GAO/HEHS-97-202 Dialysis Patients’ Lab-Testing Rates
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