oversight

Disability Programs: Use of Competitive Contracts for Consultative Medical Exams Can Save Millions

Published by the Government Accountability Office on 1990-08-17.

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

                     lJnitr!d States Gerrc~ral Accountina   Office

    GAO              Report to the Secretary of Health and
                     Human Services



    August. I!)!)0

I                    DISABILITY
                     PROGRAMS
                     Use of Competitive
                     Contracts for
                     Consultative Medical
                     Exams Can Save
                     Millions


                                                                     142035




    GA0/HRD90-141
             united states
CiAO         General Accounting Office
             Washington,      D.C. 20648

             Human Resources Division

             B-237482

             August 17,199O

             The Honorable Louis W. Sullivan, M.D.
             The Secretary of Health and Human Services

             Dear Mr. Secretary:

             We reviewed the procurement of medical examinations of claimants
             seeking benefits under the Social Security Administration’s (SSA’S)disa-
             bility programs. These consultative examinations (CES) are purchased
             when claimants’ medical evidence is insufficient for disability determi-
             nations. State disability determination services (DDSS), who are reim-
             bursed by SSAfor 100 percent of their CE costs, select medical providers
             to perform these examinations and determine CE payment amounts.1
             New York and Oregon DDS data show substantial savings in CE costs
             through the use of competitively awarded contracts. We believe that SSA
             should work closely with other DDSS to identify areas where competi-
             tively awarded contracts are feasible and to require their use, where
             appropriate, because of the potential for annual savings of millions of
             dollars.


             Consultative medical examinations are purchased by state DDSS who
Background   make disability determinations on behalf of SSAfor two national pro-
             grams-social Security Disability Insurance and Supplemental Security
             Income. In 1989, federal payments for the two disability programs were
             over $31 billion. As of September 1989, about 7.1 million disabled indi-
             viduals and their families received benefits from the two programs.

             As part of the adjudicative process for determining disability, DDSS
             obtain medical evidence from claimants’ treating sources (attending
             physicians, hospitals, or other sources of record); but when the informa-
             tion is unavailable or insufficient, DDSS must purchase a consultative
             examination. CES include physical and mental examinations, X rays and
             other diagnostic procedures, and laboratory tests. DDSS purchase CES
             from three provider groups: (1) individual physicians and psychologists;
             (2) health care facilities, such as group practices, clinics, and hospitals;
             and (3) providers that specialize in performing CES.


             ’ SSA officials said that a proposed regulation clarifies the existing policy for DDSs to attempt to
             obtain all necessary medical evidence from claimants’ treating physicians. Only when they cannot or
             will not provide sufficient medical evidence should the DDS purchase CEs from other medical
             sources, including those awarded competitive contracts. Only a small percentage of CESare pur-
             chased from claimants’ treating physicians, SSA officials said.



             Page 1                             GAO/HRD-SO-141
                                                             DDSs’Use of Competitive Contracts for CES
                                                                                                                       .J
                        B-237482




                        DDSS  are responsible for informing their medical communities about disa-
                        bility program requirements and how to participate in providing CES.
                        They also must recruit and maintain a sufficient number of medical
                        providers to meet their CE needs. DDSS select providers to perform CES
                        from a listing of these providers.* DDSS are also responsible for deter-
                        mining the amounts paid for CES. In fiscal year 1989, SSA reimbursed
                        DDSS about $12 1 million for their costs in purchasing CES.

                        Most states use fee schedules in determining physicians’ reimbursement,
                        although some states reimburse based on physicians’ usual and cus-
                        tomary charges. The reasonableness of state-determined fee schedules
                        was questioned in a 1988 report by the Department of Health and
                        Human Services’ (HHS'S) Inspector General. Based on a comparison of
                        DDS fees across the country, the Inspector General identified wide varia-
                        tions among states (see app. I). Some of the variation was due to medical
                        market and cost-of-living differences. SSAsuggested that state-imposed
                        constraints on DDS fees and rate-methodology differences also accounted
                        for some of the variation.


                        The primary objective of this review was to determine the feasibility of
Objectives, Scope,and   using competitively awarded contracts to reduce CEexpenditures.
Methodology
                        We reviewed legislation, regulations, operating manuals, and other
                        information pertaining to the purchase of CES, as well as prior studies,
                        such as a 1988 HHS Inspector General audit report and an SSA-
                        contracted study. We visited the New York and Oregon DDSSwho use
                        competitively awarded contracts and discussed their cost savings, rea-
                        sons for such contracting, and approaches to contracting. We obtained
                        the cost-savings estimates of the two DDSSand discussed the method-
                        ology used, but did not verify the accuracy of the estimates.

                        We reviewed a “model” contract that SSAhad sent to DDSSin January
                        1990 for their comment and use in contracting with volume providers
                        for CES." SSA did not provide us the DDS comments until June 1990.4 Con-
                        sequently, during our review we contacted four DDSSthat were not using

                        ‘The listing of medical providers from which DDSs make their CE selections is often referred to as a
                        CE panel.
                        “Providers who receive over $100,000 annually for performing CEss are generally referred to as
                        volume providers.
                        40ur preliminary review of the DDS comments indicated that the concerns expressed by the DDSs
                        would not alter our conclusions and recommendations.



                        Page 2                             GAO/HRD-90-141DDSs’Use of Competitive Contracts for CEs
                       B-227482




                       competitive contracts to obtain their views on contracting in general and
                       on SSA’Smodel contract specifically. To determine providers’ views on
                       contracting, we talked to all providers in New York who had been
                       awarded a competitive contract and a judgmental sample of such prov-
                       iders in Oregon.

                       Our work was performed at S&A’scentral office in Baltimore. We also
                       contacted SSA regional offices in New York City, Philadelphia, and
                       Seattle. We visited DDS locations in New York, Oregon, Maryland, Penn-
                       sylvania, and Ohio and contacted the Florida DDS. We chose the New
                       York and Oregon DDSS because they were identified by SSA as realizing
                       significant cost savings by using competitively awarded contracts for CE
                       purchases. The other four DDSS were chosen based on their total CE costs.
                       In fiscal year 1989, the DDSS contacted accounted for about 25 percent of
                       total CE expenditures.

                       We discussed SSA’Sposition on a draft of this report with agency offi-
                       cials and incorporated their comments where appropriate. We per-
                       formed our audit work between September 1989 and March 1990 in
                       accordance with generally accepted government auditing standards.


                       The use of competitively awarded contracts for CE purchases by the
Cost Savings by        New York and Oregon DDSS shows that substantial cost savings are pos-
Use of Competitively   sible. The New York DDS began competitive contracting for CES in 1986
Awarded Contracts      and expects a savings of about $8.3 million over the 3-year life of its
                       contracts.” These savings represent about 26 percent of an estimated
                       $32 million that would have been spent based on the DDS’S fee-schedule
                       amounts. (Examples of New York cost savings for specific types of CES
                       are shown in app. II.)

                       The Oregon DDS, which began using competitive contracts for CE
                       purchases in 1984, expects to save about $1.6 million through 1993.
                       These savings represent about 42 percent of an estimated $3.7 million
                       that would have been spent in the absence of contracts.” Examples of


                       “Excluded from these savings is a g-year statewide contract for laboratory services, which was
                       extended for 2 years in September 1989. For the initial 3-year period, the New York DDS estimated
                       that the contract resulted in annual cost savings of about $60,000 or a SO-percentreduction from the
                       DDS’s fee schedule for such services.

                       “Since the Oregon DDS does not use a fee schedule, the savings represent the difference between the
                       contract prices and the average of physicians’ usual and customary charges for the same services
                       within the geographic areas of the contracts.



                       Page 3                             GAO/~90-141        DDSs’Use of Competitive     Contracts   for CEs
                                                                                                ,
                      B237482




                      cost savings for specific types of CES range from 11 percent for ortho-
                      pedic examinations to 79 percent for pulmonary studies.

                      For the 3-year period ending September 30, 1989, the cost savings
                      claimed by the Oregon and New York DDSSwere about 14 and 15 per-
                      cent, respectively, of their total CE expenditures. To obtain this level of
                      cost savings, the two DDSSused competitive contracts for about 50 and
                      76 percent, respectively, of their total CE requirements. Since, nation-
                      wide, DDSSspent about $121 million for CES in fiscal year 1989, the wide-
                      spread use of competitively awarded contracts has the potential for
                      substantial program savings.

                      Savings by other DDSSwould depend on the portion of their CE purchases
                      obtained by using competitive contracts. Such a portion could be
                      affected by the extent to which DDSSare able to increase their use of
                      medical evidence from claimants’ treating sources and decrease their
                      purchases of medical evidence from other providers. Another factor
                      that could affect the amount of savings would be the extent to which
                      DDSScan obtain reductions below their established fees.

                      The New York and Oregon DDSStold us that savings from competitive
                      contracting were realized with minimal administrative costs. DDS
                      expenditures included the costs of advertising, postage, and travel. The
                      two DDSSrelied on their existing staff for most of their contracting
                      needs. Some assistance was also provided on legal and procurement mat-
                      ters by other branches of their state governments. DDS officials said that
                      staff may need to be dedicated to the project initially because of the
                      amount of work involved during the contract design and execution.


New York and Oregon   The New York and Oregon DDSShad different motivations for deciding to
DDSs’ Reasons; for    use competitively awarded contracts. The New York DDS contracted
                      because it was faced with an increasing number of volume providers on
Contracting           its CE panel. The Oregon DDS was motivated by the need to gain control
                      over escalating medical costs within the state.

                      Historically, the New York DDS has used volume providers for the
                      majority of its CE referrals. Over time, DDs officials said the number of
                      volume providers on the CE panel continued to grow. The growth was
                      attributed to a policy of allowing all capable providers access to the
                      panel. However, as the number of volume providers on the panel grew,
                      the share of referrals available to each provider decreased resulting in
                      some of the providers accusing the DDS of favoritism. Thus, the DDS


                      Page4                     GAO/HRD-9Q-141DDSs'UseofCbmpetitiveContracbforCEe
                           decided to use competitive contracts with volume providers in order to
                           eliminate the appearance of favoritism, reduce costs, and improve pro-
                           vider monitoring.

                           The New York DDS selected seven volume providers to perform examina-
                           tions in nine geographic areas. These areas included the New York City
                           metropolitan area and surrounding counties, areas with concentrations
                           of volume providers. Three of the providers were solely in the business
                           of performing CES, two were hospitals, and two were clinics. All had pre-
                           viously been on New York’s CE panel. However, before the use of com-
                           petitive contracts, they had charged the maximum fee-schedule amounts
                           for the services provided, DDS officials said. (Information on the New
                           York DDS'S contract providers is shown in app. III.)

                           The primary reason the Oregon DDS decided to use competitive contracts
                           was to save money. Because the Oregon DDS generally reimbursed based
                           on physicians’ usual and customary charges, DDS officials said there was
                           little control over prices. Thus, to gain price stability and to better
                           budget for medical costs, the Oregon DDS decided to contract competi-
                           tively with providers. As shown in appendix IV, Oregon currently has
                           33 such contracts in six geographic areas of the state. These areas have
                           a high need for specific medical services and a corresponding high con-
                           centration of specialists needed to perform the necessary CES. Most of
                           the Oregon DDS'S competitive-contract providers are individual and
                           group practices, although there are three hospitals and two clinics. Of
                           the 33 contract providers, one was a volume provider.


ReasonsMedical Providers   CE providers gave us various reasons for wanting to enter into competi-
                           tively awarded contracts with DDSS.The most important perhaps is the
Contract                   expectation of a steady number of CE referrals. These providers may
                           range from those supplementing a new private practice to those sup-
                           porting a million-dollar organization created solely for performing CES.
                           In exchange for a number of referrals, providers agree to perform CES at
                           a reduced fee. Further, regardless of provider size, the availability of
                           existing staff, equipment, and facility necessary to support the contract
                           are major considerations in the contracting decision. In particular, hospi-
                           tals and clinics may have excess capacity and be eager to contract for
                           CES to utilize this excess.




                           Page 5                    GAO/HRD-90-141DDSs’Use of Competitive Contracts for CEs
                        Some of the New York and Oregon DDS competitive-contract providers
                        said they were also providing medical services similar to CES under com-
                        petitive contract with other private and public sources. Thus, they were
                        used to entering into such contracts with clients.


New York and Oregon     ss~ requires neither that DOSSuse competitively awarded contracts nor
DDSs’Approach to        that they follow federal acquisition regulations to purchase CES.Thus, to
                        contract for CES, the New York and Oregon DOSSused the procurement
Contracting             policies and practices of their state governments. The DDS officials said
                        they (1) asked their CE panel members if they were interested in con-
                        tracting, (2) advertised in newspapers and professional journals, and (3)
                        made mass distributions of information. The terms and conditions of
                        their contracts were specified in bid proposals, which also required bid-
                        ders to submit a unit price for each specified type of CE examination,
                        procedure, or test listed. Included in the proposals was an estimate of
                        the number of expected purchases for each type of CE. However, none of
                        the estimates were guaranteed by the DDSS.

                        The DDSSestablished the relative importance to assign to quality and
                        price in the selection of successful bidders. For example, the New York
                        DDS evaluation approach called for excluding bidders that did not meet
                        minimum qualifications and then ranking the remaining bidders by
                        assigning relative weights to quality factors. From the highest ranked
                        bidders, DDS officials said that final selections were made based on the
                        lowest bid prices. Quality factors included physician and staff qualifica-
                        tions, facility and equipment specifications, and reporting standards.

                        Because the competitive-contract providers agreed to perform CES at a
                        reduced price, the DDSSestablished guidelines that gave these providers
                        preference, after the claimants’ treating sources, for CE referrals. Never-
                        theless, the guidelines allowed for continued CE referrals to other prov-
                        iders. The New York DDS, for example, established guidelines to give 80
                        percent of its CE referrals within the competitive-contract area to con-
                        tract providers and 20 percent to other panel providers. Maintaining
                        relationships with and continuing CE referrals to these other providers
                        allows for flexibility and helps keep future options open.


Other Benefits of       Besides cost savings, officials in both   DDSSmaintain that the use of com-
Competitively Awarded   petitively awarded contracts resulted     in improving the overall quality of
                        the CE services. They said that report    quality and timeliness were better
Contracts               from competitive-contract providers.      The competitive selection process


                        Page0                     GAO/HRD-QQ-141DDSs'UseofCompetitiveContractsforCEs
                        helps to ensure that better CE providers are awarded contracts. These
                        contract providers generally have more knowledge of and experience
                        with program requirements than panel members who perform CES infre-
                        quently. Also, the contract providers should have a better idea of what
                        is expected of them because expectations are formalized in the contract.

                        The officials also suggested that competitively awarded contracts better
                        assure public accountability and provide for equity and openness in the
                        selection process. Contracts can incorporate specific requirements for
                        staff qualifications and standards for reporting and processing time.7


                        In May 1987, %A solicited proposals for a study of DDS operations,
SSAActions to           including the use of volume providers. The study resulted in a January
Encourage Contracting   1989 report, which suggested that SSAdevelop a model contract for DDS
                        use in contracting with volume providers.B The use of contracts was
                        shown to improve overall quality and result in substantial cost savings,
                        the report stated. Except in unusual circumstances, it was suggested
                        that contracts be competitively awarded. By obtaining discounts from
                        existing volume providers, savings of from 10 to 26 percent below DDS
                        fee schedules were possible, the report stated.

                        The study found that the nns/volume provider relationships were
                        “informal and non-contractual.” Despite such providers receiving sub-
                        stantial payments for performing CES, the DDSS obtained little or no
                        financial advantage. In most situations that the study reviewed, the
                        volume providers had a history of prior relationships with SSA, including
                        several that involved physicians who had previously worked for ss~.
                        The report suggested that these prior relationships gave the volume
                        providers a better background on SSArequirements.

                        The report also suggested that substantial fee reductions obtained in the
                        private sector from “preferred providers” offer a precedent for DDSS to
                        obtain similar reductions when purchasing CES. Many health insurance
                        companies and self-insured corporations use contracts for purchasing
                        medical services. In contrast to the traditional fee-for-service health
                        plans, private companies contract with a network of physicians who

                        7To offset possible negative perceptions of volume providers, the New York DDS also contracted with
                        a peer review organization to perform independent quality reviews of its contractors. For fiscal years
                        1988 and 1989, the cost of peer reviews was about $126,000.

                        “In a prior report SSA Consultative Medical Examination Process Improved: Some Problems Remain
                        (GAO/HRD-86-23, Dec. 10,1986), we determined that about one-half of the states used volume prov-
                        iders, who received about 26 percent of their CE expenditures.



                        Page 7                             GAO/HRD-90-141DDSs’Use of Competitive Contracts for CEe
B-237432




typically agree to charge the company less than what they usually
charge in exchange for an increased patient load and improved cash
flow.

In January 1990, %A sent a model contract to DDSSfor their guidance
and use and “urged” DDSSwho use or plan to use volume providers to
obtain financial concessions from them. ss~ is in the process of devel-
oping guidelines for contracting and will review DDE replies on the use of
the model contract as input to any policy changes.

The model contract (similar to the New York DDS volume-provider con-
tracts) was written primarily to provide guidance to DDSSfor contracts
with large-volume providers who specialize in performing CES. It con-
tains an extensive list of “mandatory” medical services to be performed
by the selected contractor. Included on the list are over 10 types of spe-
cialty examinations and a multitude of related procedures and tests. The
model suggests that each proposal should include a fee for each medical
service listed as well as documentation to support expected personnel,
equipment, and facility costs and expected profit.

The four DDSSnot using competitive contracts that we contacted were
concerned about their ability to locate qualified providers who could
meet all the requirements called for in SSA’Smodel contract, One concern
was that few medical markets would have providers capable of per-
forming the number of mandatory examinations and other medical ser-
vices listed in the model contract. Without an adequate number of
providers willing to compete, it may not be possible to obtain the same
discounts available in a competitive market. It was suggested that the
model contract would most likely not apply to individual physicians and
group practices because of the required multiple specialties. Also, use of
the model contract may discourage some providers because of its exten-
sive requirements and the amount of information to be submitted. In
addition, one of the DDSSwas concerned that emphasis on large volume,
as suggested by SSA, may create an undesirable situation of over reliance
on one or a few providers for most CE needs.

In contrast to the model contract approach, the DDSSsuggested to us that
the contract approach used by the Oregon DDS would probably be more
suitable to the circumstances of many DDSS.The contracts used by the
Oregon DDS contain fewer requirements and are generally based on a
smaller number of CE referrals with individual physicians and group
practices that offer one or a limited number of specialties.



Page 8                   GAO/IKRIM@141DDW Use of Competitive Contracts for CES
                        5237432




                        To decide whether to contract competitively for CES, DDSSneed to eval-
SuggestedApproach       uate their individual circumstances. Steps that DDSScould take include:
to Determine            (1) targeting geographic areas within the state with concentrations of
Feasibility for         claimants and providers, (2) determining CE needs in targeted areas, (3)
                        matching CE needs with the types of specialists available in targeted
Competitive Contracts   areas, and (4) obtaining a preliminary indication of provider willingness
                        to bid at a discounted price in exchange for some or most of the
                        expected CE referrals in target areas. At this point, the DDS may wish to
                        pilot test the concept by using competitive contracting only within a
                        selected area. To encourage maximum competition, the DDS could contact
                        existing panel members and other providers in the targeted areas as well
                        as advertise in newspapers and professional journals.

                        Even if the overall state fee schedule is low, it may still be possible to
                        obtain discounts from individual specialists in certain geographic areas.
                        It may be possible to competitively contract below the DDS fee schedule
                        in areas with high concentrations of one or more specialists. Hospitals
                        and clinics were shown by the New York and Oregon DDSSto be good
                        sources for competitive CE contracts because of underutilized test equip-
                        ment and excess facility capacity.


                        Competitively awarded contracts can be effective in reducing the costs
Conclusions             of CES. Relying on marketplace forces provides better assurance of the
                        reasonableness of prices. The competitive selection process can also help
                        to ensure that the better CE providers are awarded contracts. Such con-
                        tracts can further be used to better communicate expectations and to
                        build in higher standards for quality, timeliness, and other
                        requirements.

                        The contracting experience of the New York and Oregon DDSSdemon-
                        strates the benefits that can be derived from introducing greater compe-
                        tition into the provider selection process. Nevertheless, we realize that
                        competitively awarded contracts may not always be applicable because
                        of a low fee schedule or insufficient competition. Furthermore, some
                        DDSSmay experience higher administrative expenses for contracting
                        than the New York and Oregon DDSS,especially if it is necessary to hire
                        additional staff.

                        SSA’Smodel contract is designed primarily for states that use large-
                        volume providers. Some of these states may find it impractical to use
                        competitive contracts with their volume providers. For such states and
                        for states that do not use volume providers, we believe that ss~, in


                        Page 9                    GAO/HRD-90-141DDSs’Use of Competitive Contracts for CES
                  B-237432




                  developing guidelines for contracting, should incorporate provisions for
                  the use of competitive contracts suitable for providers that offer one or
                  a limited number of specialties. We believe such provisions would be
                  more suitable for the individual and group-practice providers in DDS
                  medical markets and lead to more widespread use of competitively
                  awarded contracts.


                  We recommend that you direct the Commissioner of ss~ to:
Recommendations
                  1. Require DDSSto periodically determine the feasibility of using com-
                  petitively awarded contracts.

                  2. Require SSA’S disability program managers to work closely with DDSS
                  to determine contract feasibility and to provide assistance as needed. %A
                  should ensure that DDSSuse competitively awarded contracts where
                  feasible.

                  3. In developing guidelines for competitive contracting, include provi-
                  sions suitable for contracts with individual and group practices.


                  As you know, 31 USC. 720 requires the head of a federal agency to
                  submit a written statement on actions taken on our recommendations to
                  the House Committee on Government Operations and the Senate Com-
                  mittee on Governmental Affairs not later than 60 days after the date of
                  the report and to the House and Senate Committees on Appropriations
                  with the agency’s first request for appropriations made more than 60
                  days after the date of the report.

                  Copies of this report are being sent to interested congressional commit-
                  tees and subcommittees; the Director, Office of Management and Budget;
                  and other interested parties. Copies will also be made available to others
                  on request.




                  Page 10                    GAO/HRD-90-141DDSs’Use of Competitive Contracta for CES



                                       .I”
5287482




Please contact me at (202) 276-6193 if you or your staff have any ques-
tions concerning this report. Other major contributors to this report are
listed in appendix V.

Sincerely yours,



pm@?9
Joseph F. Delfico
Director, Income Security Issues




Page 11                  GAO/HlZD-fJO-141
                                       DDSs’Use of Competitive Contracts for CEs
Contents


Letter
Appendix I
Comparison of DDS
Feesfor Selected
Types of Consultative
Examinations
Appendix II                                                                               16
New York DDS 1989
Cost Savings:
Comparison of Fee
Schedule and Contract
Fees
Appendix III                                                                              16
New York DDS
Consultative
Examination
Contracts
Appendix IV                                                                               17
Oregon DDS
Consultative
Examination
Contracts
Major Contributors to                                                                     18
This Report




                        Page 12   GAO/HRD9@141   DDW Use of Competitive   Contracts   for CJk
Contenta




Abbreviations

CE         consultative examination
DDS        disability determination service
GAO        General Accounting Office
HHS        Department of Health and Human Services
SSA        Social Security Administration


Page 13                  GAO/HR.D&O-141   DDSs’ Use of Competitive   Contracts   for Cl%
Appendix I                                                                                                        1
Comparisonof DDSFeesfor SelectedTypes of
Consultative Examinations

                                                                                       DDS feesa
              Selected CEs                                              Hiah DDS         Low DDS               Averaae
              Examinations
                Internal medicine                                              $120               $70              $85
                Cardiology                                                      120                70               86
                Psvchiatrv                                                      120                70               90
                Orthopedic                                                      120                70               86
              Diaonostic orocedures
                Chest X rav                                                     100                22                45
                EKG                                                             103                25                42
                Doppler (resting)                                               200                60               103
                Doppler (exercise)                                              412                45               147
                Stress test-treadmill                                           400                74               162
              Laboratory tests
                Urinalysis                                                       15                 4                    4
                Blood sugar                                                      28                 4                   IO
                Creatinine                                                       29                 5                   11
                Complete blood count                                             40                 6                   17
                ANA                                                              44                15                   26
                Sed rate                                                         44                 4                   10
                SMA 12                                                           35                 9                   22
              aln commenting on a draft of this report, SSA officials said that this comparison was based on a review
              of 12 of the 52 DDSs. SSA also provided a 1990 comparison based on the fees of all 52 DDSs that
              showed wider variations for some of the selected CEs.
              Source: Disability Determination Services Medical Evidence Development Best Practices and Improve-
              ment Optrons, HHS Office of the Inspector General, August 1988.




              Page 14                             GAO/HRBBO-141       DDSs’ Use of Competitive     Contracts    for CEe
Appkhdix II

New York DDS 1989 Cqt Savings:Comparison
of FeeScheduleand Contract Fees

                                                                         Fee                              Percent
              Selected CEs                                         schedulea        Contf~~               savings
              Examinations
              Comprehensive drua addition                                $164               $106               35
              Complete ear (with baranv or caloric)                       118                 68               42
              Complete neurological                                        82                 53               35
              Complete orthopedic                                          82                 53               35
              Complete psvchiatric                                         82                 53               35
              Intelligence evaluation                                      67                 45               33
              Personality evaluation                                      107                 70               35
              Personalitv and oraanicitv evaluation                       134                 80               40
              Diagnostic procedure
              Ventilation tests                                            38                 23               39
              Electrocardiogram, resting                                   56                 22               61
              Electroenceohaloaram (EEG)                                  140                 98               30
              Electromyography (EMG) 2 extremities and
                 related paraspinol area                                  253                114               55
              Treadmill exercise electrocardiography                      211                132               37
              Speech discrimination test binaurel                          42                 16               62
              X ray, skull, complete                                      135                 81               40
              X ray, ribs, both sides                                     113                 44               61
              X rav. chest. sinale PA                                      45                 27               40
              X ray, spine, cervical, minimum of 4 views                  113                 68               40
              Doppler ultrasound flow meter test, bilateral,
                 arterial only                                              71                43               39
              Doppler utlrasound flow meter test after
                 exercise, arterial only                                   91                 53               42
              aThe New York DDS uses fees from the state workers’ compensation program




              Page 16                           GAO/HRD-90-141   DDSs’ Use of Competitive     Contracts   for CEs
                                                                                                                   7
Appendix III
                                                                                                                       Yi
New York DDSConsultative
Examination Conlmxts

                                                                                                            Estimated
                                                                                Geographical                       1889
               ContractoP                                                       area                       obligations
               Diaanostic Health Services                                       Manhattan                        $959.646
               Health Disabilitv Consultina Services, Inc.                      Manhattan                        1,008,210
               Brooklyn Hospital                                                Brooklyn                         1,595,947
               K-MD Management Services, Inc.                                   Brooklyn                         1,742,368
               K-MD Manaaement Services, Inc                                    Bronx                              778.903
               Union Hospital of the Bronx                                      Bronx                            1,182,169
               New York Diagnostic Centers                                      Queens                             995,674
               North Broadway Medical Associates                                Nassau County                      343,160
               North Broadwav Medical Associates                                Suffolk Countv                     558,108
               Total                                                                                        $9,164,185
               Average                                                                                      $1,018,243
               aEach contractor performs several types of specialty examinations and diagnostic procedures.

               bAll of the contracts are within metropolitan New York City and the surrounding counties.




               Page 16                             GAO/HRBBO-141       DDSs’ Use of Competitive      Contracts     for CEs
Appendix IV

oiregonDDSConsultative
Emmination Contracts

                                                                                 Number of Estimated 1989
              Specialty type of CEO           Contract locationsb                 contracts     obligations
              Rheumatology                    Portland                                        1                 $42,000
              Orthopedics                     Portland                                        1                 200,000
              Pulmonary                       Portland                                        1                  20,000
                                              Springfield                                     1                  15,000
                                              Medford                                         1                   7,000
              Cardiology                      Portland                                        1                  70,000
                                              Springfield                                     1                  15,000
                                              Medford                                         1                  18,000
              Neurology                       Portland                                        1                  25,000
              Mental                          Albany                                          3                  34,000
                                              Ashland                                         2                  20,500
                                              Corvallis                                       2                   9,500
                                              Eugene                                          3                  70,500
                                              Medford                                         3               / 36,500
                                              Portland                                        7                 141,500
                                              Salem                                           3                  81,000
                                              Springfield                                     1                  24,000
              Totals                                                                       33                 $829.500
              Averaae                                                                                          $2&l 36
              %cludes both specialty examination and any necessary diagnostic procedure and laboratory test.
              ‘Populations in geographic areas covered by contracts include: Portland, 1,092,OOO;
                                                                                                Medford/Ashland,
              141,700;Corvallis, 69,100; Salem/Kaiser, 255,000; Albany, 89,900; and Eugene/Springfield, 273,700.




              Page 17                           GAO/HRD-90-141     DDSs’ Use of Competitive       Contracts     for CEs
                                                                                         ,
                                                                                             ,
                                                                                                 .
Major Contributors to This Report


                  Barry D. Tice, Assistant Director, (301) 96643920
Human Resources   William E. Hutchinson, Evaluator-in-Charge
Division,         Edith J. Byrne, Evaluator
Washington, DC.




(105845)          Page 18                 GAO/HRDW141   DJXW Use of Competklve   Contracta   for C&
Official   Hlisiwss   I   Permit   No. GlOO   I