Entral nutrition

Friday, April 30, 2004

WASHINGTON - Medicare may be overpaying for Category I enteral nutrition formulas by 70% to 115%, according to an OIG study that recommends CMS use its inherent reasonableness authority to bring payments in line with provider costs.

The OIG reported that median contract prices for the formulas ranged from $.28 to $.36 per unit (1 unit = 100 calories) in 2001. The majority - 75% - of those prices fell below $.42 per unit, while Medicare’s payment for the formula was $.61.

Medicare could have saved $82 million in 2001 had the reimbursement been set at the median, according to the report. Category I formulas accounted for $201 million of the $311 million in Medicare Part B payments for enteral nutrition formulas in 2001.

The OIG did cite a flaw with the study because data was not collected regarding supplier costs related to furbishing enteral nutrition formulas to Medicare beneficiaries. However, those costs may pale in comparison to other, more clinically intensive product categories.

“It’s a once a month ship,” said Sheri Reid, director of infusion at Associated Healthcare. “You don’t have clinicians going out to the homes, so I can’t say we have as much overhead with enteral as we do with other infusions.”

“It doesn’t surprise me that this study has come out now because [enteral nutrition] is still a very lucrative product category,” said Miriam Lieber, president of Lieber Consulting. “This issue rears its head every couple years.”

A 16% overall reduction in the reimbursement for Category I formula was proposed in 1998, according to the OIG. The cut never materialized because Medicare’s IR authority was suspended in 1999.

The OIG’s current examination of enteral nutrition payments brought the issue back to life. The agency said in a letter from former CMS Administrator Tom Scully to the OIG, however, that it will not use inherent reasonableness until IR procedures are developed.
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Product Focus: Infusion, Enteral