OIG study cites overpayments of enteral nutrition formulas

Sunday, March 21, 2004

March 22, 2004

WASHINGTON - Medicare may be overpaying for Category I enteral nutrition formula by 70% 115%, and could have saved more than $82 million in 2001 if the prices had been set at the median, according to a new OIG study.
The agency said it found that median contract prices for the formulas ranged from $.28 to $.36 per unit in 2001. Medicare's payment for the formulas is $.61. While individual contract prices for Category I formulas varied from a low of $0.18 per unit to a high of $0.86 per unit, the OIG found that the majority - 75% - of individual contract prices were lower than $0.42 per unit
As a result of the findings, the OIG recommended CMS to consider using its inherent reasonableness authority to reduce payment on the formulas.
Category I enteral nutrition formulas represent $201 million of the $311 million in Medicare Part B payments for all enteral nutrition formulas in 2001.
The OIG collected its price information from a national wholesaler; a group purchasing organization and a supplier who negotiated contracts directly with two enteral nutrition formula manufactures (Novartis and Ross). In all, the agency reviewed 177 individual contract prices.