[House Hearing, 106 Congress]
[From the U.S. Government Publishing Office]
H.R. 4401, THE HEALTH CARE INFRASTRUCTURE INVESTMENT ACT OF 2000
=======================================================================
HEARING
before the
SUBCOMMITTEE ON GOVERNMENT MANAGEMENT,
INFORMATION, AND TECHNOLOGY
of the
COMMITTEE ON GOVERNMENT REFORM
HOUSE OF REPRESENTATIVES
ONE HUNDRED SIXTH CONGRESS
SECOND SESSION
ON
H.R. 4401
TO AMEND TITLE XVIII OF THE SOCIAL SECURITY ACT TO PROVIDE FOR A
MORATORIUM ON THE MANDATORY DELAY OF PAYMENT OF CLAIMS SUBMITTED UNDER
PART B OF THE MEDICARE PROGRAM AND TO ESTABLISH AN ADVANCED
INFORMATIONAL INFRASTRUCTURE FOR THE ADMINISTRATION OF FEDERAL HEALTH
BENEFITS PROGRAMS
__________
JULY 11, 2000
__________
Serial No. 106-236
__________
Printed for the use of the Committee on Government Reform
Available via the World Wide Web: http://www.gpo.gov/congress/house
http://www.house.gov/reform
______
U.S. GOVERNMENT PRINTING OFFICE
72-933 DTP WASHINGTON : 2001
_______________________________________________________________________
For sale by the Superintendent of Documents, U.S. Government Printing
Office
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Mail: Stop SSOP, Washington, DC 20402-0001
COMMITTEE ON GOVERNMENT REFORM
DAN BURTON, Indiana, Chairman
BENJAMIN A. GILMAN, New York HENRY A. WAXMAN, California
CONSTANCE A. MORELLA, Maryland TOM LANTOS, California
CHRISTOPHER SHAYS, Connecticut ROBERT E. WISE, Jr., West Virginia
ILEANA ROS-LEHTINEN, Florida MAJOR R. OWENS, New York
JOHN M. McHUGH, New York EDOLPHUS TOWNS, New York
STEPHEN HORN, California PAUL E. KANJORSKI, Pennsylvania
JOHN L. MICA, Florida PATSY T. MINK, Hawaii
THOMAS M. DAVIS, Virginia CAROLYN B. MALONEY, New York
DAVID M. McINTOSH, Indiana ELEANOR HOLMES NORTON, Washington,
MARK E. SOUDER, Indiana DC
JOE SCARBOROUGH, Florida CHAKA FATTAH, Pennsylvania
STEVEN C. LaTOURETTE, Ohio ELIJAH E. CUMMINGS, Maryland
MARSHALL ``MARK'' SANFORD, South DENNIS J. KUCINICH, Ohio
Carolina ROD R. BLAGOJEVICH, Illinois
BOB BARR, Georgia DANNY K. DAVIS, Illinois
DAN MILLER, Florida JOHN F. TIERNEY, Massachusetts
ASA HUTCHINSON, Arkansas JIM TURNER, Texas
LEE TERRY, Nebraska THOMAS H. ALLEN, Maine
JUDY BIGGERT, Illinois HAROLD E. FORD, Jr., Tennessee
GREG WALDEN, Oregon JANICE D. SCHAKOWSKY, Illinois
DOUG OSE, California ------
PAUL RYAN, Wisconsin BERNARD SANDERS, Vermont
HELEN CHENOWETH-HAGE, Idaho (Independent)
DAVID VITTER, Louisiana
Kevin Binger, Staff Director
Daniel R. Moll, Deputy Staff Director
James C. Wilson, Chief Counsel
Robert A. Briggs, Clerk
Phil Schiliro, Minority Staff Director
Subcommittee on Government Management, Information, and Technology
STEPHEN HORN, California, Chairman
JUDY BIGGERT, Illinois JIM TURNER, Texas
THOMAS M. DAVIS, Virginia PAUL E. KANJORSKI, Pennsylvania
GREG WALDEN, Oregon MAJOR R. OWENS, New York
DOUG OSE, California PATSY T. MINK, Hawaii
PAUL RYAN, Wisconsin CAROLYN B. MALONEY, New York
Ex Officio
DAN BURTON, Indiana HENRY A. WAXMAN, California
J. Russell George, Staff Director and Chief Counsel
Bonnie Heald, Director of Communications
Bryan Sisk, Clerk
Michelle Ash, Minority Counsel
C O N T E N T S
----------
Page
Hearing held on July 11, 2000.................................... 1
Text of H.R. 4401............................................ 2
Statement of:
Christoph, Gary, Ph.D., Chief Information Officer, Health
Care Financing Administration; Joel Willemssen, Director,
Civil Agencies Information System, U.S. General Accounting
Office, accompanied by Gloria L. Harmon, Director, Health,
Education and Human Services, Accounting and Financial
Management Issues, U.S. General Accounting Office, and
Donald Hunts, Senior Evaluator, Accounting and Financial
Management Issues, U.S. General Accounting Office; Marcy
Zwelling-Aamot, M.D., treasurer, Los Angeles County Medical
Association, former president, Long Beach Medical
Association; David Sparks, senior vice president, finance,
Providence Hospital, Washington, DC, on behalf of the
American Hospital Association; Donald Kovatch, comptroller,
Potomac Home Health Care, Rockville, MD, on behalf of the
National Association for Home Care; Arthur Lehrer, senior
vice president, VIPS, Inc.; and Robert Hicks, chairman and
chief executive officer, RealMed........................... 30
Lugar, Hon. Richard G., a U.S. Senator from the State of
Indiana.................................................... 18
Letters, statements, etc., submitted for the record by:
Christoph, Gary, Ph.D., Chief Information Officer, Health
Care Financing Administration, prepared statement of....... 32
Hicks, Robert, chairman and chief executive officer, RealMed,
prepared statement of...................................... 110
Horn, Hon. Stephen, a Representative in Congress from the
State of California, prepared statement of................. 16
Kovatch, Donald, comptroller, Potomac Home Health Care,
Rockville, MD, on behalf of the National Association for
Home Care, prepared statement of........................... 93
Lehrer, Arthur, senior vice president, VIPS, Inc., prepared
statement of............................................... 101
Lugar, Hon. Richard G., a U.S. Senator from the State of
Indiana, prepared statement of............................. 21
Ose, Hon. Doug, a Representative in Congress from the State
of California, information concerning Boards of Trustees... 125
Sparks, David, senior vice president, finance, Providence
Hospital, Washington, DC, on behalf of the American
Hospital Association, prepared statement of................ 82
Turner, Hon. Jim, a Representative in Congress from the State
of Texas, prepared statement of............................ 27
Willemssen, Joel, Director, Civil Agencies Information
System, U.S. General Accounting Office, prepared statement
of......................................................... 46
Zwelling-Aamot, Marcy, M.D., treasurer, Los Angeles County
Medical Association, former president, Long Beach Medical
Association, prepared statement of......................... 74
H.R. 4401, THE HEALTH CARE INFRASTRUCTURE INVESTMENT ACT OF 2000
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TUESDAY, JULY 11, 2000
House of Representatives,
Subcommittee on Government Management, Information,
and Technology,
Committee on Government Reform,
Washington, DC.
The subcommittee met, pursuant to notice, at 10 a.m., in
room 2154, Rayburn House Office Building, Hon. Stephen Horn
(chairman of the subcommittee) presiding.
Present: Representatives Horn, Biggert, Ose, Turner, amd
Maloney.
Staff present: J. Russell George, staff director and chief
counsel; Bonnie Heald, director of communications; Bryan Sisk,
clerk; Elizabeth Seong, staff assistant; Will Ackerly, Chris
Dollar, and Davidson Hulfish, interns; Michelle Ash and Trey
Henderson, minority counsels; and Jean Gosa, minority clerk.
Mr. Horn. The Subcommittee on Government Management,
Information, and Technology will come to order. We are here
today to discuss proposed legislation that would set up a
health care infrastructure capable of delivering immediate
point-of-service information to health care providers and
Medicare beneficiaries regarding their Medicare insurance
coverage and reimbursements.
Senator Richard Lugar of Indiana, who is joining us today,
first introduced the proposal in the Senate as S. 2312, the
Health Care Infrastructure Act of 2000. I have introduced a
similar measure, H.R. 4401, in the House.
[The text of H.R. 4401 follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Horn. The Federal Government currently provides
insurance coverage to millions of workers and retirees under a
wide array of complex programs. This legislation seeks to
create a health care information architecture that could
ultimately be used by all of the Federal Government's insurance
plans. As proposed, S. 2312 and H.R. 4401 would set up a
commission to oversee the design, creation and implementation
of a system to handle only Part B of the Medicare program and
the Federal Employees Health Benefits Program.
Part B covers the payments for physicians, laboratories,
equipment, supplies and other practitioners. In fiscal year
1999 Medicare Part B fee-for-service expenditures were
approximately $61 billion.
The overriding goal of this proposed legislation by Senator
Lugar is to streamline and simplify these programs for both
beneficiaries and their health care providers, while ensuring
beneficiaries that the privacy of their medical records is
protected.
At this point, since the Senator has a vote coming up in
the Senate, I'd like to introduce the author of this
legislation. We're delighted to have him as our first witness.
The distinguished Senator from Indiana, Richard Lugar,
welcome.
[The prepared statement of Hon. Stephen Horn follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
STATEMENT OF HON. RICHARD G. LUGAR, A U.S. SENATOR FROM THE
STATE OF INDIANA
Senator Lugar. Thank you very much, Mr. Chairman. I'm
honored that you have asked me to testify. I appreciate so much
your contribution to our joint efforts.
As you know, the primary goal of the Lugar-Horn bill is to
build an advanced infrastructure to efficiently process the
vast number of basic transactions that clog the pipeline and
drain scarce health care resources in our country. We target
immediate transaction, including point of service verification
for insurance coverage, point of service screening for
incomplete or erroneous claim submissions and point-of-service
resolution of clean claims. This would include providing
patients with an understandable explanation of their own
payment obligations and coverage benefits before they leave the
doctor's office.
An advanced claims processing infrastructure would allow
doctors to spend more time treating patients; it would enable
doctors' offices and insurance companies to reduce the cost of
claims processing; and it would give patients a more timely
understanding of treatments and costs. Such an infrastructure
would represent both a huge improvement in the quality of
Medicare and a source of enormous annual savings for the
program and the wider health care economy.
The act is designed to spur Federal and private sector
investment. For that reason, the bill would require insurers
who participate in the Federal Employees Health Benefits Plan
to apply the same technological innovations.
Let me take a moment to describe the often complicated and
confounding billing process that our senior citizens confront
when they go to the doctor. As a senior, when you present
yourself for care in the doctor's office, you produce your
Medicare card, as well as proof of identification. The staff
photocopies your card and gives you a clipboard of forms to
fill out. Meanwhile, they call to verify your coverage with the
insurer. By now, we all recognize that we need to arrive at the
office early to fill out the forms.
However, unlike private insurance, which allows the patient
to pay a copayment and leave the office feeling relatively
secure that their treatment has been paid for, seniors often
have no idea what has been paid for or what they owe. In fact,
it is not infrequent for seniors to be asked to sign a form
that says, ``I understand that this procedure may not be
covered by Medicare.'' They often assume that it will be
covered and are quite disconcerted when a bill shows up.
Adding to the confusion, seniors often must deal with the
complications of the supplemental insurance. Beneficiaries
receive a Medicare monthly statement, and receive statements
from their supplemental insurer and they are likely to receive
a statement from the doctor. Even a modest series of visits to
a primary care physician and a specialist or two can yield a
mountain of paperwork and unanswered questions for a Medicare
recipient.
I have had beneficiaries contact my office to say that they
just don't understand their paperwork. Often they can't tell if
their claim has been paid. The first thing my staff tells them
to do is to call their doctor to verify that their claim has
been filed. Sometimes it has not been filed.
Many people would be surprised to learn that doctors are
not required to file their Medicare claims right away. And some
doctors hold on to claims and file once a month or, in some
instances, even every 6 months. This is a commonly accepted
practice and fits within current Medicare filing requirements.
It adds to the uncertainty and worry of seniors that they
cannot verify that the claim has been paid.
I also have heard from doctors who are so frustrated by the
system they forgo participation in Medicare altogether.
According to estimates, I am told that each practicing doctor
requires an average of two-and-a-half administrative staff to
fill out paperwork. Doctors themselves spend an average of 2
hours on insurance paperwork each day.
I was pleased to see on June 20th HCFA announced that it
will test simplified or have test-simplified coding guidelines
for doctors. This would be a good step.
I envision a system that would allow most claims to be
approved before the patient leaves the doctor's office. A
patient could submit a claim for tests and learn immediately
not only if they qualify, but also the amount that Medicare
would approve for payment and any balance they would owe.
In addition, the doctor's office could immediately correct
a claim filed to Medicare that was kicked back because of
missing information. Not only would this allow the patient to
leave the office knowing what Medicare would pay, it would also
save the office the time and expense of refiling claims.
Mr. Chairman, today nearly every industrial sector is
involved in a race to apply new information technology to gain
greater efficiencies. Yet government health care programs,
which are enormously important to so many Americans, still use
a patchwork of outdated technology.
Creating an advanced infrastructure that is capable of
immediately processing most health care transactions is a big
task, but it is well within our technological capability. One
only has to consider that for years we have been using credit
cards to purchase items at almost any location in the world.
With a single swipe and a few seconds for verification, we can
purchase everything from groceries at the supermarket to a
hotel room or restaurant meal on a different continent. None of
us in Congress should be satisfied with claims that health care
is too big or too complicated to undergo a similar information
technology revolution.
In fact, this concept is being advanced now in the private
sector. Last fall, I saw it in action at RealMed, a growing
high-tech firm in Indiana that specializes in real-time
resolution of medical claims. I was impressed, first, by the
simplicity of their product, but more so by the sweeping change
it has brought to companies who have contracted with this firm,
RealMed, to handle their bills. Representatives of RealMed will
testify, I understand, on a later panel about their system and
their findings before you this morning.
But it is not hard to fathom the value for the Federal
Government of the advances that RealMed was putting into
practice. The HCFA spends nearly 1 in 8 Federal dollars. Real-
time processing of HCFA's 1 billion claims per year would
produce an extraordinary monetary and efficiency savings.
Given this potential, we need to put the government's best
information technology talent to work on the problem. The
Commission that our bill establishes was designed to harness
the full intellectual resources of the Federal Government
regarding the design of large, complex and distributed computer
systems. Institutions such as DARPA, the National Science
Foundation and NASA have been instrumental in putting the
United States at the forefront of this technology.
Of course, we can't talk about information technology
progress without giving attention to the issue of medical
privacy, by itself a policy issue of great importance. For
several years, the Congress has been engaged in this debate and
the committees of jurisdiction have been studying the options
diligently. We have not yet formed a consensus. It is my hope
we will do so in the near future.
This is an issue that is crucial to the successful
implementation of a modern medical infrastructure. Building
such an infrastructure will require a nationwide standard of
privacy because electronic payment systems will not know State
borders. I hope that with your committee's experience in these
matters, you are taking steps to provide recommendations on
this important issue.
There are other benefits that improving the health care
payment infrastructure can bring to HCFA, to patients and to
doctors. One of the foremost is better information about what
the government is paying for or wasting its money on, and I
think this is why HCFA has reacted positively to our bill.
Cutting into the estimated $13.5 billion in annual Medicare
fraud and the enormous costs of administration would benefit
all Americans. Further qualitative targets can also be realized
by better data management and an accurate accounting of the
number of mammograms, flu shots, MRIs or hip replacements for
which Medicare pays.
Mr. Chairman, I appreciate the work and the interest that
you and your committee have shown toward advancing this
concept. I know that you share my concerns, and I look forward
to working with you and members of the committee to ensure that
the Lugar-Horn bill will serve the best interests of each
individual in the Medicare health care continuum from patient
to provider to payer.
I thank you very much for this opportunity.
[The prepared statement of Hon. Dick Lugar follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Horn. Thank you very much, Senator. It's a very good,
succinct view of your legislation.
I want to turn now to Mr. Turner, our distinguished ranking
member--the gentleman from Texas, Mr. Turner.
Mr. Turner. Thank you, Mr. Chairman.
Senator Lugar, thank you for your testimony. This
legislation that you and Chairman Horn have joined together in
support of and advocacy of I think is very important piece of
legislation. It has the potential to save millions of dollars
in taxpayer money, and it is certainly, I think, noted by
anyone who's had contact with the Medicare system that the need
for improved administration and processing is a very
significant need.
I have heard a lot of complaints from providers over the
years regarding frustration they have experienced with the
system, and I know Chairman Horn has provided a lot of
leadership for our committee, trying to implement technology
and make government more efficient and more effective. And this
certainly in keeping with that overall goal they know we all
share.
So I appreciate the fact that you have come over to our
side this morning and testified before our committee, and we
will look forward to working with you to be sure the objective
is obtained.
Thank you so much for being here, Senator.
Mr. Horn. I thank the gentleman.
Mr. Turner has a lot of rural hospitals in his area, and
we're concerned about those, too; and I hope that the Senate
and the House will be able to solve the problems for the
disproportionate in urban America as well as rural America.
I now call on the vice chairman of the subcommittee, Mrs.
Biggert, the gentlewoman from Illinois. She has a very
worthwhile bill that we will be looking at in a hearing in the
next month. So she has a great interest in the Medicare
situation also.
Mrs. Biggert.
Mrs. Biggert. Thank you, Mr. Chairman.
And welcome, Senator Lugar, to our committee. I am really
interested in cutting out the administrative costs and,
particularly, in the issue of Medicare fraud. Maybe you could
expand just a little bit on how this bill will be able to
reduce the fraud, waste and abuse that we have found.
Senator Lugar. I would just respond briefly that by having
this audit trail from the beginning, with the resolution of who
pays what and who gets what at the very beginning, the
possibilities of the fraud that comes from claims that are not
paid or claims that are unknown or paperwork that is lost or
the refiling back and forth, rob the--in other words, at the
moment of truth, the moment where the patient sees the doctor
or the nurse, then we all know what the insurance got paid, the
doctor got paid, the hospital got paid, and it's resolved.
Now, conceivably, there could be fraud right at that
moment, all of these people in collusion; but this is less
likely. The fraud and abuse is more likely to occur in these
interim weeks and months--the lost papers, the filed, the
uncertainty of who is responsible.
Mrs. Biggert. So we won't find that someone who claims that
their office is in the middle of the Miami Airport, that
location will no longer exist as a payment center?
Senator Lugar. Not unless they have a patient there in the
middle of the Miami Airport and an insurance company willing to
vouch for both of them.
Mrs. Biggert. Thank you very much.
Mr. Horn. The gentleman from California, Mr. Ose, who has
also rural hospitals and has a great interest in the Medicare
program.
Mr. Ose. Thank you, Mr. Chairman.
Senator, welcome. I do have one question. I notice on the
membership of the committee that there are Secretaries
appointed to the Commission, and then there's a member from
NASA, DARPA, National Science and the Office of Science and
Technology, VA and the OMB. The question I have, as I was
reading this material for this morning's hearing, was that we
have trustees for Medicare right now, and there are four
statutory appointments and two discretionary appointments.
I'm curious, do you have any information as to whether or
not those six people have looked at this issue in terms of the
IT infrastructure that will allow us to get to the point that
we're trying to get to?
Senator Lugar. No, I do not, sir. I don't know what
examination they have made, and it is a very important point.
The reason for these members that are mentioned from these
agencies is, they have a great deal of experience in this
infrastructure technology. But clearly people who have
responsibility for Medicare have got not only to sign off on
this, but have got to shape it. So the governance has got to
include these people, and hopefully they will be enthusiastic.
I'm led to believe, having talked about this issue--
principally before the medical community, the hospital
community, in my home State of Indiana, at various
conferences--that there is, if not unanimous feeling that
something like this should be done, but usually pauses, as this
is really a very big subject and probably a multiyear business;
but not objection, conceptually, to the idea that it would be
ideal to know all of this at the moment of truth, the moment of
service.
Mr. Ose. I do want to compliment you and Chairman Horn for
coming up with this proposal. I checked on my question that I
just presented to Senator Lugar, and I went back into the
trustee's reports from 2000, to the IT report, the data of
which actually originated in 1997; I found no evidence that the
trustees for OASDI have even looked at that question. So the
bill has merit is what I'm reporting back to you.
With that, I will yield back and get my phone.
Mr. Horn. I know the Senator has a vote coming up, but Mr.
Ryan has just joined us. We are delighted to have him, the
gentleman from Wisconsin, a fellow Midwesterner.
Senator Lugar. We've enjoyed having Mr. Ryan before the
Agriculture Committee, and we share a feeling that's very
strong about health care to rural areas and the extension to
the communities there.
Mr. Horn. Since I grew up on a farm, I am also very
sympathetic.
Mr. Ryan. This bill may be the only chance to get relief to
the Midwest dairy farmers, so I applaud the effort.
Senator Lugar. That was our last meeting.
Mr. Horn. Well, thank you, Senator. We appreciate your
coming over here.
OK. We will now continue on Mr. Turner and my opening
statement here.
Just to note the overview that we hope to learn from those
who would be affected by the Health Care Infrastructure Act
whether this bill, as proposed, attains those goals. So we
expect our witnesses to be very frank, and we would welcome
expertise from those in the audience to please file with us a
letter or a brief statement on this, because we will be marking
up the bill within the next few weeks and it will move very
rapidly.
So our second panel after the General Accounting Office and
others--second panel will include representatives of
physicians, hospitals, home health care industries that provide
medical services to Medicare beneficiaries. Among the
witnesses, although we'll introduce them at the time, is Marcy
Zwelling-Aamot, M.D., a practicing physician from my own
hometown of Long Beach and former president of the Long Beach
Medical Association.
Although the private insurance companies that process
Medicare claims declined our invitation, we're pleased to have
Mr. Arthur Lehrer, the second vice president of VIPS, whose
company is responsible for maintaining the information
technology system of many of these contractors. In addition, we
welcome Mr. Robert Hicks, the chairman and chief executive
officer of RealMed, that was mentioned by the Senator, an
Indiana firm that has developed an information system similar
to that envisioned in the proposed legislation.
So we're delighted to have all of you today, and Mr. Turner
has some additional remarks, and then we'll proceed with the
first panel after Senator Lugar.
Mr. Turner. I'll just file my remarks for the record, Mr.
Chairman.
[The prepared statement of Hon. Jim Turner follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Horn. Without objection, and they will be in the record
as if read.
Any other opening statements you wish to be put in the
record?
All right. Well, let us start.
Mrs. Biggert. Yes, Mr. Horn, I have an opening statement I
would like to be put in the record.
Mr. Horn. Sure, and we'll put that in as read. So, in other
words, it's big print and people can read it easily.
We will now have the first witness list that will come up
and that is Gary Christoph, Ph.D., Chief Information Officer of
the Health Care Financing Administration; Joel Willemssen, not
new to this committee, he's been our major resource on Y2K for
4 years. He's Director of Civil Agencies Information Systems,
U.S. General Accounting Office. He's accompanied by Gloria L.
Jarmon, Director of Health, Education and Human Services,
Accounting and Financial Management Issues, U.S. General
Accounting Office, part of the legislative branch; and Donald
Hunts, the Senior Evaluator, Accounting and Financial
Management Issues of the U.S. General Accounting Office.
So next would be Marcy Zwelling-Aamot, M.D., treasurer, Los
Angeles County Medical Association, former president, Long
Beach Medical Association, and then David Sparks, senior vice
president, Finance, Providence Hospital, here in Washington,
DC; Donald Kovatch, the comptroller, Potomac Home Health Care,
Rockville, MD, on behalf of the National Association for Home
Care; Arthur Lehrer, senior vice president, as I have noted,
VIPS, Inc.; and Robert Hicks, chairman and chief executive
officer, RealMed.
Let me explain how we do business here, our friends from
the General Accounting Office know, but we will swear all
witnesses to affirm that their testimony is the truth. And No.
2, please don't read your statement to us. We've read them.
Summarize it and keep it to about 5 minutes, 6 minutes, 7
minutes, whatever. We'd like to, one, go through that formal
testimony so we can have a dialog between you because we're
interested in relating to your experiences, and please tell us
line by line either now or in the next week or so as to where
you think we could do something a lot better in either Senator
Lugar's version or mine, which is generally his version also.
So that's why we welcome your expertise here. So if you will
stand up, raise your right hands, we will give you the oath.
[Witnesses sworn.]
Mr. Horn. The clerk will note that all the witnesses and
their staff have taken the oath, and we will go down the list
and start with Mr. Gary Christoph, Chief Information Officer of
Health Care Financing Administration. He's done a very good job
as we saw him through the Y2K bit. We're glad to have him here,
and Mr. Christoph, it's all yours.
STATEMENTS OF GARY CHRISTOPH, PH.D., CHIEF INFORMATION OFFICER,
HEALTH CARE FINANCING ADMINISTRATION; JOEL WILLEMSSEN,
DIRECTOR, CIVIL AGENCIES INFORMATION SYSTEM, U.S. GENERAL
ACCOUNTING OFFICE, ACCOMPANIED BY GLORIA L. HARMON, DIRECTOR,
HEALTH, EDUCATION AND HUMAN SERVICES, ACCOUNTING AND FINANCIAL
MANAGEMENT ISSUES, U.S. GENERAL ACCOUNTING OFFICE, AND DONALD
HUNTS, SENIOR EVALUATOR, ACCOUNTING AND FINANCIAL MANAGEMENT
ISSUES, U.S. GENERAL ACCOUNTING OFFICE; MARCY ZWELLING-AAMOT,
M.D., TREASURER, LOS ANGELES COUNTY MEDICAL ASSOCIATION, FORMER
PRESIDENT, LONG BEACH MEDICAL ASSOCIATION; DAVID SPARKS, SENIOR
VICE PRESIDENT, FINANCE, PROVIDENCE HOSPITAL, WASHINGTON, DC,
ON BEHALF OF THE AMERICAN HOSPITAL ASSOCIATION; DONALD KOVATCH,
COMPTROLLER, POTOMAC HOME HEALTH CARE, ROCKVILLE, MD, ON BEHALF
OF THE NATIONAL ASSOCIATION FOR HOME CARE; ARTHUR LEHRER,
SENIOR VICE PRESIDENT, VIPS, INC.; AND ROBERT HICKS, CHAIRMAN
AND CHIEF EXECUTIVE OFFICER, REALMED
Mr. Christoph. Thank you, Mr. Chairman. Chairman Horn,
Congressman Turner, other distinguished members of the
committee, thank you for inviting me to discuss the Health Care
Financing Administration's information technology and
architecture and H.R. 4401, the Health Care Infrastructure
Improvement Act of 2000.
We appreciate the opportunity to be here today to share our
information technology plans and our vision for achieving the
goals that are espoused in H.R. 4401. I have prepared some
written remarks that I ask to be included for the record, but
I'll briefly discuss the key points.
Assuring access to health care services for our
beneficiaries is a priority for our agency. The need for
cutting edge, modern information technology and a strategic
information technology vision are critical to this mission. The
health care industry is becoming, as others have noted,
increasingly data and technology intensive. The demands on our
outdated information technology architecture are greater than
ever before. Clearly we must modernize and expand our
information technology capabilities in order to meet today's
needs and tomorrow's challenges successfully.
Medicare is already the most highly automated, most
efficient and fastest payer in the health insurance industry.
Our costs are low, roughly $1 to $2 to process each claim, and
over 90 percent of Medicare claims today are processed
electronically and paid on average within 15 days after
receipt. We have been able to achieve this despite our archaic
information technology environment. Nonetheless, there is an
urgent need to update our systems.
We learned a great deal about how to proceed last year when
we successfully met the year 2000 challenge. Now with our
resources no longer committed to that effort we are refocusing
on the technological promise of the new millennium. Our
comprehensive modernization plan will support more efficient
operations and our systems will be easier and less expensive to
maintain. It also will help us develop innovative ways to
manage data, to be more responsive to new initiatives and to
support efforts to improve health outcomes for our
beneficiaries.
Your legislation, H.R. 4401, Mr. Chairman, includes some
interesting provisions that could benefit beneficiaries,
providers and our program management. We strongly agree with
the bill's information technology service concepts. Our target
IT architectural goals for the whole agency include central
core relational data bases, standard interfaces, modular
applications, real-time claims processing and security and
privacy controls fundamentally built in so as to enable
Internet communication amongst and between HCFA, its contractor
partners, providers and beneficiaries. Thus we have much in
common in our plans with what you propose in H.R. 4401.
However, the legislation's mechanisms and means raise some
concerns about potential program integrity problems and other
serious unintended consequences that we need to better
understand. I look forward to discussing these with you further
today.
We must ensure that any proposal to modernize Medicare's
information technology environment maintains Medicare's strong
beneficiary privacy protections, strengthens our ability to
identify, analyze and respond to fraudulent schemes, and
carefully takes into account our own legacy systems. Past
experience teaches us that our systems modernization efforts
must proceed incrementally, that we need to build modularly,
plan meticulously, manage with prudence and savvy and above all
not bite off more than we can chew.
Equally important is incorporating the requirements set
forth in the Clinger-Cohen Act and the so-called Raines rules
into our internal systems governance processes to help ensure
that our decisionmaking is sound and disciplined. In addition,
we must ensure that our agency has the resources to attract and
recruit the information technology talent and subject matter
experts we need to successfully implement these system changes.
We are already making substantial progress in modernizing
our Medicare systems architecture. To facilitate more efficient
operations, as well as develop innovative and secure ways to
manage and access data, our ultimate goal of course is to
improve the health outcomes for the more than 39 million
Americans who depend on the Medicare program every day. We
realize that undertaking such a large system modernization
effort is by no means a simple task, but with careful planning
and by taking incremental steps I am confident we will meet
this challenge successfully.
We welcome your continued input as we move forward and we
do appreciate your continued interest. I am happy to answer any
questions you may have.
[The prepared statement of Mr. Christoph follows:]
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Mr. Horn. Thank you, Dr. Christoph. The fine resume that
precedes you will be automatically in the record when we called
your name, and we'll do that with all witnesses because you
bring a great amount of expertise to this hearing.
I now bring the next principal witness, who is Joel
Willemssen, the Director of the Civil Agencies Information
System of the U.S. General Accounting Office, and he has a lot
of his experts here, as I have noted earlier, and we appreciate
very much your testimony, and we dreamed up last night, oh, a
few other projects you might want to do in relation to this and
get them done by last week if you will. We're all busy. We know
you will do a great job. So go ahead and tell us your view in
the General Accounting Office.
Mr. Willemssen. Thank you, Mr. Chairman, Ranking Member
Turner, members of the subcommittee, thank you again for
inviting us here to testify today. Joining me is Gloria Jarmon,
who's responsible for our financial management and overpayments
work at Medicare. As requested, I'll briefly summarize our
testimony.
H.R. 4401 has worthwhile objectives and would offer
benefits to providers and beneficiaries. Specifically,
implementation of the real-time claims processing system
proposed in the bill would lead to decisions on authorized and
denied claims being provided immediately. However, most
Medicare claims could be paid more quickly using current
processes by eliminating existing mandatory delay in paying
claims. A drawback to eliminating this mandatory delay is that
the Medicare Trust Fund would lose some of the interest it
currently earns. Beyond this, there are a number of other
challenges that would need to be successfully addressed to
implement the proposed system.
First, before an implementation decision is made, it's
particularly important to demonstrate that a system can be
designed that provides the safeguards necessary to minimize
improper payments. For example, any new real-time system for
all claims would have to find a way to accommodate existing
processes such as claims examiners reviews that are suspended
because claims did not pass certain edits. Further, because a
real-time system can be vulnerable to code manipulation through
repeated submission of fraudulent claims until they pass the
system's edit, it would be prudent to have appropriate controls
to screen providers using the system.
Second, technical and cost risks should be considered and
analyzed before embarking on design and implementation. For
example, analyses covering costs, benefits, risks and the
adherence to HCFA's guiding systems architecture are essential
to reducing the risks of this proposed system.
Third, as recognized in the bill, computer security must be
adequately addressed in any proposed system. GAO and the
Inspector General have previously reported on HCFA's lack of
effective computer security controls.
Fourth, developing a system to be initially used for
Medicare part B and then to also be used for the Federal
Employees Health Benefits Program and potentially other Federal
health benefits programs would be very challenging. These
programs have substantially different underlying program
requirements which would make designing a single system for
them quite difficult.
Fifth, the role and composition of the commission
identified in the bill as responsible for developing and
implementing the proposed system needs to be carefully
considered. Namely, issues such as how the proposed system
would affect HCFA's and existing contractors' systems
development and maintenance activities and how to ensure that
appropriate health care and financial management expertise is
included in the commission would need to be addressed.
In tackling these implementation challenges, it's
instructive to keep in mind HCFA's experience with a prior
system development failure in the mid-1990's. Mr. Chairman, as
I testified before you in May 1997, this system known as the
Medicare Transaction System [MTS], was plagued with schedule
delays, cost overruns, and the lack of effective management and
oversight. Ultimately, HCFA terminated the MTS contract after
it had spent about $80 million but had not received one line of
software.
Two key lessons came out of that experience: One, that
major projects such as MTS must be managed as investments with
periodic assessments of costs, benefits, risks, and other
alternatives and, two, that a phased approach to major projects
can reduce the risks inherent in any large computer development
effort. Such lessons could be valuable in considering how to
best proceed with the development and implementation of a real-
time claims processing system.
That concludes a summary of our testimony. Thank you.
[The prepared statement of Mr. Willemssen follows:]
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Mr. Horn. Thank you and I assume the rest of your
colleagues will also be helping to respond on questions and
there's nothing else to be said on the basic presentation.
Mr. Willemssen. Yes, sir.
Mr. Horn. Let us now move to Marcy Zwelling-Aamot, who's
the former president of the Long Beach Medical Association and
now the treasurer of the Los Angeles County Medical
Association. We're delighted to have a true professional on the
firing line with us today and we look forward to your
testimony. It will also be sprightly I realize.
Dr. Zwelling-Aamot. Thank you, Mr. Chairman, and thank you,
committee, for the privilege of allowing me to testify today.
This bill is a well-intended bill but it is grossly misguided
and I would like to speak to the issue of claims data versus
clinical data.
The unintended consequences of submitting claims data is
that we make bad conclusions. It has been said garbage in,
garbage out. As a clinician I treat patients. I treat human
beings, I do not treat coded representations of persons. And
yet that is the data that the system currently compiles. Making
a larger system a real-time based system is a wonderful
thought, but inherent in it is the danger that the data that
you collect is just bad data and that the conclusions then are
wrong. That's what happens today.
Making that system faster, while I'll tell you as a
clinician it would be wonderful to get paid on time, it would
be wonderful to be able to decrease my staff. They must have to
submit claims, quote, legitimately but I would suggest to you
that the duplicitousness of this system is not the provider,
the provider as a physician, a hospital, or as home health
agency, but the system itself. The system is the fabricator
because it doesn't work.
Remember the only reason that I contact HCFA is for
reimbursement purposes. That data, however, is used for a
multitude of purposes, some of them quite dangerous. For
instance, epidemiologically, we make statements about our
Nation's health based on this data. I'd like to give you a
perfect example, if you will, of why that data is really not
good data.
Just last week a patient in my office with abdominal pain
came in and we realized that all her tests were completely
normal. So I took the time to speak with her only to find that
her pain was probably of a somatic nature and was probably
because of some abuse that she had received as a child. Her
father had recently died, these things were coming to the fore.
We spent 30 to 45 minutes. I got her to the proper clinicians,
that being a psychiatrist and a psychologist, and now it's my
duty to code that visit. Do I code it abdominal pain? Somatic
pain? Depression? Abuse? My choice as to how I might select
that code will then delegate what's in that patient's file from
here on out.
We talk about the privacy issues. I'm not a particularly
private person in the sense that if somebody's going to say
something about me I don't mind as long as it's true, but
imagine that the government has data that is not true. How
dangerous. It may prevent a patient from getting insurance
later in their life, it may prevent them from getting a job.
Bad data is far worse than no data.
I might also note, Mr. Chairman, that because the coding
system's purpose is only the exchange of dollars, I would not
code depression for that patient, even though it was a very
important part of her medical problem, and the reason is
because by just adding depression to the code, my reimbursement
becomes 60 percent of the allowed. Now it has often been said
that physicians are not good business people. I conclude that
that is probably correct, but our common sense has not gone
astray, and so we don't code some of these things. We could
talk if you have any questions later about how that data is
collected in terms of how many lines of data are transmitted to
HCFA and what they do with the data and the need for us to get
the right code on the right line so the right procedure is
compensated, but again I stress to you, Mr. Chairman, that the
purpose of our communication with HCFA at this point in time
and every other insurance company is based on claims
reimbursement data which does not represent the clinical
condition.
What I would like this committee to do is to take a step
back and realize that we really must start over in terms of the
data that's collected in real-time at the time of the patient
visit in an ICU. We should not conclude that patient has high
blood pressure. We should specifically state what that blood
pressure is. The conclusions also come later, not in the making
of the code.
Myself, I treat people, not numbers. And unless you have
the winning lottery number as a physician I'm just not
interested in coded systems. I think they're dangerous and I
think that our country as a whole deserves more accurate data.
I'll summarize with a TV show that I saw this morning, Good
Morning, America. I was pleased to see Dr. Lila Nautergal, who
was my mentor at NYU, talking about estrogen. Throughout her
testimony on the TV she kept alluding to the fact that we don't
have good data, we don't have good data, breast cancer is
plastered across the front pages of our paper and yet we don't
know what causes breast cancer. We make surmises, we make
guesses, again based on a coded system that's based on claims
and we don't have the data. We have 250 million people in this
country, we have tons of data in doctors' offices. It never
gets put into any computerized system. It never gets melted
down into any particular clinical code, and it sits unutilized
in our offices and in files.
I thank you again for the opportunity to speak to you on
this matter and I'll answer any questions when they come.
[The prepared statement of Dr. Zwelling-Aamot follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Horn. Thank you very much. We appreciate your
testimony.
Next is David Sparks, the senior vice president for finance
of Providence Hospital, the oldest hospital in Washington, DC,
speaking on behalf of the American Hospital Association. Mr.
Sparks.
Mr. Sparks. Thank you, Mr. Chairman. I'm David Sparks. I am
the senior vice president of Providence Hospital. I do
represent the American Hospital Association's membership of
nearly 5,000 hospitals, health systems, networks and other
health care providers. On behalf of AHA, I'd like to thank you
for inviting us to comment on H.R. 4401, the Health Care
Infrastructure Investment Act of 2000.
Providence Hospital is a 380-bed facility located in
Northeast Washington. We have a 240-bed nursing home and
several outpatient clinics that we operate. We complete and
bill for more than 108,000 encounters every year, of which only
14,000 of those are inpatient. At any point in time, we are
managing approximately 36,000 accounts, and we bill both Part A
Medicare and Part B for the hospital.
In addition, we also bill approximately 50,000 physician
bills every year, and those all get billed to the Part B
carrier. We also participate in the Medicaid program, Blue
Cross and Blue Shield programs and over 111 managed care
programs. Each of these programs has their own requirements for
billing, payments, eligibility, medical reviews, but Medicare
is by far the most prolific with over 135,000 pages of rules.
The rules by which we must play have become very complex.
They result in reams of procedures and require extensive
standardization, but Medicare is by far the fastest and best
payer that we have today. Yet there can be improvements made in
the Medicare system.
Mr. Chairman, we commend the legislation's intent to reduce
improper payments. This legislation, however, proposes a
wholesale change of the Medicare billing and payment system
which may result in unintended or adverse consequences.
As a hospital administrator that deals with Medicare, its
fiscal intermediaries, I know increased standardization and
improved automation not only would ease the paperwork burden of
hospitals but reduce billing errors. Proposed systemic
technology change of a program that serves almost 40 million
Americans, however, will be incredibly complex. It will be
fraught with challenges and it will be difficult to execute.
There are incremental solutions to reducing erroneous
claims and assisting providers with the myriad of rules with
which we must adhere. We could greatly enhance our ability to
submit clean, concise claims to the intermediaries if we had
access to the logic for Medicare edits or to a common working
file and were able to run electronic claims checks on our bills
prior to submission for payment. Currently, the fiscal
intermediary returns the bills to us if a discrepancy is found
during electronic claims checks, resulting in many more man-
hours spent in determining the error and then resubmitting the
claim correctly.
We've also found that incremental solutions to some of
these problems are more beneficial than full-scale system
redesigns. In 1991, the Health Care Financing Administration
launched a program to do just that, the Medicare Transaction
System. Unfortunately, after several years of time and money,
the effort has failed. HCFA discovered that wholesale change is
extremely difficult, at best, for a system with more than 40
million beneficiaries in a diverse care setting around the
country and where rules and system requirements change
periodically.
Standardizing practices around the country would also
enhance the ability to reduce erroneous claims. Many hospitals,
health systems and providers must constantly be aware of the
rules under which care can be administered. Even so, some
providers, who even follow the rules to the best of their
ability, are penalized for events out of their control and for
information which they do not have access to.
The Health Information Portability and Accountability Act
of 1996 [HIPAA], addresses several of these items in the
proposed legislation. It requires the development of standards
not only for confidentiality of patient information, but also
for a number of common health care transactions involving
electronic billing and payments not only to Medicare, but to
many of the commercial payers. One of the outcomes we would
expect to see as a result of some of these HIPAA standards is
fewer improper payments.
AHA is working closely with the Department of Health and
Human Services, HCFA and Congress to address concerns about
privacy and safeguarding personal information regarding a
patient's medical record information. The administrative
simplification standards replace the numerous nonstandard
formats currently used for certain transactions with a single
uniform set of electronic formats.
In conclusion, we understand and agree with the need to
reduce erroneous bills and claims, and AHA stands ready to
assist. However, wholesale replacement of the Medicare billing
system would only add levels of confusion to an already complex
situation.
The goals of this legislation of processing claims
correctly and accurately and timely is one that we all want to
attain. For us, it would mean less manual intervention and time
chasing claims, approved efficiency and timelier payments. For
the government, it would mean paying an accurate bill in a
timely manner and being good stewards of the public's funds.
We can do this by continuing to work with HCFA in assisting
in their efforts to streamline the system in a manner that
makes sense for patients, hospitals and Medicare.
Thank you very much.
[The prepared statement of Mr. Sparks follows:]
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Mr. Horn. Thank you and next is Donald Kovatch, the
comptroller of Potomac Home Health Care in Rockville, MD, on
behalf of the National Association for Home Care.
Mr. Kovatch. First, I'd like to thank you for the
opportunity to testify related to this bill.
My name is Don Kovatch. I'm currently the comptroller for
Potomac Home Health in Rockville, MD. Previously, I worked for
a midsized church-affiliated--church and hospital-affiliated
home health agency, and prior to that, with a large chain of
home health agencies. I'm also a member of the National
Association for Home Care's Financial Manager's Forum, the
national association of the Nation's largest home health
organization, with nearly 6,000 home health Medicare providers.
Home health Medicare claims processing is highly complex,
with many technical rules subject to rapid change. Since the
majority of home health agencies are small businesses, many are
unable to keep up with these changes. I feel that changes can
be made to the Medicare system to facilitate more accurate
claims submission, allowing home health agencies to continue to
provide the stellar care that beneficiaries are accustomed to
receiving.
The amount of paperwork required by a Medicare program to
submit a claim for a home health agency is enormous. Upon
admission to the agency, the home health agency must complete
an OASIS assessment of the patient, which often consists of
over 120 questions.
Next, the home health agency must complete a HCFA Form 485,
which duplicates much of the information on the OASIS
assessment. Additionally, all visits to a patient must be
tracked, not only by discipline, but also in 15-minute
increments and compiled onto a UB-92 bill.
The home health agency is also responsible for obtaining
physician signatures, signed on patient orders, prior to
submitting a claim to a fiscal intermediary.
Finally, the Medicare bill is submitted. However, it is
subjected to medical review by the fiscal intermediary.
The medical review process is often a complex task which
seldom results in more than--in additional work for both the
home health agency and the fiscal intermediary. In my
experience, the most common problems found in the medical
review process are bills being sent prior to having an actual
doctor's orders received and written. That is not to say that
the doctor has not ordered the visits or that the visits not be
done, but just the logistics problem with getting the orders
back in.
The second issue has been improper notation of end of care
on the 485 itself, which again is a logistics problem.
Many of these issues and errors can actually be easily
avoided with the following recommendations. If these
recommendations are adopted the Medicare claims submissions
process will become significantly more effective and
streamlined.
First and foremost is capital support for electronic
recordkeeping. Under the current Medicare payment system for
home health, technology such as point-of-care assessment,
electronic billing and care planning are out of the reach of
many agencies. This funding would not only improve the
effectiveness of the home health agency, it would also greatly
improve patient care.
Second, we'd like to establish a standard for electronic
submission of doctors' orders and establish timetables for
medical review of claims. This is especially an issue with my
agency when it affects our cash-flow and our ability to meet
payroll.
Fourth and fifth, we would like to allow for resubmission
of technical error claims. A benchmark has already been set for
this in the physician arena, where physicians are allowed to
resubmit claims that are denied on a technical basis; that's
not the case in home health.
And finally, we'd like to be able to directly appeal
technical denials instead of troubling the beneficiary with
their authorization to do so.
We applaud the chairman and Senator Lugar for putting forth
the Health Care Information Investment Act of 2000. Also, we
feel the following changes would make the legislation more
effective in improving Medicare payment process and patient
care: financial assistance to providers to implement electronic
capabilities. The systems that home health agencies would
require under this bill require often very expensive and at
times are out of reach for many agencies. These anticipated
costs should be made a part of Medicare reimbursement.
Second, provider representation should be included on the
Health Care Infrastructure Commission. We feel that in order
for the Commission to be exposed to hands-on experience
provider representation should be included on this board.
Again, I'd like to thank you for the opportunity and for
your support in home health and for the opportunity to address
this legislation. We stand ready to assist you and your staff
in all of your efforts, and at this time, I'd be glad to take
any questions you may have.
Mr. Horn. Thank you very much.
[The prepared statement of Mr. Kovatch follows:]
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Mr. Horn. Our next presenter is Arthur Lehrer, the senior
vice president, VIPS, Inc. You might explain what V-I-P-S means
in this context.
Mr. Lehrer. V-I-P-S is simply the name of our company. It
no longer has an acronym meaning behind it.
Mr. Chairman and members of the committee, I'm pleased to
be here on behalf of my company and to comment on the proposed
bill, H.R. 4401. I will summarize my written statement in some
fairly brief comments.
The processing of Medicare Part B claims is faster and much
more efficient than 30 years ago. In fact, the cost of
processing a Medicare Part B claim 30 years ago averaged
approximately $3 per claim. Today, after 30 years of inflation,
most carriers process a Part B claim for less than $1.
The current environment supports electronic and paper
receipt of claims. Services are audited, services are edited.
Medicare coverage provisions are automatically checked. More
than 80 percent of all of the Part B claims are received
electronically, as Dr. Christoph noted. The overwhelming
majority of these claims are processed from start to finish
without human intervention. In fact, approximately 85 percent
are adjudicated within 2 to 3 days. After that time, the claims
are intentionally held for approximately 12 more days before
payment is issued. This waiting period is commonly referred to
as the ``payment floor.''
The question that gets asked most frequently is, were the
claims processed correctly, and it's where I want to spend some
of my time. The best I think we can say is that based upon the
information presented on that Medicare claim, the claims were
technically paid correctly.
We in the claims technology business have built complex
editing and auditing modules. Those who are involved in
provider practice management systems have spent the same time
building systems that edit those claims prior to submission,
designed to pass those edits of claims systems.
A clean claim as defined by HCFA and by Congress is not
necessarily a legitimate claim. The rules to create a clean
claim are well-known and documented. The challenge for the
health care industry in general and Medicare Part B program
specifically is to determine if, in fact, the services
represented on the bill were actually performed as stated for
the reasons indicated to the beneficiary identified. If
everything on the claim is filled out properly, a system that
makes payment decisions, as the one being proposed, with split-
second speed may have less chance of detecting attempts to
defraud it. The cost of recovering improper payments is far
greater than the cost of preventing the payment in the first
place.
My company has developed technology that takes advantage of
the time that claims wait on the payment floor to statistically
review aberrant payment patterns and prompt human review where
appropriate.
My remaining comments will be divided into three areas:
improper payments, the deploying of technology and
confidentiality, and a couple of general comments on the actual
Commission organization.
As proposed, the system would be designed in such a way as
to provide real-time claim processing. I suggest that, as
presented, it brings technical innovation that is desperately
needed to the Medicare community, and it would provide for much
more rapid disbursement of payment to providers. If the goal of
the bill is to reduce improper payments, we would recommend
that the Commission consider during its study designing or
selecting prepayment audit and antifraud technology to guard
against improper payments. We would also recommend mechanisms
to prequalify providers and suppliers, based upon prior
experience with those providers and suppliers.
If, on the other hand, the goal of the bill is simply to
reduce the time to payment, then we would recommend that the
payment floor be suspended.
Patient confidentiality is a critical topic. It has been
the subject of many discussions regarding use of the Internet
and other standard identifiers. At the same time, technological
solutions must be developed to allow the split-second
processing of these claims transactions while protecting the
integrity of the Medicare program. These are not necessarily
compatible objectives.
If the Commission is to proceed as proposed, we would
recommend representation from HCFA's technology group. We would
believe that this bill could develop and complete the
activities intended, it can be accomplished technically; our
concern is that if we spend 3 years designing it and 7 more
implementing it, we will have an outdated solution when we're
finished.
We should be equally concerned that we have the right
objectives and we've crafted the right solution to meet those
objectives.
I'd be pleased to continue to work along with you and your
committee, Mr. Chairman, in providing information as you
proceed. Thank you.
Mr. Horn. We thank you.
[The prepared statement of Mr. Lehrer follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Horn. And our last presenter is Mr. Robert Hicks, the
chairman and chief executive officer of RealMed, based in
Indiana.
Mr. Hicks. Thank you, Mr. Chairman. Good morning.
My name Robert Hicks. I'm chairman and CEO of RealMed Corp.
We're an Internet-based, business-to-business health care
technology company located in Indianapolis, IN. I greatly
appreciate the opportunity to speak to the distinguished
members of the House of Representatives Subcommittee on
Government Management, Information, and Technology.
I also have submitted our remarks. I will not just read
them. I will probably highlight them for you and then explain
the testimony.
I'd also like to thank Senator Lugar and Congressman Horn
for their leadership in exploring ways to deploy new technology
to create efficiencies and cost savings for the Federal
Government through H.R. 4401, which we've been discussing
today.
RealMed is a company which was founded with the idea of
fixing something that was broken. We evaluated first the
private health care claims industry in the United States and
decided that the disparate steps that are required to process
health care claims was basically a broken system. Parts of it
were improving, parts of it were not.
Our company today has about 200 FTEs, 160 employees and 40
contractors, working full time on implementing our solution on
a nationwide basis. When we founded the company back in 1996,
there were a number of questions we posed to look at and say:
How can we make this system better?
We asked, What if the resolution of a health care claim
occurred in seconds at the point of care and was painless due
to its simplicity; wouldn't that benefit the payer, the
provider and the member?
What if the burdensome cost of health care claims
administration could actually be reduced by 50 percent without
requiring any replacement of existing systems or significant
infrastructure technology investments by a payer and/or
provider?
What if you could deliver an EOB, or explanation of
benefits, to a patient in seconds at the point of care while
they were still standing in the office and could remember the
services which were actually performed?
What if providers could be told when they would be paid,
and receive their money in less than a week, much like a
merchant does today when they sell a shirt out of their store
and they receive their reimbursement for a credit card payment?
What if we could actually help reduce fraud and completely
eliminate errors in submitted claims, based on the system?
RealMed set about to trying to solve that issue, first for
the private sector, and is now looking at doing this in the
Federal Government sector. In 1999, we went live with our
first--or what we believe to be the Nation's first Internet-
based electronic claims resolution aired platform. What that
means is we do four basic things in our system today.
We do real-time claims eligibility, which means we access
the payer's data bases with up-to-the-minute information and
that takes about 5 seconds. We actually submit the claim from
the provider's office, the provider does, and sends it against
the claims engine of the payer system. So it does not replace
or replicate their claims engine; it actually utilizes their
existing infrastructure.
A message is then sent back to the provider, which enables
the provider to know whether the claim is going to be resolved,
whether it's going to be pended on the payer's system for
further review or whether it will be rejected. Then an
explanation of benefits appears which can be delivered to the
patient so the doctor can actually collect from the patient, or
at a minimum, it allows them to tell the patient how much is
owed on behalf of that bill.
We have five major clients today which include Anthem
Insurance Co.'s, which is the dominant payer in about 8 States;
CareFirst, which is right here in the District of Columbia,
Maryland, northern Virginia and Delaware; Healthcare Services
Corp., which includes Blue Cross-Blue Shield of Illinois and
Texas; North Carolina Blue Cross; and importantly, Mr. Horn,
WellPoint out in California.
We are rolling our system out in major cities across the
country on a private basis first and are intending to look at a
pilot program with HCFA to prove that this could work. We do
not believe we will be a sole source provider. We believe there
are several others working on similar solutions that will be
competition for us.
Our system effectively allows the physician's office to
work directly with the payers, in this case, potentially a
fiscal intermediaries system, and allows them to correct claims
before they're submitted. It does not allow them to gain the
system. It does ensure confidentiality, and that would have to
be further detected and studied in the committee, but it
effectively allows the provider to input the claim and fix it,
correct any errors and submit it online. It also allows the
payer to send messages back to the provider to tell them what's
wrong with the claim and also to send other messages, i.e.,
sending them a real-time message which also is intended to help
improve the claims resolution process and the delivery of
messages from the payer.
Our system does not replace infrastructure. It doesn't need
to. I guess the point is, we don't need to say that we will be
replacing a system. Whatever HCFA would be doing could continue
and this is simply an integration into that system, much like
the ATM network or the Cirrus Plus network integrates with
mainframe legacies systems at a bank.
We attempted to parallel our system with how the ATM
network was built. We found five early adopters of the
technology wanted to examine a proof-of-concept phase where we
could actually go out and show that it works, which is a
technology proof of concept. It's also a business model proof
of concepts, i.e., will the provider use this system, will they
actually invest in a computer when in many cases they don't
have it today?
It is a challenge, but to get them electronically
connected, a couple of things needed to happen. There needed to
be an Internet revolution, which we're experiencing today.
There also needed to be a technology expense reduction so that
the average cost of a computer today is probably one-third of
what it was 4 years ago; and that's an important thing to know,
that providers will have the technology infrastructure to be
able to make a system like this work. We think that's an
important consideration.
We agree with every one of the panelists that Medicare
claims have reduced in cost over the past several years and
probably is the least expensive and potentially the quickest
payer. It also tends to represent the highest number of claims
in any doctor's office that we work with, and for that reason,
the doctor's care greatly about reduced paperwork on that
number of claims.
The fraud reduction aspects of the bill, I think, are
extraordinarily important. Claims administration savings are an
important component. They pale in comparison to the fraud
reduction expenses that can be saved, to the extent our system
could actually affect that type of problem.
How does a system which delivers an explanation of benefits
or a statement of services to a provider--I'm sorry, to a
member--actually help reduce member fraud--provider fraud,
excuse me. Delivering an explanation of benefits to a member or
a patient while they're in the office and can remember the
services that were provided would potentially eliminate many
claims that could be submitted by a provider that are not real.
In addition, various digital certification methodologies,
identifications and the use of some form of a ``smart card'' or
a ``swipe card'' can also help, much like in the credit card
industry, identify that that person is actually the person who
they're supposed to be. The use of a driver's license along
with that card would also be a very useful verification. So we
believe that this could have a major impact on the fraud
reduction goals of the bill.
There are numerous studies that have occurred on how much
claims cost, how much the loss of float would cost the
government by paying faster. In our experience in the private
sector, we find that the administrative savings are generally
about three times as great as the loss of float. We don't
anticipate that it would be as great of an impact for the
Federal Government because they do it more efficiently. We do
believe, however, the fraud reduction--because in the Federal
Government it's such a greater significant issue, we think we
could have a major impact, or this solution could have a major
impact in the Medicare arena.
I will be available for questions, and I too would offer
our support to work with the committee on any further
discussions that they'd like to have.
[Note.--The publication entitled, ``Solutions for the New
Pace of Healthcare,'' may be found in subcommittee files.]
[The prepared statement of Mr. Hicks follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Horn. Well, thank you very much. That's a very helpful
presentation.
We're now going to go to questions from the Members. There
will be 5 minutes for each of us and then we'll alternate
between the majority and the minority. So let me start in for
the first 5 minutes.
Mr. Christoph, I was particularly interested in--divisions,
I don't think, between you and Senator Lugar and myself are
that far apart, but your comment was particularly pertinent, I
think, that replacing a computer network as large as the Health
Care Financing Administration too quickly could result in
another debacle; and I think that's a point well taken.
Have you prepared a master plan for your Health Care
Financing Administration project that includes key tasks and
milestones and timeframes?
Mr. Christoph. Yes, sir. In the sense that we have prepared
an IT vision, we have laid out the broad plan of where we want
to take the agency's information technology. We don't have a
set of time lines or plans that are in that level of detail.
As you're aware, we've spent the last several years working
very hard on Y2K, and some of these efforts have had to take a
back seat to that effort, but we have laid out a 30,000-foot
view. We're in the process of taking that down to a lower view.
Our friends at GAO have been very careful to ask us to develop
integrated project plans and to go to that level of detail.
We have engaged in a variety of incremental projects at the
lower end as we start experimenting to try and achieve some of
the goals, and for those, we do have timetables and plans. For
example, we've developed a beneficiary data base prototype
which we expect to be operational as a fully implemented
system, one integrated place for all the beneficiary
information, within about the next 8 to 10 months.
Pieces are on schedule to be built into this, but for an
overall time line, I can't answer that because some pieces of
the picture we have sketched out are only now being painted in
in detail. So as we proceed, we will be finalizing that and
developing more careful plans.
Mr. Horn. Well, how specific are some of your tasks or
milestones?
Mr. Christoph. Some are very specific, down to, you know,
what data elements will be in data bases, when those will be
delivered. Eight to 10 months is to have that prototype
operational, and this is a departure from the present legacy
kind of data bases that we have. It relies on modern
technology, relational data bases and essentially instant
access to any of the utilities or applications that need to
drive that data.
Mr. Horn. In terms of how you pay for the computerization
and recomputerization, that needs an appropriation, doesn't it?
It doesn't come out of the people's premiums for Medicare. It
acts like Social Security, and that's what we modeled it on; is
that correct?
Mr. Christoph. That's correct. We have an administrative
budget which--the payments for the health care come out of the
trust funds, and there is a separate appropriation for our
administrative budget, and that's what pays for whatever
management of the current program or any improvements.
Mr. Horn. What's your estimate on what this might take to
update your whole computer system?
Mr. Christoph. What we are trying to design is an
architecture that is not built of--we don't want to replicate
existing stovepipes either with new stovepipes or bigger
stovepipes. What we're trying to design is a system which is
continually evolving as technology evolves. In that sense, it's
kind of hard to put an overall price tag on it. To renovate
some of these very large systems certainly will cost in the
hundreds of millions of dollars.
As one of the other panelists pointed out, the regulations
and the rules that govern Medicare are extremely complex, and
these systems are unlike any of the commercial systems that are
out there that health insurance companies use. So it will be
very expensive to build completely new systems; and again, as
something that's being done over time and incrementally, we
won't know exactly what the final outcome will be for the whole
system.
Mr. Horn. When you impose new requirements on the providers
and the carriers or the HMOs, does the agency ever give them
updated software?
Mr. Christoph. We provide--we make available to providers
free or low-cost software so that they can electronically
submit claims. The main claims processing software that we use,
of course, is operated by the carriers or intermediaries. We
provide other information to the providers. We publish the
rules and the tables and the payment, the codes; all of those
things are made available. We want to facilitate as much as
possible the providers' ability to submit good, clean bills.
Mr. Horn. Are there intermediaries that the Medicare
administration doesn't really feel that they're doing the job
they should do? And what can you do about it?
Mr. Christoph. We have--since the program's inception we've
relied on carriers and fiscal intermediaries to do essentially
all of our claims processing work. We've outsourced, in
essence, the main line of our business, which is the claims
processing.
We've been struggling within the last few years--and Y2K
helped us immensely in that--to get a handle on exactly what
happens at the carriers and fiscal intermediaries. I can say
that we have developed a much clearer picture of how claims are
processed. We have established finer grains of control.
Yes, I would say that some fiscal intermediaries and
carriers are more proficient at performing their tasks than
others. The larger ones certainly have more IT resources and
more ability to operate, but I'd hesitate to beat up on any
particular one.
I think what we need to do is to provide increased
oversight, more involvement in the process. As you're well
aware, the more attention you pay to an activity, the more
attention the people who are performing the activity pay to it
as well, and they do a better job. We've been trying to do the
same thing with our carriers and fiscal intermediaries.
I think that's the answer, for us to simply pay better
attention, and as a consequence, we'll manage them better.
Mr. Horn. Thank you, and I have exceeded my time so the
gentleman from Texas has 7 minutes for questioning.
Mr. Turner. Thank you, Mr. Chairman.
Dr. Christoph, you were referring to your 26 carriers or
intermediaries. Are there some things that we could do to
encourage those intermediaries to adopt better technology,
things like Mr. Hicks is talking about? Are there some ways we
could encourage that?
I mean, obviously you've alluded to the fact that there are
some intermediaries that are doing a lot better job than
others. You didn't want to specify which one. Is there any way
we could increase the efficiency of those intermediaries or
incentives that we can have that would make them more
innovative in terms of making the system work a little better?
Mr. Christoph. I believe the innovation is going to have to
come from our direction. The difficulty we face, we have been
gradually reducing the number of standard claims payment
systems and forcing carriers and intermediaries to use one of
our standard systems.
When the program began, we had over 130 carriers and
intermediaries, and the health claims industry was largely a
paper process. As automation came along each of them automated
their own, and HCFA was dealing with on the order of 100
individual systems that had been developed locally at each of
those contractors.
We have been forcing them to reduce down to just a few
systems, and our goal is to get down to one Part A and one Part
B system. The idea there is, if we're only dealing with a few
systems, we can manage them better, we can manage them more
tightly; and it also would enable us to make changes that would
be widespread and concurrent. So it's our direction that's
going to push innovation.
One of the things that actually hurts innovation is the
fact that we deal with all of these contractors as cost
contracts. Title 18 specifies that we contract with insurance
companies on a cost basis. In a day when most of these
contractors were nonprofits, that made a great deal of sense,
but many of those contractors are no longer nonprofits; and any
business nowadays, if they're in there looking for profits,
have to maximize the return. If we're looking at a cost
contract, by definition, there's no profit in it.
So it's difficult for us to incentivize contractors to make
changes. I think contract reform in a sense would help us
because it would enable us to give greater incentives to the
contractors.
Mr. Turner. Mr. Willemssen, what do you think about that
suggestion, that we need to have more incentives for the
contractors and move away from the cost base reimbursement?
Mr. Willemssen. I think that is something that could be
explored and I would agree with Dr. Christoph's comment about
the gradual movement to more standardization of those systems.
That's really been an instrumental element in helping achieve
that.
For Part B, HCFA and its carriers are down to four standard
systems and by 2003 expect to be down to that single standard
system that Dr. Christoph mentioned. So I think that will also
go a long ways to assisting in standardization.
Mr. Turner. Dr. Christoph, how long do these carriers have
the contract? What period of time are they awarded for?
Mr. Christoph. I'm not a contract specialist. I believe
that the contracts are basically annual but renewable. Any
contract term changes need to be through bilateral
negotiations, but I believe every year we renew these
contracts.
Mr. Turner. You mentioned that originally there were 130
carriers or intermediaries and we're down to 26 carriers now,
is that correct, or 23?
Mr. Christoph. It is on the order of the low twenties for
the number of carriers. We've got something less than 60
contractors total now. Over the years many of the contractors
have voluntarily, largely for their own business reasons,
decided to leave the program. This results in a declining pool
of contractors able to take business over from leaving
contractors and presents greater difficulties for us because
we're not sure what kind of excess capacity is there to accept
business from a contractor that's leaving. So there are a
number of areas of risk that contract reform would help us on,
perhaps increasing the pool of people we could go to.
Mr. Turner. Thank you. Thank you, Mr. Chairman.
Mr. Horn. Thank you, and I now yield 5 minutes to the
gentlewoman from Illinois, Mrs. Biggert.
Mrs. Biggert. I don't get 7 minutes, Mr. Chairman?
Mr. Horn. Seven minutes. You're a good bargainer, Vice
Chairman.
Mrs. Biggert. Mr. Kovatch, I appreciate all that you do for
home health care. In one of my former lives I was chairman of
the board of the Visiting Nurse Association of Chicago. So I
spent quite a few years involved in that and in fact was the
chairman when we celebrated our 100-year anniversary.
Unfortunately, shortly after that, because of mergers with
Home Health Care and with other groups and particularly with
hospitals, we decided to turn over the business to the
University of Chicago, but the major reason was because we
found that in the billing procedure, and how difficult that
was, we ended up subsidizing Medicare and Medicaid to the tune
of $2 million. We were very fortunate to have a high endowment,
but knew that after, well, several years that we would run out
of funds to do that, and I think that the problems that you
have talked about in the home health care association industry
were present then, and I can see that it has continued, that
certainly one of the biggest problems that we had then was
getting the doctor's approval and particularly now when home
health care is much more prevalent because of the acute care
that they have to provide and when people are coming out of the
hospital so soon.
So why is it that there's this problem and isn't it--
wouldn't it be that just using the letterhead or a special
stamp or the doctor's name and Medicare identification number
would be enough to satisfy that requirement?
Mr. Kovatch. That is still the requirement to obtain the
doctor's written approval. It isn't that the doctor hasn't
given verbal approval prior to care. That's not necessarily the
issue. It's more getting the doctor to physically sign off on
the orders themselves, which we're currently required to do
prior to billing. So, yes, that would help greatly if we could
just use the doctor's verbal approval as approval to bill.
Mrs. Biggert. And the other problem that we had, too, and I
saw really a reduction in the amount of service, and certainly
one of the requirements for being on our board was to go out
with the visiting nurses periodically on visits and I think
once you do that you're really hooked into the system to see,
going from the Robert Taylor homes in Chicago to the high scale
North Side and visiting these patients. I found that, and could
understand why our nurses, particularly when there was such a
limitation placed on the days of service that Medicare or
Medicaid would pay for, that our nurses refused to end the
service, and that's how we really got into subsidizing some of
this because they found the patients were in such need of such
care that they could not give up going to see them and of
course then we had to pay for it.
And I know that the physician fills out a form that has a
definite beginning and a definite end of the service. Has there
been any change of that or how complicated is it to request an
extension of this service?
Mr. Kovatch. That's actually very complicated, and with the
prospective payment system coming on board it's probably going
to become more of an issue. One of the things on our wish list
was to increase the amount the prospective payment system was
going to pay to the home health agencies by about $500 million.
With PPS a lot of agencies are going to be tasked to see
patients with a certain amount of reimbursement and cutoff
basically at that point, and that is going to be a challenge
for a lot of agencies.
Currently we're having to subsidize our home health
business with our private duty business, with the profits from
our private duty business.
Mrs. Biggert. I think there were a lot of agencies that got
into this business thinking they could make a profit and found
it was a difficult business to be in but one that's certainly
most needed.
Mr. Christoph, I think that Mr. Kovatch in his testimony
had--written statement had talked about the denial of claims
for technical errors and it differs in the home health care
than for physicians or hospitals, both of which can fix and
resubmit, but I know when I was in this that so many claims
were turned back because of technical errors and could never be
paid whether the time ran out or not. Is that true?
Mr. Christoph. Actually Medicare accepts claims for a very
long time. I believe it can go up to 18 months that a claim can
be submitted. So I think there's quite a long time available.
Also, all of our carriers and intermediaries provide a great
deal of assistance to providers to try and ensure claims are
submitted correctly the first time. We're engaged in a very
large training effort to try and assist providers. We
appreciate that that's a difficulty; 90 percent of the claims
that we get electronically are paid promptly within 14, 15
days. So it's the smaller percentage that encounter these kind
of technical errors. We try and build into the systems checks,
edits, policy edits to ensure that the claims are paid
correctly. We are very sensitive to the program integrity
issues. So when something gets denied for a technical error,
it's part of our program to try and make sure that the claim is
well justified.
Overall, I think the program works pretty well given its
complexity, but we're always trying to improve it and
particularly working on provider education.
Mrs. Biggert. I think in the home health care though the
beneficiary has to initiate the appeal rather than the
provider; is that correct?
Mr. Christoph. I can't answer that. I'm not familiar with
that area. We can find out and get back to you though.
Mrs. Biggert. Thank you. Well, I'm on the yellow so I guess
I'll have to yield back, Mr. Chairman. Thank you.
Mr. Horn. Thank you very much. I see the distinguished ex-
ranking member from New York and member of the subcommittee and
5 minutes to 6 minutes for questions.
Mrs. Maloney. OK. I just want to compliment the chairman
for keeping on making government work better and being more
responsible, and this is one approach. I just would like to ask
every member of the panel if they'd like to comment on it.
There's a lot of fraud that takes place in Medicare. We
read about it all the time. I met with the IG once. We met
actually together with the IG and they talked about all the
money that they brought in when they did investigations, and
all the time when you pick up the paper you read about another
Medicare fraud. I would like to know if you have any ideas in
addition to the bill before us, No. 1, whether you think this
would help and, No. 2, what would you do to stop Medicare
fraud? I mean this is a great program. It helps a lot of
people, but every time you read about Medicare fraud it really
undermines the effectiveness of the whole system and takes away
the faith of people in the system. I would just like to throw
that out. If you were sitting up here and you had the
opportunity to write these oversight bills, what would you do
to make sure that we don't have the type of the fraud that has
existed in the past and which this tries to attack? Anybody
have any ideas?
Dr. Zwelling-Aamot. I'll suggest an answer to that. The
system itself is the fraudulent part. It is the fabricator of
the truth. The data you collect is just not accurate data. You
cannot make clinical decisions based on claims data. And what
is called fraud or duplicitousness is really not that at all.
It's just perhaps an error in translation in taking a clinical
situation and trying to make a code out of it, remembering that
the only reason to do that in the first place is for
reimbursement purposes. So by its very undertaking, the system,
while it's not fraud because it's not purposeful in that sense,
the system just does not collect the right data. So even after
investigation, when someone goes into a physician's office to
look at medical records and they claim fraud, it's not fraud.
It's another interpretation.
We treat patients, not codes. This system deals with codes,
codes to translate into reimbursement, and that's a very
dangerous precedent, and I implore the committee to look at
this at its very most basic point of integrity of data.
Health care is a science. What we do is based on science
and bad science is not what this country represents. The health
care in this country and the good health of our patients is
implicitly necessary for the increase in productivity and for
good lives, and the government as the collector of that data
must bear the responsibility of the integrity of that data.
So in answer to your question, Mrs. Maloney, the first
thing we need to do is to collect the right data. We need a
relational data base. We need to better define the product that
physicians sell and that patients purchase, and then you can
development a reimbursement system based on reality.
Mr. Sparks. I would just like to add that--I will give you
an example of what might be considered fraud and yet is really
not, and it deals with having all of the standards available to
the providers.
There's this thing called local medical review policies
which allows each intermediary around the country to establish
what they believe are the appropriate diagnoses that support a
clinical test, and they vary from place to place. In the last
year we underwent an audit to look at our--a particular lab
test and the particular lab test had--we had a book from our
laboratory that had all of the diagnoses that supported that.
But when we looked at it we ended up getting denied for a
number of those. The test was syphilis. The diagnosis that we
had used was organic brain syndrome. It was a valid diagnosis
code that supported the test, but it was in Virginia. It was
not from the Maryland intermediary. So all of those tests in
one jurisdiction were covered under the Medicare program and in
another jurisdiction were not covered.
So I think part of the problem that we face is we need to
have standardization of the information that we're dealing with
in order to bill.
Mr. Hicks. Mrs. Maloney, you asked whether--do we think
this system actually addresses the fraud. I would comment in
part to say I don't think any one system will eliminate the
fraud. I think different things can help. One thing that we
can--one industry we can borrow from for some learnings is the
credit card industry. The credit card industry experiences a
fraud rate which is substantially below what the Medicare fraud
rate is projected to be. That doesn't mean we're accurately
able to really track fraud. If we could really accurately track
fraud we could probably eliminate it.
The one thing about this kind of a system is that it
creates a point of encounter where the service provider
actually delivers the equivalent of a bill or a statement of
services to the recipient of the services. That recipient of
the services is probably the best person to determine whether
those services set forth on that bill were actually performed
and to do it timely. So that is certainly one thing----
Mrs. Maloney. Right now do they send the services back to
the person who got them?
Mr. Hicks. In certain cases----
Mrs. Maloney. Not in certain cases. In some cases they
don't.
Mr. Lehrer. In almost all they do.
Mr. Hicks. But it's usually at a much later date. For
example, and again I can speak to the private sector better,
but in the private sector many times it's 6 or 8 weeks later,
and if it's in our house that bill never gets opened or that
statement of services never gets opened. Further, it doesn't
necessarily say that it is a bill, so you may not pay attention
to it until you've got somebody breathing down your neck to pay
a bill.
So I guess the point is getting it timely, if somebody said
they gave you a blood test and you received a bill onsite and
it said blood test, you know----
Mrs. Maloney. Mr. Hicks, I just want to understand it. What
happens usually is someone goes to the doctor and gets the
blood test and they don't get the bill then, they get it like
what, 2 months later?
Mr. Hicks. Potentially 2 weeks later, potentially 8 weeks
later. It depends on the timing. In Medicare it may be
different and I think some of the others----
Mrs. Maloney. Whereas with the credit card you know right
then and there.
Mr. Hicks. With the credit card you know right then and
there. In addition, there are other aspects of fraud that can
occur. In the credit card industry, if somebody steals your
card, you have the ability electronically to shut them out of
the system immediately. We have all experienced being
potentially shut out of a system, and I guess the concept is if
through a combination of a point of encounter system, through
membership IDs, through unique provider IDs and some antifraud
gaming provisions that you can build into the system through
the gateway, which is what our expertise potentially is here,
you start eliminating and cutting back on the fraud. I don't
believe you eliminate it.
I believe you also need the ability to do statistical
analysis and I kind of like the idea of Mr. Lehrer, who said
treat certain providers who have a track record and you've
studied them statistically. The chances of that person
committing fraud may be less than somebody who's done it
before. So if you can evaluate patterns of activity, that's
another way of whittling away at this.
Mrs. Maloney. We're not doing that now? We're not doing
patterns of activity? If I could just throw in for personal
experience, I know my time is up, the red is on. I've had
constituents call me or come to see me or mail me information
or even forms for services that were billed to government that
they never received. You know, some of them are wheelchairs or
this, that and the other, and I just take it and mail it into
the Medicare fraud to followup and see if there is any truth to
it or whatever. That's happened to me I'd say roughly 10 times.
Then there's another issue that many of the doctors are
telling me that the reimbursement rate is far lower than what
the reality of the cost of their services is, which is another
totally important issue that we need to look at. But I think
that anytime that there is fraud like this it just destroys the
whole system.
I know you had a comment, Ms. Jarmon.
Mr. Christoph. Congresswoman Maloney, I'd like to say a
little bit about what Medicare is doing because we are very
concerned about the issue of program integrity, making sure
that claims are paid correctly, that claims are correct, and
from my standpoint as Chief Information Officer I appreciate
that there is a need to have the information at hand that we
can mine and look for that kind of fraud. Our systems are
antiquated. The purpose of H.R. 4401 is to advance the state of
art in our systems that would enable us to do this kind of
statistical data mining that is very difficult nowadays because
our information systems aren't built to allow the easy sharing
of information.
One of the things that we're doing, our flagship data base,
the national claims history file, is probably the biggest
mountain of claims information in the world, but it's very
difficult to get an answer out of that. We have to code up a
special program to go and access it. It may take 3 months to
get an answer out of that data base. We've prototyped a new
version of that data base that gives us an answer in 20 minutes
to an hour and that's because we can access the information
more readily.
The analogy between doing health care claims and credit
cards I think is a false one because the transactions are
inherently very different. A credit card transaction, all you
need is an amount and a payer ID and a cardholder ID and you
can look at some patterns very quickly. Health care is a much
more complicated program, developing the tests, trying to do
these statistical analyses, much more complex problem. I have
looked at this myself and it's a very complex undertaking.
Our goal is to build an infrastructure to enable us to do
those kinds--ask those kind of questions and detect program
integrity problems.
Mrs. Maloney. Even with an antiquated computer system or
whatever, I think the IG at the Medicare Department, in the
reports that I have read, has been the most successful in
correcting and bringing in revenue that was owed the government
in various ways.
Mr. Horn. I think Ms. Jarmon wants to comment on that and
then we go to Mr. Ose for 10 minutes.
Ms. Jarmon. We at GAO have been resolved in reviewing the
studies that have been done by the IG and trying to estimate--
their attempts to estimate improper payments in Medicare fee
for service and I just wanted to say that HCFA has several
initiatives underway and you will never be able to determine of
course what the total fraud rate is because like Dr. Christoph
mentioned, it is complex and there are some pretty
sophisticated fraud schemes, and things like kickbacks and
collusion are very difficult to measure and to control, but one
of the things that we think is important is that there be an
analysis of these improper payments that are identified from
the IG's study to determine the cause of those improper
payments, determine where the risk is, where is the fraud
occurring and what can be done to address it, to address it for
improving internal controls and things like that, and many of
the problems that they find in their study where they come up
with an error rate of about 8 percent seem to relate to medical
necessity and documentation not being provided. So there needs
to be this additional analysis related to those issues.
Mrs. Maloney. Thank you. My time is up.
Mr. Horn. Gentleman from California, Mr. Ose, has 10
minutes.
Mr. Ose. Thank you, Mr. Chairman. I first want to make sure
I understand, Dr. Christoph. According to your resume, you came
to HCFA as CIO after the MTS contract was terminated.
Mr. Christoph. That's correct.
Mr. Ose. I also want to suggest to the other members of
this committee that perhaps Dr. Christoph's service at Los
Alamos was ended too soon.
Mr. Willemssen, I always enjoy reading your testimony and
having the opportunity to visit with you. I mean I marked this
baby up, as you can see, last night reading it. The question I
have relates to the current trustees of the system obviously,
and maybe, Dr. Christoph, you could chime in here, have a
responsibility to make sure that the system stays up to date
and current. I'm still trying to find out whether or not those
six individuals ever in their trustee meetings discussed
updating our IT infrastructure so we can accomplish payments
for processing in a timely fashion. Are you aware of any such
discussion?
Mr. Willemssen. I will have to check on that, Congressman.
I don't have the answer to that question at hand, but we will
get the answer for you.
[The information referred to follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Ose. Let me ask Dr. Christoph then since he's kind of
had that job. Have you ever sat with those six individuals, the
purpose of which was to have this very discussion we're having
here today?
Mr. Christoph. The short answer is no, but my belief is
that the trustees are focused mostly on the financial health of
the Medicare system and have not been involved in the details
of payment operations. So I believe that--I have only been
there 3 years. I don't know the history and we will have to
check and see if they have been involved, but my expectation is
that their focus is in the other more policy areas about the
longevity of the program and how the trust funds are
performing.
Mr. Ose. I would suggest to you that management includes
all of these areas, and I would hope that one of the things you
might take back is any interest in having the trustees look at
this as part of their managerial umbrella.
The second question I have is, as it relates to the common
working file, if I understand correctly, the system exists in
such a way that it is hard to divine from the common working
file any epidemiological data that would allow HCFA or anybody
else to analyze certain issues. Now you have got a prototype
you have worked on that apparently indicates a much compacted
process by which you can get epidemiological information.
Correct me if I'm wrong.
Mr. Christoph. No, I don't believe I said that. The common
working file--in fact, our whole Medicare claims payment
operation is focused on claims payment. It was not designed to
collect medical information to be used for epidemiology. It is
often used for that because the other data just doesn't exist.
It is a huge repository of medical claims information; that
is correct. However, people study it because it's the best data
we have around. It is a proxy at best for doing epidemiological
studies. There are other efforts under way in other parts of
the government dealing with telemedicine, the government
computerized patient records effort. These are all focused on
trying to develop better health information and that is very
different from claims information.
We are under numerous restrictions to collect only the data
we need to perform our function. So we collect the claims
information focused on trying to make sure we pay claims
accurately and efficiently. The other information that is there
is kept by local hospitals as part of the health records that
they maintain. My understanding is Mayo Clinic has a huge
repository; they computerized all their patient information,
their medical records, and are able to mine that effectively
for epidemiological studies.
Mr. Ose. In effect, what you're saying is, you only have
the codes that come in on the claims submittal rather than the
underlying symptoms, if you will, that might be the basis for
the--I can't even talk today--the basis for the analysis.
Mr. Christoph. That's correct, we collect information
that's relevant to a claim. It includes procedure codes, codes
for diagnoses, information about who the beneficiary is, who
the provider is. But the detailed medical information, there
may be supplemental medical information attached to the claim
to enable us--to help us to see whether it's medically
necessary; but in general, no, we don't collect that
information if it's not necessary for the payment of a claim.
Mr. Ose. If I understand correctly then there are 26 or
28--there are different numbers in the different testimony,
there are 26 to 28 carriers who process Part B claims on behalf
of the Health Care Financing Administration.
I want to go back. I think it was either Mr. Hicks or Mr.
Kovatch or Mr. Sparks who commented on the analogous situation
in the credit cards. You have suggested that it's not a clean
analogy. How about the securities industry where you have four,
five or six major securities brokers with offices around the
United States, all of whom are matching customers with stocks,
some on a 24-hour settlement basis, some on a 72-hour
settlement basis, varying payments, varying receiving entities
such as IRAs, pension plans, individual holdings and the like?
It would seem to me that the infrastructure, at least the basic
infrastructure, exists that could be moved over in a successful
effort to comport with the chairman's bill. Is that accurate?
Mr. Christoph. Actually, there is an accurate piece to the
analogy. Everything you describe is a transaction, OK, in the
sense that medical claims are transactions. There are pieces of
that that, yes, apply, but the analogy breaks down when you
look at what's behind the transaction, OK? If you're
transferring money, Medicare has something like 1.3 million
providers, huge disparity in large numbers of people that we
make payments to.
Mr. Ose. Isn't that an issue for the carrier and not for
Medicare or HCFA because you're only dealing with 26 or 28?
Mr. Christoph. We end up trying to oversee that program.
You can think of HCFA as managing these 20-odd subsidiaries
that carry out this business. There is a structure for the
claims. We do it very efficiently to do the transactions. The
difficulty and where the analogy breaks down is in the
complexity of the program, the policies, what claims can be
paid, looking behind the claims where necessary to the
supporting medical information for the medical review to ensure
that the service was medically necessary.
It is a transaction, yes, but a very complex transaction;
and it's the claims processing--VIPS can talk about how large
their system is. It's several millions lines of code, and that
mostly does these policy edits looking to determine what is the
proper payment.
Mr. Ose. I want to go to these policy edits then because I
noticed in Mr. Sparks's testimony, and he reiterated it this
morning, the desire to have access to the logic underlying the
edits themselves, and I was unclear. Are you talking about the
rationale that management uses to create certain edits, or are
you talking about the actual software program that has the
``logic,'' that substantiates the edits? I was unclear which of
those you were addressing.
Mr. Sparks. I think that the providers really want to get a
clean bill. So in order for us to get a clean bill, we need--
there are edits that are done at HCFA after we have submitted
the bills, or at the intermediary, that we don't have access
to; nor do we have access to the common working file, both of
which would help in our ability to provide cleaner claims on a
timely basis.
Mr. Ose. But is it the software processing logic that
you're after, or is it the rationale that management uses to
impose this or that edit?
Mr. Sparks. The software logic.
Mr. Ose. I was unclear on that.
Mr. Chairman, I see my time has evaporated. I had a huge
number of questions just from Mr. Willemssen's testimony, not
even to mention the others. If I could submit the questions in
writing--I regret that it will be a rather substantive number
of questions, but I would appreciate the chairman's indulgence.
Mr. Horn. We would appreciate it if you would give a
response. We'll put it in the record at this point.
Mr. Ose. I have them for all of you. So don't worry about
it, you won't be left out.
Mr. Horn. I'm going to go back now to starting over with 5
minutes, now that everybody's had their say on some of this;
and what I'd like to do on my 5 minutes--and we will just start
down at this end and give Mr. Christoph a rest--if you had a
wish list, what are the two top changes you would like to see
made in Medicare and in the Health Care Financing
Administration requirements to streamline the system or to make
things easier?
Mr. Hicks, what are your top two?
Mr. Hicks. Actually, the system that is outlined sort of
closely aligns with our vision of what we think the system, the
HCFA system, can do long term. Two of the most important
components of that, I believe, are the delivery of a settlement
or an explanation of benefits to the member while they're in
the doctor's office. That's first and foremost.
Second, providing the edits, etc., online to the doctor
while they're using the system is what this entire concept
encompasses. I mean to be able to look at that online, I agree,
is a very important function in the system.
So if you ask for the most important components of what we
would be advocating, it's those two things.
Mr. Horn. OK.
Mr. Lehrer.
Mr. Lehrer. I think the two things that would support
reducing the inappropriate payments that the Health Care
Financing Administration could act on would be an ability to
combine history information, that is, the patient history.
We talked about the national claims history file. The
reality that an ambulance trip that doesn't result in a
hospital admission is not verifiable today, that is, the
ambulance could get paid even though no one ever went anywhere
is a concern. So I think having combined history, as Dr.
Christoph described, in the prototype history file is a major
advancement.
Innovations again to the standard processing systems that
support or today support the underlying Medicare claim
processing need to continue and need to be encouraged.
Mr. Horn. Mr. Kovatch, two, and if we can keep it short, I
just want to get your thoughts on the record.
Mr. Kovatch. First, to provide financial assistance to home
health providers. Most home health providers are small agencies
and unable to purchase the electronic systems that would be
necessary to speed payment along.
Second, to establish time lines for the fiscal
intermediaries in responding to medical reviews and completing
medical reviews. This is a huge problem with a lot of agencies,
especially my own, because we're at times unable to meet
payroll and cash-flow.
Mr. Horn. Mr. Sparks.
Mr. Sparks. Standardization of policies, procedures,
medical criteria, as well as access again to the software, so
that the hospitals and nursing homes can do their own edits in
submitting clean bills.
Mr. Horn. Dr. Zwelling-Aamot.
Dr. Zwelling-Aamot. Not surprisingly, again, my first wish
would be legitimate data. I think the system must support
legitimate data, and while all these comments are very well
taken, when the data itself is not legitimate, the whole system
breaks down.
Second, I would agree that standardization is very
important, particularly in the physician's office where we
don't have the financial means to address the thousands of
different issues that various insurance companies and the
government ask us to address.
Mr. Horn. Ms. Jarmon.
Ms. Jarmon. From the financial management perspective, I
would encourage HCFA to continue to analyze the result of the
improper payment study, so they can understand, even on a sub-
national basis, where errors are occurring--by contractor, by
provider.
And then also, second, address the computer security issues
and privacy issues that are related to this; and I'm sure Joel
will talk more about those.
Mr. Willemssen. Mr. Chairman, from a systems perspective.
First, as HCFA and its partners become increasingly automated,
they must retain and actually increase their focus on computer
security matters, especially if they go to a more Internet-
based architecture.
Second, linking back to your question earlier, I think it's
very important for Dr. Christoph and HCFA to fill in the
details behind how he intends to achieve his vision from a task
deliverable and milestone perspective.
Mr. Horn. Dr. Christoph, do you disagree or agree with some
of the ones that have been in the hurricane heading in your
direction?
Mr. Christoph. I agree with a number of them, if I can
state my two wish lists.
Mr. Horn. Absolutely.
Mr. Christoph. Actually, I've interpreted them a little
differently in the sense that I have some requests for help
from Congress.
My two wish lists, Mr. Hicks mentioned individual
identifiers as being critically important. I think one of the
things that would go very far in helping us deal with program
integrity issues would be a national public key infrastructure.
This requires Congress' delicate hand in dealing with a number
of very sensitive privacy issues, and I think that's something
that if your committee can work on that, would be very helpful.
Second, a moratorium on changes in the Medicare program
would give us time and ability to focus on modernization
efforts that we need to undertake in order to provide the kinds
of things that many of the panelists and your committee have
asked for.
Mr. Horn. This is very helpful, and since my colleague from
California has a few more questions, how about if you do it in
4 minutes, and then I can wind it up.
Mr. Ose. I will attempt.
I'm sitting up here cheering on this moratorium on changes.
Mr. Willemssen, you noted in your testimony--on page 13 of the
draft, you noted two things about the Medicare coding system,
one of which is that the coding system changes every year. I
cannot imagine why you would change the coding system every
year and I'm interested in being educated.
Who makes such a decision and why?
Mr. Willemssen. Well, in part, there are sometimes changes
in the law, sometimes changes in regulations, sometimes changes
in prevailing medical practice and what kind of techniques may
be used; and it adds up to a great number of changes. But I can
definitely see Dr. Christoph's point that if he had a
moratorium coming out of Y2K, where all their attention was on
that, then he could be in a more proactive posture to address
the kinds of issues that have been discussed today.
Mr. Ose. Here's the thing that just drives me nuts, that
the codes get changed--the standard in the industry evolves
over time, and I recognize that; to the extent that occurs,
clearly the codes have to change. But if we have a wholesale
changing of codes on an annual basis, we end up with doctors
and other providers who are in a position of perhaps being
tired 1 day or being in a hurry 1 day, and they make a mistake
on a coding.
The Department of Justice picks that up in a regular audit
and says, Wait a minute, we've got waste, fraud and abuse and
all of a sudden I've got people like Mr. Sparks, or others
whose business is to provide service, spending millions
fighting a waste, fraud and abuse action.
Now, I mean, we had--I don't remember who it was that
recommended having prequalification for providers and the like,
which is probably too logical for us to ever consider; but in
the sense that the system is complex, I mean--Dr. Christoph,
you're the expert here. How do we address this?
And I can't help but think that the codes are one area that
we need to focus on. Correct me if I am wrong.
Mr. Christoph. We have been--actually, some of the codes
that we use are industry standard consensus codes. And the
standardization here to all use the same set of codes.
Mr. Ose. So you end up with, like category 100 is this DRG
and category 200 is this DRG, and you might get 203, 204 as you
differentiate among the specialties.
Mr. Christoph. Exactly. There might be 100 codes that deal
just with various kinds of operations in the chest cavity.
Mr. Ose. Well, if that's the case, why don't we take the
codes and change the system so that we anticipate an evolution
over a 5-year period of time and make the code large enough so
that based on past history, whatever might occur within a 5-
year period of time, we don't have to change the basic
structure of the code from a 1,000 or 10,000 code to a 20,000,
30,000, 40,000, 50,000. It just seems to me like we're moving
in inches when we can move in leaps on a 5-year basis instead
of an annual basis.
Mr. Christoph. Again, those codes are industry consensus
standards that Medicare uses, so--one of the sets of codes is
actually maintained by the AMA, so we don't try and create new
codes. We add codes if there's new procedures, OK, as new
technology----
Mr. Ose. All I'm saying is that the structure of the code
itself, if it is a three-digit code, you only have one basic
categorization and 99 options. If it's a four-digit code, you
have one basic categorization and 999 options. If it's five
digits, etc.
Why don't we make that leap so that we have sufficient
flexibility in the code that we don't have to change the basic
architecture?
Mr. Christoph. You're talking like in area codes and ZIP
codes where we have run out of room, and I believe we are--
there is enough room in there for new additional codes; there
are a lot of unused numbers. But I agree with your point, there
needs to be room in there to handle additional codes.
Mr. Ose. So you say we're moving in that direction or we're
there already, or we're moving in that direction?
Mr. Christoph. I would have to rely on the experts that
maintain those codes, but I believe that there is room for
additional codes.
It is like the library indexing system, Dewey decimal. You
can always add books in the middle. If you have to, you can go
to decimal points and add codes there.
Mr. Ose. You got my concept. So on a practitioner's side,
how does it work?
Dr. Zwelling-Aamot. Much different.
There are a variety of different codes. There are
diagnostic codes, there are billing codes, and for the hospital
there are DRG codes.
I personally worked for various hospitals to try to enhance
their DRG coding or make it more accurate. I started that job
at--we will call it ``year zero,'' and I educated the staff and
the nursing staff to do the coding as to what they might look
for.
Mr. Ose. You need to shrink. The chairman is giving me the
eye here.
Dr. Zwelling-Aamot. The long and short of it is, there was
a 30 percent error rate when I initiated the job, and 5 years
later there was a 30 percent error rate. The codes do not
adequately describe what it is we clinicians do for our
patient; and as such, they're an unfair representation and, as
I said earlier, lead to really bad conclusions.
Mr. Ose. Mr. Sparks from the hospitals.
Mr. Sparks. We do have problems with standardization of
supporting diagnosis for codes. As I indicated before, you have
lab tests for which you have to provide valid diagnosis, and
those are not standardized in the country. I think we need to
look at standardizing those.
We also need to look at--in a 3-year period, we have three
directions from the intermediary on how to submit our lab
charges. One year they told us, don't bundle anything; the next
year they said, bundle only this; and the next year they said,
unbundle these things. Every year for a 3-year period this has
changed.
Mr. Ose. This is from your carrier or from HCFA?
Mr. Sparks. The direction is coming from HCFA to the
carriers.
So we need to have standardization. If we're going to do
it, let's do it one way and not have a change every year.
Mr. Ose. What about that, Dr. Christoph?
Mr. Christoph. I firmly believe in standardization, and
that's a direction we definitely want to go in.
Mr. Ose. Your testimony said you had been here 3 years, and
Mr. Sparks is saying in that 3-year period we've had three
changes--or two changes, excuse me.
Now, are you driving this or is somebody else driving this?
Mr. Christoph. The area that I think the changes come from
deals largely with policy which is outside of my realm of
competence. I'm an IT person who is trying to provide the
infrastructure to allow operations to occur, and I can't speak
to the policy areas that lead to some of those changes.
Mr. Ose. Mr. Chairman, you have been very generous with
time, and I've eliminated two questions from my list, but I'm
still going to give you a list.
Mr. Horn. I thank the gentleman. He always asks excellent
questions.
We now have a vote on the floor. I have one more short
question of Mr. Christoph.
To what degree do we have, in Medicare, prior approval of
nonemergency treatments? It seems to me that might simplify
some of the problem. If you had a preapproval, it just makes
sense. Why we have to think of each case, I'll never know; but
what is the situation?
Mr. Christoph. I believe the situation we have is that when
Medicare is submitted a claim and that claim must come after
the service is delivered, then Medicare begins its processing
effort. We don't have, in a sense, a Medicare beneficiary
because they are eligible. There are many things that they are
eligible for; in a sense, they know they have Medicare in back
of them, supporting them, whether a specific procedure is
covered or not.
I think that's what you're looking for, is there a way of
generating some kind of clearance so that a doctor would know
up front whether or not this procedure will be covered. I think
that is something that is possible to do. It might well be one
of the targets, and we look forward to working with your
committee to see if those things can be done.
Mr. Horn. Well, I agree with you, and I'm delighted.
Let me note here that we've had a number of staff that have
helped with this hearing: the Professional Staff Member,
Director of Communications, on my left and your right is Bonnie
Heald for this hearing; the head of the whole staff is J.
Russell George, staff director, chief counsel; Bryan Sisk, our
clerk; Elizabeth Seong, staff assistant; Will Ackerly, intern;
Chris Dollar, an intern; Davidson Hulfish, intern; and minority
staff, Trey Henderson is the counsel; Jean Gosa, the minority
clerk over there in the corner; and the official reporter of
debates is Melinda Walker.
We thank you all for what you have done to make this a very
successful hearing; and on behalf of Senator Lugar and the
subcommittee and myself, I want to thank each of you for the
insight and candor that you have brought to this situation.
You've played a very important role in the legislative process,
and frankly, we have a lot of work to do in order to refine the
bill.
I'd certainly appreciate it if you could in the next week--
if driving away or on a plane, you could say, ``Gee, I really
wanted to do that'' and send it to either Mr. George or myself.
I can see that we have a lot of work to do, and I think your
testimony will be taken to heart as we reconsider some of the
bill's provisions.
And so thank you for coming and sharing your wisdom with
us. Thank you very much. And we're adjourned.
[Whereupon, at 12:10 p.m., the subcommittee was adjourned.]
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