[House Hearing, 107 Congress]
[From the U.S. Government Publishing Office]
SECOND IN SERIES ON MEDICARE REFORM: BRINGING REGULATORY RELIEF TO
BENEFICIARIES
=======================================================================
HEARING
before the
SUBCOMMITTEE ON HEALTH
of the
COMMITTEE ON WAYS AND MEANS
HOUSE OF REPRESENTATIVES
ONE HUNDRED SEVENTH CONGRESS
FIRST SESSION
__________
MARCH 15, 2001
__________
Serial No. 107-12
__________
Printed for the use of the Committee on Ways and Means
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For Sale by the Superintendent of Documents, U.S. Government Printing Office
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COMMITTEE ON WAYS AND MEANS
BILL THOMAS, California, Chairman
PHILIP M. CRANE, Illinois CHARLES B. RANGEL, New York
E. CLAY SHAW, Jr., Florida FORTNEY PETE STARK, California
NANCY L. JOHNSON, Connecticut ROBERT T. MATSUI, California
AMO HOUGHTON, New York WILLIAM J. COYNE, Pennsylvania
WALLY HERGER, California SANDER M. LEVIN, Michigan
JIM McCRERY, Louisiana BENJAMIN L. CARDIN, Maryland
DAVE CAMP, Michigan JIM McDERMOTT, Washington
JIM RAMSTAD, Minnesota GERALD D. KLECZKA, Wisconsin
JIM NUSSLE, Iowa JOHN LEWIS, Georgia
SAM JOHNSON, Texas RICHARD E. NEAL, Massachusetts
JENNIFER DUNN, Washington MICHAEL R. McNULTY, New York
MAC COLLINS, Georgia WILLIAM J. JEFFERSON, Louisiana
ROB PORTMAN, Ohio JOHN S. TANNER, Tennessee
PHIL ENGLISH, Pennsylvania XAVIER BECERRA, California
WES WATKINS, Oklahoma KAREN L. THURMAN, Florida
J.D. HAYWORTH, Arizona LLOYD DOGGETT, Texas
JERRY WELLER, Illinois EARL POMEROY, North Dakota
KENNY C. HULSHOF, Missouri
SCOTT McINNIS, Colorado
RON LEWIS, Kentucky
MARK FOLEY, Florida
KEVIN BRADY, Texas
PAUL RYAN, Wisconsin
Allison Giles, Chief of Staff
Janice Mays, Minority Chief Counsel
______
Subcommittee on Health
NANCY L. JOHNSON, Connecticut, Chairwoman
JIM McCRERY, Louisiana FORTNEY PETE STARK, California
PHILIP M. CRANE, Illinois GERALD D. KLECZKA, Wisconsin
SAM JOHNSON, Texas JOHN LEWIS, Georgia
DAVE CAMP, Michigan JIM McDERMOTT, Washington
JIM RAMSTAD, Minnesota KAREN L. THURMAN, Florida
PHIL ENGLISH, Pennsylvania
JENNIFER DUNN, Washington
Pursuant to clause 2(e)(4) of Rule XI of the Rules of the House, public
hearing records of the Committee on Ways and Means are also published
in electronic form. The printed hearing record remains the official
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unintentional errors or omissions. Such occurrences are inherent in the
current publication process and should diminish as the process is
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C O N T E N T S
Page______
Page
Advisory of March 8, 2001, announcing the hearing................ 2
WITNESSES
U.S. Department of Health and Human Services, George F. Grob,
Deputy Inspector General for Evaluation and Inspections, Office
of Inspector General........................................... 76
______
American Health Care Association, and Marriott Senior Living
Services, Mary K. Ousley....................................... 23
American Hospital Association, and Northwestern Memorial
Healthcare, Gary Mecklenburg................................... 17
American Medical Association, Richard F. Corlin, M.D............. 12
Center for Medicare Advocacy, Inc., and National Citizens'
Coalition for Nursing Home Reform, Toby S. Edelman............. 64
Moffit, Robert E., Heritage Foundation........................... 89
National Association for Home Care, Connecticut Association for
Home Care, and Visiting Nurse Association of Central
Connecticut, Inc., Susan Wilson................................ 30
Wilensky, Hon. Gail R., Project HOPE, and Medicare Payment
Advisory Commission............................................ 98
SUBMISSIONS FOR THE RECORD
American Association of Homes and Services For the Aging,
statement...................................................... 119
American College of Physicians--American Society of Internal
Medicine, statement............................................ 123
American Occupational Therapy Association, Inc., Bethesda, MD,
statement...................................................... 126
American Physical Therapy Association, Alexandria, VA, statement. 129
Mayo Foundation, Bruce M. Kelly, letter and attachment........... 134
National Association of Chain Drug Stores, Alexandria, VA,
statement...................................................... 135
SECOND IN SERIES ON MEDICARE REFORM: BRINGING REGULATORY RELIEF TO
BENEFICIARIES AND PROVIDERS
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THURSDAY, MARCH 15, 2001
House of Representatives,
Committee on Ways and Means,
Subcommittee on Health,
Washington, DC.
The Subcommittee met, pursuant to notice, at 10:10 a.m., in
room 1100 Longworth House Office Building, Hon. Nancy L.
Johnson (Chairwoman of the Subcommittee) presiding.
[The advisory announcing the hearing follows:]
ADVISORY FROM THE COMMITTEE ON WAYS AND MEANS
SUBCOMMITTEE ON HEALTH
CONTACT: (202) 225-3943
FOR IMMEDIATE RELEASE
March 8, 2001
HL-2
Johnson Announces Second Hearing in
the Series on Medicare Reform
Congresswoman Nancy L. Johnson (R-CT), Chairwoman, Subcommittee on
Health of the Committee on Ways and Means, today announced that the
Subcommittee will hold the second day in the hearing series on Medicare
reform. On this occasion, the Subcommittee will examine ways to bring
regulatory relief to beneficiaries and providers and restructuring the
Health Care Financing Administration (HCFA) in the context of efforts
to improve the Medicare program. The hearing will take place on
Thursday, March 15, 2001, in the main Committee hearing room, 1100
Longworth House Office Building, beginning at 10:00 a.m.
In view of the limited time available to hear witnesses, oral
testimony at this hearing will be from invited witnesses only.
Witnesses will include a panel of health care providers representing
doctors, hospitals, nursing homes, and home health agencies. The second
panel will include Dr. Gail Wilensky of Project HOPE and other Medicare
experts to discuss regulatory relief and to provide suggestions on how
HCFA can be more responsive to beneficiaries and providers, possibly
through agency restructuring. Any individual or organization not
scheduled for an oral appearance may submit a written statement for
consideration by the Committee and for inclusion in the printed record
of the hearing.
BACKGROUND:
This hearing will be the second in a series of Subcommittee
hearings intended to lay the groundwork for the development of
legislation to improve and strengthen the Medicare program, including
the addition of a much needed prescription drug benefit to the program.
The first hearing, held on February 28th, gave members a general
overview of the reform debate. This and subsequent hearings will focus
on particular areas in need of reform.
In announcing the hearing, Chairwoman Johnson stated: ``Regulatory
relief has to be at the center of any effort to improve the Medicare
program. Too many providers are spending too much time struggling with
paperwork rather than treating patients. It is time to introduce a
little common sense into the HCFA bureaucracy.''
FOCUS OF THE HEARING:
The March 15th hearing is not intended to convey that all
regulation is inappropriate--in fact, many regulations addressing
patient protections, financial accountability standards, and
operational guidance are a vital part of the Medicare program. However,
some of HCFA's 130,000 pages of regulations place an unnecessary, and
oftentimes duplicative and cumbersome burden on providers that can
negatively affect the beneficiaries who rely on them for needed
services. Witnesses will provide specific examples of burdensome
regulations--and specific suggestions for regulatory changes that can
be made to promote, rather than hinder, efforts to improve the Medicare
program. The Subcommittee will be presented with testimony on how the
government can do its job better, to ensure that beneficiaries are
protected, and that taxpayer dollars are used wisely and responsibly
without placing undue burdens on providers.
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noted above.
Chairwoman Johnson. Thank you. Today's Subcommittee holds
the second in a series of hearings designed to lay the
groundwork for the development of legislation to improve and
strengthen the Medicare Program, while adding a much needed
prescription drug benefit to that program.
The first hearing, held last week, gave Members a general
overview of the reform debate. This and subsequent hearings
will focus on particular aspects of the Medicare Program in
need of reform.
The purpose of this hearing is to examine the impact of the
regulatory burden on beneficiaries and the providers that serve
them and to examine specific proposals to provide regulatory
relief. Our intent is to distinguish between unnecessary
regulations and those that are critical to program integrity
and effectively deterring fraud and abuse.
Our witnesses will provide us with specific examples of
burdensome regulations and specific suggestions for regulatory
changes that can be made to promote efforts to improve the
Medicare Program.
The Subcommittee will be presented with testimony on how
the Government can do its job better to ensure that
beneficiaries are protected and that taxpayer dollars are used
wisely and responsibly, without placing undue burdens on
providers.
I thought it was important to begin with this topic
because, like many of my colleagues, I hear every day from
doctors and home health agencies, from nursing home
administrators and ambulance companies, that the status quo is
not only unacceptable, it is destructive. Not only is the
tremendous explosion of payments diverting valuable nursing
hours from patient care, but it is on the verge of severely
reducing seniors' access to essential health care services.
Indeed, if we cannot return common sense to the Health Care
Financing Administration (HCFA) bureaucracy, we will lose the
services of small nursing homes whose two Medicare patients are
imposing loads of paperwork for all patients, the services of
small home health care providers who will simply be unable to
serve the dual-eligible because delayed reimbursements cause
such severe cash flow problems, and the shower of paperwork
imposes such significant new and unreimbursed costs.
The testimony today dramatizes the challenge this Committee
faces to preserve Medicare, to strengthen Medicare, to preserve
it for our seniors. As this Committee continues to prepare
through our hearings and our bipartisan seminars for the
development of Medicare improvement legislation, we need to
keep what we will hear today from witnesses in the forefront of
our minds. We must not, we simply cannot compound the
regulatory problems we face. We must instead make it a priority
to improve administration responsiveness to beneficiaries and
providers.
We will work closely with Secretary Thompson, whom we heard
from yesterday, to explore how HCFA can restructure as we work
to modernize Medicare. As we think about regulatory relief,
however, it is vitally important that we not allow ourselves to
believe that all regulation is inappropriate. In fact, patient
protections, financial accountability standards, and
operational guidance are a vital part of the Medicare Program.
Just last week, the Office of Inspector General reported
that inappropriate Medicare claims had fallen to 6.8 percent
from 14 percent in 1996. That is good news for beneficiaries
who are paying the bills and for taxpayers. However,
simplifying HCFA's 130,000 pages of regulations will bring
these numbers down steeply, as the testimony today clearly
indicates, and at the same time protect seniors' access to
quality care.
While we must balance accountability and relief, as we will
hear from witnesses today, we must move forward in developing
legislation, and I am confident that as we work together, we
will get it right. No matter what shape a modernized Medicare
Program ultimately takes, we all know that one of the most
important measures of success will be whether we can protect
program integrity while ensuring that health care providers can
focus on patients rather than paper.
I would like to recognize now Mr. Stark.
[The opening statement of Chairwoman Johnson follows:]
Opening Statement of the Hon. Nancy L. Johnson, a Representative in
Congress from the State of Connecticut, and Chairwoman, Subcommittee on
Health
Today this Subcommittee holds the second in a series of hearings
designed to lay the groundwork for the development of legislation to
improve and strengthen the Medicare program while adding a much needed
prescription drug benefit to the program. The first hearing, held last
week, gave members a general overview of the reform debate. This and
subsequent hearings will focus on particular aspects of the Medicare
program in need of reform.
Today, there are more than 130,000 pages of Medicare regulations.
That's four times the number of IRS! This regulatory burden is a
consequence of Medicare's administered pricing system, which requires
government micro-management of health care. Certainly, this is not all
the fault of the Health Care Financing Administration (HCFA). Indeed,
Congress has enacted significant Medicare legislation in three of the
last four years.
The purpose of this hearing is to examine the impact of the
regulatory burden on beneficiaries and the providers that serve them,
and to examine specific proposals to provide regulatory relief. Our
intent is to distinguish between unnecessary regulations and those that
are critical to program integrity and effectively deter fraud and
abuse.
Our witnesses will provide us with specific examples of burdensome
regulations--and specific suggestions for regulatory changes that can
be made to promote efforts to improve the Medicare program. The
Subcommittee will be presented with testimony on how the government can
do its job better, to ensure that beneficiaries are protected and that
taxpayer dollars are used wisely and responsibly without placing undue
burdens on providers.
I thought it was important to begin with this topic because, like
many of my colleagues, I hear nearly every day from doctors and home
health agencies, from nursing home administrators and durable medical
equipment providers, that the status quo is unacceptable. Too many
health care providers are spending too much time struggling with
paperwork rather than treating patients. It is time to introduce a
little commonsense into the HCFA bureaucracy.
As this Committee continues to prepare, through our hearings and
bipartisan seminars, for the development of Medicare improvement
legislation, we need to keep what we will hear from our witnesses today
in the forefront of our minds. We must not simply feed the regulatory
monster--we must instead make it a priority to improve administrative
responsiveness to beneficiaries and providers. We will work closely
with Secretary Thompson, who we heard from yesterday, to explore how
HCFA can be restructured as we work to modernize Medicare.
As we think about regulatory relief, however, it is vitally
important that we not allow ourselves to believe that all regulation is
inappropriate--in fact, patient protections, financial accountability
standards, and operational guidance are a vital part of the Medicare
program. Just last week, the Office of Inspector General reported that
inappropriate Medicare claims had fallen to 6.8% from 14% in 1996.
That's good news for taxpayers and beneficiaries who are paying the
bills. However, some of HCFA's 130,000 pages of regulations clearly
cross a line and place an unnecessary burden on providers--a burden
that can negatively affect the beneficiaries who rely on them for
needed services.
We will have to be sensitive to this balance between accountability
and relief as we hear from our witnesses today and as we move forward
in developing legislation. But, I am confident that as we work together
we will get it right. No matter what shape a modernized Medicare
program ultimately takes, we all know that one of the most important
measures of its success will be whether we can protect program
integrity while ensuring that health care providers can focus on
patients rather than paper.
Mr. Stark. Thank you, Madam Chairman.
Just very quickly, as we begin studying possible reforms to
HCFA and its regulatory process, I think it is important that
we remember that we are responsible for providing the resources
to HCFA and the flexibility they need to fulfill their
responsibilities. So I am pleased that you are having these
hearings and that Secretary Thompson agrees with this notion
and said so, I think, in this room just yesterday that he would
work with us to see that we get the resources to HCFA to carry
out the responsibilities with which we have charged them.
I think it is also important to note, most importantly,
that Medicare regulations and policy guidance, as issued by
HCFA, merely implement the laws that we--and, actually, we on
this Committee--have enacted and that the relative complexity
and burden of Medicare regulations rests with us, not HCFA. I
also want to congratulate the Chair because this Committee
hasn't met for over 6 years to review the regulations and the
procedures at HCFA. And, Madam Chair, you are to be commended
because we should have been doing this every year, as it used
to be done years ago.
HCFA cannot operate with laws that have not been updated
and reviewed, and so you are to be credited with understanding
this process. HCFA can only promulgate regulations that we tell
them to promulgate. They have no independent authority, which
means we have to look at ourselves when we look at the problem.
I would also like to point out that, in regard to this
burden of paperwork that these poor, overburdened providers
face, the physicians in this country continue to be the
highest-paid profession in the United States with median
incomes of nearly $175,000 a year--exactly those people whom
the new tax bill will help the most.
We say nothing about what we are doing to lift the burden
on children who don't qualify for CHIP or the 42 million
uninsured Americans who are unable to see these well-to-do
physicians who are going to complain to us this morning about
how tough it is to make $175,000 to $600,000 or $700,000 a
year. The same is true of the hospitals. They have had the
highest margins, some as high as 45 percent, on their Medicare
payments, and they are going to be in here whining about it is
so difficult to run a hospital. Boy, if you could run the
dotcom businesses with a 45-percent margin today, the stock
market would be doing a whole lot better.
We have, because of these regulations, I would like to
point out, significantly lowered the improper payment rate.
That is not necessarily all illegal activity. That may be
mostly mistakes. But the improper payment level has dropped to
6.8 percent from 14 percent 5 years ago. That is a $12-billion
saving since 1996. Madam Chair, that these tough regulations
have saved the taxpayer. That is a lot of money.
Finally, I would suggest that I have heard from some
physicians that they are being harassed by HCFA. I suppose that
could be a good rap song, but there were fewer than 100
physicians arrested for Medicare fraud last year; just 12 were
convicted. That is out of about 600,000 physicians in our
country. My math shows me that that is 0.02 of a percent. Now,
I happen to be familiar with the one Member of Congress that I
know is under active criminal investigation. That is 0.23 of a
percent for our group. So I am saying, Docs, that you are doing
a lot better than Congress in terms of those of you who are
subject to arrest for fraudulent behavior, and I would count
your blessings. When there are as many doctors in jail as a
percentage as there are Members of Congress, or former Members,
then you might have a reason to complain.
So I think that we do have to look to our own Committee and
our own actions to see how we can continually improve and
upgrade Medicare, which is the finest, most efficient bill-
paying system in the country today. And I thank you very much
for beginning these hearings, and I hope it will lead to some
serious legislation that will help make our system of Medicare
and Medicare reimbursement to the providers continue to be the
most efficient, lowest overhead system in the United States.
Thank you, Madam Chair.
[The opening statements of Mr. Stark and Mr. Ramstad
follow:]
Opening Statement of the Hon. Fortney Pete Stark, a Representative in
Congress from the State of California
As we begin deliberations on possible reforms to the Health Care
Financing Administration (HCFA) and its regulatory process, it's
important to provide HCFA with the resources and flexibility needed to
fulfill its responsibilities. There seems to be broad agreement among
experts and stakeholders that HCFA's resources need to be dramatically
increased. I hope we will hear from Gail Wilensky with respect to that
concern later this morning.
I am also pleased that Secretary Thompson agrees with this notion
and has said so in numerous public settings. We should not wait to
increase HCFA's administrative budget and staffing opportunities until
there is consensus on whether or how to restructure HCFA or reform
Medicare. With the budget season upon us, there should be a coordinated
effort for a significant increase this year.
During the last five years, Congress has significantly increased
HCFA's responsibilities, without adding the commensurate, necessary
resources to accomplish the work.
In 1996, the Congress enacted the Health Insurance Portability and
Accountability Act (HIPAA), the Mothers and Newborns Protection Act and
mental health parity legislation; in 1997, the Congress enacted the BBA
of 1997; in 1999, the Congress enacted BBRA; and in 2000, the Congress
enacted BIPA. These laws added hundreds of new provisions for HCFA to
implement. Yet Congress increased HCFA's administrative budget by only
2.6 percent since 1997; if you subtract out the earmarks for research
projects, the increase was only 1.6 percent.
That leads directly into the point that it is also important to
remember that the Medicare regulations and policy guidance issued by
HCFA implement the laws that the Congress enacts, and the relative
complexity and A burden of Medicare regulations reflect those laws.
In promulgating regulations, HCFA has only the regulatory authority
that it is given by the Congress; it has no other independent
regulatory authority. As we examine these issues today, we should also
examine the complexity and burden of the Medicare statute.
There are steps we can take to improve HCFA's ability to fulfill
its responsibilities under the law, while easing legitimate concerns
about regulatory burden. But it is critically important that we do not
do so in a vacuum. Regulations and other guidance materials are needed
to protect beneficiaries from abuse and to assure the financial
integrity of the Medicare and Medicaid programs.
The Department of Health and Human Services (HHS) has very recently
reported that improper Medicare payments to doctors, hospitals and
other health care providers declined in fiscal year (FY) 2000 to an
estimated level of 6.8 percent. This level compares favorably with an
error rate of approximately 8 percent in FY 1999, and is roughly half
of the original FY 1996 rate of approximately 14 percent.
This continued decline in the Medicare payment error rate
demonstrates the success of HCFA's efforts to reduce billing errors in
Medicare over the past five years. According to the Inspector General,
the significant, sustained improvement reflects HCFA's improved
oversight, its efforts to clarify Medicare payment policies, and its
insistence that doctors and health care providers fully document the
services that they provide. Other factors have been new initiatives and
resources to prevent, detect and eliminate errors and fraud in
Medicare.
Many criticized HCFA when the payment error rate was 14 percent and
demanded that HCFA reduce it. Now many criticize HCFA for the actions
it has taken to reduce payment errors and for insisting that providers
file claims accurately. It is my understanding that fewer than 100
physicians were arrested for Medicare fraud last year B and only 12
were convicted. That is out of more than 600,000 physicians across the
country. I say that we should praise HCFA for its efforts to reduce
Medicare payment errors, and we should ensure that HCFA does not
diminish its efforts to reduce those errors still further.
Finally, while I know today's hearing is not specifically focused
on HR 868, the Medicare Education and Regulatory Fairness Act, many of
the providers testifying before us have endorsed that legislation.
While I agree that there are some legitimate issues relating to
provider regulation that need to be addressed, the over-reach of MERFA
as introduced undermines the credibility of its champions. And could
easily return us to the days of 14% overpayment rates.
Attached is a much more detailed list of broad ideas and principles
for consideration in the debate on HCFA reform. I look forward to
hearing from our panelists this morning.
1. First, do no harm
Along with Social Security, Medicare is the most effective and
popular government program in existence today. It provides health and
financial security for nearly 40 million persons with disabilities and
senior citizens that was not available prior to its enactment.
Every major poll reaffirms the popularity of Medicare among seniors
and their families. HCFA announced December 22nd that for the second
year in a row, Medicare beneficiaries had rated the agency A excellent
in the way it provides information, the usefulness of that information,
and the courtesy and professionalism of its staff.
In 2000, HCFA went up three points from last year's score of 74 out
of 100 on the American Customer Satisfaction Index (above the average
Federal score of 68.6).
In addition, surveys show that Medicare is more popular among
providers, including physicians, than private insurance or Medicaid.
While improvements are needed in HCFA's management of Medicare,
Congress should proceed with caution and with the acknowledgment that
we are examining ways to improve a program that already does well
according to many objective measures and has strong public support.
2. Increase HCFA resources B and give priority to information
technology (IT) modernization
We cannot discuss the problems associated with Medicare regulations
and guidance without discussing the lack of resources given to HCFA to
carry out its regulatory responsibilities, and to educate affected
parties about the rules of the game.
In the January/February, 1999 issue of Health Affairs, 14 of our
nation's leading Medicare policy analysts--ranging from conservative to
liberal--published an open letter titled, ``A Crisis Facing HCFA &
Millions of Americans,'' regarding the lack of resources allocated to
administer Medicare. The Medicare Payment Advisory Commission (MedPAC)
agreed with that letter, and published it in their March 1999 Report to
Congress.
In MedPAC's March 2001 Report to Congress, MedPAC makes the
following points that are particularly relevent to this discussion:
A HCFA cannot do everything at once. The BBA required many
changes in Medicare's payment policies within a very short
period. . . . HCFA lacked the staff resources and time to fully
prepare new payment systems and make necessary changes in its
administrative systems.
As a result of Congressional time deadlines, some tasks, such
as delivery of critical coding, patient assessment, and billing
software to HCFA's billing agents and providers for pre-
testing, and the development and dissemination of edit
standards--were often delayed until new payment systems were
about to go into effect. . . . leaving providers little time to
prepare.
A second lesson is that you get what you pay for. Many of the
data limitations that cause problems in establishing accurate
payments for some settings are due, at least in part, to
chronic under funding of HCFA's administrative budget.
Activities that help to improve the accuracy and reliability of
providers' reported data--such as auditing cost reports or
developing and disseminating coding instructions--have received
inadequate support for many years. HCFA's administrative
expenses generally have accounted for less than 2 percent of
total outlays in recent years, well below the comparable
proportion of private insurers' expenses for similar
activities. The lack of adequate monitoring tools and data is a
major problem. This problem will be difficult and costly to
remedy. Consequently, additional resources will be needed.
While critics of HCFA may complain about HCFA's performance, MedPAC
and other independent experts have pointed out that they have been
tasked with the impossible under the circumstances.
Information technology (IT) systems
We need to undertake a ``Manhattan Project'' in Medicare
information technology (IT) to improve quality, fight fraud, and slash
paperwork costs.
As we all know, HCFA's IT systems are obsolete. HCFA has tried for
more than a decade to develop new IT systems, and we still haven't
achieved that goal.
Without modern information systems, HCFA cannot effectively and
efficiently administer the Medicare program--regardless of
administrative structure or process. We cannot pay bills efficiently,
we cannot limit paperwork hassles, we cannot monitor and assure
coordination of services and quality, and we cannot identify fraud and
abuse.
Equipment alone won't solve the problem. Information technology
experts are needed, too. Problems attracting and retaining good
personnel to work on IT issues are not limited to HCFA. Agencies and
departments throughout the entire Federal government are having
difficulty hiring and keeping IT staff. Good computer personnel can
make many times more in the private sector than we can pay in the
Federal government. While we may never be able to pay enough to attract
and retain good computer professionals, we clearly need to do better
than we are doing now.
Medicare is not alone in facing these challenges. The entire health
sector needs to make major advances in this area. In general, American
business spends about 7.1% of its gross company revenue per year on IT
improvement.\1\ The health care sector spends about 3.2%, yet IT
improvements are the key to error reduction, quality improvement, and
paperwork savings.
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\1\ From Dr. Howard A. Rubin's A Industry Watch, 1998.
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HCFA provides FREE software to physicians via the Internet to
enable electronic claims filing. In addition, Medicare carriers help
teach physicians how to file their claims electronically. It costs
Medicare an extra dollar to process each paper claim that is filed.
It's not too much to make electronic filing the default for all
providers, while allowing those who may to file paper claims to do so
for a fee consisting of the extra dollar that it costs to process that
claim.
I have asked GAO to review current HCFA activities to develop new
IT systems for Medicare, and to make recommendations on how to proceed
in terms of hardware, software, and staffing. I expect the report later
this Spring.
Direct Appropriations
We should consider funding HCFA's administrative budget through a
direct appropriation. Currently, HCFA staffing and administration must
be approved through the appropriations process, where HCFA resources
must compete for scarce resources with NIH, education, and other
Congressional and Administration priorities.
However, for many years, Peer Review Organizations (PROs) have been
funded through a ``direct appropriations'' process, in which the
Secretary of HHS (with OMB approval) simply transfers funds from the
Medicare Trust Funds to fund the activities of the PROs.
We should consider this approach for all Medicare management
functions and needs, and not just the PROs. All funds for Medicare
management already are appropriated from the Trust Funds, so the only
change would be to shift the oversight of funding from the
Appropriations Committees to the authorizing committees.
3. Regulations Process
When Medicare began in 1965, Congress wrote:
``No rule, requirement, or other statement of policy (other than a
national coverage determination) that establishes or changes a
substantive legal standard governing the scope of benefits, the payment
for services, or the eligibility of individuals, entities, or
organizations to furnish or receive services or benefits under this
title shall take effect unless it is promulgated by the Secretary by
regulation under paragraph (1).'' (Section 1871(a)(2))
The statute requires HCFA to make policy changes through the
regulatory process, which provides for public involvement. However,
HCFA for years has made policy changes and issued guidance through
``manual instructions''. Manual instructions are not subject to a
public comment process, which has frustrated some providers. In
addition, because manual instructions can be issued more easily than
regulations, providers feel that HCFA is overwhelming them with new
policies.
Too many directives have been issued that have had to be corrected
and re-issued, and I am sympathetic to rational efforts to improve
coordination of the various components of policy guidance.
4. National v. Regional Policies
Throughout the history of Medicare, we have relied on contractors
to establish many Medicare policies B including Medicare coverage
policies.
In addition, the 10 HCFA regional offices establish separate
policies on many issues, and often offer differing interpretation of
national policies.
Although that approach worked well for many years, we should
consider a move toward more national policies in Medicare, and minimize
B as appropriate-- regional variations in policies.
Clearly, we need fewer contractors processing claims, and we need
to separate contractor activities along functional lines (e.g., bill
paying, anti-fraud, quality, appeals, and beneficiary services) rather
than geographic lines. In addition, we should continue to move toward
specialized contractors for specific services, such as the four DME
carriers and the five home health intermediaries.
The Congress needs to reform Medicare contracting rules, as
supported by many experts and repeatedly proposed by previous
Administrations, including the previous Bush Administration. This
Committee should pass that legislation.
5. Information and Education
We need to do more to help beneficiaries and providers understand
the rules and options under Medicare.
We must find a way to simplify and consolidate the information
being provided to physicians and other providers, and to provide
adequate funding for these activities.
Funding and operating the recently reinstated toll-free telephone
service for providers and physicians is but one step that we can take
to help increase HCFA's communication efforts.
6. Reduce Complexity of Medicare Laws
In large measure, regulatory burden is a direct result of
legislative complexity. Frequently when Members of Congress criticize
HCFA, they are really criticizing laws that Congress has passed and, in
some case, that they have voted for.
As MedPAC has pointed out, the Congress should give HCFA more lead
time to implement changes, and should listen to technical experts about
the feasibility of legislated changes. For example, in the BBRA 1999,
the Congress added legislation creating the hospital outpatient
department pass through provision for medical technology, which greatly
added to the complexity of the Medicare payment system. In BIPA 2000,
the Congress added a new-technology DRG, making the inpatient hospital
PPS more complex.
Too often, Congress legislates failure; yet, when the agency is
unable to fulfill an impossible demand on deadline, Members accuse the
agency of incompetence.
7. Payment Errors/CFO Audit
Just last week Department of Health and Human Services (HHS)
reported that improper Medicare payments to doctors, hospitals and
other health care providers declined in fiscal year (FY) 2000 to an
estimated level of 6.8 percent. This level compares favorably with an
error rate of approximately 8 percent in FY 1999, and is roughly half
of the original FY 1996 rate of approximately 14 percent.
The FY 2000 payment error rate represents improper payments of
$11.9 billion out of total payments of $173.6 billion in the
traditional fee-for-service Medicare program.
This continued decline in the Medicare payment error rate
demonstrates the success of HCFA's efforts to reduce billing errors in
Medicare over the past five years. According to the Inspector General,
the significant, sustained improvement reflects HCFA's improved
oversight, its efforts to clarify Medicare payment policies, and its
insistence that doctors and health care providers fully document the
services that they provide. Other factors have been new initiatives and
resources to prevent, detect and eliminate errors and fraud in
Medicare.
Many criticized HCFA when the payment error rate was 14 percent and
demanded that HCFA reduce it. Now many criticize HCFA for the actions
it has taken to reduce payment errors and for insisting that providers
file claims accurately. I say that we should praise HCFA for its
efforts to reduce Medicare payment errors, and we should ensure that
HCFA does not diminish its efforts to reduce those errors still
further.
To achieve further reductions in Medicare payment errors, we must
reduce the complexity of Medicare payment rules and improve provider
education, but we must also continue to insist on the filing of
accurate claims. HCFA should have additional resources to help
providers file their claims properly and to monitor claims for
accuracy.
8. Simplifications for Beneficiaries
We need to look for simplifications not only for providers, but
also for beneficiaries. As a result of the BBA, HCFA recently
established the toll-free number, 1-800-MEDICARE, that has been a great
success by all accounts. HCFA should consider expanding it to become a
single entry point to Medicare for beneficiaries. For example, the
latest national Medicare handbook includes 14 pages of telephone
numbers for beneficiaries to call with specific questions. It seems
reasonable to allow beneficiaries to call one number for triage to the
appropriate person or department.
In addition, HCFA should establish or support caseworkers to help
beneficiaries with their Medicare problems. In the past, HCFA has
relied on the contractors, but many of the problems are with the
contractors themselves. HCFA now relies on State Health Insurance
Counseling and Assistance Programs (HICAP) organizations to help
beneficiaries. While I am a strong supporter of these organizations,
they are underfunded, staffed by volunteers and cannot accommodate the
demand for assistance. It is absurd for a huge public program the size
of Medicare to rely on volunteers to be the main source of assistance
for its beneficiaries.
We need only to look to Social Security to learn other ways to help
beneficiaries--for example, Social Security has regional teleservice
centers to staff their national toll-free line and help beneficiaries
with their questions. SSA also has Program Service Centers to perform
casework for Social Security beneficiaries with specific problems. We
need a similar effort for Medicare beneficiaries.
Currently, Medicare casework is handled by Congressional offices,
since no casework office exists in Medicare. We should consider whether
to station Medicare staff in Social Security field offices to help
answer Medicare questions.
Opening Statement of the Hon. Jim Ramstad, a Representative in Congress
from the State of Minnesota
Madam Chairwoman, thank you for calling this important hearing on
regulatory reform within the Medicare system.
In my meetings with health care providers in Minnesota, I hear
every time about the crushing paperwork burden imposed on providers by
HCFA. Why should duplicative documents and redundant forms be necessary
to treat patients and obtain reimbursements?
Too many providers are spending too much time struggling with
paperwork rather than treating patients. In my view, it is time to
introduce a little common sense into the HCFA bureaucracy. Clearly,
130,000 pages of rules and regulations are excessive and must be
streamlined.
Too often, providers are considered guilty until proven innocent
and it seems that HCFA is more interested in enforcing arcane
regulations than in patient care.
Our health care dollars should be spent on care not so heavily on
administration. A hospital or doctor's office should spend their scarce
resources on patients not on excessive paperwork.
I also believe that this unreasonable regulatory burden is delaying
and even denying new technologies to seniors. This is simply
unacceptable.
I certainly believe it is a necessary to have a reasonable level of
documentation to prevent fraud and improve patient care. However, I
believe it is time for HCFA to start focusing on working with the
health care industry in a collaborative way, rather than working
against honest providers in an adversarial way.
Of course, this requires a careful balancing act and I hope today's
hearing will begin to shed light on this subject.
Thanks again, Madam Chairwoman for calling this important hearing.
I look forward to today's testimony.
Chairwoman Johnson. Thank you.
I would like to call the first panel forward: Dr. Richard
Corlin of the American Medical Association; Gary Mecklenburg,
Northwestern Memorial Healthcare from Chicago for the American
Hospital Association; Mary Ousley, the senior vice president of
health services for the Marriot Senior Living Services for the
American Health Care Association; and Susan Wilson, from my own
hometown in New Britain, a person I have worked with many years
on home care issues and I am particularly pleased to welcome
here today for the National Association of Home Care.
Let me just say as you start that I do wholeheartedly agree
with Mr. Stark that this is an important time for us to try to
do our work fairly. We do seem to have the backing of the
administration in looking at both resources and legal authority
for HCFA, and I think we do need to do some serious work in
that area.
Dr. Corlin, let me just remind you that because we have two
long panels, you do have 5 minutes each, and then the lights
will go on, as you can see there, and then we will have time
for questioning.
Dr. Corlin.
STATEMENT OF RICHARD F. CORLIN, M.D., PRESIDENT-ELECT, AMERICAN
MEDICAL ASSOCIATION
Dr. Corlin. Thank you. Good morning, Madam Chairman and
Members of the Subcommittee. My name is Richard F. Corlin, M.D.
I am president-elect of the American Medical Association, and I
am a practicing gastroenterologist from Santa Monica,
California. On behalf of the AMA, I would like to thank you,
Madam Chairman, for your commitment to making Medicare more
effective and less bureaucratic. Physicians want to spend time
on what matters--patient care--and not on paperwork.
We welcome the opportunity to work with the Subcommittee on
regulatory relief, the need to modernize the Medicare Program,
and to create a prescription drug benefit. The AMA recognizes
that one of HCFA's most important functions is to maintain
program integrity. We also recognize that post-payments audits,
if they follow sincere education efforts, can ensure that
improper payments do not occur.
I want to emphasize that the AMA in no way condones the
behavior of fraudulent providers. We support the government's
effort to root out true causes of fraud from the system.
At the same time, it is becoming increasingly difficult for
physicians to comply with Medicare rules. We have reached a
point where there are over 110,000 pages of Medicare rules,
policies, and regulations. In a recent AMA survey, more than
one-third of the responding physicians reported spending an
hour completing Medicare forms and administrative requirements
for every 4 hours of patient care.
We have also reached the point where physicians are
creating documentation in their patients' charts not for the
patient's benefit, but simply to meet the Government's demands.
Extraneous documentation in patients' charts can lead to
unnecessarily delayed care for the critically ill.
Tuesday night I was on call. I spent all except 2 hours of
it in the hospital in Santa Monica, and the one patient who was
in the intensive care unit, hemorrhaging from an ulcer, it took
me 20 minutes longer to go through an unnecessarily long chart
to figure out what was going on with that patient before I
could get to the patient to take care of him.
Medicare requirements are not only complex, but they are
constantly changing so that even carrier employees are not
aware of all the current Medicare standards. In the AMA survey,
80 percent of physicians stated that carriers do not give them
clear guidance on Medicare requirements with which they are
expected to comply. Physicians who call their carriers face
personnel who give incorrect answers, refuse to divulge what
their names are, and refuse to send physicians written
confirmation of the conversations so that they can be used as
guidelines in that physician's practice.
In my written statement, I have described in detail the
situation physicians face when a carrier alleges they have
received an overpayment by mistake, and I want to stress that
these situations involve carrier allegations regarding
unintentional billing errors, not fraud. When fraud is alleged,
HCFA requires the carrier to refer these cases directly to the
OIG, and we strongly support the continuation of this policy.
To address these egregious situations, the AMA urges this
Subcommittee to support the bipartisan Medicare Education and
Regulatory Fairness Act (MERFA), which was recently introduced
by Representatives Pat Toomey and Shelley Berkley and which
currently has nearly 60 cosponsors. Under MERFA, HCFA
contractors would educate physicians and providers on Medicare
requirements so that fewer billing errors occur.
On a separate note, we commend Representative Stark for his
recognition of the need for this education in his recent
comments before the National Academy of Social Insurance.
MERFA would also provide physicians and providers with
greatly needed due process rights in these post-payment audit
situations and require HCFA to pilot test documentation
guidelines to minimize the burden and focus on clinically
relevant documentation before they are put into effect
nationwide.
Recently, a cardiologist reported that when he made
hospital rounds, he found two nurses taking care of patients
and six nurses checking documentation, and this simply does not
serve patients well.
We also heard from a critical care physician whose practice
group staffs a local hospital on a 24-hour-a-day basis, and who
was actually the advisor to the local carrier on coding issues.
He is now going through a post-payment audit because the
carrier has denied all of that physician's nighttime critical
care billing charges. The idea that a patient may be critically
ill during the day but not critically ill at night is an
absurdity.
MERFA provides incremental, modest reforms that should
provide immediate relief to physicians and providers who are
extremely frustrated with the Medicare program. These changes
would help ensure that patients continue to have access to a
wide range of physicians and providers in the Medicare Program,
and we look forward to working with Congress and Secretary
Thompson to reform Medicare so that it effectively continues to
meet the needs of patients now and in the future.
Thank you.
[The prepared statement of Dr. Corlin follows:]
Statement of Richard F. Corlin, M.D., President-Elect, American Medical
Association
RE: Patient Care, Not Paperwork--the Need for Medicare Regulatory
Relief
Good morning Chairwoman Johnson and members of the Subcommittee, my
name is Richard F. Corlin, M.D., and I am President-Elect of the
American Medical Association (AMA). I am a practicing
gastroenterologist from Santa Monica, California. On behalf of the AMA,
I would like to thank you for holding this hearing regarding regulatory
reform for physicians and providers. This issue is a top priority for
America's physicians, who want to spend time on what matters--patient
care--rather than paperwork.
We very much appreciate the new Administration's recognition,
during Secretary Thompson's confirmation hearings and in the
President's Budget Blueprint, that the growing complexity of the
Medicare program's rules and policies is driving physicians from the
program. We were gratified that one of the President's first steps was
to place a 60-day stay on the numerous Department of Health and Human
Services (HHS) regulations impacting physicians that were issued in the
final weeks of the last Administration, pending a new review.
The AMA recognizes that one of the most important functions of the
Health Care Financing Administration is to maintain program integrity,
and that post-payment audits, if they follow sincere education efforts,
can be a valid way of ensuring that improper payments do not occur. In
addition, the AMA wants to emphasize that it in no way supports or
condones the behavior of fraudulent providers. We support Medicare's
efforts to root true fraud out of the system.
At the same time, we have several concerns regarding some the most
recently-issued regulations, as well as more longstanding regulatory
burdens, which we have shared with the new Administration, and which we
would like to share with the Subcommittee.
For example, we have reached the point where there are now over
110,000 pages of Medicare rules, policies, and regulations. In a recent
AMA survey, more than one-third of the 653 responding physicians report
spending one hour completing Medicare forms and meeting administrative
requirements for every 1-4 hours of patient care.
We have also reached the point where physicians are creating
documentation in their patients' charts often not for the benefit of
the patient's care, but purely to meet the government's demands. These
regulatory requirements have resulted in voluminous charts filled with
layers and layers of extraneous information. All this additional
documentation in patients' charts can actually result in unnecessarily
delayed care for the critically ill while physicians are attempting to
access the truly relevant information.
Regulatory Overload Has Resulted in Allegations of Overpayments
Due to the overly complex nature of Medicare documentation
requirements, physicians are often not entirely certain if they are
submitting the correct information to their carriers. Medicare
requirements are constantly changing, so that even carrier employees
are not aware of all the current Medicare requirements. Physicians who
try to contact their carriers are faced with carrier personnel who give
incorrect answers, refuse to divulge their true names, and refuse to
send physicians written confirmation of their conversations upon which
they can rely. In the AMA survey, ``80% of physicians believe that
carriers do not give them clear guidance as to the Medicare rules and
requirements (with which) they are expected to comply . . .''
Physicians with rural practices are 7% more likely than non-rural
practices to experience this lack of communication from the carrier.
As a result, carriers and physicians understandably can disagree
over the correct coding, documentation, and billing requirements. At
this point of disagreement, physicians have found that under the
current system, they receive no education from the carrier and that
they have very few rights to contest these overpayment accusations.
Madam Chairman, I would like to give the Subcommittee an example of
what physicians are faced with when a carrier alleges that a physician
has received an overpayment by mistake. As background, I must stress
that such situations involve carrier allegations regarding
unintentional billing errors--not fraud. When fraud is alleged, the
Health Care Financing Administration (HCFA) requires the carriers to
refer these cases directly to the Office of the Inspector General.
(1) The carrier identifies a suspected billing error involving
significant payment amounts. Without making an effort to educate Dr.
Smith or other physicians about the problem, the carrier sends Dr.
Smith a request for records and documentation surrounding 20-40 claims
the carrier has selected. Dr. Smith sends the requested documents to
the carrier for review within the very short deadline provided by the
carrier.
(2) The carrier generally sends another letter (a consent
settlement letter) to Dr. Smith approximately one year later.
Frequently, this letter will allege an ``actual overpayment amount''
which the carrier uses to ``extrapolate'' \1\ to arrive at a larger
``projected overpayment amount.'' As an example, a carrier could allege
an ``actual overpayment'' of $10,000 and then could extrapolate this
amount to a $150,000 (or even more) ``projected overpayment.''
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\1\ ``Extrapolation'' refers to the carrier/fiscal intermediary
practice of using alleged overpayments amounts to assume that all
similarly coded claims during the same time period were incorrectly
submitted. It is analogous to the IRS assuming that a taxpayer has made
the same mistake on all of her past tax returns.
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(3) Once the carrier presents Dr. Smith with the consent settlement
letter, Dr. Smith has up to 60 days to choose one of three options:
Option One:
admit liability, waive appeal rights and pay the $150,000;
Option Two:
admit liability, waive appeal rights and submit additional
information to ask the carrier to reduce the $150,000 to a lower
projected overpayment; or
Option Three:
not admit liability and open up his/her practice to a statistically
valid random sample (SVRS) in order to maintain his/her appeal rights.
To address these egregious situations, the AMA urges this
Subcommittee to support the bipartisan Medicare Education and
Regulatory Fairness Act of 2001 (MERFA) (H.R. 868), which was recently
introduced by Representatives Patrick Toomey (R-PA) and Shelley Berkley
(D-NV), and which currently has over 50 cosponsors. This bill would
require HCFA contractors to educate physicians and providers as to
coding, documentation and billing requirements, so that fewer billing
errors ultimately occur. Passage of this legislation, independent of
any HCFA reform efforts, would send a clear message to HCFA and its
contractors that Congress wants them to focus on educating physicians
and providers about how to bill correctly rather than to conduct heavy-
handed audits of already-submitted claims. Such an approach would be a
paradigm shift for Medicare contractors, whose focus has been punitive
rather than preventive.
MERFA would also provide physicians and providers \2\ with greatly-
needed due process rights in these post-payment audit situations. MERFA
would also address problems with HCFA's documentation requirements.
Under MERFA, HCFA would be required to undertake four pilot projects to
test documentation guidelines prior to any new guidelines being put
into effect. A Section-by-Section Summary of the legislation is
attached to my written statement.
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\2\ ``Providers'' is defined as hospital, critical access hospital,
skilled nursing facility, comprehensive outpatient rehabilitation
facility, home health agency, or hospice program. (Section 1861(u) of
the Social Security Act). Ambulance Service Providers are also covered
by the MERFA provisions.
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At a press conference held last week by the sponsors of MERFA, we
heard the following disturbing accounts of how medical care has been
adversely affected by this type of regulatory overload:
A cardiologist recounted how when he made rounds on
one of the hospital floors, two nurses were taking care of
patients, and the other six nurses were checking documentation
to make sure that it complied with regulations.
The same cardiologist had been though prepayment
review (when payment is withheld pending review) for 793
claims. These claims were worth $50,000. The costs to the
practice of processing and producing documentation and
reprocessing was $44,000. The eight denied claims (for which
services were provided, but for which the physician and his
staff concluded that documentation did not exist) were
ultimately worth $356.
A critical care physician whose practice staffs a
local hospital 24 hours a day, and who actually advises the
carrier on coding issues, is now going through a post-payment
audit. In years past, the carrier has cited this physician as
providing laudable care; however, the carrier has denied the
physician's nighttime critical care claims. Since his practice
staffs the hospital 24 hours a day/7days a week, it is absurd
to suggest that patients do not require care in the middle of
the night. In fact, this 24/7 staffing resulted in the practice
being singled out as substantially reducing the mortality rates
in this hospital.
In his audit, 29 records were originally requested.
His alleged overpayment was extrapolated from approximately
$7,000 to $340,000. To maintain his appeal rights, the
physician agreed to an SVRS, which reduced the overpayment
projection to $220,000, which the carrier gave his practice 30
days to pay. This demand for payment would have put this
critical care practice out of business, and would have denied
hospital patients access to this type of intensive care, well
before this physician had exercised his appeal rights. The OIG
recently released a report stating that HCFA had been
incorrectly denying payments to critical care physicians. Even
so, this physician was still faced with this audit and an
alleged overpayment demand that would have shut down his
practice.
We hope to work with members of this Subcommittee during the coming
months to advance MERFA through the House. These are incremental,
modest reforms that should provide immediate relief to physicians and
providers who are extremely frustrated with the Medicare program. These
changes would help ensure that patients continue to have access to a
wide range of physicians and providers in the Medicare program in the
future.
The following are other substantial AMA regulatory concerns upon
which we urge the Subcommittee to take action:
Office of Civil Rights Policy Guidance on Persons with Limited English
Proficiency
The AMA strongly disagrees with the ``policy guidance'' issued last
August by the previous Administration that would require physician
practices treating Medicaid patients and other public program
beneficiaries to incur, at their own expense, the cost of hiring
trained clinical interpreters to assist the physician's patients who
have limited English proficiency.
The cost of retaining an interpreter vastly exceeds the Medicaid
payment for an office visit. As an example, one physician reported
recently that he had to pay $237 to hire an interpreter for a non-
English speaking patient, while his Medicaid reimbursement for the
visit amounted to $38. Such a policy, which also prohibits using the
services of family members (who are often most familiar with the
patient's history), is an unfunded mandate which is likely to
discourage physicians from treating Medicaid patients. It will have the
opposite results of its intention by exacerbating problems with patient
access to needed physician services. There are other more appropriate
ways to deal with this issue which include, but are not limited to:
demonstration projects with community and faith-based organizations,
allowing family members to serve in this capacity, and providing full
federal reimbursement for these translator services.
This is an instance where HHS has issued a new directive without
any physician or provider input. This new requirement will have
substantial negative consequences on the population it was intended to
aid. The AMA recognizes that valid and important issues exist regarding
patients with limited English proficiency, but we have called upon the
new Administration to withdraw this ill-conceived initiative and to
work with the physician and provider communities to fashion a desired
workable solution.
Pending Regulations Expanding the Scope of the Emergency Medical
Treatment and Labor Act (EMTALA)
HCFA has been attempting to expand the scope of EMTALA to reach
well beyond hospital emergency departments to encompass non-emergency
inpatient facilities and hospital outpatient department care. This
expansion will result in extremely serious implications for hospital-
owned physician practices and outpatient facilities, which may have to
maintain emergency personnel on site as a result of these guidelines
and impending regulations. There are many additional issues surrounding
follow-up care and transfer requirements that may also be addressed by
these new guidelines.
Congress expressed serious concerns last year regarding the
direction and impact of EMTALA on the physician and provider community.
In fact, in the Beneficiary Improvement and Protection Act, Congress
required the General Accounting Office (GAO) to conduct an important
assessment of EMTALA by May of 2001. The Office of the Inspector
General (OIG) also recently published a report on EMTALA which urged
the HHS to create a multidisciplinary group of public and private
sector representatives to address issues associated with EMTALA. This
type of communication between the agency and physicians and providers
is essential prior to the Agency moving forward with the promulgation
of new regulations. We urge the Subcommittee to evaluate carefully
HCFA's efforts in this regard and the attendant, disproportionate
burdens being placed on the country's physicians and providers.
HHS Rules on Administrative Simplification Provisions of the Health
Insurance Portability and Accountability Act (HIPAA)
The AMA strongly supports the principles of standardization
embedded in the HIPAA Administrative Simplification provisions.
However, we have urged the Administration to create a uniform
compliance date of two years after the last Administrative
Simplification rule is published (with exception for the individual
identifier rule, which may be significantly delayed).
These HIPAA provisions are intended to address the multitude of
conflicting rules and requirements imposed by public and private payers
which result in physicians spending more time on the administrative
requirements of their practices and allowing them less time for patient
care. Initially, the volumes of regulations that comprise these HIPAA
provisions will entail significant financial and staff expenditures. To
minimize this burden and to realize the goals of administrative
simplification, an orderly implementation process will be needed.
Physicians need to know which aspects of their administrative practices
need to be modified, as well as how and in what manner this should
occur. Adjusting to moving targets with rolling deadlines is neither
cost effective nor efficient for small physician practices.
HCFA Final Rule on Hospital Conditions of Participation for Anesthesia
Services
HCFA issued a Final Rule late last year that would eliminate
physician supervision of nurse anesthetists from the Medicare/Medicaid
Conditions of Participation for hospitals and ambulatory surgical
centers. The AMA strongly supports the position of the American Society
of Anesthesiologists and the Anesthesia Patient Safety Foundation that
revision of the current physician supervision requirement should be
considered only after the development and review of current scientific
outcomes data. We are deeply troubled by the position of the Department
that the elimination of physician supervision can be presumed to be
safe--without scientific proof--especially in light of the overall
improvement of anesthesia safety over the past several years during
which physician supervision has been required. We believe that Medicare
and Medicaid beneficiaries deserve better than a mere presumption of
safety that has no basis in the scientific literature.
We appreciate the opportunity to testify before the Subcommittee,
and we are heartened that the Subcommittee has held this hearing to
examine the regulatory burdens on physicians and providers. We look
forward to working with you to craft solutions to these issues, and we
believe that MERFA would provide an effective solution to physicians'
most immediate concerns.
[The attachments are being retained in the Committee
files.]
Chairwoman Johnson. Thank you very much, Dr. Corlin.
Mr. Mecklenburg.
STATEMENT OF GARY MECKLENBURG, PRESIDENT AND CHIEF EXECUTIVE
OFFICER, NORTHWESTERN MEMORIAL HEALTHCARE, CHICAGO, ILLINOIS,
ON BEHALF OF AMERICAN HOSPITAL ASSOCIATION
Mr. Mecklenburg. Madam Chairman, Members of the
Subcommittee, my name is Gary Mecklenburg. I am CEO of
Northwestern Memorial Hospital, a large teaching hospital in
downtown Chicago. But I am here today as chairman of the board
of the American Hospital Association, representing the AHA's
nearly, 5,000 hospital and health system members. Thank you for
the opportunity to testify.
To be clear, the American Hospital Association does not
believe that all regulations are bad. But we do think
government regulations should do at least one of three things:
improve the delivery of health care services to patients,
enhance patient safety, or facilitate the timely and
appropriate distribution of Federal funds to the health care
system. Our experience, however, shows that regulations often
do not achieve the desired effect. We are subject to 132,000
pages of rules that govern the Medicare and Medicaid program.
That is 3 times the size of the IRS Code and its Federal tax
regulations.
In addition to Medicare and Medicaid, we face rules from an
alphabet soup of Federal agencies, from OSHA and the EPA, to
the FDA, the FAA, and the IRS, just to name a few. We have a
chart before you that helps show the more than 30 agencies
hospitals must answer to.
Complying with standards of this many agencies and so many
regulatory tasks is no small task, especially in our small and
rural hospitals. For example, I am told that Memorial Hospital
in Gonzales, Texas, a 33-bed hospital, has 20 billing staff. At
my hospital, I can tell you we spend more than 3,200 staff
hours per month sorting through Medicare billing requirements
alone. In total, we employ more than 100 full-time staff solely
to ensure compliance with a variety of regulatory requirements,
26 of whom have been added just this year. This includes new
staff hired to work exclusively on the Health Insurance
Portability and Accountability Act of 1996 (HIPAA) and new
Medicare outpatient billing requirements.
But the impact of excessive regulation goes far beyond
finances. As you know, the health care system is facing a
critical, long-term shortage of nurses and other patient care
personnel. We also know that one of the significant factors
driving staff away from hospitals and making health care a less
attractive field for students is the diminished time for
bedside care and increasing responsibility for paperwork and
compliance. If we are going to meet the future needs of an
aging population, we have to get a scarce number of caregivers
back to what they were trained for and want to do, that is,
patient care.
Excess regulations also affect our patients and families
who become frustrated and confused when we can't explain
billing procedures or why they must answer the same question
over and over again.
To tackle these issues, the AHA Board of Trustees formed a
30-member advisory committee. Allow me to share a few of our
suggestions with you now.
First, implementation of regulations should be better
coordinated. Hospitals have had to implement too many
regulations at the same time that have required wide-ranging
impact on our operations. Therefore, we recommend enhancement
of the duties of the Office of Information and Regulatory
Management at OMB to allow for the more orderly release of
regulations to ease these transitions.
Second, hospitals must be able to challenge attempts by HHS
to overstep their authority. Today, if hospitals wish to seek
judicial review of a regulation, they must knowingly violate
Medicare law and risk exclusion from the program. That is too
high a price to pay. We are not looking to bring every
disagreement to court, but when rulemaking procedures are not
followed, hospitals deserve due process. Congress should enact
legislation to provide hospitals and other providers with a
specific opportunity to appeal decisions made by HHS on
questionable Medicare policies.
Third, MedPAC should be required to include hospitals'
compliance costs when recommending payment rates. Complex
regulations are an increasing hospital cost. An AHA-
commissioned study found that the cost of implementing HIPAA
could cost as much as $22.5 billion over 5 years for just three
of the rule's proposed provisions.
Fourth, paperwork requirements should be streamlined. For
example, patients must fill out the 25-question Medicare
Secondary Payor questionnaire every time they come to the
hospital. We recommend altering this standard to require
completion of the MSP every 90 days for recurring services.
Finally, Congress should enact the Regulatory Fair Warning
Act, introduced by the 106th Congress. This bill would help
stop the enforcement of ambiguous and conflicting regulatory
pronouncements.
Though most of the examples I have given today come from my
hospital's experience, I believe I speak for hospitals across
the country. We need to carefully examine the impact regulation
is having on our organizations. We pledge to work to make the
health care system better for patients, but need the assistance
of the regulatory agencies and Congress to achieve this goal.
Thank you again for the opportunity to testify, and I look
forward to answering your questions.
[The prepared statement of Mr. Mecklenburg follows:]
Statement of Gary Mecklenburg, President and Chief Executive Officer,
Northwestern Memorial Healthcare, Chicago, Illinois, on behalf of
American Hospital Association
Madam Chairman, I am Gary Mecklenburg, president and CEO of
Northwestern Memorial Healthcare in Chicago. I am here today on behalf
of the American Hospital Association's (AHA) nearly 5,000 hospital,
health system, network, and other health care provider members. We are
pleased to have the opportunity to testify on the complexity and burden
of Medicare's regulations on providers.
Though Northwestern Memorial Hospital's history dates back to the
mid-1860s, the Northwestern of today was created in 1972 when two
leading Chicago hospitals, Wesley Memorial and Passavant Hospital,
consolidated their services. Today, Northwestern Memorial is the
primary teaching hospital for the Northwestern University Medical
School and enjoys a national reputation as a strong, well-managed
organization. The hospital is staffed by more than 5,000 caregivers, in
addition to 1,200 physicians in 30 medical and surgical specialties,
all dedicated to the organization's mission of putting ``Patients
First.'' In 2000, Northwestern Memorial provided care for more than
304,000 outpatients and admitted more than 35,000 patients. The
hospital has a diverse patient population in its urban locale, serving
patients with many ethnic and socioeconomic backgrounds.
MAZE OF REGULATIONS
As a large urban hospital, Northwestern Memorial is well acquainted
with the maze of regulations Medicare and Medicaid requires us to
comply with on a daily basis. Government regulations should improve the
delivery of health care services to patients, enhance safety, and
facilitate the timely disbursement of federal funds in the health care
system. However, regulations can also have the opposite effect.
Regulations that miss the mark can force a wedge between patients and
their caregivers. They divert limited resources to administrative
paperwork and create a morass of complicated and duplicative
requirements that confuse those they are supposed to guide.
Allow me to share with you the regulatory maze that hospitals,
health systems and other providers must navigate every day. In addition
to Medicare and Medicaid, hospitals and health systems face laws,
regulations and guidance from the Occupational Safety and Health
Administration (OSHA), the Environmental Protection Agency (EPA), the
Food and Drug Administration (FDA), the Federal Aviation
Administration, Federal Communications Commission, the Internal Revenue
Service (IRS), and other regulatory agencies. The attached chart
depicts the web of regulators to whom hospitals must answer. There are
at least 30 entities issuing some type of rules, regulations or
instructions to hospitals.
The Mayo Foundation estimates that we are subject to 132,720 pages
of rules that govern the Medicare and Medicaid programs--that's three
times the size of the IRS Code and its federal tax regulations. Besides
federal regulations, hospitals must comply with state and local
regulations, which can be complex and costly. For example, hospitals in
California are required to meet sweeping seismic safety regulations
that require hospitals at risk for collapse during an earthquake to be
retrofitted, rebuilt or closed by 2008. These requirements are
estimated to cost $24 billion.
Complying with this many pages of regulation is clearly no small
task. In fact, some rural hospitals have almost as many billing clerks
as they do beds. In Gonzales, Texas, Memorial Hospital has 33 beds and
a billing staff of 20 employees. At Northwestern Memorial, our patient
financial services department spends more than 3,200 staff hours per
month, or 38,400 staff hours per year sorting through Medicare billing
requirements alone. This year, Northwestern Memorial Hospital is adding
26 new FTEs solely to ensure compliance with regulations. This includes
new staff hired to work exclusively on the Health Insurance Portability
and Accountability Act (HIPAA) and our staff devoted to Quality
Strategies and Management. Our estimated costs for these activities
thus far, excluding space and support expenses, is nearly $5 million
annually.
Hospitals are drowning in this sea of government rules and
regulations. Lost is a sense of fairness, due process and common sense.
And the real victims are patients, because regulatory burdens are
impeding the efficient delivery of health care. Hospitals are forced to
direct more and more resources to paperwork--resources that could be
better used on direct patient care. It is time to make the regulatory
process make sense.
We are not the only ones who feel this way. Health and Human
Services (HHS) Secretary Thompson echoes our concerns. In his
confirmation hearings, he expressed strong views about Medicare's
regulatory overload. ``Patients and providers alike are fed up with
excessive and complex paperwork . . . Complexity is overloading the
system, criminalizing honest mistakes and driving doctors, nurses and
other health professionals out of the program,'' he said. It is
important to note that the regulatory burden is a contributing factor
to the health care staff shortage the United States is experiencing--
nurses, doctors and technicians are leaving health care professions in
pursuit of other opportunities.
Earlier this year, the AHA Board of Trustees formed a 30-member
Advisory Committee on Regulatory Reform and Relief to address the
problems that hospitals face in trying to comply with federal rules and
regulations. To date, the AHA has identified five areas for process
reform, and four instances for refinement of current regulations. Allow
me to share these suggestions with you now.
PROCESS REFORMS
Improve coordination in the release of federal regulations. First,
we urge the government to better coordinate the release of regulations.
In 2000, hospitals received numerous complex regulations from the
Health Care Financing Administration (HCFA), OSHA, HHS, EPA and FDA,
several of which required sweeping changes to our information systems.
For example, to implement prospective payment systems for Medicare
skilled nursing care, home health care, outpatient care, and transfers
of inpatients, hospitals have had to make significant changes to their
patient data collection, coding and billing systems. This is in
addition to other regulations hospitals are currently in the midst of
implementing, such as uniform electronic transactions standards,
privacy standards and prospective payment for rehabilitation services.
Such extensive and frequent systems updates are especially troublesome
for small and rural hospitals that have limited information systems
staff.
We believe that the implementation of regulations should be better
coordinated in and amongst the various federal agencies. To that end,
we recommend enhancement of the duties of the Office of Information and
Regulatory Management at the Office of Management and Budget to allow
for the orderly release of regulations so that providers'
administrative and information systems are not overwhelmed.
Allow providers their day in court. Hospitals must also be able to
challenge in federal court any attempt by HHS to overstep its authority
or to enforce questionable policy in the Medicare program without
following established rulemaking procedures. Today, if hospitals wish
to seek judicial review of a regulation, they must knowingly violate
Medicare law and risk exclusion from the program. That's too high a
price to pay for the opportunity to question rules that so
fundamentally affect our operations. It's interesting to note that
regulations promulgated by any other agency permit a challenge under
the Administrative Procedures Act. Hospitals are not looking to bring
every disagreement to court. However, the law requires that HHS issue a
regulation and act within certain parameters. When these procedures are
not followed, hospitals deserve due process in court. Therefore,
Congress should enact legislation to provide hospitals and other
providers with a specific opportunity to appeal decisions made by HHS
with respect to questionable Medicare policy.
Require MedPAC to include hospitals' compliance costs when
recommending payment rates. The cost of caring for patients continues
to increase as a result of complex regulations such as HIPAA and
greater technological advances in such areas as pharmaceuticals and
blood products. An AHA-commissioned study, looking at hospital costs
alone, found that the cost of implementing HIPAA could be as much as
$22.5 billion over five years, for three of the rule's proposed
provisions. In addition, new advances in blood filtration are expected
to increase the price of blood by 50 percent.
The costs incurred by hospitals to comply with federal regulations
and standards are simply part of our costs to provide care to patients.
Therefore, MedPAC should be required to annually aggregate the
estimated impact of a regulation on providers' payments and costs, and
to incorporate this aggregated impact into the Medicare inflationary
market basket update.
Consult health care professionals on rule development. Early in the
development process, regulatory agencies should consult those affected
by a regulation--the caregivers--so practical implementation issues and
problems can be identified and resolved before a particular regulatory
approach is locked in. An example of this problem is last year's
ambitious implementation schedule of the outpatient prospective payment
system. Despite providers' warnings, late changes to the implementation
caused updated software to be unavailable in time. Fiscal
intermediaries (FIs) were then unable to process outpatient claims for
more than six months. For Northwestern, this meant $2.3 million in late
reimbursement.
To facilitate improved rule development, agencies should be
required to publicly release databases, cost estimates, assumptions and
methodologies at the time notice is given of a proposed rule. Regulated
entities could then conduct their own studies and analyses, and
possibly suggest alternate regulatory models that would be more
appropriate. We fully support Secretary Thompson's recent
recommendation that HCFA pilot test new regulatory measures for
feasibility and workability before requiring them of providers
nationwide.
Enact the Regulatory Fair Warning Act. Today's highly regulated
health care environment demands that federal rules and regulations are
issued in a timely manner, and made available and understood not just
by those who are regulated by them, but also by those who enforce them.
Passage of bipartisan legislation similar to the Regulatory Fair
Warning Act, introduced by Rep. George Gekas (R-PA) in the 106th
Congress and reported favorably by the House Judiciary Subcommittee on
Commercial and Administrative Law, would help stop ambiguous and
conflicting regulatory pronouncements. Specifically, the Regulatory
Fair Warning Act would prevent federal agencies from penalizing
businesses or entities for alleged violations if:
the rule was not published in a public document;
the agency did not give fair warning that a type of
conduct is prohibited or required; or,
the agency had already given specific guidance that
contradicts an inspector's claim that the regulation had been violated.
CURRENT REGULATIONS IN NEED OF REFINEMENT
Streamline paperwork. Much time, effort and expense could be saved
if paperwork requirements were streamlined. For example, patients must
fill out the 25-question Medicare Secondary Payor (MSP) questionnaire
every time they come to the hospital for recurring services, such as
chemotherapy or blood work. Altering this requirement to require
completion of the MSP every 90 days for recurring services would be a
substantial improvement. We commend Rep. Saxby Chambliss (R-GA) for his
efforts in convincing HCFA to no longer require a MSP questionnaire be
completed for every outpatient rehabilitation therapy encounter.
However, the agency has yet to implement this improvement and some FIs
still require completion of the MSP.
In addition, hospitals to which doctors' offices forward specimens
for laboratory analysis are required to contact a beneficiary whose
specimen was submitted, and collect information about possible
secondary insurance coverage. Beneficiaries often react with suspicion
when contacted by a hospital lab asking them personal questions. They
naturally assume that their physician is handling the lab tests.
Independent labs are not required to collect this information. Hospital
labs should be treated no different than independent laboratories
providing the same service.
Fix the costly and needlessly burdensome HIPAA medical privacy
regulation. Hospitals are encouraged by Secretary Thompson's decision
to re-open the privacy rule for comments and urge him to suspend the
effective date and fix the rule. We believe a better privacy rule would
benefit patients and providers alike. Many provisions in the final rule
and the aggressive implementation schedule were written without
consideration of the impact on patient care and the high costs of
compliance. As I mentioned earlier, an AHA-study looking at hospital
costs alone, found that the cost of only three key provisions of the
proposed rule could be as much as $22.5 billion over five years.
The AHA has long supported the development of uniform national
privacy rules. However, HIPAA's privacy rule, as currently written, is
overly burdensome and its implementation schedule too aggressive. We
believe concerns about the rule's complexity, costs and implementation
timetable must be addressed prior to the rule's effective date.
Emergency services needed to stabilize patients should not be
denied payment. As a participating provider in the Medicare program,
Northwestern is required to screen any individual who comes to the
emergency department to determine whether that person has an emergency
medical condition or is a woman in active labor and, if so, to
stabilize him or her. To adequately screen and stabilize the patient,
we often employ ancillary services that are routinely available to the
emergency department. Medicare sometimes denies payment for the
services furnished in the emergency department because they exceed the
local medical review policies (LMRPs) or utilization guidelines for
coverage and frequency established by the Medicare fiscal
intermediaries. However, we are prohibited from billing beneficiaries
for such services unless we notify patients in advance that the service
may not be covered (advanced beneficiary notice). Conversely, we cannot
notify patients in advance because the Inspector General interprets
this advance notification of possible non-coverage as a delay in
screening and stabilization. Hospitals, caught in a Catch-22, are often
left with an unpaid bill for emergency care.
To reconcile these conflicting requirements, services furnished in
the emergency department should be exempt from denials based on LMRPs,
and Medicare should pay for all services necessary to screen and
stabilize patients.
Limit data collection to what is necessary for payment and quality.
Prospective payment systems should be simple, predictable and fair.
Unfortunately, the patient assessment tools for skilled nursing,
rehabilitation and home health are far from ideal. In fact, HCFA has
devised three separate instruments, the Outcome and Assessment
Information Set (OASIS), Minimum Data Set (MDS), and MDS-PAC, which
collect much extraneous information, lack statistical reliability, and
are extremely burdensome on hospitals. We concur with MedPAC's
recommendation in its annual report to Congress (March 2000) that ``the
secretary should review all post-acute data collection requirements.
Each item should have an explicit rationale, and only information
needed for accurate billing, risk adjustment, or quality measurement
should be required.''
COMPLIANCE COSTS ARE HIGH
Complying with this growing mountain of rules and regulations comes
with a high administrative price tag.
At Northwestern Memorial, we take corporate compliance seriously.
We have committed a great deal of time and resources to ensure that we
follow state and federal regulations. We have a corporate compliance
department headed by a corporate compliance officer, who is also an
experienced health care attorney. The hospital's corporate compliance
committee includes 10 senior officers who meet monthly to discuss
regulatory changes and compliance initiatives. We have an internal
audit department with a staff of six, who actively focus an increasing
amount of time on Medicare-related compliance issues. Northwestern
employs several outside consultants to help us prepare for review by
HCFA and other agencies. In addition, we have numerous internal cross-
functional task forces dedicated to ensuring compliance with
regulations covering the Emergency Medical Treatment and Active Labor
Act (EMTALA), coding, laboratory tests, patient observation and
employee education, among others.
Besides the known expense of time and resources, burdensome
regulations incur hidden costs--a prime example being the toll they
take on employee morale. People choose to work at hospitals because
they want to help others. The current regulatory environment buries
dedicated employees in bureaucratic paperwork. In today's tight job
market and shrinking caregiver workforce, we face employee exodus to
jobs that involve less red tape and hold the potential for greater job
satisfaction. Constantly training and educating new staff in the
intricacies of these burdensome regulations is another hidden cost that
hospitals must bear.
CONCLUSION
Hospitals' first priority is to provide high-quality care to our
patients. Many regulations contribute to our efforts to provide quality
patient care, but others simply drain resources away from that goal,
placing a financial strain on providers.
Madam Chairman, we all agree the health care industry should be
regulated. There are valid reasons why HCFA, the Joint Commission on
Accreditation of Healthcare Organizations, the IRS and OSHA should
monitor hospitals' activities. However, the strain of 30 or more
organizations issuing thousands and thousands of pages of often
conflicting and complex rules, instructions and laws is hurting the
health of our nation's hospitals. There is no coordination among
agencies that regulate providers, and rules appear to be issued in a
vacuum with no regard to the fiscal consequences of compliance and the
impact on our daily operations.
Though most of the examples I have given today come from
Northwestern Memorial's experience, I speak for hospitals across the
country, large or small. The AHA is ready and willing to continue our
work with HHS, HCFA and other agencies to improve the way rules and
regulations are promulgated and implemented. We pledge to do all we can
to help make the regulatory system work better not just for hospitals
and health systems, but also for the patients and communities we serve.
But we need the assistance of the regulatory agencies and Congress to
achieve this goal.
I thank the Committee again for the opportunity to describe the
regulatory difficulties hospitals face. I welcome any questions you may
have.
[GRAPHIC] [TIFF OMITTED] T4213A.001
Chairwoman Johnson. Thank you very much, Mr. Mecklenburg.
Ms. Ousley.
STATEMENT OF MARY K. OUSLEY, SENIOR VICE PRESIDENT, HEALTH
SERVICES, MARRIOTT SENIOR LIVING SERVICES, BETHESDA, MARYLAND,
ON BEHALF OF AMERICAN HEALTH CARE ASSOCIATION
Ms. Ousley. Good morning, Madam Chairman and Members of the
Subcommittee. My name is Mary Ousley, and I am here today on
behalf of the American Health Care Association. I have been in
the caregiving profession for nearly three decades. I am a
registered nurse and a licensed nursing facility administrator.
I would like to commend you, Madam Chairman, on your vision
for long-term care and for taking the time to know our
profession and the care needs of the beneficiaries we serve.
I have worked both formally and informally with the Health
Care Administration for many years, representing the long-term
care profession. I am not here to bash HCFA. I consider the
individuals that I have worked with to be not only my
colleagues but also my friends.
However, there is a storm approach long-term care. We have
a demographic crisis brewing, and we need to address that
today. The baby boomers are retiring, the supply of care givers
is dwindling, and recruitment has become virtually impossible.
Financially, nursing facilities are treading water. We are
facing dual fronts with government financing care at less than
cost and a staffing crisis of epidemic proportions. A primary
contributor to this crisis is the regulatory oversight system.
The system demoralizes care givers, burdens them with endless
paperwork, and perhaps far, far more importantly, affords the
long-term care professional very little respect for their hard
work and dedication to the seniors of America.
I am not here today to ask for less government. I am here
to ask for smarter, more accountable government.
We all know that however well intended this system for
oversight for nursing facilities has been, it has failed to
measure or improve quality in our Nation's nursing facilities.
What was originally envisioned by the Institute of Medicine in
1986 to be residence-centered, outcome-oriented, and
consistent, there is little resemblance today with what care
givers deal with.
What has evolved is a regulatory system that is subjective,
process oriented, a snapshot that focuses on punishment. After
three decades in this profession, I can absolutely tell you
that we cannot punish our way to improvement. We can only
improve if we do that internally and we do it collaboratively.
Let me be clear about one thing. Chronic poor providers, if
they are unable or unwilling to meet the standards, should be
terminated from the program. But with such a failed system, how
can we know what is the right action?
The questions before us are: What is the role of government
in quality? And what reforms would garner the most meaningful
improvements?
Number one, we believe that the Health Care Financing
Administration must adopt new technologies that create an
objective system that provides useful, real-time, accurate
information to consumers and providers alike. Such technologies
are being used today by health care providers to improve our
quality of care. The bottom line is, as quality measurement has
improved, HCFA's inspection system has stagnated.
I would like to highlight a few specific recommendations.
Number one, as we move forward, allow and create a
collaborative system so providers and regulators can work
together. Investigators and surveyors must respect the
parameters of clinical practice for both physicians and nurses.
Prevent HCFA from closing nurse aide training programs unless
the deficiencies are tied directly to those programs. And
implement a fair and impartial system of appeals that will
dispose of grievances in an equitable way, quickly impose
citations that are merited, and do away with those that are
not. Allow additional care givers that can demonstrate
competency to perform such tasks, such as feeding and
hydration, to meet the needs of residents under the direction
of a registered nurse. And please stop the punitive approach
that is driving care givers and professionals out of long-term
care and help us facilitate a system back to what was
originally envisioned of residence-centered.
Second, as we look to the future, I think that the Health
Care Financing Administration should grant waivers for States
that have innovative ways to improve better oversight.
My third recommendation for reform is broader restructuring
and, yes, focusing on resources. We do not believe that the
Health Care Financing Administration today has all the
resources that they need to get the job done as they are
expected to do. And we believe as we move forward that it is
imperative that we move toward one primary objective: that
policy and oversight of providers be housed together with a
distinct philosophy of partnership.
I have confidence that as we all work together in this new
spirit of partnership, we can establish a fresh start and
provide positive dialog with the interests of patients always
first.
Thank you very much for the opportunity to testify.
[The prepared statement of Ms. Ousley follows:]
Statement of Mary K. Ousley, Senior Vice President, Health Services,
Marriott Senior Living Services, Bethesda, Maryland, on behalf of
American Health Care Association
Good morning Madam Chairman, and Members of the subcommittee. Thank
you for inviting me here today to provide perspective on reform of the
Health Care Financing Administration. I am honored to be here.
My name is Mary Ousley, and I am here today on behalf of the
American Health Care Association. The American Health Care Association
is a non-profit association representing more than 12,000 non-profit
and for-profit skilled nursing, assisted living, subacute facilities,
and facilities treating the developmentally disabled nationwide.
Let me briefly tell you about myself. I have been in the caregiving
profession for nearly three decades. I am a registered nurse, a
licensed administrator, and someone with first-hand experience on the
front lines of caregiving. I am not here to beat up on HCFA. I have
worked with them both informally and formally, in many capacities, and
on many issues. However, it is critical that we enlist them as partners
in serving the beneficiaries through a more active role in quality
improvement.
I would like to commend you, Madam Chairman, on your vision for
long term care, and for taking the time in the last few years to roll
up your sleeves and get to know the intricacies of the care needs--and
care environment--of our nation's frail, elderly and disabled
population.
There is a storm approaching in long term care. We have a
demographic crisis brewing that, if not addressed today, will severely
threaten the quality and availability of care for the baby boomers who
are now entering retirement. While this generational bubble begins to
strain the long term care system, the supply of caregivers dwindles to
crisis levels, and the oversight system serves to promote distrust of
providers, demoralizes caregivers, and scares families.
Financially, nursing homes are treading water. We appreciate the
Medicare PPS adjustments you made in BIPA last year because these
adjustments are providing some stability to our Medicare patients. But
it is imperative to note that nearly 70% of our residents are Medicaid
beneficiaries, and that is where our real financial trouble lies.
You spoke eloquently a few short month's ago about the state of
caregiving in this country, and your words have been appreciated by
those hard working women who perform a very difficult and demanding
job. You said, ``We're going to drive people out of the caregiving
environment--because they came there to give care, not to do
paperwork.''
All I can say is, how right you were. We are facing a staffing
crisis of epidemic proportions in every part of the United States.
Turnover rates in our profession are more than 80%. Recruitment is
nearly impossible. This crisis is compounded exponentially by a
regulatory system that forces caregivers to focus an extraordinary
amount of time on cumbersome paperwork and complex, confusing
regulatory requirements.
This burdensome system is having a negative impact on patient care
by driving good providers out of the business. Caregivers who enter
this profession today quickly find themselves spending more time on
paperwork describing their care, and justifying their actions on behalf
of patients--than on actually delivering care.
I am not here today to ask for less government--I am here today to
ask for smarter, more accountable government--government that works in
the best interest of promoting and maintaining quality care for
beneficiaries.
Since the Institute of Medicine (IOM) study in 1986 and the Nursing
Home Reform Act of 1987 (OBRA '87), nursing facilities' daily
operations have been inextricably linked to the Health Care Financing
Administration (HCFA). The system of oversight that exists today--
though well-intended--grew like a vine, and evolved into an ineffective
bureaucracy.
The result of this evolution is that what was originally envisioned
by the IOM to be a resident-centered, outcome-oriented, consistent
system of oversight, was implemented in a manner that meets none of
those criteria, and in many cases, does just the opposite.
Today, providers face a system of oversight that is an entirely
subjective, process-oriented snapshot inspection system that focuses on
punishment--not quality improvement. This system bears very little
resemblance to what OBRA '87 envisioned.
The current system is susceptible to political forces, and
providers are caught in the crossfire. The result of the current
political climate is a type of ``catch-22'' scenario, in which a low
number of citations is interpreted as poor oversight, while a high
number of citations are seen as poor care. Clearly the incentive for
inspectors is to cite more deficiencies.
The subjectivity of the survey system makes it unpredictable. This
means that no provider, even if they have done everything correctly,
can predict whether they will receive citations on any given
inspection. This helps explain the wide variation in the charts
attached to my testimony.
The Institute of Medicine (IOM) in their December 2000 report
``Improving the Quality of Long Term Care,'' discovered that ``forty
concurrent surveys in ten states found that state surveyors were
inconsistent in detecting problems related to outcomes of care . . .'',
and that ``At the same time, states surveyors also cited some
facilities for deficiencies that appeared to be a function of their
high prevalence of seriously impaired residents rather than poor
quality care.'' In our view, a system that consistently fails to
measure quality has little hope of improving it.
Let me again be very clear about one point: We are not talking
about less regulation, we are talking about better, more intelligent
regulation.
We need regulation that holds, as its ultimate goal, the
improvement of care quality we provide to our frail, elderly and
disabled patients. We absolutely believe that the underlying concepts
in OBRA'87 are sound. Yet, we as providers know that it has been the
implementation and evolution of that statute-- through HCFA regulation
and related policy-- that has missed the mark.
Dr. William Scanlon of the GAO, when asked by Senator Grassley last
September if the quality of the surveys and the data derived from them
is reliable enough to make judgements about the level of quality
provided in nursing homes, answered: ``I am afraid it is not.''
Over four years ago, HCFA itself, when writing about the same
subjective inspection system used in hospitals wrote, ``. . . there are
no data supporting the link between structure and process requirements,
and positive patient outcomes. The combination of process-oriented
requirements with an enforcement approach that focuses on identifying
providers that do not have the required structures and procedures in
place, no longer represents the best available method for assessing and
improving hospital quality of care.''
I would ask then, how could it represent the best available method
for assessing and improving nursing home quality of care?
So, the questions before us are: What is the role of government in
quality? What reforms would garner the most meaningful improvements?
And, how can we ensure these reforms will provide continuous
improvement in quality of care while protecting residents?
First, let me state that chronic poor performers that are unwilling
or unable to improve the level of quality they provide should be
closed. But this is extremely hard to judge because as the GAO
testified, our oversight system does not provide a reliable measure of
quality, only compliance with process requirements. It also does not
reward excellence in caregiving with incentives to providers that
achieve great outcomes.
HCFA must adapt to new technologies that create an objective system
that provides useful, accurate information to consumers and providers
alike.
In many states, the oversight bodies that contract with HCFA to
inspect nursing homes have applied for waivers from HCFA to use modern
technology in quality measurement, to use outcome measures, or provide
a collaborative approach to quality improvement. Unfortunately, all of
these waivers have been denied.
The American Health Care Association (AHCA) has also worked toward
meaningful improvement of the oversight system for years. We have
developed software that gives providers information on their
performance on key ``quality indicators'' (QIs) measured against
national and local benchmarks. As opposed to the current snapshot, this
system monitors actual resident conditions continuously over time. We
have also developed customer satisfaction tools that measure residents'
and families satisfaction with the care received.
However, these efforts have been stymied by HCFA's refusal to share
the aggregate data (MDS) that each provider transmits to them
electronically every month. Members of this subcommittee have called
HCFA asking them to provide these data to facilities to improve quality
internally. We have even filed a Freedom of Information Act (FOIA) suit
to get this quality information, with no response. This makes little
sense, and is emblematic of the overall problem where HCFA can not
move, and retards quality improvement.
The bottom line is that as quality measurement technology has
advanced, and HCFA's inspection system has stagnated--As a result it
has become out of date, a more subjective and more punitive system.
It is imperative that the focus of HCFA oversight be changed to one
of quality improvement in which government becomes a true stakeholder
in improved quality for beneficiaries.
We urge you to adopt three types of reform of nursing home
oversight:
One is making the much-needed incremental changes in the
current regulatory system.
The second is to allow the regulators in the states to make
advances in oversight without facing certain denial by
Washington--to approve state waivers.
The third is broader restructuring of the role and
responsibilities--and resources--of the HCFA. Yes, we believe
they do not have adequate resources or training to do what is
expected of them adequately.
With regard to the incremental improvements to the current system,
the following are key areas in which minor changes could be made that
would improve the quality of regulation, and also the quality of care
we can provide. Below are 10 recommended steps:
1. Allow Collaboration--Create a collaborative system so
providers and regulators can work together to address problems.
In such a system, providers would retain responsibility to fix
problems, but surveyors would play a supportive role to help
providers achieve improvements. Currently, when surveyors find
a problem, they are not allowed to discuss possible causes,
provide technical assistance, or to suggest solutions. This
``no collaboration'' policy is an obstacle to ongoing
improvements in quality. This is directly opposite of the
approach taken with other providers such as clinical
laboratories. Solution: Guidance must be given to inspectors
through the State Operations Manual (SOM) to encourage
collaboration and compliance-assistance toward quality
improvement.
2. Allow providers to follow physician orders--All too often,
providers are cited for deficiencies for simply following the
orders of the residents' physician. Nursing home inspectors,
who are rarely physicians and do not have medical training,
often cite providers for giving medication as prescribed, but
that the inspector might not understand is appropriate and, in
the physician's judgement, is in the best interest of the
patient. This is the only instance in health care where less-
skilled personnel are allowed to second guess the orders of
physicians, and nursing home care providers get punished. This
system has forced providers to choose between government fines
and the well being of those for whom they care. Most of the
time, they pay the fine and protect the resident, but this
system must be changed. Providers need to be allowed to follow
the patients' doctor's orders without fear of citation.
3. Prevent HCFA from closing Nurse Aide Training Programs--We
are currently operating in a severe shortage of nursing home
workers. This shortage is predicted to rapidly escalate until
there are far fewer caregivers than needed. In this
environment, HCFA is terminating the in-house nurse aide
training programs for facilities with certain deficiencies or
enforcement actions (even if completely unrelated to the
training programs themselves). Clearly this ``punishment'' only
hampers the providers' ability to fix the problem and hire and
train adequate staff to improve quality. Termination of Nurse
aide training must only be an option when there is a deficiency
directly related to the training program itself.
4. Implement a fair and timely appeals process--Currently,
providers who want to dispute citations they believe have been
issued in error first appeal to the agency that issued the
citation. This process is not objective, and more often than
not, a decision is rendered against the facility. Next, they
must go through an administrative process that takes, on
average, 1 year and 2 months. If appealed further, the next
level, the Departmental Appeals Board (DAB) takes, on average,
1 year and 6 months. We must establish a fast and impartial
system of appeal that will dispose of grievances in an
equitable way, quickly impose citations that are merited, and
dismiss those that are not.
5. Enlist Resident Assistants--Allow additional caregivers to
help meet resident's daily needs. Currently, HCFA allows
untrained volunteers to perform nursing-related tasks, but the
paid staff of the facility can not help dress, feed, or even
push a wheelchair (even under direct RN supervision) unless
trained to become a full CNA. During this severe shortage of
caregivers, and amid concern about nutrition and hydration, we
need every caring hand we can find to help meet resident needs.
Legislation is being drafted by Members of this Committee to
address this problem through a demonstration program, and we
look forward to working with you to pass this into law.
6. Remove disincentives to improving facilities--Allow new
owners to improve facilities without threats of closure due to
previous problems. Today, a new owner who purchases a troubled
facility inherits the track record, fines, enforcement
penalties, and the termination status of the previous owner. In
some cases, facilities have been closed within months of the
takeover due to compliance problems that were cited before the
turnover. This policy discourages companies from taking over
problem homes and improving care. The government should work
towards improving care for residents--not prevent it. A
positive step forward would be to allow a new owner to start
with a chance to improve care.
7. Spend fine money improving care for residents--Funds
collected from nursing facilities through fines for care
problems should be spent on fixing the problem, not sitting in
state and federal coffers ready to be diverted to other
purposes. In the last 2\1/2\ years, funds collected from
nursing facilities by states alone amounted to over $20
million--and this does not include a large amount of federal
fines. The overwhelming majority sits in state coffers and is
not spent on the improvement of care. This is a significant
amount of money to take from the facilities that need it most,
and unconscionable to allow it to go unused for care
improvement. The federal government should mandate that fines
collected from troubled facilities be spent improving care in
those facilities. HCFA must review and find appropriate
citation levels for fines. At what level is correction less
desirable than punishment?
8. Prevent mandatory termination--Current law dictates that
if a facility has been cited for substantial deficiencies, the
clock starts running, and they must be found in compliance
within six months or face mandatory termination of their
Medicare certification. This may sound reasonable, but the
effect has been that homes fix all problems cited in the
initial survey, but have very minor new deficiencies in follow-
up surveys--for which they are terminated. Most homes cannot
remain open without being paid, and therefore residents are
forced to give up their home. The statute must be changed to
allow providers and regulators to consider other options for
the residents' benefit, and to give residents and their
families more voice in those decisions.
9. Prevent the labeling of Chains--It is inappropriate to
label all facilities that have common ownership as poor
performers just because of the shortcomings of one facility.
This is misleading to consumers and in no way fosters care
improvement. ``Guilt by association'' should not be tolerated,
nor allowed.
With regard to the second issue, I can be brief and keep it simple.
The oversight system works best when people closest to the beneficiary
have a stake in the decision making process. HCFA does have the
authority to grant Medicaid waivers to states, and should approve good
waivers. HCFA should also be granted similar authority for oversight of
dually-certified providers who serve Medicare beneficiaries as well.
Lastly, in terms of broader HCFA restructuring, we feel it is
imperative that any new structures put in place be targeted toward
achieving two major goals. The first is that policy and oversight for
providers of care be housed together, but with a distinct philosophy of
partnership. That government be a real stakeholder, accountable with
providers and dedicated to working collaboratively to improve quality
for beneficiaries.
The second major goal must be that the continuum of long term care
be made more seamless so that the mass of baby boomers needing benefits
can access services in a clear, rational manner. As the needs of
seniors shifts the benefits should follow the individual without
excessive paperwork and hand-offs between regulators.
In the final analysis Madam Chairman, it is imperative that the
HCFA of the future have the resources and the structure to meet the
needs of the millions of retiring seniors as the system meets the
challenge of this demographic boom.
I have confidence that government and health care providers seek
the same goal of ensuring quality care. With a new Administration, new
leadership at HHS, HCFA, and even right here on this Committee, we look
forward to establishing a fresh start, and a new, positive dialogue in
which caregiver and regulator alike always puts the interests of
patients first.
Thank you.
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[GRAPHIC] [TIFF OMITTED] T4213A.003
Chairwoman Johnson. Thank you very much.
Ms. Wilson.
STATEMENT OF SUSAN WILSON, R.N., M.P.H., VICE PRESIDENT,
CLINICAL OPERATIONS, AND CHIEF OPERATING OFFICER, VISITING
NURSE ASSOCIATION OF CENTRAL CONNECTICUT, INC., NEW BRITAIN,
CONNECTICUT; PRESIDENT, BOARD OF DIRECTORS, CONNECTICUT
ASSOCIATION FOR HOME CARE; AND MEMBER, NATIONAL ASSOCIATION FOR
HOME CARE
Ms. Wilson. Thank you, Madam Chairman, Representative
Stark, and Committee members, for inviting me to present
testimony today on behalf of Medicare beneficiaries and their
home health providers. I am Susan Wilson, vice president of
clinical operations for VNA of Central Connecticut, president
of Board of Directors for the Connecticut Association for Home
Care, and a Member of the National Association for Home Care.
In preparing for this testimony, we provided you with
extensive written testimony in reference to the issues that
face us today. If you refer to Attachment 1, it references the
8,000 pages of regulation under which home care is presently
working, which was published just between June 1999 and March
of this year. It primarily addresses the two most significant
regulations impacting home health care today: the Outcome
Assessment Information Set, or OASIS, and the implementation of
the prospective payment system.
I would like to just highlight a few areas, one of which,
obviously, is the overall concern for the prospective payment
system. The stringent payment limits that we experienced under
an interim payment system resulted in the closure of
approximately 3,400 agencies, and NAHC's preliminary PPS
reveals that 45 percent of the remaining agencies are now
reporting losses and difficulty in billing. It is
understandable that with any new system there are going to be
problems; however, the extent of the problems have created a
huge impact on cash flow and an overwhelming environment of
frustration. We literally have requested hundreds of
clarifications from HCFA in reference to the regulations, and
essentially they have remained unresolved.
Under PPS, we are mandated to refer to a common working
file which was intended to provide us with information
regarding the beneficiaries and the benefits they have
utilized. It is, however, cumbersome to use, as some providers
do not have access to the common working file, and the
information that is there is frequently difficult to access,
untimely, and inaccurate.
Home health agencies also have difficulty in processing
claims. When subject to medical review, they may be denied in
part or in full, and HCFA has issued no instructions for what
we are to do with partial denials. Also, there are errors which
occur, human errors which occur in the processing of claims,
and it can take up to an additional 30 days to resolve these,
if not more.
Also, beneficiaries are now receiving Medicare summary
notices which explain the changes; however, we found that they
often overstate the information by as much as 10 times. Notices
have been received in which the sum of the episodic payment and
the charges are lumped together, giving the appearance that the
home health agency has been overcharging or has been overpaid.
Although HCFA is in the process of correcting this information,
there is no plan to suspend these notices.
Just as the beneficiaries receive notice, we also receive a
notice called a remittance advice report. They are fraught with
errors and are often incomprehensible, leaving the reports of
little value to the providers.
Finally, the case mix adjustment system which is presently
used is difficult to use, at best, and found to be slightly
better than 30 percent accurate. Changes are definitely needed
in this to reflect more in terms of clinical care and clinical
factors rather than the service provision itself.
In my own agency, we have had the great fortune of having a
highly skilled staff that provide acute clinical interventions
and also extensive coordination to the community. I bring to
your attention an example of a 102-year-old woman in our
community who had pressure ulcers due to an ill-fitting brace.
Our intervention was requested twice a day, and the related
supplies were extensive. Today, that wound is healing, the
family has once again resumed the majority of her care, and
inpatient care has been avoided. However, the average cost of
supplies was $680 per episode, although we were only reimbursed
approximately $50. The agency sustained an average loss on a
total reimbursement of $1,410.
We have provided you with a list of recommendations that
would help in most of these regards. I do bring to your
attention in particular the elimination of the mandatory 15-
percent cut.
There are other issues which we face: an extensive
assessment form, which in combination can be upward of 20 pages
and duplicative in nature. The other issue which we face has
just come upon us: the home health advanced beneficiary notice.
This is primarily intended for duly eligible clients. We have
found that HCFA failed to provide accurate instruction in a
timely manner. It has been very costly for agencies to provide,
the forms are confusing, and, in particular, we are asked to
provide this information and submit claims on services that we
know full well are not provided, for example, home health aide
services only. We also have to deal with medical claims
reviews, technical denials, and sampling methodology.
In conclusion, on behalf of the National and Connecticut
Association for Home Care, we recognize the workload that HCFA
presently faces, as we all do. However, it also indicates
longstanding operational weaknesses, but we look forward to
working with the Committee and with HCFA to help resolve these
and would hope in the future that we can work together. I am
deeply honored today by the opportunity to represent not only
the work of home care providers throughout the Nation but, more
importantly, the interests and concerns of the sick, the frail,
and the elderly. And I thank you once again, Madam Chairman,
and the Committee.
[The prepared statement of Ms. Wilson follows:]
Statement of Susan Wilson, R.N., M.P.H., Vice President, Clinical
Operations, and Chief Operating Officer, Visiting Nurse Association of
Central Connecticut, Inc., New Britain, Connecticut; President, Board
of Directors, Connecticut Association for Home Care; and Member,
National Association for Home Care
Thank you, Madam Chairman, Representative Stark, Committee members,
for inviting me to present testimony on ways to bring regulatory relief
to beneficiaries and providers and restructure the Health Care
Financing Administration (HCFA). My name is Susan Wilson. I am Vice
President of Clinical Operations and Chief Operating Officer of the
Visiting Nurse Association (VNA) of Central Connecticut. I am also the
President of the Board of Directors of the Connecticut Association for
Home Care (CAHC), the voice of homecare in Connecticut, and a member of
the National Association for Home Care (NAHC).
NAHC is the largest national organization representing home health
care providers, hospices, and home care aide organizations. Among
NAHC's nearly 6,000-member organizations is every type of home care
agency, including nonprofit agencies like the VNA, for-profit chains,
public and hospital-based agencies and free-standing agencies. CAHC
represents 61 providers, delivering greater than 75 percent of all home
health and hospice services provided in the state.
Home health care providers that participate in Medicare are
required to be knowledgeable of and comply with a vast number of
statutes, regulations and policies, including Medicare coverage rules,
reimbursement guidelines, and quality of care standards. However, for
over the last two years, this burden has increased with a proliferation
of new requirements.
In preparing for this hearing, NAHC has compiled many of the
regulatory directives governing the Medicare home health program. These
include the Medicare Conditions of Participation, coverage rules,
standards for payment and appeals process (all found in Title 42, Code
of Federal Regulations); Interpretive Guidelines (HCFA Publication 7,
Appendix B); Home Health Agency Medicare Manual (HCFA Publication 11);
as well as numerous HCFA Program Memoranda and Transmittals. We have
included for your review a listing of these regulations and notices
comprising more than 8,100 pages of instructions (Attachment 1). The
majority of the listings published between the time period of June 19,
1999-March 5, 2001 principally address two most significant regulations
impacting home health agencies--the Outcome and Assessment Information
Set (OASIS) for home health and the implementation of the home care
prospective payment system (PPS).
In addition to the regulations and policies imposed by HCFA, home
health agencies (HHAs) must comply with all other applicable federal,
state and local laws and regulations. Some examples of the federal laws
include:
Occupational Safety and Health Administration (OSHA)
standards for:
protection against illness due to bloodborne
pathogens;
prevention of needlesticks;
prevention of transmission of tuberculosis; and
recording of work-related injuries and illnesses.
Department of Health and Human Services (HHS)
standards for:
Health Insurance Portability and Accountability Act
of 1996;
Culturally and Linguistically Appropriate Services;
and
Limited English Proficiency Guidelines.
Food and Drug Administration (FDA) standards for:
Medical devices.
For the purposes of this written testimony, I will highlight
several Medicare regulations and policies that impact the home care
provider's ability to deliver efficient patient care. These include the
requirements associated with PPS, OASIS, Home Health Advance
Beneficiary Notice (HHABN) and demand billing, medical claims review,
appeal of technical denials, sampling procedures for post-payment and
audit reviews, branch office designation, and Medicare cost reporting.
REGULATORY BURDENS
A. PPS
Under the Balanced Budget Act of 1997 (BBA), Congress mandated a
number of dramatic changes in the Medicare home health benefit,
including requiring that home health move to a PPS, and imposed an
interim payment system (IPS) until PPS could be put in place. The
stringent payment limits under IPS, which were in place from October
1997 through September 2000, reduced home health outlays far more than
expected, resulting in widespread home health agency closures
(approximately 3,400) and problems for beneficiaries in obtaining
access to care. The implementation of PPS represented a dramatic change
in billing and payments procedures for home health agencies under
Medicare. Now, when a home health agency admits a patient for services,
the agency submits a request for anticipated payment, or RAP, to
Medicare and receives a portion of the full payment for the 60-day PPS
episode. At the conclusion of the episode of care, the HHA submits a
final claim to Medicare and receives the remainder of the episode
payment. Payment is based upon a series of OASIS assessment questions,
which categorize a patient into one of 80 categories that are intended
to reflect differences in care needs.
While Congress has made several significant BBA modifications, many
agencies around the country continue to feel the financial constraints
imposed by the BBA coupled with the administrative adjustments required
for adaptation to the PPS.
NAHC's preliminary PPS survey of HHAs found that about 45 percent
of the agencies are reporting losses and difficulty with billing their
regional home health intermediary (RHHI), resulting in cash flow
problems. Although it is understandable that some problems would occur
in a new system, the extent of the problems has created an overwhelming
environment of frustration and increased stress within the HHAs. At the
same time, HHAs are experiencing record difficulty in recruiting and
retaining staff needed to adequately serve the growing population of
disabled and elderly patients. Financially burdened HHAs are hard-
pressed to compete with other employers that offer better wages, better
benefits, lighter workloads, and better hours.
HCFA has worked with the home care community to facilitate the
implementation of these new regulations and policies through meetings,
conference calls, Web site postings and list serves. However, due to
the breadth of these changes over the past two years, these efforts
have not been sufficient to ensure a smooth transition. NAHC, state
home care associations and HHAs have had to request literally hundreds
of clarifications from HCFA since the implementation of PPS. These
clarifications pertain to several areas, including information systems,
common working file, billing codes, claims review issues, explanation
of benefits to beneficiaries, payment remittances, and case-mix
adjustment.
Common Working File (CWF)
The (CWF) is a database that allows agencies to access information
about the enrollment status of Medicare beneficiaries and their
utilization of Medicare benefits. It is an important component of the
Medicare reimbursement system for home health agencies because PPS
bundles payment for all services related to home care during an episode
of coverage. In order to avoid duplicate billing, it is necessary that
all providers of services have access to the CWF and that the CWF is
actively updated. HCFA envisioned the CWF would provide accurate, up-
to-the-minute information about Medicare beneficiaries, but there are
problems. For example:
--When a Medicare beneficiary is discharged with services
completed from an HHA prior to the 60th day of an episode, the
CWF may still incorrectly show them as being under a home
health plan of care thus preventing other providers (such as
another HHA, medical supplier or outpatient therapy provider)
from being paid for services provided during the 60-day period.
--Other providers whose services should never be considered
bundled under the home health PPS rate have had claims rejected
due to a combination of instructional errors and system errors.
--It takes about 10 days for the CWF, which primarily
responds to regionalized queries, to verify a beneficiary's
admission status from the full national database.
--Certain providers and suppliers have no access to the CWF.
As a result, providers and suppliers report avoiding home care
patients for fear of claims denials.
Claims Processing and Review
HCFA has been diligent in its efforts to work with home health
agencies to resolve claims processing problems. In addition, HCFA has
developed new procedures for medical review under PPS. Nonetheless, a
number of problems continue to negatively impact cash flow.
--When claims are subject to medical review, they may be
denied in full or in part. HCFA has issued no instructions for
partial denials under PPS and some providers report claims
being held in suspense.
--Although HCFA reports that a fix is under way, RAPs
submitted by an agency that provided the initial care to a
patient have been rejected when the patient transfers to
another agency, and the second agency happens to bill first.
--When a provider makes a clerical error in the beneficiary's
Health Insurance Claim (HIC) number, payments can be delayed
for an additional 30 days in order for the erroneous
information to be purged from the system.
Medicare Summary Notice Over Billing Errors
The Medicare Summary Notice (MSN), also known as an explanation of
benefits, is issued to Medicare beneficiaries every month explaining
charges to Medicare. The MSN is required to provide information about
services and charges. However, the current MSNs overstate charge
information by as much as 10 times the actual charges. Although HCFA is
in the process of correcting MSN information, there is no plan to
suspend the erroneous notices, causing beneficiaries to complain about
excessive charges.
Some specific problems with MSNs are:
--Issuing an MSN after a single visit to the beneficiary,
based on a RAP submission. These MSNs include charge
information for a full episode payment.
--MSNs for final claims that erroneously report payments as
the sum of episodic payments and charges, giving the appearance
that the HHA has either overcharged or been overpaid by
Medicare.
--MSNs include nonsensical statements and single-line
listings of all services, making them cumbersome and difficult
to understand.
Remittance Advice Errors
The remittance advice (RA) was designed to provide detailed
accounts receivable information on Medicare payments and adjustments.
Since the implementation of PPS, HCFA altered the RA in order to
accommodate the changes in payment methodology. HCFA has been working
on correcting remittance advice information but providers and fiscal
intermediaries alike are still having problems using the RA to
reconcile payments.
--Intermediaries have instructed HHAs to manually track
payments since the first payments under PPS but this is time
consuming and is not an adequate solution. Manual tracking does
not allow agencies to determine how much they have been paid
for individual patients or what amounts have been withheld and
for what reasons.
--There is no indication that HCFA has a plan to address the
remittance advice problems that occurred in the first six
months of PPS.
At the Visiting Nurse Association of Central Connecticut (VNACC),
we have found that the problems with remittance advices are further
compounded because our intermediary has told us that it can adjust the
RAP despite the calculated case-mix grouper. The RAP is then not
reconciled until the final payment.
Case-Mix Adjustment
The home health PPS base rate is inadequate because of the budget
neutrality requirement compounded by a case-mix adjuster system that
needs refinement. The budget neutrality requirement for the first year
of PPS artificially lowers PPS payment levels by requiring that they be
based upon outlays for home health under the disastrous interim payment
system. As a result, there is widespread concern that existing payment
levels will fall short of agencies' actual expenditures in serving
patients. The PPS includes an 80-category system of case-mix adjuster
groupings (Home Health Resource Group or HHRG) that serves as the basis
of determining the episode payment. The system utilizes selected OASIS
data elements and features three domains, clinical/functional/service
utilization and therapy needs. The reliability of the case-mix adjuster
in explaining the variations in resource use by patients is slightly
better than 30 percent.
There are a number of refinements that need to be made to the case-
mix adjuster.
--More work must be done on diagnostic issues. Although the
case-mix research only identified three diagnostic conditions
(orthopedic, neurologic and diabetes), significantly impacting
costs, more research is needed on other historically high-cost
conditions, such as congestive heart failure, cancer and
stroke.
--Co-morbidities have not been taken into account. For
instance, a patient with diabetes, hypertension, and end-stage
renal disease, is much sicker than a patient with just
diabetes. Also, a stroke patient with Alzheimer's requires much
more care than a patient whose only condition is a stroke.
--Caregiver availability is not included in the case-mix
system.
--HCFA did not identify sufficient clinical factors, which
resulted in use of proxy information, such as number of therapy
visits and use of services prior to home health admission.
--Medical supplies, which can be very costly depending upon
the medical condition and supply needs of the patient, are not
case-mix adjusted. Instead, each episodic payment contains
approximately $50 for medical supplies, regardless of patient
needs.
--PPS requires that home health agencies provide all supplies
to the beneficiary during an episode of care, regardless of
whether they are on the plan of care or needed by home health
agency staff to carry out the plan of care. Many of these
supplies were used by the patient prior to initiation of home
health services, resulting in a disruption between the patient
and the prior medical supplier.
Following are some examples of case-mix and supply concerns faced
by the VNACC:
The population served by VNACC is older and generally lives alone
or with a caring spouse who suffers from an equal number of frailties.
It is not unusual to admit a client with five (5) or more co-morbid
conditions, all which significantly impact their well being, their
safety and the intervention required by staff to meet professional
standards of care. Under the present system of case-mix groupings, it
is the primary diagnosis alone that adjusts the level of reimbursement.
Many of our clients have other primary diagnoses, such as congestive
heart failure, hypertension, chronic obstructive lung disease and
atrial fibrillation, as co-morbidities. Because these diagnoses are not
in those three diagnostic categories that produce higher reimbursement
in the case mix system, the reimbursement rate is not adequate to meet
the high costs of their care.
In addition, VNACC provides care to a demographically older
population. Due to the provision of highly intensive, skilled clinical
interventions and the extensive coordination of community resources,
this agency is very successful in maintaining our older citizens in the
comfort of their home rather than in an inpatient setting. One such
example is a 102-year-old woman and her 74-year-old daughter, both of
whom required extensive and prolonged intervention. Due to pressure
ulcers induced by an ill-fitting brace, our intervention was requested
initially two times a day and the related supplies were extensive.
Today, that wound is healing, the family has once again resumed the
majority of her care, and inpatient care was avoided. On average, the
cost of supplies was $680.60 per episode and the agency sustained an
average loss on the total reimbursement of $1,410.04 per episode.
This client's 74-year-old daughter is also a client of this agency.
Her story is similar. While caring for her mother, this agency also
cared for her. Under the PPS system, the financial loss to this agency
was $1,934.22 inclusive of $395.03 in supplies alone.
Recently, our agency admitted an elderly woman, status-post total
hip replacement. Her plan of care for rehabilitation required the
intervention of a physical therapist only. In addition to her recent
surgery, this woman had also had a colostomy several years prior. She
was totally and proudly independent in her colostomy care. While her
additional health care needs were recognized and addressed, no further
intervention was required by the staff of VNACC. Under the present
system of reimbursement, however, this agency became financially
responsible for her ostomy supplies throughout the course of the
rehabilitation plan of care.
Legislative and Administrative Recommendations
Congress should safeguard the viability of the home health PPS by:
1. Directing HCFA to continually update the CWF and make this
data available to all health care providers on an expedited
basis.
2. Directing HCFA to maintain a listing of outstanding PPS
problems/issues complete with anticipated fixes for publication
on their Web site and on NAHC's home health list serve.
3. Establishing expedited payment schedules for Medicare home
health services such that initial episode payments to agencies
are equal to 90 percent of the anticipated episode
reimbursement amount and exempt home health agencies from the
14-day payment floor.
4. Directing HCFA to fix the errors on the Medicare
remittance advice.
5. Ensuring an equitable PPS with an adequate case-mix
adjuster by requiring ongoing, in-depth study and appropriate
adjustments as necessary.
6. Developing a case-mix methodology to account for variation
in costs of medical supplies.
7. Restricting the ability of HCFA to modify payment rates
and revise the PPS case-mix adjustment system so as to prohibit
any adjustments without adequate advance notice.
8. Ensuring continued care access for high-cost and medically
underserved patients under PPS by monitoring the adequacy of
payments, adjusting overall home health outlays as needed, and
developing a more adequate system of outlier payments.
9. Limiting the responsibility of the HHA for medical
supplies to those that directly relate to the patient's current
treatment plan.
10. Reimbursing agencies for costs incurred in complying with
regulatory and legislative requirements that were not included
in the initial calculation of the PPS rates.
11. Requiring HCFA to develop criteria for case-mix
adjustment corrections on a prospective basis through public
rulemaking, as authorized under the Benefits Improvement and
Protection Act of 2000 (BIPA).
12. Restoring the full market-basket updates for home health
services that were reduced under BBA and the fiscal year 1999
omnibus appropriations measure.
13. Eliminating the mandatory 15 percent cut, in home health
reimbursement scheduled for October 1, 2001, and pass
legislation introduced by Senator Susan Collins (R-ME) and
Representative Wes Watkins (R-OK) the ``Home Health Payment
Fairness Act of 2001'' (S.326 and H.R.975).
B. The Outcome and Assessment Information Set (OASIS)
In July 1999, HCFA implemented mandatory use of a uniform patient
assessment instrument, OASIS, for all patients served by home health
agencies participating in Medicare. Under the Medicare home PPS,
episodic (60-day) payments include $4.32 for ongoing agency OASIS
expenses, including telephone, computer hardware, editing and auditing
data entry, and supplies. During fiscal year 2001, an additional $5.50
is also added to the episodic rate for adapting OASIS forms to PPS use.
The HCFA OASIS User's Manual consists of 700 pages of instructions.
This assessment instrument is required to be used for all patients
regardless of payor source. While there are valid reasons to use a
uniform patient assessment instrument, the extensive administrative
responsibilities with OASIS must be streamlined to reduce costs,
increase direct patient care time, and improve staff satisfaction and
retention. HCFA has now indicated that it will be issuing to home
health agencies patient-identifiable, adverse event reports and report
cards on the agencies. This planned action raises numerous concerns
relative to patient privacy and report accuracy. Home health agencies
have had limited time to adjust to the OASIS method of patient
assessment and uses of the report. Further, the use of a first
generation adverse event report, which is not case-mix adjusted, is
occurring without adequate training of providers and the state
surveyors who will use these reports to survey agencies.
Recently the General Accounting Office (GAO) published a report,
``Medicare Home Health Care: OASIS Data, Use, Cost, and Policy
Implication, (GAO-01-205) which was mandated by the Medicare, Medicaid,
and SCHIP Refinement Act of 1999. GAO found that use of the OASIS has
made documentation of home health patient information more consistent,
while adding approximately 40 minutes to the start-of-care assessment.
GAO also reported that previous studies did not capture the additional
50 minutes per OASIS needed to check and edit collected data, enter and
transmit the information electronically, and train new staff. Eighty-
four percent of agency survey respondents disclosed that they provide,
on average, eight hours of training for newly hired staff. The GAO
thinks, however, that agencies receive adequate compensation for these
activities. In their opinion, the episode payment ``could provide an
ample cushion for many agencies, which can be used to offset the costs
associated with the OASIS mandate.''
With respect to privacy concerns, GAO stated that, while HCFA's
policies and procedures regarding disclosure of personally identifiable
information were generally consistent with the Privacy Act, they found
weaknesses in HCFA's implementation of them. Among their concerns were
some agencies failures to clearly inform beneficiaries of the purposes
for which their information may be disclosed and failure to routinely
monitor contractors and researchers use of the information. Further,
GAO found little or no oversight of how effectively the state agencies
and third-party payors are maintaining the privacy of OASIS
information.
While the report correctly notes an underestimation of the burden
of OASIS, the GAO conclusion regarding adequate financing for OASIS is
based on an incorrect understanding of PPS rates. The GAO neglects to
acknowledge that, while payment rates are based on 1998 utilization,
those payments are reduced significantly to comply with the ``budget
neutrality'' requirement in place during the transition to the PPS,
which reduced the base payment rate by approximately 25 percent. This
oversight leaves the public and policymakers with a mistaken impression
regarding the level of reimbursement provided under the PPS.
Furthermore, with respect to the GAO OASIS survey, the costs of newly
instituted requirements, such as additional assessments beyond those
required prior to OASIS, are not taken into account. These new
requirements have added significant costs to agencies as they continue
to comply with the burdensome and paper intensive OASIS mandate.
The VNACC incurred the following costs, which have not been
recognized, other than data entry costs, in the PPS payment rate:
Oasis Training Costs exceeded $9,000.00 for classroom training
alone. This does not include the 4 month preparation and implementation
by administrative staff, the individual conferencing and joint home
visits after orientation to assure staff competency in completing the
assessment and ongoing education and updates.
External Printing Costs = $15,000.00. Note: When revisions were
made to the assessment tools in preparation for PPS, all existing stock
needed to be destroyed and new tools set and printed.
Scanners/Software/Computers = $18,000.00
OASIS Data Entry Personnel Salaries = $25,000.00
OASIS Clinical Reviewer Salary-- $47,000.00
Additional non-billable visits to complete OASIS assessments = 228
Legislative and Administrative Recommendations
1. Congress should appropriately compensate providers to
cover the full cost of OASIS data collection and reporting of
Medicare home health skilled patients.
2. Congress should amend the Medicare Conditions of
Participation for Home Health and eliminate the requirement to
collect OASIS data on non-Medicare patients.
3. HCFA should provide training in the use of adverse event
and outcomes reports for quality improvements and focus on a
supportive, rather than a punitive, approach.
4. HCFA should strengthen its oversight of state agencies and
third-party payors' privacy maintenance of OASIS information.
C. Home Health Advanced Beneficiary Notices
Formal written notice is required to advise Medicare beneficiaries
when the home health services they need will not be covered under
Medicare, either in whole or in part. After several false starts, the
Home Health Advance Beneficiary Notice (HHABN) was implemented on March
1, 2001. The Medicare Conditions of Participation for home health
mandate that agencies notify the patient, orally and in writing, about
changes in Medicare coverage. The HHABN is HCFA's mandatory form.
When a beneficiary is given a HHABN notifying them of non-coverage,
the beneficiary has three options: (1) the patient wants the specified
home health services, agrees to be fully responsible for payment, and
asks for an official Medicare decision (demand bill); (2) the patient
does not want to receive the service; or (3) the patient wants home
health services, agrees to be responsible for payment but does not want
the HHA to submit a demand bill.
A HHA must submit a RAP when a patient requests that a demand bill
be filed with Medicare. Medicare pays the RAP even though the HHA
considers the care to be non-covered. Under PPS, a demand bill can only
be submitted at the end of a 60-day episode of care. Some state
Medicaid agencies have suggested that the HHABN must be given every
subsequent 60 days. Further, third party payers, such as Medicaid or
another insurance, refuse to pay until Medicare makes a payment
determination. This is a particular problem in the New England states.
This process for making the initial determination takes a minimum of 90
days, partly due to the fact that a determination cannot be requested
until the end of a 60-day episode or discharge of the patient. In those
states where the Medicaid agencies have taken an aggressive approach to
Medicare payment, the process will take longer because the states
exercise their appeal rights, including requests for reconsideration
and administrative law judge hearings. This process could take an
additional 60 days to two years. While Medicaid exercises its appeal
rights, the home health agency receives no payment for the care
provided, since Medicare recoups the RAP payment upon determinations of
non-coverage.
The financial implications for beneficiaries and agencies could be
enormous. Beneficiaries who do not have Medicaid or other insurance
must pay out-of-pocket for the services. Home health agencies must
continue to provide care they believe to be non-covered. By the time
the HHA receives Medicare's official determination, the beneficiary may
have already moved into a second, or third, episode of care.
Following are related HHABN issues and unresolved problems:
--The process imposes an additional paperwork burden on HHAs,
which must complete Medicare paperwork for patients who, in
fact, are not eligible for Medicare services or Medicare
payment.
--Intermediaries initially issued incorrect instructions to
providers resulting in the development of HHABN forms that
could not be used, and confusion regarding the scope of the
notification process.
--Although HHABN requirements were implemented March 1, 2001,
there are still many unresolved concerns, including: (a)
whether the HHABN must be provided to patients receiving only
personal care; (b) whether the HHABN must be provided every 60
days to ongoing patients; and (c) whether beneficiary-requested
demand bills must be submitted on an ongoing, 60-day cycle.
--If HHAs are directed to complete the notice every 60-days
for ongoing patients, agencies will have to complete additional
paperwork (e.g., discharge OASIS and start of care OASIS forms)
to discharge the patient from Medicaid and readmit them to
Medicare every 60 days. For VNACC, the two OASIS forms that
would be completed comprise 28 pages of documentation and 183
repetitive questions.
--Cash flow will be significantly impacted since the pre-
demand bill RAP payment will be recouped and, in many cases,
the HHA cannot pursue Medicaid payment until an official denial
is obtained from Medicare.
--During the time that a beneficiary's coverage determination
is under consideration by the intermediary, other providers
such as outpatient therapy providers and medical supply vendors
will have their claims rejected by Medicare B.
--In addition, some state Medicaid agencies will refuse to
pay for medical supplies until the official Medicare coverage
determination is obtained, because of the consolidated billing
requirement under PPS.
The VNACC found that HCFA failed to provide accurate instruction in
a timely manner, creating an environment that makes providers prone to
errors. These can be very costly, because agencies will be liable if
proper notice is not given. The process and forms are confusing to
Medicare beneficiaries, particularly in regard to their failure to
include other payer options, such as Medicaid. Other payers may
exercise the option to appeal adverse Medicare determinations to the
highest level. In Connecticut, due to our experience with Medicaid
third party liability (TPL) recovery efforts, we know the delay to
reach an administrative law judge (ALJ) could take a year or more. Due
to the delays in getting a determination, and then pursuing the appeals
process, along with the medical supply issues, many providers in
Connecticut are considering whether they can afford to provide services
to the Medicaid population. In addition to the reduction of 32 (24%) of
the agencies in Connecticut, this creates a serious shortage for the
clients.
Legislative and Administrative Recommendations
1. HCFA should clarify and simplify the HHABN and demand
billing notice procedures and allow for a single notice.
2. HCFA should, in an effort to decrease the paperwork burden
on health care providers, get states to honor single notices.
3. HCFA should clarify expeditiously the outstanding issues
and questions from the HHAs.
4. HCFA should allow HHAs to submit a final claim for
determination immediately after delivery of at least one visit
rather than at the end of the episode.
D. Medical Claims Review
Home health providers are experiencing increasing difficulties in
processing claims through the RHHIs for services provided to Medicare
beneficiaries. Problems cited by agencies include increased
inappropriate and excessive random and focused medical reviews, medical
review inconsistencies, and technical denials.
A wide variety of inconsistencies exist in payment decisions by the
RHHIs reviewing medical claims. Differences in interpretation of
homebound, technical requirements, and medical necessity requirements
have resulted in confusion among many home care providers. In addition,
local medical review policies (LMRP) are often more restrictive than
the coverage policy dictates, complicating coverage decisions further.
Given the current financial uncertainties related to intensified
audits and disallowances and inconsistent medical reviews, coupled with
the PPS billing problems, thousands of Medicare claims are currently in
dispute or on appeal. This has created severe cash flow problems for
many providers. Agencies are under severe financial hardships when
payments are delayed weeks or months while under review and appeal.
Reduced payment levels have a direct impact on agency ability to
respond to mandatory documentation and claims compliance. The costs to
comply with Medicare regulations are consuming a greater portion of the
PPS base payment rate. In order to keep losses to a minimum while
meeting increased compliance pressures, HHAs must implement more
sophisticated information systems that can adapt to the ever-changing
regulatory environment. The need for systems upgrades to capture
accurate data once for use by multiple users while protecting the
confidentiality and security of patient information is acutely needed
within HHAs. The long term viability of HHAs hinges on their ability to
file accurate and timely claims, treatment plans, and outcome
documentation.
At the VNACC, the business staff has shared that the increased
level of medical review and the financial constraints on agencies are
compounded by the difficulty in accessing intermediary staff, poor
response time (as long as two weeks), and conflicting information from
the intermediary. In addition, at a recent meeting between the
intermediary and Connecticut agencies, we were told that several errors
in the system have not been resolved. However, HHAs are responsible for
tracking claims and payments manually, because the intermediary is
unable to do it at this time. This would not be accepted in reverse.
When providers are mandated to comply, no excuses are tolerated.
Last April, the VNACC was notified that a focused medical review of
30 records resulted in the denial of 20 home visits. The penalty was a
30% prepayment review for a full quarter. Approximately 150 records
were selected for review every month. We had to copy each page of
documentation, mail them to the intermediary and wait for their
determination. No payment was received until each record was reviewed
and any appeal process finalized. During our ongoing communication with
the intermediary, their office made 18 errors ranging from sending
lists of client denials and copies of final determinations belonging to
other agencies, to claiming denial of visits previously reviewed and
approved by their own medical review department. Our denials were
reduced to 4 nursing and 4 home health aide visits, but we remained on
the 30% prepayment review.
Legislative and Administrative Recommendations
1. Congress should reform the home care provider's claim review
process by passing legislation that contains the following principles:
--Time limits should be imposed on intermediaries for review
of claims.
--Additional Development Requests (ADRs) should be
coordinated within the intermediary systems to avoid
duplication.
--HHAs should be provided with the standards by which the
intermediary initiates and discontinues focused medical review.
--Use of prepayment review should happen only after a
provider has demonstrated non-compliance.
--Successful appeal determinations should be factored into
decisions on continuing focused medical review.
--Sampling should be used only as a last resort.
2. Congress should authorize HHAs to utilize PPS payments in a
flexible manner in order to achieve system efficiencies without adverse
consequences relative to payment, coverage, and compliance with the
Conditions of Participation.
3. Congress should enact legislation that reforms the claim audit
process and sets standards for providers that would diminish extensive
prepayment claim reviews.
4. Congress should enact a temporary ``technology'' pass-through to
upgrade and modernize HHAs information systems.
5. Congress should enact the ``Medicare Education and Regulatory
Fairness Act of 2001'' introduced by Senator Frank Murkowski (R-AK) and
Representative Pat Toomey (R-PA) (S.452 and H.R.868).
E. Appeal of Technical Denials
Home health care benefits under Medicare involve a combination of
technical and substantive requirements. For example, as a substantive
requirement, a patient must be homebound in order to be entitled to
benefits. A technical requirement includes that the patient's physician
must certify, in writing, that the patient meets the homebound
requirement. However, if the certification is not signed and dated
prior to the billing for coverage, a claim denial is issued. While the
technical error can easily be corrected, HCFA forces both types of
denials into the time consuming and expensive appeals process. This
delays payment by at least three months and as much as a year and a
half in some cases.
The VNACC has found such excessive scrutiny of technical errors to
be costly, both in financial terms, as well as in administrative and
staff time. The repeated duplication of mountains of paper only
scratches the surface. It is difficult enough to hire staff to meet the
needs of the community, much less dedicate staff to the preparation of
all of the documents necessary to appeal technical denials caused by
simple, clerical errors.
Legislative And Administrative Recommendations
1. HCFA should reject the technically non-compliant claims,
but allow for resubmission when the claim is technically
appropriate. Such approach would continue to encourage
compliance while significantly reducing administrative burdens.
2. Congress should require HCFA to allow physician assistants
(PAs) and nurse practitioners (NPs) to certify and make changes
to home health care plans. PAs and NPs are oftentimes more
familiar with a patient's case and more readily available than
physicians to expedite the processing of paperwork, ensuring
that home health agencies will be reimbursed in a timely manner
and that care to the beneficiary and cash flow to providers
will not be interrupted.
F. Statistical Sampling Methodology For Post-Payment Audit and
Review
In March 1999, HCFA published an RHHI manual update outlining new
procedures for comprehensive medical review using statistical sampling
(Transmittal Number 1770). The updated instructions provide details for
conducting comprehensive medical reviews, medical review audits, and
for statistical sampling and overpayment projections.
The use of sampling procedures involves the RHHI identifying a
specific portion of claims from among an agency's claims submitted
during a specified period of time. The proportion of denied claims in
the sample would be extrapolated to all claims for the period,
resulting in denial of claims that were never reviewed individually.
Sampling imposes significant risks to agencies and eliminates some
providers' appeal rights. Under HCFA's sampling policy, the
overpayments projected through the claims reviews are recouped by
Medicare prior to any rights of appeals. Since the projection can
involve millions of dollars, home health agencies are unlikely to
survive long enough to access the appeals process. Appeals are
important because reversals of claims have routinely exceeded 80% over
the years.
The HCFA Region V Associate Regional Administrator registered a
protest alleging that the statistical methodology used is invalid and
irresponsible. This claim is supported by the Region V statistician and
the statistical consultant to the Department of Justice in Chicago.
Documents have been submitted to this committee regarding this
allegation. With an improper sampling methodology, the risk of
erroneous overpayment projection is dramatically heightened.
HCFA has rejected the majority of recommendations made by home care
providers to stop sampling and overpayment projections. In addition to
opposing the use of statistical sampling, NAHC objects to the manner in
which HCFA implemented this policy. At a minimum, policy changes of
this nature should be subject to public review and comment, as required
under the Administrative Procedures Act, before it is finalized. NAHC
recommends that HCFA suspend its instructions to the intermediaries on
statistical sampling of home health claims until appropriate
modifications are made in policy.
In March of 1998, the VNACC was randomly selected for a financial
Medicare audit. We were told in advance that several auditors would
remain in our office for five days to scrutinize all aspects of our
financial record as they relate to our cost report. We asked if
clinical records would be audited as well, and were told no. One hour
before the financial auditors were expected, two clinical surveyors
arrived and announced their intention to remain for three days to
review records and meet with clients. We provide the clinical records
from their pre-determined list. Home visits to randomly selected
clients revealed that we had properly exercised the regulatory
provisions for home care. We were commended for the quality of care we
provided. However, the surveyors did announce that three visits, from
the hundred reviewed, would be denied. In their opinion, two home
health aide visits represented more homemaking activity than personal
care. The third visit was clearly a human, billing error. The actual
total of these home visits was less than $90.00. Medicare however
extrapolated this figure ``to the universe of claims'' and demanded a
$5,000.00 repayment, for which we had no recourse.
Legislative and Administrative Recommendations
1. HCFA should develop a sampling regulation through public
notice and comment.
2. HCFA should use sampling only as a last resort and only
with statistically supportable methods.
3. HCFA should not undertake recovery of payments until all
appeals have been exhausted.
G. Branch Office Designation
HCFA has established new criteria for branch offices that emphasize
the distance of the branch locations from the parent without reasonable
consideration of the parent entity's actual supervisory capabilities.
The policy does not recognize the use of modern methods of
communication such as faxes, telephones, pagers and telecommunications
that are used by every other business in the country as acceptable
methods of communications and supervision. HCFA's branch office
policies are contrary to regulatory reform initiatives and the proposed
conditions of participation which espouse the need to care. In many
cases, agencies have closed branch offices because of the added costs
of complying with the conflicting and unnecessarily restrictive branch
office policies, producing access problems for beneficiaries. NAHC
drafted a petition for rulemaking on behalf of Medicare-certified home
health agencies, requesting HCFA to institute a new rulemaking
procedure and establish a single set of national criteria for defining
``branch office'' of a home health agency under the Medicare program.
After two years, HCFA has failed to respond to this rulemaking
petition. Last year the Congress prohibited use of time or distance as
sole criteria for determining branch office designation. Unfortunately,
that falls short of what is needed.
Legislative and Administrative Recommendations
Congress should amend the definition of branch office by:
1. Recognizing that technological advances provide efficient
and effective ways to ``distance-manage'' branch offices and
workstations.
2. Eliminating the criteria of time and distance for
designating branch offices.
H. Medicare Cost Reporting
The onset of the Medicare home health prospective payment system on
October 1, 2000 did not end cost reporting responsibilities for home
health agencies and audits of cost reports. It will be several years
before cost reimbursement reaches its effective end as there are
thousands of home health agencies still subject to cost report audits
and cost disallowances. It is reasonable to assume that it will be
three to five years before most of these issues are eliminated.
Cost reporting has long been a contentious area between the
Medicare program and affected health care providers. Differences
regarding the interpretation of cost reimbursement principles have
existed for years. At the same time, the cost reporting and audit
process has imposed needless administrative burdens on home health
agencies' directing operational expenditures away from patient care and
into paperwork. These administrative burdens continue today with home
health transitioning to PPS since HCFA has chosen to continue their
requirement for cost reporting even in the absence of cost
reimbursement.
Listed below are the most notable of unnecessary administrative
burdens.
--After nearly six months into PPS, HCFA has yet to finalize
a revised cost report and instructions. However, the proposed
revisions require that home health agencies maintain
significantly different statistical information compared to
past years without providing any notice prior to the fiscal
year that such information would be required. As such, home
health agencies run the risk of providing unreliable data or
need to retroactively construct a database to satisfy the cost
reporting demands.
--The proposed revisions to the cost report provide for the
use of inconsistent standards regarding the rule that providers
are paid the lesser of their costs or charges. Under this
proposed revision, aggregate costs are determined on a full
twelve-month basis while customary charges are based on the
charges imposed only during the portion of the year during
which Medicare cost reimbursement applies. As a result, home
health agencies may face retroactive payment disallowances that
were unpredictable and unforeseeable.
--Auditors from Medicare intermediaries are requiring some
home health agencies to produce complete financial records that
are under common ownership or control with the home health
agency. These demands are made despite the fact that the home
health agency has no financial transactions or shared
operations with the other organizations. Medicare law requires
access to the financial records of related organizations that
do business with the home health agency. However, there is no
law requiring access to these records where there is no
business relationship.
--The audit process often leads to demands that home health
agencies produce documentation that is not specifically
required by the Medicare program. For example, home health
agencies have been requested to produce time and function logs
for staff in 15-minute increments even though the job
description for the staff squarely fits within Medicare
allowable cost standards. These documentation demands have
forced home health agencies to immediately create an expensive
record keeping system.
Legislative and Administrative Recommendations
Congress should reduce the administrative burdens placed on home
health agencies at cost reporting process by:
1. Directing HCFA to utilize pre-existing statistical
reporting standards to support revisions in the home health
cost reporting process. Any changes in required data should be
made prospectively.
2. Directing HCFA to utilize a consistent standard for the
calculation and application of the lower of cost or charges
rule during the transition from cost reimbursement to PPS.
3. Eliminate the inappropriate demands for documentation to
support reimbursement claims by requiring fiscal intermediaries
to adhere to professional auditing standards and generally
acceptable accounting principles.
4. Restricting HCFA's ability to demand financial records
from commonly-owned or controlled organizations that do not
have financial transactions with a Medicare home health agency.
Conclusion
The comments of the National Association for Home Care and the
Connecticut Association for Home Care, as set forth above, should not
be construed as critical of the Health Care Financing Administration or
its hard working staff. Instead, NAHC and CAHC offer these comments
with constructive intent and the recognition that HCFA has been
overwhelmed with an unprecedented workload that began with the dramatic
reforms of the Balanced Budget Act of 1997 and continued since that
point. Many of the concerns expressed herein could be alleviated if
HCFA were provided with sufficient resources. However, there are others
that indicate long-standing operational weaknesses within HCFA relating
to the performance of in-depth impact analyses and full consideration
of alternative approaches prior to the implementation of new policies
and procedures.
HCFA has routinely opened its doors to suggestions from NAHC and
CAHC. We hope that HCFA's recognition of the value of provider input
can be maintained, if not enhanced, over the coming years. NAHC and
CAHC look forward to the opportunity to work with the Subcommittee and
with HCFA personnel to eliminate unnecessary administrative burdens and
alleviate necessary ones where acceptable, but more efficient
alternatives exist to accomplish the same policy goals.
Supplemental Statement
This statement supplements testimony given on March 15, 2001, by
Susan Wilson of the Visiting Nurse Association of Central Connecticut,
Inc. on behalf of the National Association for Home Care at a hearing
before the Subcommittee on Health of the House Ways and Means
Committee. Chairwoman Nancy Johnson has requested the submission of
this statement in response to the testimony and supplemental statement
of Toby S. Edelman of the Center for Medicare Advocacy regarding its
efforts to pursue Medicare payment on behalf of the state Medicaid
program.
MEDICARE: MAXIMIZATION: CAUGHT BETWEEN TWO PAYORS
The National Association for Home Care takes no issue with the bona
fide beneficiary-related advocacy provided by the Center for Medicare
Advocacy in Connecticut. However, NAHC disputes the claim of the Center
for Medicare Advocacy that it, as well as its client, Connecticut's
Department of Social Services, have undertaken reasonable efforts to
avoid the use of costly, time-consuming, and paperwork-intensive
methods of pursuing Medicare payment on behalf of Medicaid-eligible
recipients of home health services in Connecticut. Instead, the 15-year
history of the so-called ``Medicare maximization effort'' in the state
of Connecticut demonstrates a dominant interest in continuing to pursue
Medicare payment through retroactive demands for claim submission and
high volumes of appeals. The inefficiencies of this method of pursuing
potential payment from the Medicare program fails to serve any patient
related interest and only leads to higher administrative costs that are
borne by patients, providers of services, and the Medicaid and Medicare
programs.
In its supplemental statement, the Center for Medicare Advocacy
(CMA) touts its success in securing over $133 million from the Medicare
program as a recovery of funds originally paid by Connecticut's
Medicaid program for home health services since 1988. It neglects to
offer any reference as to the costs of the efforts, including the costs
of the state, Medicare, and the home health agencies. It is NAHC's
understanding that the Medicare program expends significant
administrative monies to process demand bills, reconsideration appeals
and administrative law judge hearings. For example, NAHC believes that
each reconsideration costs approximately $300 and each hearing
approximately $1000 to process from beginning to end. For home health
agencies, the costs of patient chart compilation, review, and copying
to respond to the demand bills of Connecticut Medicaid ranges from $50
to $100 for each billing period. These costs, as well as the state's
own internal and contracted costs must equal several millions of
dollars each year.
At the same time, the Center references that ``Connecticut's
activities to obtain proper Medicare for dually eligible clients have
always included efforts to obtain appropriate benefits in the first
instance.'' However, if there were a true interest in avoiding
unnecessary Medicaid payments, the Medicare maximization efforts of
demand bills and appeals should be gradually shrinking over the past 13
years. Instead, the state of Connecticut and its contractor, the Center
for Medicare Advocacy, continue to push high levels of demand bills
months after Medicaid payment has been made, file hundreds of
administrative appeals each year, and initiate litigation to establish
the state's role as a party in interest in the Medicare appeals
process.
In contrast, home health agencies in Connecticut have attempted to
advance alternative, more efficient methods of insuring that Medicare
meets its responsibility as the primary payor of services, with
Medicaid as a payor of last resort. It must be understood, that home
health agencies in Connecticut generally consider that the level of
Medicare payment for services rendered is preferable to the payment
rates made for the services under Medicaid. Home health agencies have
no financial or operational interest in receiving Medicaid payment over
Medicare. The recent implementation of Medicare home health prospective
payment (PPS) adds further complications since Medicaid maintains a per
service payment method in contrast to the 60-day episodic payment under
Medicare PPS. In addition, the current nursing shortage is exacerbated
by diverting clinical resources to paperwork. Home health agencies have
a strong interest in avoiding unnecessary administrative burdens that
in no way improve access to care or the quality of services.
In reality, home health agencies in Connecticut are simply victims
in a fight between two huge bureaucracies, each of which may have an
interest in shifting responsibility for necessary home health services
to the other. Home health agencies have not voluntarily chosen to take
on the nearly impossible task of distinguishing Medicare-covered home
health services from that care covered under the state Medicare
program. The role of an informal Medicare coverage decisionmaker has
been forced upon home health agencies with the threat that the home
health agency could be liable for the cost of care whenever it fails to
determine that care, before it is provided, is outside of Medicare
coverage. Through the so-called limitation on liability provision of
Medicare law, 42 USC Sec. 1395pp, the Health Care Financing
Administration has created a system which shifts the financial
liability for the cost of home health services to the provider in most
circumstances where Medicare is billed for non-covered care. Using
ambiguous Medicare coverage standards that are inconsistently applied
within the Medicare intermediaries, the home health agency must notify
the patient that care is noncovered by Medicare before the services are
rendered or end up assuming the liability for the cost of care. In such
circumstances, the home health agency will receive no payment from
Medicare and is prohibited from billing the patient or other third-
party payors. With the current retrospective review method by Medicaid,
home health agencies face double jeopardy--service costs without
payment from Medicare or Medicaid.
It is hoped that with the recent changes in Medicare's criteria for
determining homebound status, as contained in the Benefit Improvement
and Protection Act of 2000 (BIPA), that some of the difficulties
experienced with this confusing concept will be reduced. For example,
under BIPA, Medicare patients regularly receiving adult day facilities
services may retain homebound status. Prior to BIPA these patients were
generally disqualified from Medicare home health services coverage as a
result of their absences from the home. CMA had successfully appealed
such cases on behalf of Medicaid. However, these appeals did not alter
the standard applied by Medicare on its initial review of claims. Home
health agencies are caught between a Medicare program that rejects the
claims and a Medicaid program that pursues them.
THE INEFFICIENT DEMAND BILLING/APPEAL PROCESS
In the event where a dual eligible Medicare/Medicaid beneficiary
receives home health services paid under the state Medicaid program,
Medicare payment is pursued through a process known as ``demand
billing.'' This process entails a retrospective demand from the state
Medicaid program to submit individual Medicare claims on behalf of the
dual eligible beneficiaries. Where that demand bill claim is not fully
paid by Medicare, an appeals process is utilized. That process involves
three administrative appeals steps and the opportunity for a federal
district court review. In circumstances where Medicare coverage is
awarded, the state recoups Medicaid payment directly from the provider
of services, which then receives the appropriate Medicare payment. As a
result of the timing of the process, home health agencies are often
required to submit revised annual cost reports to Medicare and await
settlement of the cost report before payment is made.
The demand bill process for home health agencies encompasses the
preparation of Medicare claims for multiple time periods for each
beneficiary, extensive medical records review, a high volume of
document copying and transmittal, and the management of a complex
accounting and financial system to properly reconcile retroactive
Medicare with earlier Medicaid payments. When a claim proceeds into the
appeals process, the workload magnifies as duplicative documentation
requests are issued at each stage.
A central feature in the demand bill process is the new Home Health
Advance Beneficiary Notice (ABN). While NAHC fully supports timely and
appropriate Medicare coverage notices, the integration of the ABN with
the state's Medicare maximization efforts has fostered improper
payments, confused patients and providers, and increased paperwork. The
ABN may work with patients that have no potential payer source other
than Medicare, but it doesn't fit for a patient that has access to
continued care and payment under Medicaid.
In the 13 years in which the state of Connecticut has pursued
Medicare maximization on home health services through the Center for
Medicare Advocacy, the process has been essentially unchanged. In the
beginning, the Center for Medicare Advocacy made large-scale requests
for demand billings to home health agencies at certain points in the
year while also pursuing a high volume of administrative appeals. A
semblance of a claim selection process was utilized by the Center for
Medicare Advocacy based upon the dollar amount involved and the volume
of services provided to the patient. In most respects, that same system
is in place today. While the efforts have recovered significant
Medicare payments for the state Medicaid program, no advances have been
made in reducing the administrative burden or preventing a Medicare
disallowance in the first instance.
RECOMMENDATIONS
Over the years, home health agencies in Connecticut have made
numerous recommendations as to steps that could be undertaken to
significantly reduce the administrative burden related to dually-
eligible patients. These recommendations require cooperation between
the Health Care Financing Administration and the state Medicaid
program. Most can be undertaken under current authority. However, there
may be a need for legislative change to authorize some of the
recommendations. These recommendations include:
1. Eliminate the threat of shifted liability for a provider
of services on dual-eligible Medicare/Medicaid beneficiaries.
In these circumstances, there is no question as to the
necessity of the services to the patient, only the identity of
the payor source.
2. Provide front-end billing of dual-eligibles to the
Medicare program with any residual claims transmitted from
Medicare to Medicaid. This process would require structured and
expedited time frames for claims processing in order to
maintain reasonable cash flow for home health agencies. To
reduce the volume of dual eligible claims submitted in this
process, selection criteria established by the state Medicare
program could be utilized to pre-screen claims.
3. Establish a reconciliation process between Medicare and
Medicaid relative to any disputed claims. Through this process,
a sample of the claims in dispute would be appealed and a
financial reconciliation occurs between Medicare and Medicaid.
The home health agencies need not be part of the appeals
process except for the potential of providing a copy of the
patient's record. There would be no cost report adjustments or
shuffling of payments between the provider, Medicare, and
Medicaid. The process would be similar to the subvention method
utilized to reconcile VA and Medicare obligations.
4. In Connecticut, those Medicaid services authorized through
the state's case management contractor would be excluded from
the process because they would involve a pre-screening to
determine whether the plan of care is, in full, or in part,
covered under the Medicare program.
In summary, NAHC supports an efficient and accurate process which
properly assigns payment responsibility to Medicare or Medicaid.
However, the concerns with the Medicare maximization efforts is that
they rely upon inefficient, burdensome, and costly processes that do
not include preventative action and instead utilize a system designed
for individual claims to pursue a high volume of disputes. The home
health community continues to recommend that a new process be
established to address these mass payment disputes as distinct from
that process originally intended to address the small number of
circumstances where an individual beneficiary requests the submission
of a demand bill.
[The attachments are being retained in the Committee
files.]
Chairwoman Johnson. I thank the panel for your testimony
and for the speed with which you were able to move through the
highlights. Indeed, I hope the Members of the Committee will
take time to read these papers in detail because they are very
thoughtful. They do focus on very real, practical problems that
I think we really must tend to.
Dr. Corlin, I wanted to mention that the inspector general
believes that the bill that you support introduced by
Representative Toomey would undermine his ability to eliminate
fraud. How do you respond to that?
Dr. Corlin. We are aware of that interpretation, and we are
a bit surprised by it. Nothing could be further from the truth,
Madam Chairman.
In any case where fraud is suspected or alleged, that would
have to be referred immediately to the OIG, as it is now, and
would not be different in any way, shape, or form from the
present situation.
Our concerns and the reason we support this legislation are
to deal with how inadvertent billing errors are dealt with. We
want fraud to be dealt with just as vigorously as it is now and
would not impede the OIG in any way in anything they do in a
fraud investigation.
Chairwoman Johnson. Dr. Corlin, when an inspector general
comes into a physician's office, do they differentiate between
billing errors that represent an undercoding and billing errors
that represent an overcoding?
Dr. Corlin. Initially, not at all. And what was happening
is that assessments were being made based just on overpayments
rather than the net of overpayments and underpayments.
Now, at least there is some net charge based on the two,
but it just strikes me that if I was an investigator and I went
in and I saw a pattern where most of the bills were correct but
some of them were wrong, and if all of them were wrong in the
positive direction, I would have some real suspicions. But if
all of them were wrong and there was a pattern of some being
overbilled and some being underbilled, if that is fraud, that
is the dumbest fraud I have ever seen in my life. And to me,
that should be evidence of the fact that there are problems in
lack of education and inefficiency in the billing process, not
a deliberate attempt to defraud.
Chairwoman Johnson. I don't remember quite how long it took
for the inspector general to realize that he needed to offset
underpayments and overpayments, but it did take a couple of
years. I just want to put on the record the experience of a
physician in one of my small towns who had the inspector
general come in, and he found $1,742 in overcharges. But
through Medicare's methodology, this resulted in a demand to
repay $74,000.
So there is a methodological problem there with the way
they move from the problems that they have seen and the
conclusion that they come to. There also is, I think, just for
the Committee's knowledge, no way that a physician can even
challenge a single review of a case and say to the overseer,
the inspector general's person, that actually this is what the
case really was, challenge his interpretation of that case. He
really has to abdicate his right. As this doctor says, ``I had
to choose to either abdicate my rights of appeal and other due
process protections, or challenge the Medicare to an
adversarial conflict on their turf by their rules.''
So there are some significant problems here.
Dr. Corlin. Madam Chair, we agree absolutely and have seen
horror show after horror show take place. One group, if I may
give an instance----
Chairwoman Johnson. Actually, I don't want to take too much
time as chairman, so I would appreciate it if I could just move
on to the others.
I just want to mention that I was interested that
Northwestern added 26 full-time employees this year solely to
comply with new regulations. True?
Mr. Mecklenburg. That is correct. We added 16 additional
utilization review staff and 10 additional billing coders this
year, primarily for HIPAA and outpatient payment coding.
Chairwoman Johnson. And then I would like to ask Ms. Ousley
to comment just very briefly, because I would like to ask Ms.
Wilson to comment very briefly.
On this issue of the turnover rates in the nursing homes, I
know it is almost impossible to recruit new nurses, but this
turnover rate, you say, of 80 percent, is that unusual? How
many years ago was it that you had a lower turnover rate? And
what have been the changes that have caused this?
Ms. Ousley. It is unusual and it is growing by unbelievable
dimensions today. And as I said, I do believe that it is
related very much to the atmosphere in which we are asking our
nurses to work. They, again, are afforded so very little
respect, and as I indicated, the oversight process that the
nurses go through is just almost unbelievable.
There is such a demand for write it down, write it down,
document it, that they are getting so frustrated that they
absolutely cannot do what they were trained to do, their
profession, to provide the care for residents.
A personal example. In one of my facilities just a few
weeks ago during the survey process, two of the nursing
supervisors--and this is a facility that has been essentially
deficiency-free for the last 20 years. One of the nursing
supervisors actually got physically sick in the middle of the
survey and said, ``I have to go home.'' Another nursing
supervisor said, ``When it is over, I am done. I can't stay
here anymore. I can't go through this again. We work too hard
to have to deal with this.''
Both those nurses, thank goodness, are still with us today
because it is a good and it is a stable community, and the
administrator was able to convince them. But that is the type
of thing that is happening that is driving good, caring people
out of this profession. And I firmly believe that is one of the
reasons that it is increasing.
Chairwoman Johnson. This is a very big issue, the change
that has happened in the survey and certification process over
the last 5 or 6 years, and I urge members to go visit their
nursing homes and talk to the people who have been through
these surveys, talk about what the impact has been on the
quality of care of this kind of survey versus the kind of
survey work we were doing in a more collaborative environment a
few years ago. You can only really get the flavor of the
change. There is no question in my mind but that it is forcing
people out of the business.
Ms. Wilson, let me just ask you--and thank you for your
detailed testimony. It was extremely useful. But one of the
things that disturbed me the most is that Congress mandated
that there be a case mix adjuster. Now, in your testimony, you
mentioned that comorbidities were not taken into account. Could
you just describe to us what impact this had? And then save
just 1 minute to also describe what kinds of cases some to you
that couldn't possibly be covered by Medicare, and yet you have
to go through this time-consuming process that results in a
delay for service payment of at least 2 months, and often as
much as year. So just would you comment on that comorbidity
issue? Because it is astounding to me that this would not have
been built into case mix adjustment.
Ms. Wilson. On the issue of comorbidities, when the OASIS
data set is completed--and at the start of care, OASIS
assessment is comprised of about 83 separate questions. One of
the very small factors is, in fact, the diagnosis. There are
only three primary diagnoses, which pertains to orthopedics,
neurological issues, and diabetes, which are drivers of a
differentiation in reimbursement.
Having a population in New Britain which is an older
population, our agency primarily serves an older population. Of
course, we see people with comorbidities: congestive heart
failure, chronic obstructive lung disease, et cetera. It
requires intensive intervention on the part of the clinicians.
We have to organize many community resources, and obviously all
of those factors impact the individual's safety and well-being.
The cost in time and money is astronomical. However, it has
absolutely no impact on the cost of reimbursement. Only if, in
fact, a primary diagnosis of diabetes, an orthopedic, or a
neurological diagnosis were primary would that have any impact
whatsoever.
Chairwoman Johnson. So the bottom line is that there is
very little relationship between the cost of care that senior
needs and actually your reimbursement level?
Ms. Wilson. Correct.
Chairwoman Johnson. Let me move on now and not go to the
other question and give Mr. Stark an opportunity.
Mr. Stark. Thank you, Madam Chair. Just a couple of issues
here because I need a little more data from some of our
witnesses.
I think, Dr. Corlin, you indicated--and we are going to
have a little difference, I suspect--in the testimony today
that Medicare's rules and policies are driving physicians from
the program.
Now, what we are finding, for example, is that in every
State except Missouri, the participating physician rate is
higher in 2000 than it was in 1999; MedPAC did a study of
physicians, and they found, in questioning physicians about the
difficulty of finding a referral, that only 4 percent of the
physicians said it was very difficult to find a referral for a
Medicare patient, but 3.7 percent had the same difficulties
finding referrals for privately insured patients. So there is
almost no difference in finding a referral for a Medicare
patient. If we were driving the docs out, one would suspect
that it would show up there.
By the way, this is a 1999 survey; there is another one in
the works. When they surveyed physicians about their attitudes
about Medicare and comparisons to Medicaid--which I think is
probably the worst in terms of physicians' preference-fee-for-
service, PPOs, and private HMOs, Medicare does pretty well. In
other words, 54 percent felt that the billing paperwork was a
very serious problem for patients served by HMOs, and only 29
percent gave this answer for Medicare. So one could say
Medicare is doing better than private HMOs, which should not
come as any surprise because the physicians have been
supporting our efforts to get the Patient's Bill of Rights
passed. That has sort of fallen off.
Dr. Corlin. No, sir, it has not.
Mr. Stark. OK, good. But what I guess I am saying is that,
while I am perfectly willing to urge my colleagues to move
efficiently and to improve Medicare, I think it is fair to say
Medicare is--in your own practice, I will bet you--one of the
two best or least hassling payers you have got. And I find this
is true from many physicians. In Connecticut, for example, the
AMA affiliate there is suing Aetna for paying claims slowly.
Now, let's say that a doctor's practice grosses 2 million
bucks. That is before it pays all the nurses and rent and
everything else. We pay--we, being HCFA-clean claims in 30
days. You are lucky if you could tell me with a straight face
that managed care plans pay you in under 120 days.
I am suggesting that you get to float a half a million
bucks with us that you are not getting out of these other
plans. And if you can earn 6 or 8 or 10 percent on that. You
don't do so badly. Again, I am not suggesting that we can't
improve, but I think you have got to compare us to the others.
I don't think, Doctor, that you would ask me to turn Medicare
over to Aetna without any change in regulation and let them pay
you under their plan for all your patients. I just think that
you would probably have trouble getting re-elected as
president. I might have trouble getting re-elected----
Dr. Corlin. I am only allowed to serve one term, sir.
[Laughter.]
Mr. Stark. Don't mention that to the good folks in the 13th
District of California, please.
There is no business operation--and that is what HCFA is--
that can't stand improvement and doesn't need constant revision
to see that we are using current technology. In fact, we are
offering you a buck off, I think, if you will file
electronically. Maybe we should charge you a buck--you being
your group and other participating doctors--if you don't file
electronically to urge you to get out and buy that laptop and
help us be more efficient.
There are a lot of ways we can cooperate, but the MERFA may
very well completely eliminate any ability to enforce our laws
and regulations. It is not the way to go. And I would urge you
to--which is unlike previously, 10 years ago with the AMA--
continue to be in the tent with us as we write any improved
legislation, and I think we can go a long way together.
But, please, you know, for a lot of the guys who work hard,
this argument 135,000 pages of regulations is baloney. We have
counted them. There are about 35,000, which is maybe too many,
but it isn't 135,000. That number came from Mayo, who have
refused to send us any documentation of where it came from.
But, believe me, I want to stay out of the Mayo Clinic if they
can't tell the difference between 135,000 and 35,000, or when
they read my cholesterol level, I am going to have a real
problem.
So thank you for your organization's support to stop
smoking, to get kids insured, to reform managed care. But
remember that one of the complaints you have that are fixed in
the Patients' Bill of Rights is that you get paid by the
private insurers on time. At least we do that. We may come back
after you later, and maybe we have to change that. But be
careful what you wish for. It could come to pass. And I look
forward to working with you.
Now, if I have misstated any of your position or the
difference--if you want to shed any light on the difference in
our statistics, please do. Sorry, Madam Chair.
Dr. Corlin. Thank you, Mr. Stark----
Chairwoman Johnson. Dr. Corlin, if you will be quite brief,
as the red light is already on.
Dr. Corlin. Yes, I will. I would be pleased to respond.
We are not here today to talk about specifically just
payment issues. I can tell you that in virtually every
community in which I speak, there are at least one or two of
the senior internists who have said, ``I have had it with the
kind of audit process that they have put me through, and I am
not going to see Medicare patients anymore,'' and that is a
shame.
I would like to respond by giving two very, very brief
responses which focus on our concerns today, and one has to do
with a six-person group dealing in one subspecialty with
internal medicine. And I have seven lines that I want to read
you about what they went through. They are recognized in the
entire area in which they practice as being the most high-
quality group in that specialty.
The carrier audited 80 claims from their practice--this is
six doctors in a very active practice--and demanded all the
supporting documentation within 45 days, which they sent. The
carrier then extrapolated from those 80 claims and said that
that practice owed somewhere between $99,000 and $285,000, and
they would accept the $99,000, but it had to be paid within 30
days, and they had to admit liability.
Also, if they wanted to try to get an extended payment
system, they would have to provide financial documents that
they were turned down for loans at the bank in order to do it.
The physicians appealed the audit finding after paying the
$99,000, with interest, and 3 years later after the initial
audit was done, the administrative law judge held that the
carrier was wrong and that there was no overpayment and ordered
their $99,000 returned to them, without interest.
The other issue we find ourselves in is we are told
repeatedly that if you contact the carrier and ask a question
and get an answer, you can only rely on that answer if you are
subsequently audited, as we did it the way the carrier told us,
if you are given a written confirmation of the answer. We are
never able to get those.
I would love to be able to tell you that I can go to 300
physicians around the country, ask them to ask the same
question of their carrier 10 times each over 3 months, and get
3,000 answers the same. I suspect we would have 1,200 different
answers to that same question.
Help us with those issues, and the financial factors that
we are concerned about will not be as great.
Mr. Stark. And just a follow on, Madam Chair, a quick
comment. We have about 50 different carriers across the
country. They are not government employees. Generally, they are
Blue Cross or Aetna employees who contract with the Government,
and each one has a different set of standards. And we recognize
that as do you. This is not ``the government.'' This is 50
different contractors. It is like dealing with 50 different
banks around the country chasing you for your visa card bill.
And we and HCFA recognize that we don't have common computers.
I mean, I could go on----
Chairwoman Johnson. Mr. Stark, we do need----
Mr. Stark. The Chair knows this----
Dr. Corlin. HCFA, when they say they can't control the
carriers----
Chairwoman Johnson. I believe the whole point of this
hearing is to get this kind of problem on the record, because
while in the old days you might be able to tolerate it, now
with the incredibly complex cases, the variety of diagnostic
treatment and technologies, you cannot put people through this
and expect them to participate in the program, and we really
have an obligation to hear this and deal with is
constructively. Mr. McCrery.
Mr. McCrery. Thank you.
I think Mr. Stark does raise a legitimate question, though,
and I would like for you, Dr. Corlin, and maybe Mr. Mecklenburg
to elaborate.
What is the difference in paperwork requirements or the
burden of compliance between HCFA and Medicare and the private
sector in your private-pay patients? Dr. Corlin?
Dr. Corlin. Thank you, Mr. McCrery. It is all across the
board with the private payers. Some are very good and respond
very quickly and are very efficient. Others, the situation is
terrible. And I think probably if you want to characterize
managed care, the best thing you can say is if you have seen
one managed care plan, you have seen one managed care plan.
Some of them work through a delegated model, either fee-for-
service or capitation, and work very efficiently with minimal
disruption to the practice. We are fortunate in our community
that that is the way we work. I have never had a circumstance
where I have had to do anything more, if I got a rejection,
than call and speak to a medical director over the phone and
got it taken care of very quickly. I am talking about
authorization, not payment. And many of ours in our own
practice are capitated. Some are not. We are much more
fortunate than some. It ranges from very good to very bad.
The Medicare payments themselves, the payment system, at
least for physicians, is not the problem. We are not
complaining that there is slow pay for Medicare.
Now, we had in southern California 4 months of slow pay,
and many physicians didn't get paid at all for 3 months when
they switched from one intermediary to another. That is a
specific issue. It is not likely to happen again.
But our concern is we want the auditing process that it is
the carriers that do to be efficient, appropriate, and
businesslike. I would love to be able to come back here near
the end of my presidency and congratulate you for making HCFA
the Nordstrom of Government agencies.
Mr. Mecklenburg. Mr. McCrery, I would concur with the
assessment that we have problems with most of our payers in
terms of slow pay, burdensome requirements, added paperwork. I
think in terms of Medicare and Medicaid, in our own
organization right now we have had two major impacts by
example: one, implementation of new outpatient payment
regulations that have been very difficult for us to get to a
completed and clean claim; second, we have had a change in
intermediaries, which has already been discussed, with
dramatically different paperwork requirements, dramatically
different interpretations of Medicare payment restrictions,
that have led to dramatic increases in receivables and in our
allowance for bad debts.
Mr. McCrery. Well, generally, though, can you help me with
my question, which is: How does the burden of complying with
Medicare compare with the burden of complying with the private
sector in general?
Dr. Corlin. That burden is much, much worse in the
standpoint of having----
Mr. McCrery. What burden is worse?
Dr. Corlin. The burden regarding Medicare.
Mr. McCrery. Is worse than the private sector?
Dr. Corlin. It is much worse based upon the uncertainty and
inexactitude of knowing what to do. At least with managed care
plans, whether we like it or not, we know exactly what has to
be done. And if we call and ask a question, chances are we are
going to get the same answer time after time. We may not like
the consistency, but there is consistency and we know the
rules.
There are circumstances in dealing with the Medicare
intermediaries where the rules are confusing, the wording is
confusing, and when we call we get different answers without
the substantiation.
Mr. McCrery. So you disagree with Mr. Stark's
characterization that the private sector is just as bad as
Medicare in terms of the burden it places on you for paperwork
and compliance?
Dr. Corlin. Absolutely. With regard to those aspects of it,
I do.
Mr. McCrery. Mr. Mecklenburg, how about hospitals?
Mr. Mecklenburg. I would agree with that conclusion. If I
can give you one simple example of a difference between
Medicare and many of our other payers, every time a Medicare
patient receives service, we are required to ask a series of
questions about secondary payers. It has 25 questions on it. We
have to ask it every single time a patient receives services,
whether it is a physician service or a laboratory test. That is
not only a burden for our personnel----
Mr. McCrery. Private payers don't require that.
Mr. Mecklenburg. Not this kind of questioning. The first
question I have to ask a patient every time is: Are you
receiving black lung benefits and will services being performed
be paid by black lung? A patient that is seeing us every couple
weeks for a lab test gets very tired of answering that
question.
Mr. McCrery. Well, Madam Chair, evidently these witnesses,
who are from the health care sector, disagree with the
information that Mr. Stark provided us. Maybe we should ask Mr.
Stark to provide some witnesses to substantiate the claims that
he is making so we could clear this up.
Mr. Stark. If the gentleman would yield?
Mr. McCrery. Sure.
Mr. Stark. Most of that comes from MedPAC, and we will hear
from them, and they are doing another study. So I think that is
right on. We should find out. We will have MedPAC as a witness
later.
Mr. McCrery. Good.
Ms. Wilson. May I add a comment in reference to your
question as it pertains to home care?
Mr. McCrery. Sure.
Ms. Wilson. Certainly in terms of the private sector, we
definitely have our problems, and there is definitely a
financial burden that comes with contracts at substandard pay
rates, et cetera. However, when it comes to the coverage, very
often, as has been said, we can call, we can discuss what the
situation is, and seek some resolution. There is also a very
clear process in terms of appeal, and we have utilized that.
One example that we have had with our agency is that the
fiscal intermediary routinely does focused medical reviews, and
we are not aware of when those are taking place. In April 1999,
we were notified that our agency had undergone a focused
medical review of 30 records which resulted in--now, 30 records
can total hundreds and hundreds and hundreds of visits. It
resulted in a denial of 20 home visits. The penalty was a 30
percent prepayment review for a full quarter, which is going to
total about 450 records for our agency.
What that meant was we needed to copy each and every
record, send it to the intermediary, have it reviewed, wait for
their determination, appeal if necessary. This is a process
that goes on for weeks, months, and sometimes could last for a
year or more.
However, during that process, what we found was that the
intermediary made 18 errors ranging from sending lists of
client denials and copies of final determinations belonging to
other agencies to claiming denial of visits previously reviewed
and already approved by their own medical review department.
When this was clarified, what they originally said was 20 home
visits was actually a total of eight. However, we still were
subjected to the 30 percent prepayment review. There was no
getting away from that process.
That I don't believe would have occurred with the private
sector.
Ms. Ousley. If I could also add, just on behalf of the
nursing facilities----
Chairwoman Johnson. Very brief, Ms. Ousley. That red light
is on.
Ms. Ousley. For Medicare, for us, in justifying the 44
category claims requires, again, tremendous documentation, and
like my colleagues, with review many times comes numerous
denials for paperwork reasons.
Chairwoman Johnson. Thank you very much. Mr. Kleczka.
Mr. Kleczka. Thank you, Madam Chair.
Mr. Mecklenburg, the form that you refer to that has to be
asked of every patient coming into the hospital, is that a
verbalized form or is it given to the patient and you just
check the various questions?
Mr. Mecklenburg. Depending on the patient, it may be done
either way.
Mr. Kleczka. But for the most part, it is given to them and
they will just go and check it off? Then also there is another
form: Do you use insulin? Are you allergic to anything? Have
you seen a doctor? You know, that type of info is also
requested, right?
Mr. Mecklenburg. Yes, there is a variety of information----
Mr. Kleczka. All right. So on the 25 questions, that is
probably just given to the patient and they check yes or no,
and so that, you know, isn't an overly--I think the
presentation here is overly exaggerated on that.
Madam Chair, I think it is important that we look at the
regulatory burden of the program. I know full well there are 40
million-plus people getting the services of the program. So,
naturally, it is going to be somewhat cumbersome. But to blame
all the woes in the medical profession on the regulations of
the Medicare program I think is going a little above and beyond
where we should be going today. The only thing I haven't heard
from this panel is blaming the recent demise of the stock
market on the Medicare burdens, but that may come maybe from
the second panel, Gail.
Nevertheless, the point I wanted to make is if, in fact, we
are going to talk about the issue, I think we better get some
facts straight and start with the database that we somewhat
agree with. And I think Mr. Stark brought up the fact that
there are not 132,000 pages of regulation. That sounds good to
the public, and they will scratch their head and say, oh, my
gosh, we have got to do something about it. But I am told by
the former HCFA Administrator Nancy Ann DeParle that the actual
pages, including the manuals, comes out to be about 35,000
pages, which is no small number but, nevertheless, a lot less
than 132,000.
Do you agree with that, Mr. Mecklenburg, or not?
Mr. Mecklenburg. I don't know that I do agree with that,
but I would be happy to get back to you on that.
Mr. McCrery. Where did the 132,000 come from?
Mr. Mecklenburg. I think as Mr. Stark said, it came from a
study at the Mayo Clinic.
Mr. McCrery. OK. And are you aware that Nancy Ann DeParle
wrote the Mayo Clinic to ask for justification, which they
never responded to?
Mr. Mecklenburg. Not until----
Mr. McCrery. It is nice to use the number, but I would just
make sure we use it with some accuracy.
Dr. Corlin, you indicated a recent situation with your
practice, we had to do some paperwork before attending to the
patient. I can't find that in your printed statement. Could you
just re-relate that to the Committee real quick?
Dr. Corlin. The circumstance occurred that--and it was
Tuesday night. It was one of the three hemorrhaging patients
that I got called to see. It was someone who had been in the
intensive care unit for several days, and because of the
requirements to have each and every physician who sees the
patient put documentation that is unnecessary and repetitive,
instead of about four or five pages of progress notes, there
were 33 pages of progress notes. Simply to find out what had
gone on with that patient in the last 72 hours, those had to be
read before I could----
Mr. McCrery. But the inference was that you were filling
out this paperwork while the patient was bleeding. Was that----
Dr. Corlin. No, no. I didn't say that. I was called in and
I had to go over that patient's chart. Prior to a couple of
years ago, the same amount of medical information would have
all been on the chart in probably four or five or six pages.
Now it is over 30 pages.
I would invite you, if you ever come to Southern
California, I will take you on rounds with me for a day, and we
can go through some of the charts, after I cover the patient's
name for their confidentiality, and you can----
Mr. McCrery. And you are saying those numerous pages are
because of the Medicare rules and regulations?
Dr. Corlin. Absolutely.
Chairwoman Johnson. If the gentleman will yield?
Mr. McCrery. Sure.
Chairwoman Johnson. We will provide you with a list that
the Mayo Clinic actually did of Medicare regulations and
supporting documents.
Mr. McCrery. OK.
Chairwoman Johnson. And all of the coding books and those
kinds of things that are absolutely essential, plus the laws,
and that 137,000 does come from that study.
Mr. McCrery. OK. Well, I haven't seen that, and I would
like to take a gander at it. But I am told there are 900 pages
of statutes, so Congress is not bashful by any stretch. To
implement those statutes, there are 1,700 pages of Medicare
regulations, and then we do have some HCFA program manuals, and
that totals about 32,000. And I am told that is the sum and
substance of the Medicare regs that you folks have to adhere
to.
But, again, Madam Chair, it is something we should look at.
But to blame all the woes, including nursing shortages, on the
paperwork I think is a real stretch. I have a niece who is an
RN--in fact, I have a couple nieces who are RNs back in
Milwaukee, and one is a critical care RN. And the shortage
there is a shortage in the nursing profession and not
paperwork. And when these nurses have to mandatorily work
either another half shift or another full shift at the expense
of the family, that gets pretty burdensome. And that is not a
Medicare problem.
So I think what we have to do as a nation and possibly as a
Congress is look into the actual nursing shortage, which is, I
think, more dominant than paperwork having nurses quit the
business.
Thanks.
Chairwoman Johnson. I think certainly our goal here in this
hearing is not to claim that the change of administrative
burden is the whole problem or solving it the whole answer. But
it is important, and it is the first time in my experience--and
I have been on this Subcommittee for 12 years--that we have
ever had a panel like this. It is the first time, I think, that
we have ever faced the dimension of problems and, therefore,
needed to have this. So it isn't the whole answer, but it
certainly is one of our obligations to deal with, Jerry. I
didn't mean to imply that it was the only thing. But I think
their testimony does help you to see that it is an element in
the nursing----
Mr. Kleczka. Madam Chair, again, I agree with you for the
most part that it is something we should look at. The program
is getting bigger, and it is going to double in size in our
lifetime. But to blame everything in the world on HCFA, I am
just not ready to do that.
Chairwoman Johnson. I would hope that you would take from
this--go visit your nursing homes, go visit doctors who----
Mr. Kleczka. Oh, I am there all the time.
Chairwoman Johnson. Talk with them firsthand. Mr. Ramstad.
Mr. Ramstad. Thank you, Madam Chair, and thank you for your
leadership in this area. If anything needs to be changed, it is
the overregulation of HCFA.
I wish my good friend from California, Mr. Stark, were
still here. I would remind him that the Mayo Clinic is
recognized as one of the foremost medical centers in the world
by virtually everyone in medicine, and I certainly respect and
take seriously their concerns with regard to overregulation by
HCFA and the overly burdensome, cumbersome Medicare
regulations. I meet ever week, virtually, with health care
providers in Minnesota. I am home every week. And I hear
virtually every time about the crushing paperwork burden
imposed on providers by HCFA, as has been testified to here
today, duplicative documents, redundant forms that are
unnecessary to treat patients, unnecessary for quality health
care. Too many providers are spending too much time struggling
with paperwork rather than treating patients, and it is time, I
believe, to introduce common sense into the HCFA bureaucracy;
130,000 pages of rules and regulations are clearly excessive.
For the first 6 or 8 years I was in office, the IRS managed
to garner the most complaints among my constituents. Over the
last several years, it has certainly been HCFA.
I just was at a nursing home several weeks ago where the
administrator explained to me they just hired two new nurses to
do nothing but fill out forms. Two new nurses that could be
helping patients, working on health care issues, to do nothing
but fill out Medicare forms.
This regulatory burden is unacceptable. Certainly it is
necessary to have a reasonable level of documentation to
prevent fraud, to improve patient care, but it is time, Madam
Chair, for HCFA to start focusing on working with patients,
working with the health care industry in a collaborative way,
rather than working against health providers in an adversarial
way. And from your testimony and from the firsthand accounts of
providers in Minnesota in my district, it is certainly the
consensus, if not the unanimous feeling, of my providers that
they are burdened, overly so, by paperwork. And certainly they
corroborate your testimony today, every one of you, despite
what some of my friends who sometimes--and they are my friends
on the other side. Sometimes I think they are operating on a
different planet. I couldn't believe what I was hearing, and I
wish they were still here to respond.
But I want to thank you, all four of you here, for telling
it like it is. Congress needs to hear from you who are
operating in the real world and who deal with patients, who
represent the best in providers, and I appreciate your coming
forward and being helpful to this Committee, because this
Committee is very serious about changing the overly
bureaucratic, overly burdensome regulatory scheme, regulatory
regime of HCFA. This must change because the current regime is
totally unacceptable to quality and cost-effective health care.
As you suggest, too many people are being driven out of health
care because of HCFA.
Let me just ask Mr. Mecklenburg, if I could, do you have
any idea--have you quantified this? What percentage of
administrative staffs employed in hospitals today deal for the
most part, for most of their time, with Medicare reimbursement
issues and regulations? Can you estimate the number or the
percentage and/or the cost of the Medicare regulations?
Mr. Mecklenburg. I don't know that I can give you that
number. I would be happy to try and find that for you and get
back to you.
I would just go back to my testimony. In my organization
alone, which is a large teaching hospital, we can identify
specifically 100 employees--that ranges from utilization review
coordinators, billing coders, corporate complaint staff,
internal auditors, various billing folks--that are full-time in
compliance. That does not include the staff nurse, the
management staff who spend some part of their day. So it is a
significant amount of the effort. And what is unfortunate, I
think what you can look at, if you are looking at a hospital
like mine or many others across the country, if you look at
where staff have been added over the years, the high proportion
has been made in administrative services, mostly to comply with
regulation.
Mr. Ramstad. Just like the two nurses just hired by that
Dakota County, Minnesota, facility to do nothing but paperwork.
Mr. Mecklenburg. That is correct.
Mr. Ramstad. Thank you again. I see my time has expired.
Thank you, Madam Chair.
Chairwoman Johnson. Thank you.
I am going to recognize Mr. McDermott, and you see people
leaving because we have a vote on. I, too, am going to go and
vote, but after Mr. McDermott questions, it is my hope that one
of the other Members who has not had a chance to question will
have returned so we can proceed promptly and move on to the
next panel. Mr. McDermott.
Mr. McDermott. It is kind of a weird experience sitting up
here by myself, nobody listening to what I ask.
[Laughter.]
Mr. McDermott. In listening to this debate here today, one
could come down only, it seems like, in extremes, on one side
or the other. Either there is an enormous amount of fraud,
waste, and abuse out there, and, by God, we are going to find
it; or else we are all doing just fine, and why are you being
so intrusive. As a practitioner myself, I can feel for what
that is like.
I have a couple of questions that I have been thinking
about. One is, it seems to me that in 1995 HCFA put out some
rules for evaluation and management documentation guidelines,
and they barely got those in, and then in 1997 we started with
another provision, and in 1998 another set of rules came out,
and we are doing it again.
It seems to me that one of the problems may well be that we
haven't taken the time to let anything settle in and for people
to actually figure out how it works. But I was reading in the
MedPAC recommendations where they suggest that HCFA should
pilot test documentation guidelines for evaluation and
management services before their implementation and/or pilot
test any alternative method.
It seems to me that that is partly what is missing here. I
was in medicine when we put on the DRG system. It just came out
of nowhere, boom. And it was a research tool at Rutgers or some
place, and they were looking for something in the Congress on
how to deal with costs, so, bang, that is the answer.
When you do it to the whole system without testing, it
seems to me that there is a real problem, and I wonder if my
perception is correct. And if it is, what kind of pilot test do
you think would give HCFA the capacity to figure out what they
want to know without running over the doctor-patient
relationship and setting the IG at encouraging senior citizens
to call in when you find somebody who has mis-paid a bill?
We have created an atmosphere in medicine which I don't--
and in health care in general. It is also with hospitals and
with home health and so forth, and in nursing homes, that I
don't think is a very healthy one. I don't think it is good for
the patients.
I wonder what kind of pilot testing you think, starting
with you, Dr. Corlin, and perhaps others have some ideas.
Dr. Corlin. Thank you, Dr. McDermott. And I very much
appreciate your comments and that kind of an attitude. I think
it is a thing that we look forward to working with and
cooperating with. And unlike Mr. Kleczka's comments, we are not
blaming everything in the world on this. HCFA does a lot of
things very, very well, but it does some things not well and
some things that we think are really counterproductive. And we
would like to see those things corrected so that there can be
better focusing of HCFA's resources as to where the problems
are.
With regard to the specific question you ask, first, I
think there has to be the realization that, whatever the
regulations are, while there has to be clear uniformity and
equality in how they are applied, there also has to be a
realization that in dealing with medical practices and in
patients, this is not a one-size-fits-all situation.
We would like to see one pilot done in a teaching setting
where you have physicians in training supervised by staff
physicians, to see what kind of requirements are appropriate
there.
We would like to see one pilot done in a far rural setting
where there are much more limited resources, both on the
practitioners there and the patients having fewer resources in
terms of do I go to this practitioner or that practitioner or
the other practitioner. They may only have one source that they
can go to, and we would like to see one setting done there.
We would like to see one pilot done which is the result of
a peer-reviewed development, almost a clinical vignette
setting: Is this the right way to get the documentation?
I think there has to be the realization that while the
public and the Government clearly have the right to say we need
to prove that when something is billed for it was actually
done, by the same token the patients and the physicians have
the right to say, you know, this is not just an accounting
exercise where you do double-entry bookkeeping and make sure
the numbers add up. It has to be relevant to the medical
practice, it has to be clinically appropriate, and it has to
not interfere with what the patients need.
We would love to be able to sit down out of the glare of
lights and cameras and say: How can we work out these pilot
studies? And let's put them into working for a while and have
people who are, you know, disinterested and are not biased on
either side evaluate the results and see what we come up with.
Mr. McDermott. Did I misunderstand? Did not the AMA and
HCFA work together in putting these E&M criteria together or
this classification together?
Dr. Corlin. The AMA urged a lot of the classification and
criteria to be developed. We did not work with the development
of a lot of the overly burdensome ones. And in many cases, we
will come forth and I believe--I am going to have to check with
staff because I was not personally involved with that. We may
well have been involved in requesting some of the general
category to be addressed, but were not involved in the
development of the details.
Now, many of the specialty societies put forth individual
items for it, and we coordinated some of that. But we were most
distressed, particularly with the 1997 guidelines, because of
how clinically inappropriate they were in comparison with what
has to be on the chart meeting HCFA's requirements versus what
has to be on the chart to document good medical care that is
easily retrievable the next time that chart is picked up.
Mr. Crane. The time of the gentleman has expired.
Mr. McDermott. Would you extend it for just 1 second?
Mr. Crane. All right. One second. One thousand one.
Mr. McDermott. One of the cases that--the fraud and abuse
initiative started in 1998, and an example used as an
unsupported service for physician payment was ``a routine
physical exam.'' And to put that into the improper payments
implies it is bad or fraudulent. How do we get around that? I
mean, the IG says he is looking for improper payments.
Dr. Corlin. I think, sir, that right now there is a
reasonably good understanding on everybody's part as to what
fraud is. When fraud occurs, fall on them like a ton of bricks,
and we will be there clapping. No question about it.
Beyond that, there are the inadvertent billing errors that
occur by people who they or their office staff may not know the
proper way to do it, and then there is a third thing, which I
think, Dr. McDermott, gets to the point you raise, which is the
coverage issue. If a routine physical is not a covered
benefit--and I am a gastroenterologist; up until July 1st,
when, fortunately, it will change--routine colonoscopy may not
be a covered benefit, if it is done, if it is needed by the
patient for good medical care, if it is documented that it was
done but it is not a covered benefit, then simply reject that
as not being a covered benefit, send back an EOB saying it is
not a covered benefit, and the issue is done with. That is a
different category of situation.
Mr. McDermott. Did I understand, then, they wouldn't have
paid for the routine physical exam?
Dr. Corlin. They shouldn't have. Whether they did or not
may be another matter.
Mr. McDermott. Is there any way it could have gotten paid
for? I mean, it would seem to me that the intermediary would
have a screen that said any time that comes up, no.
Dr. Corlin. Well, they probably do and I hope they do. And,
again, being a gastroenterologist, let me get back to one
example that has caused a lot of confusion in people's minds
with regard to the issue of screening colonoscopy, which has
gotten a lot more publicity because of Katie Couric and the
tragedy of her husband. In the long run, it is going to help
people enormously.
People consider screening colonoscopies and don't know what
it really means. That doesn't mean a patient who has had, say,
an episode of rectal bleeding and comes in to a doctor. That is
not a screening test. That is in regard to a specific symptom.
A screening test is somebody who is completely healthy, who has
no family history of colon cancer, who says I am 50 and I want
the test just because I think it is good to have it when I am
50, good medical care says, yes, that is right. Is that a
covered benefit of any given program? That is another issue
completely, and we would--you know, the coverage issues are the
coverage issues. But that is just for screening, not for when
someone has symptoms, and one of the difficulties we have had--
and I am sure Mr. Mecklenburg can relate the same thing--is
confusion in the part of a lot of reviewers' minds of care
given on a truly screening or surveillance basis as opposed to
the same care given in response to someone who has some history
or symptoms that indicate it is specifically necessary.
Mr. McDermott. If a patient--I am stretching my----
Mr. Crane. Two seconds.
Mr. McDermott. Two seconds. With respect to a patient who
would come in and say, ``I feel bad and I don't know what it
is, I just don't feel right,'' you would so a physical exam.
Would that be considered a routine physical exam?
Dr. Corlin. To my way of thinking, no. A routine exam of
any sort, whether it be a general physical, a colonoscopy, a
mammogram, a Pap smear, this is something that someone says I
am well, I have learned either from my physician or from the
media, or whatever, that it is good to have this test every so
often, and I want to have mine to be sure I don't have a
problem, that is routine screening.
When a patient comes in with any symptoms, that is not
routine screening anymore.
Mr. McDermott. Thank you.
Chairwoman Johnson. Mr. Crane.
Mr. Crane. Thank you, Madam Chairman.
Dr. Corlin, just last week the Office of Inspector General
reported that nearly $12 billion in Medicare spending was lost
last year to improper payments. And while this represents a
welcome improvement over the previous years, it remains
unacceptably high.
The OIG has claimed that this bill substantially undermines
the program's integrity. How do you respond to that assertion?
Dr. Corlin. First, let me say that I agree with your
initial statements. We are glad the amount is down, it is still
far too high, and would support any reasonable efforts to get
it even lower. We would disagree with the OIG's conclusion
because nothing in this bill would in any way deter or
interfere with the investigation of suspected fraud, whether
that is the most blatant of fraudulent billings or even--there
are certain provisions in the bill that would say if the
physician or the practice brings forth concerns about claims
that may have been paid improperly, that they cannot be held
accountable on fraud for that since they brought it forth.
The OIG complained that, well, the physician could just
take all their bills for the year, bring them forth, and say,
gee, I may have done it wrongly, can you help me, get the
advantage of the float, the way Mr. Stark described it, and
immunize themselves on all their claims. That is not true
because that pattern of behavior in itself is fraudulent. That
clause is given to the physician who finds in an occasional
case or, gee, in this one code I just realized I may have been
billing it wrong, and I want to get it corrected.
We in no way want to do anything to limit their
investigation or prosecution of fraud when it occurs. And if
there is anything in this bill that inadvertently would have
that result, we would look forward to be supportive of changing
language to see to it that that doesn't occur.
Mr. Crane. And, I don't know, Gary, should I call you ``Mr.
President''?
Mr. Mecklenburg. Whatever you wish, Mr. Crane.
Mr. Crane. All right. You mentioned several burdensome
operational processes that hospitals are required to do by
Medicare. Do other payers, private insurance companies or HMOs,
ask you to do the same task but in a less onerous way? And if
so, could you elaborate a little?
Mr. Mecklenburg. I think as we talked a little bit before,
I think the requirements of each payer can be highly variable.
That is another operational problem that we have of
inconsistency in the forms, in the data, in the way that we
must submit claims.
I would submit that the regulations that come from Medicare
and Medicaid are often longer, more onerous, more subject to
interpretation perhaps by a variety of people than we
experience with most of our payers.
Mr. Crane. In your testimony, you suggest that hospitals
must be able to challenge in Federal court any attempt by HHS
to overstep its authority or to enforce questionable policy.
Could you please tell us specifically what you are referring to
and what sort of questionable Medicare policy have you
encountered? And why should your provider seek legal rather
than regulatory or legislative remedies?
Mr. Mecklenburg. The problem that we have with this part of
the Medicare regulations is that, in order for us to exhaust
the administrative processes under Medicare, we have to first
be in violation of the Medicare rules or law. And if we are in
violation, then we risk being banned from participation in the
program. We certainly think that that is not the proper way for
us to go about determining whether or not a specific rule or a
specific regulation is appropriate or inappropriate inside the
law. So we simply think we ought to have the opportunity from
time to time to be able to challenge in a due process sense
what has been proposed.
Mr. Crane. Thank you for your testimony, and I yield back
the balance of my time, Madam Chairman.
Chairwoman Johnson. Thank you very much, Mr. Crane. Miss--
Mrs. Thurman from Florida. Sorry about that.
Mrs. Thurman. It is OK. It has already been a long morning.
I want to add my thanks to the chairwoman for bringing this
particular issue to the forefront, because we have all seen
this to be a problem.
Dr. Corlin, one of the interesting things, though, that I
did notice in one of the responses was that you mentioned that
you had gone from about six pages to 33 pages in the last 5 to
6 years. Was that correct? In the paperwork that you were
doing?
Dr. Corlin. Actually, it is probably a more recent
timeframe. It is probably within about the last 3 or 4 years.
Mrs. Thurman. So we could actually say that some of this
has coincided with the major changes that have been happening
here in Congress through the BBA, the buybacks, and then again
over the last couple of years where these regulations have
actually gone up.
Dr. Corlin. I think probably related to the 1997 HCFA
regulations. If there is any one point that they are key to, it
is probably more the 1997 E&M guidelines than anything else,
yes.
Mrs. Thurman. One of the things that I would just caution
with this Committee is that we have just also done one this
last year, again, and, you know, it is probably apropos that we
are talking about this now, because there is probably going to
be a whole other set of guidelines out there that potentially
will also have an impact on what you are doing, plus the
information I know that we are asking from all of the providers
now because we, you know, stopped some of the things that have
been put in place so that we could gather additional
information, so that we could make a better decision on how we
might implement any of that. I mean, I think that is true.
So the question that I would ask all of you then is: In the
time that we have gone through these transitions, have you used
the process of, you know, when the rules are set out there, and
are you using the process to give your comments on review as to
where you think there are problems? And if you can, can you
cite some of those for us so that we can find out potentially
from this Committee what has happened to those rule suggestions
and how they have been implemented that have not been, you
know, what you might have put down as the providers?
Mr. Mecklenburg. I think we consistently comment on various
rules and regulations that come out, and we would be happy to
provide you back with very specific examples of where we have
done so and where we believe the outcome hasn't been
appropriate.
Ms. Ousley. Certainly, we spend a lot of time commenting on
the rules and regulations as it pertains to nursing facilities.
One of the issues that we have faced over these last several
years, especially with the implementation of the Medicare
prospective payment system for nursing facilities, is that we
essentially implemented the system with an interim final rule.
So it can be said that we were actually flying the airplane as
it was being built. So as we would train our nurse aides, train
others on exactly what would be required, as we were getting
them trained and getting one process implemented, then the
process would start to change. So that was very, very
difficult, and it really has contributed tremendously to the
burdens and some of the issues that we have talked about today.
HCFA certainly listened to our comments and worked with us
to try to accomplish all of that under a very short time frame,
but it was very, very difficult to accomplish.
Mrs. Thurman. But they also were given directive by the
Congress----
Ms. Ousley. Correct.
Mrs. Thurman. To, in fact, do certain things to have an
outcome, which has created--even with the comments sometimes,
you know, was maybe not the outcome that you wanted, but
certainly might have been the outcome that Congress wanted, I
would suggest.
Ms. Wilson, I want to say that you all do have an awful lot
of paperwork, and I think probably of all of the areas that
beneficiaries see that, more is from your particular area of
the visiting nurses or home health care, because I can tell you
from just sitting down with my mother, you know, up here and
then in Florida, I did the same paperwork ten times. There was
no difference. And I was just transferring her from, you know,
here to there, and, you know, you do 2, 3 hours as the
caregiver to the person who is going to be responsible for
taking care of them in your home. And I found that just
incredibly----
Ms. Wilson. Well, thank you for mentioning that, because
not only am I an administrator of a home health agency, I am
also a daughter and a daughter-in-law of aging parents, and it
has been astronomical to sit down and try to explain what it is
that we are presenting.
One of the common complaints that we have from our clients
is that there are too many questions, there are too many
papers, I have to sign my name too many times, and I don't know
what I am signing.
Mrs. Thurman. And I heard that from your nurses as well,
and they have said to me, if you could do one thing, do that.
However, in saying all of that, the other thing that I would
ask from all of you is, you know, part of the problem that I
think has come to our attention and one of the problems that we
face is that at the same time that all of these issues were
going on, we were having Operation Trust out there, we had all
of this fraudulent activity just recently in Florida under
Medicaid. We have now found payments that, you know, could
average up to as much as $10 million in the Medicaid fund
because people who have died have actually still--Medicaid is
still being billed for them.
So I think one of the things that, as we go through any of
these changes, is that you have to understand I believe from
our side over here that we are also responsible for the dollars
that are coming in and that are being spent. You are taxpayers.
You understand that. And over the years it has been our
responsibility to hold that accountability and to make sure
those things aren't happening. And we constantly see from every
organization, from all of our constituents, saying I know there
is fraud, you know, I have been here, I have done that, we have
started programs. And so we are, you know, trying to be
helpful, but on the same side of it, we are the protectors of
the taxpayers' dollars, and they demand a certain amount of
accountability from us to show that we are not allowing these
kinds of actions to take place.
Ms. Wilson. May I comment in reference to that? I
absolutely agree with you. I do believe that there needs to be
oversight. I do believe that there needs to be protection. I
absolutely believe that regulations that are in place are there
for a purpose.
We did go through a period of time where certainly fraud
and abuse was on the front page of every single newspaper in
the country. However, in speaking particularly about the
Northeast, many of the surveys that were done, the audits that
were done, found very, very little. However, agencies continue
to be under scrutiny.
Our agency alone, within a period of 18 months, had 12 to
13 different surveys. Every single one of them came out
perfectly clean. We turned around and the next proverbial knock
would be at the door.
I had one of the staff people say that it got to the point
where, while we absolutely agree with zero tolerance as far as
fraud and abuse is concerned, that we are now in a system where
the best is never enough and everything you do is suspect. And
that the staff find intolerable.
Mrs. Thurman. If I could just say, Madam Chairman, one of
the things that I would think that, as Secretary Thompson said
yesterday, that we certainly needed to be giving more money to
HCFA, that one of the things that I think that we should look
into--and I don't want to mandate anything more to HCFA, but is
to look at what is happening in the training aspects of both
those that are going out to inspect and those that are doing
the coding.
I remember in the early 1980s when every government agency
started going on computers, and we spent all this money on
computers, but we spent no money on training. So a lot of the
computers would sit there because people couldn't use them. And
I think we have got a similar situation going on here, and
maybe we should be putting a moratorium on any kind of
regulations until we can figure out where we are today.
Chairwoman Johnson. Thanks very much, Congresswoman
Thurman. I thank the panel very much for your excellent
testimony and for your patience in answering questions.
We will move on to the next panel now: Toby Edelman,
attorney for the Center for Medicare Advocacy; George Grob, the
Deputy Inspector General, the Office of the Inspector General;
and Bob Moffit, the director of Domestic Policy Studies at the
Heritage Foundation; and the Honorable Gail Wilensky, Project
HOPE.
As is our usual procedure, you will each have 5 minutes,
and then we will turn to questions. As soon as you are ready,
Ms. Edelman, if you will proceed.
STATEMENT OF TOBY S. EDELMAN, ATTORNEY, HEALTHCARE RIGHTS
PROJECT, CENTER FOR MEDICARE ADVOCACY, INC., AND MEMBER, BOARD
OF DIRECTORS, NATIONAL CITIZENS' COALITION FOR NURSING HOME
REFORM
Ms. Edelman. Good morning. I am Toby Edelman, an attorney
with the Center for Medicare Advocacy, and a Member of the
Board of Directors of the National Citizens' Coalition for
Nursing Home Reform. Thank you for the invitation to testify on
behalf of Medicare beneficiaries and their advocates. I would
like to summarize my written testimony and three points and
then elaborate briefly on each of them.
First, Medicare beneficiaries and advocates view HCFA's
rules and the regulatory process somewhat differently from the
providers who have testified this morning. We see the rules
promulgated by HCFA as helping to assure that beneficiaries
have full access to high-quality health care.
Second, we know that law and regulations can work. In the
area of nursing homes, the nursing home reform law and Federal
rules have improved the quality of care for residents in some
important respects. The good care practices mandated by the
reform law and rules are also cost-effective and save Medicare
dollars.
We have seen other examples where HCFA's rules and
guidelines are criticized by providers, including this morning
the home health advanced beneficiary notice. But these give
beneficiaries important information that helps them get the
health care they need and are entitled to receive under
Medicare.
Third, we believe that HCFA is often overly deferential to
the health care industries it regulates and that beneficiaries
can be seriously harmed as a result.
Medicare beneficiaries see the rulemaking process, at its
best, as both open and highly democratic. The process allows
all sectors of the public to participate, to express their
views, and to be heard. Beneficiaries as well as providers can
influence HCFA's rules and guidelines. The rulemaking process
also requires HCFA to respond to these public comments and to
explain its rationale in making regulatory decisions.
The reform law enacted in 1987 and its implementation by
HCFA are a clear example of how law and regulation work
effectively. They established a high level of care as the
Federal standard and helped improve the quality of care for
residents.
The reform law was based in large part on good practices
that had been tried and proven effective in States and
facilities, and I would like to discuss just two of the
practices this morning: reduction in the use of restraints and
resident assessment.
When the law was enacted, nursing practice and the nursing
home industry in general believed that restraints would protect
residents from injuries and falls. As a result, in the late
1980s an estimated 41 percent of all residents in the country
were physically restrained. The reform law changed that
paradigm. Based on practices of facilities that had
demonstrated that removing restraints was a better and safer
way to provide care, Congress and HCFA made restraint reduction
a priority concern. In 1999, only 11.2 percent of residents
were physically restrained.
The Institute of Medicine report on long-term care that was
issued earlier this year called restraint reduction ``the
greatest improvement in nursing home care.'' And the Institute
of Medicine credited HCFA's regulations and oversight for this
tremendous improvement. Being restraint-free is better for
residents and it is cheaper for government payers.
The second example is the requirement from the law that all
facilities assess residents using a comprehensive,
standardized, reproducible assessment instrument. The minimum
data set, or MDS, was developed by HCFA through an intensive
public process that involved all sectors of long-term care, and
I would add parenthetically that, although the nursing home
reform law explicitly authorizes States to develop their own
assessment instrument, all States in the country have chosen to
use the MDS process that HCFA developed.
An evaluation in 1996 found that MDS improved care outcomes
for residents. There were more positive outcomes--more
residents had hearing aids; more of them were involved in
meaningful activities--and fewer negative outcomes--fewer
residents had catheters, for example.
Not only was care better, it cost less. Hospitalizations
were reduced by 26 percent, reflecting an annual estimated
savings to the Medicare Program of $2 billion in hospital costs
in 1992 alone.
As I describe in my written testimony, clinical staff and
administrators continue to resist using the MDS and have
complained about it, even as they acknowledge that it gave them
better information about residents and helped them provide
better care.
Despite improvements, we know that serious and
unconscionable care problems remain in too many nursing homes.
Many of these problems were documented by Senators Grassley and
Breaux in the extraordinary series of hearings they held in the
Senate Special Committee on Aging between July 1998 and
September of last year. But these hearings also demonstrated
that the care problems resulted primarily from lack of strong
public enforcement of the care standards and not from the
statutory and regulatory standards themselves. And the recent
IOM report agreed with this analysis.
I would like to turn briefly to my third point, that HCFA
is too timid in exercising its rulemaking authority and overly
deferential to health care providers. In the nursing home area,
HCFA at first had difficulty implementing the strong
enforcement approach of the reform law in the face of fierce
and aggressive opposition by the industry. The weak enforcement
system initially established by HCFA's guidelines tolerated
high levels of facility non-compliance with care standards. The
General Accounting Office reported in July 1998 that 99 percent
of facilities that had deficiencies were not subject to any
remedy at all. The GAO called this an amnesty program for
providers and said they were given a chance to correct their
problems.
The weak enforcement of the care standards was a major
cause of the care crisis that Senators Grassley and Breaux's
hearings vividly documented. Strong congressional oversight and
the administration's nursing home initiative have now helped
redirect the agency's approach to enforcement to some extent.
The enforcement system is now more consistent with Federal law
and more likely to achieve its purposes of assuring correction
of deficiencies, sustained compliance by facilities, and, of
course, most important, high quality of care for residents.
Nevertheless, many beneficiaries have been hurt by what the
GAO described as the lax and overly tolerant enforcement system
that HCFA at first created in deference to the industry.
I would just like to say something very briefly about
benefits of other HCFA rules beyond nursing home care. This
morning we heard criticism of the new home health advanced
beneficiary notice, which requires home health agencies to use
a standard form in notifying beneficiaries when they believe
the Medicare Program will not cover particular home health
benefits. I have three comments about that.
First, this requirement is not new. HCFA has required home
health agencies to provide beneficiaries with notice of non-
coverage since at least 1975. What is new is the requirement
that home health agencies use a form specified by HCFA.
But the second point is that home health agencies had been
informed in advance that HCFA intended to mandate use of the
HHABNs, and they have been fully involved in the regulatory
process since September 1999 in developing that form.
Finally, and I think most importantly, receiving notice
about non-coverage of care is critical to beneficiaries. Once
beneficiaries receive such a notice, they can require that
their home health provider submit what is called a demand bill
to the Medicare Program. This is the first step in the appeals
process. But even at this early step, more than half the
beneficiaries who submit demand bills win their claims and get
coverage for home health care from the Medicare program. In
other words, the home health agencies were wrong in more than
half the cases in saying that the services needed by
beneficiaries would not be covered by Medicare. The HCFA-
mandated notice from the provider and the demand----
Chairwoman Johnson. If you would please conclude?
Ms. Edelman. Yes, thank you. That----
Chairwoman Johnson. I know how important this is to you,
and we will get back to it in the question period.
Ms. Edelman. Yes, well, thank you very much. The final
point about this is that this notice helps beneficiaries pursue
their right to Medicare coverage, and without the notice and
without the system, beneficiaries would not receive the
Medicare coverage of home health care that Congress intended.
Thank you very much.
[The prepared statement of Ms. Edelman follows:]
Statement of Toby S. Edelman, Attorney, Healthcare Rights Project,
Center for Medicare Advocacy, Inc., and Member, Board of Directors,
National Citizens' Coalition for Nursing Home Reform
INTRODUCTION
Good morning. I am Toby Edelman, an attorney with the Healthcare
Rights Project of the Center for Medicare Advocacy, Inc. and a member
of the Board of Directors of the National Citizens' Coalition for
Nursing Home Reform. Thank you for the invitation to testify before the
Subcommittee on behalf of Medicare beneficiaries and their advocates.
OVERVIEW
Rules promulgated by the Health Care Financing Administration to
implement federal Medicare legislation have helped to assure that
Medicare beneficiaries have access to high quality health care. In the
area of nursing homes, the nursing home reform law and federal rules
have improved aspects of quality of care for residents. In addition,
the good care practices mandated by the reform law and rules are cost-
effective and save Medicare dollars.
However, while HCFA can and does play an important role in
protecting beneficiaries' access to high quality care, too often, the
agency is timid and overly deferential to the health care industries it
regulates. Beneficiaries can be harmed as a consequence.
THE PURPOSE OF THE MEDICARE PROGRAM IS TO PROVIDE HEALTH CARE SERVICES
TO BENEFICIARIES, NOT PAYMENTS TO HEALTH CARE PROVIDERS
Congress enacted the Medicare program in order to provide health
care benefits to older people and people with disabilities. Courts have
repeatedly recognized and stated that the program is designed for
beneficiaries, not providers. Home Health Services, Inc. v. Currie, 531
F. Supp. 476, 479 (D.S.C. 1982), aff'd 706 F.2d 497 (4th
Cir. 1983) (``[T]he statute was obviously not enacted primarily for the
benefit of the provider of services, but rather for the recipients of
medical care benefits.''); Gartman v. Secretary of the United States
Department of Health and Human Services, 633 F. Supp. 671, 679
(E.D.N.Y. 1986); Mays v. Hospital Authority of Henry County, 582 F.
Supp. 425 (N.D. Ga. 1984).
THE ADMINISTRATIVE RULEMAKING PROCESS ENABLES BENEFICIARIES AS WELL AS
HEALTH CARE PROVIDERS TO PRESENT ISSUES AND CONCERNS TO THE
HEALTH CARE FINANCING ADMINISTRATION
Due to the complexity of health care programs and the expertise
needed to administer them, Congress delegates responsibility to the
Department of Health and Human Services to provide the details for its
legislative enactments. The Health Care Financing Administration is the
component within the Department that has expertise and is given the
authority to implement the Medicare statute. HCFA meets its duty to
implement federal legislation, including Medicare, through a public
rulemaking process.
While the rulemaking process is lengthy and time-consuming, it is
also, at its best, both open and highly democratic. The rulemaking
process allows all sectors of the public to express their views and to
be heard. Beneficiaries and their advocates, as well as health care
providers, participate in the rulemaking process in order to bring
their experiences and concerns to the attention of HCFA. Through their
comments on rules, they explain the impact of rules on all segments of
the public and offer suggestions to improve or strengthen rules to
achieve their statutory goals. When HCFA publishes final rules, it is
required to respond to these public comments and to explain its
rationale in making regulatory decisions. HCFA is publicly accountable
for its decisions.
MEDICARE BENEFICIARIES AND THEIR ADVOCATES SEE RULES AND THE RULEMAKING
PROCESS AS HELPING TO ASSURE BENEFICIARIES' FULL ACCESS TO HIGH
QUALITY HEALTH CARE
While providers may see various aspects of the laws and rules as
burdensome and excessive, beneficiaries often view these same laws and
rules quite differently. Beneficiaries see the laws and rules as
establishing a system that protects their rights and interests in
receiving full access to high quality health care.
NURSING HOME CARE
The nursing home reform law enacted by Congress in December 1987
and its implementation by HCFA are a clear example of how law and
regulation work effectively both to establish a high level of care as
the federal standard of care and to help improve the actual quality of
care that residents receive. I follow nursing home law closely, having
spent nearly 25 years advocating on nursing home issues on behalf of
residents, particularly Medicare and Medicaid beneficiaries.
The 1987 reform law was the most comprehensive revision to federal
nursing home law since the Medicare and Medicaid programs were enacted
in the 1960s. Congress based the detailed legislation on a series of
hearings in 1987 in the three committees with legislative
responsibility for the Medicare and Medicaid programs; on the 1986
report of the Institute of Medicine, Improving the Quality of Care in
Nursing Homes, which itself was the result of several years of
exhaustive research; and on recommendations of the Campaign for Quality
Care, an ad hoc coalition of nursing home provider associations, health
care professionals working in nursing homes, and residents' advocates,
convened by the National Citizens' Coalition for Nursing Home Reform to
identify areas of consensus about how best to translate the IoM's
recommendations into federal law.
The nursing home reform law was based in large part on good
practices that had been tried and proven effective in states. Requiring
the training of nurse aides (who provide the majority of direct care to
residents) and comprehensive assessment and care planning, guaranteeing
residents' rights, and authorizing a broad range of intermediate
sanctions that survey agencies could impose against facilities that
failed to meet care standards were among the innovations of the
legislation. These good practices involved both the care practices that
nursing homes had developed and used with success as well as survey and
enforcement practices that states had successfully used. The reform law
made these good practices mandatory for all states and all facilities
that chose to participate in the Medicare and Medicaid programs.
The Law and Implementing Regulations Promulgated by HCFA Have
Promised Residents High Quality of Care and Have Led to Some
Significant Improvements in Care.
The nursing home reform law and regulations and guidelines
published by HCFA to implement the law have led to demonstrable
improvements in the care that residents receive. While the series of
hearings held by Senators Charles Grassley and John Breaux in the
Senate Special Committee on Aging, between July 1998 and September
2000, documented that grave and unconscionable problems remain in the
quality of care provided by too many nursing homes, the hearings
demonstrated that these problems result primarily from the lack of
strong public enforcement of the care standards, not from the statutory
and regulatory standards themselves.1
---------------------------------------------------------------------------
\1\ The Institute of Medicine's 2001 report Improving the Quality
of Long-Term Care also identified ``serious deficiencies'' in
assessment and enforcement of care standards as the cause of continuing
serious care problems in nursing homes. Institute of Medicine,
Improving the Quality of Long-Term Care, 251 (2001) [hereafter IoM,
Improving the Quality of Long-Term Care].
---------------------------------------------------------------------------
The Reform Law Required Reduction in the Use of Physical and
Chemical Restraints.
The requirement to reduce the use of physical and chemical
restraints was based on good care practices in some nursing homes that
had reduced or entirely eliminated restraints. At the time the law was
enacted, however, a more common view in the nursing profession and the
nursing home industry was that restraints would protect residents from
injuries and falls. As a consequence, in the late 1980s, an estimated
41% of all residents were physically restrained.2
---------------------------------------------------------------------------
\2\ Id. 79.
---------------------------------------------------------------------------
The reform law adopted the best practice from the restraint-free
movement (which recognized that restraints in fact caused more injuries
to residents than restraint-free care), changed the paradigm of care on
a national scale, and led to a reduction in restraint use for
residents. The most recent national data indicate that in 1999, 11.2%
of residents were restrained.3 Freeing residents from
restraints was documented to be not only better from residents'
perspective, but also a less costly way of providing care.
---------------------------------------------------------------------------
\3\ Charlene Harrington, et al, Nursing Facilities, Staffing,
Residents, and Facility Deficiencies, 1993 Through 1999, 85 (Oct.
2000), at http://www.hcfa.gov/medicaid/nursingfac/nursfac99.pdf.
---------------------------------------------------------------------------
As Joani Latimer, a nursing home residents' advocate, wrote in the
Journal of the American Society on Aging, ``good law takes everyone to
a higher standard.'' 4 The reform law set a new standard
regarding restraints. When the New York-based Commonwealth Fund
supported a project several years ago on restraint reduction in nursing
homes, project staff asked facility staff why they participated in the
research. Many answered that since the reform law now required
reduction of restraints and facilities would be evaluated by the survey
agency by this different standard of care, they were motivated to learn
how to comply with the new rules most effectively. The project gave
them that opportunity.
---------------------------------------------------------------------------
\4\ Joani Latimer, ``The Essential Role of Regulation to Assure
Quality in Long-Term Care,'' Generations, Vol. XXI, No. 4, 13 (Winter
1997-1998) [hereafter Latimer, ``The Essential Role of Regulation''].
---------------------------------------------------------------------------
In a report issued this year, the Institute of Medicine attributed
the reduction in the use of physical and chemical restraints
nationwide, which it called ``the greatest improvement in nursing home
care,'' 5 to the requirements of the reform law:
---------------------------------------------------------------------------
\5\ IoM, Improving the Quality of Long-Term Care, supra note 1, 79.
---------------------------------------------------------------------------
[M]any facilities have successfully reduced the inappropriate
use of physical and chemical restraints. The focus of increased
regulatory scrutiny on these two areas of care was a major
contributing factor in reductions in both of these.6
---------------------------------------------------------------------------
\6\ Id. 77.
---------------------------------------------------------------------------
Reducing the use of restraints is good care; it is also a less
expensive way to provide care to residents.7
---------------------------------------------------------------------------
\7\ Charles D. Phillips, Hawes, C., and Fries, B., ``Reducing the
Use of Physical Restraints in Nursing Homes: Will It Increase Costs?''
American Journal of Public Health, Vol. 83, 342-348 (Mar. 1993).
---------------------------------------------------------------------------
The new survey process that was put in place in July 1999 included
six new investigative protocols addressing adverse drug reactions,
pressure sores/ulcers, hydration, unintended weight loss, dining and
food service, and sufficient nursing services.8 With the
restraint experience as a model, it can be hoped and expected that the
new regulatory attention on these care areas will also lead to
improvements in care outcomes for residents.
---------------------------------------------------------------------------
\8\ HCFA, Transmittal No. 10 (Jul. 1999). The survey protocol is at
http://www.hcfa.gov/pubforms/pub07pdf/part-07.pdf.
---------------------------------------------------------------------------
The Reform Law Required Standardized Resident Assessments.
Another beneficial aspect of the 1987 reform law was the
requirement that all facilities assess residents using a comprehensive,
standardized, reproducible assessment instrument. The assessment would
identify ``potentially treatable or reversible causes of functional
impairment'' and would be used to plan each resident's care in the
individualized care-planning process.9
---------------------------------------------------------------------------
\9\ Charles D. Phillips, Hawes, C., Mor, V., Fries, B.E., and
Morris, J.N., ``Geriatric Assessment in Nursing Homes in the United
States: Impact of a National Program,'' Generations (Journal of the
American Society on Aging), Vol. XXI, No. 4, 15, 16 (Winter 1997-1998)
[hereafter Phillips, ``Geriatric Assessment''].
---------------------------------------------------------------------------
The new resident assessment instrument, known as the minimum data
set, or MDS, was developed through an intensive public process that
involved all sectors of long-term care and included extensive testing.
Although the nursing home reform law explicitly permitted states to
develop their own assessment instruments, all states have chosen to use
the assessment instrument and process that were developed by HCFA.
An evaluation of the impact of the MDS in 1996 found that the new
assessment process improved care outcomes for residents. The study
found, among other changes:
``a 24 percent increase in the accuracy and
comprehensiveness of information in the residents' nursing home
records.''
``a 17 percent increase in the number of problems
that are addressed in residents' care plans.''
``a 30 percent increase in the use of hearing aids
for persons with hearing difficulty.''
``a 27 percent increase in the use of behavior
management programs for residents who wander, display physical
aggression, or resist nursing care.''
``Residents with bowel incontinence were almost
twice as likely to receive a toileting program.''
``a 29 percent decrease in the use of indwelling
urinary catheters.''
``a 28 percent decrease in the proportion of
residents with little or no activity.'' 10
---------------------------------------------------------------------------
\10\ Catherine Hawes, ``Assuring Nursing Home Quality: The History
and Impact of Federal Standards in OBRA 1987,'' 6-8 (Commonwealth Fund,
Dec. 1996).
---------------------------------------------------------------------------
The increase in positive care outcomes and decline in negative care
outcomes that resulted from implementation of the MDS had a price tag--
they saved Medicare dollars. Providing good care to residents and more
accurately identifying and meeting residents' care needs also led to
reduced instances of hospitalization. Dr. Catherine Hawes reported that
introduction of the MDS led to a 26% reduction in hospitalization of
residents, resulting in an annual estimated savings to the Medicare
program of two billion dollars in hospital costs in 1992
alone.11
---------------------------------------------------------------------------
\11\ Id. 8.
---------------------------------------------------------------------------
While use of the MDS led to an increase in positive health outcomes
for residents and, at the same time, significantly reduced costs to the
Medicare program, administrators and nurses who were questioned about
the MDS reported mixed feelings about the new assessment tool. Dr.
Charles Phillips, et al., reported that 43% of clinical staff were
``resistant'' to using the MDS and that 68% of administrators
complained about the ``excessive paperwork burden.'' 12
---------------------------------------------------------------------------
\12\ Phillips, ``Geriatric Assessment,'' supra note 9, 16.
---------------------------------------------------------------------------
However, a majority of both administrators and nursing
directors agreed that the RAI had positive effects on quality:
some 59 percent of nursing directors reported that the RAI
improved the quality of residents' clinical assessments, 69
percent that their staff's assessment of residents' functional
status improved, and 75 percent acknowledged that the RAI was
more useful than the assessment system used in the past.
Finally, 78 percent of nurses reported that the RAI improved
their ability to detect clinically meaningful changes in
resident functioning.13
---------------------------------------------------------------------------
\13\ Id. 16-17.
---------------------------------------------------------------------------
Health care providers may find fault with regulations even when
they recognize the improved health care for beneficiaries (and cost
savings to the Medicare program) that result.
ACCESS TO CARE
Some of the Medicare regulations that health care providers
complain about are intended to assure that beneficiaries receive the
health care benefits that Congress mandated.
In the area of home health care, for example, home health agencies
have recently been critical of the home health advance beneficiary
notice (HHABN) issued by HCFA through a program memorandum. Effective
March 1, 2001, HCFA requires home health agencies to use a standard
form to notify beneficiaries when they believe that the Medicare
program will not cover particular home health benefits. This
substantive requirement is not new. In fact, HCFA has required home
health agencies to provide beneficiaries with notices under these types
of circumstances since at least 1975. The recent program memorandum is
different from prior notices only in its specification of the actual
language that home health agencies must use in the HHABNs that they
give to beneficiaries to advise them of their rights under the Medicare
law.
Home health agencies were well-informed in advance that HCFA
intended to mandate use of the HHABNs and were fully involved in the
process. The model notice was issued through the Paperwork Reduction
Act process, which requires public comment and review by the Office of
Management and Budget. Beginning in September 1999, transmittals and
draft notices were issued and withdrawn several times, in large part,
in response to comments from home health agencies. OMB and HCFA held a
public hearing in July 2000, in which representatives of the home
health industry actively participated and expressed their concerns
about the burden imposed by the HHABNs.
Receiving notices about non-coverage of care is critical to
beneficiaries, however, and outweighs the minimal burden imposed by
using a standard notice form. Beneficiaries who are able and willing to
pay for home health services can do so after receiving a notice of non-
coverage from their home health agency. If they choose, they can also
require their home health provider to submit what is called a ``demand
bill'' to the Medicare program. Once the Fiscal Intermediary receives a
demand bill, it makes a formal determination whether a particular home
health service is covered by the Medicare program.
Beneficiaries who request that a home health agency submit a demand
bill are often successful in getting Medicare coverage of their home
health services. According to HCFA data, between 1994 and the first
three months of 1998, beneficiaries who had demand bills submitted on
their behalf were fully or partially successful at the initial claims
stage in getting home care coverage in 50.2% of the cases.14
---------------------------------------------------------------------------
\14\ Healey v. Shalala, 2000 WL 303439, at 4, 68 Social Security
Reporter Service 212 (D.Conn. Feb. 11, 2000). This statistic does not
include beneficiaries who were successful in getting coverage at later
stages of the appeals process.
---------------------------------------------------------------------------
Without the HCFA-mandated notice from the provider and the demand
bill process that enables them to request that Fiscal Intermediaries
review their health care needs, beneficiaries would be unable to pursue
their rights to receive their statutory entitlement to home health care
under the Medicare program. As the court said in Healey v. Shalala, ``A
demand bill is the key to the administrative process.'' 15
---------------------------------------------------------------------------
\15\ Id.
---------------------------------------------------------------------------
A second example illustrates the importance of the Medicare
program's providing information to beneficiaries about their rights
under the Medicare statute. A recent report by the Office of Inspector
General recommends that HCFA ``educate beneficiaries on the options and
consequences of assigned and non-assigned claims and purchasing medical
equipment and supplies from participating and non-participating
suppliers.'' 16
---------------------------------------------------------------------------
\16\ Office of Inspector General, Department of Health and Human
Services, Balance Billing for Medical Equipment and Supplies, ii, OEI-
07-99-00510 (Jan. 2001).
---------------------------------------------------------------------------
Under Part B of the Medicare program, suppliers of medical
equipment may choose to submit assigned or non-assigned claims. For
assigned claims, where suppliers agree to accept the amount allowed by
Medicare as payment in full, Medicare pays 80% of the allowed amount
and the beneficiary pays 20% of the allowed amount (plus any
outstanding deductible). For non-assigned claims, Medicare pays 80% of
the allowed amount, but sets no limit on the charge that the supplier
may charge the beneficiary. The beneficiary must pay all the supplier's
charges after Medicare pays its amount. Balance billing is the term
used to define ``the portion of the charge in excess of the Medicare
allowed amount.'' 17 Suppliers may also ``participate'' in
Medicare or not. Participating suppliers submit assigned claims for all
items and services provided to beneficiaries; non-participating
suppliers submit either assigned or non-assigned claims to Medicare,
decided on a case-by-case basis.
---------------------------------------------------------------------------
\17\ Id. i.
---------------------------------------------------------------------------
The Inspector General's recent report indicated that Medicare
beneficiaries paid $41 million above the Medicare-allowed amounts for
equipment and supplies and that most beneficiaries are unaware of the
cost implications of purchasing equipment and supplies from
participating and non-participating suppliers.18 Informing
beneficiaries about the cost implications of their purchases could help
beneficiaries reduce their health care costs. Since non-participating
suppliers are unlikely to advise beneficiaries that they could purchase
the same supplies for less money elsewhere, only the government is
likely to inform beneficiaries of their rights under the Medicare law.
---------------------------------------------------------------------------
\18\ Id. i-ii.
---------------------------------------------------------------------------
QUALITY OF HEALTH CARE
Rules and regulatory systems also require and promote high quality
of care for beneficiaries. This purpose of the regulatory system is
also of critical importance to beneficiaries.
Ms. Latimer reports that regulation is necessary in the health care
area, particularly in long-term care, because market forces may be
unable, alone, to assure high quality of care for
beneficiaries.19 The factors that may make the marketplace
work as a mechanism assuring high quality of products are largely
absent in health care. Health care consumers may be inadequately
informed; may have little choice among health care providers (because
of insurance limitations or provider discrimination against program
beneficiaries); and may be required to make decisions at a hurried,
stressful time. Moreover, the consequences of their decisions often
cannot be reversed. People can choose to buy a different television set
if the one they buy breaks. Similar opportunities are unlikely in
health care. Health care that is denied or inadequately provided may
not be able to be fixed or corrected.
---------------------------------------------------------------------------
\19\ Latimer, ``The Essential Role of Regulation,'' supra note 4,
10.
The Institute of Medicine's 1986 report on nursing home quality
rejected reliance solely on market forces to improve the quality of
long-term care:
[H]istorical experience hardly supports an optimistic
judgment about the effects on quality of care of allowing
market forces to exert the primary influence over nursing home
behavior. Nursing homes were essentially unregulated in most
states prior to the late 1960s. Their operations were governed
almost entirely by market forces, and the quality of care was
appalling.20
---------------------------------------------------------------------------
\20\ Committee on Nursing Home Regulation, Institute of Medicine,
Improving the Quality of Care in Nursing Homes 5 (Mar. 1986).
---------------------------------------------------------------------------
As noted above, the IoM's report was the blueprint for the nursing
home reform law that Congress enacted in December 1987. Fifteen years
later, the Institute of Medicine reiterated its support for a
regulatory model to assure quality in long-term care.21
---------------------------------------------------------------------------
\21\ IoM, Improving the Quality of Long-Term Care, supra note 1,
141.
---------------------------------------------------------------------------
The value of a regulatory system to assure quality of care for
nursing home residents was also firmly recognized by the California
Supreme Court. In a 1997 decision, the Court recognized that regulatory
systems are intended to prevent avoidable bad outcomes for residents:
``the very purpose of the statutory scheme'' is ``preventing injury
from occurring.'' 22
---------------------------------------------------------------------------
\22\ California Association of Health Facilities v. Department of
Health Services, 16 Cal.4th 284, 940 P.2d 323, 336, 65 Cal. Rptr.2d
872, 885 (1997).
---------------------------------------------------------------------------
Public support for regulation of nursing homes to address quality
continues. The New England Journal of Medicine reported this month that
a strong majority of Republican voters (57%) and Democratic voters
(68%) in 2000 supported increasing regulation of nursing home
quality.23
---------------------------------------------------------------------------
\23\ ``Health Policy 2001: The Implications of the 2000 Election,''
The New England Journal of Medicine, Vol. 344, No. 9, 679, 681 (Mar. 1,
2001).
---------------------------------------------------------------------------
AT TIMES, HCFA HAS BEEN TOO TIMID IN EXERCISING ITS RULEMAKING
AUTHORITY AND OVERLY DEFERENTIAL TO THE HEALTH CARE PROVIDERS IT
REGULATES
Although Medicare beneficiaries and their advocates recognize
HCFA's ability to implement federal legislation in ways that improve
access and quality of care, we are concerned that the agency at times
defers excessively to the health care providers it regulates.
In the nursing home area, HCFA had difficulty implementing the
strong enforcement approach of the nursing home reform law in the face
of fierce and aggressive opposition by the nursing home industry. The
weak enforcement system initially established by HCFA's guidelines
tolerated high levels of facility non-compliance with federal standards
of care, leading to the care crisis that Senator Grassley's and Senator
Breaux's hearings vividly documented. Strong Congressional oversight
and the Administration's Nursing Home Initiative have now redirected
the agency's approach to enforcement, making it more consistent with
the law and more likely to achieve its goals of assuring correction of
deficiencies and sustained compliance by facilities.
While beneficiaries and their advocates would not disagree that
HCFA has experienced problems and delays in implementing federal
legislation, we would contend that some of the agency's difficulties
result from the increased numbers of mandates from Congress and
inadequate resources to meet those mandates. HCFA and the state
regulatory agencies need more money to do their jobs well. HCFA should
not be asked to do more work with insufficient funding and then be
criticized for not doing it well. The agency needs adequate financial
support to do its work.
HCFA underwent an extensive reorganization just a few years ago.
Another reorganization would consume considerable agency resources
without sufficient benefit. Any organizational structure is always
inherently artificial to some extent because of the agency's extensive
and overlapping areas of responsibility. What is needed is good
coordination within the agency and adequate support for the staff who
work there.
Thank you for the opportunity to appear before you today.
SUPPLEMENTAL STATEMENT
This statement supplements testimony given on March 15, 2001 by
Toby S. Edelman of the Center for Medicare Advocacy, Inc. (the Center)
on behalf of Medicare beneficiaries and their advocates. At the
hearing, Chairwoman Nancy Johnson expressed considerable
dissatisfaction with the work of the Center. The Chairwoman's comments
reflected a misunderstanding of the Center's work on behalf of Medicare
beneficiaries and Connecticut's Department of Social Services and about
the Medicare demand bill process. Since the Center was not allowed an
opportunity at the hearing to respond to the Chairwoman's concerns,
this Supplemental Statement is submitted to explain both the work of
the Center in Connecticut and the Medicare demand bill process.
About the Center for Medicare Advocacy
Since 1986, the Center for Medicare Advocacy has been providing
legal assistance and education on behalf of Medicare beneficiaries and
their community. Our work is focused on frail elderly people,
individuals who are disabled or chronically ill, and those who need
Medicare coverage in order to receive home care, long-term care, and
rehabilitative services. The Center's goals are to:
Increase proper Medicare coverage, and, therefore,
access to health care, for beneficiaries who are most
vulnerable and most in danger of unfair Medicare denials;
Promote the ability of Medicare beneficiaries
themselves and those who care about them to advocate
effectively for proper Medicare coverage.
Our Medicare advocacy services, which are available at no cost to
all Connecticut residents, include a toll-free telephone line, dozens
of educational and self-help materials, brochures, manuals, and
training and legal support for Connecticut's ``CHOICES'' health
insurance and assistance program. Each quarter our attorneys,
paralegals, and nurses respond to approximately 2,000 calls from
Medicare beneficiaries, their family members, and the community. We
staff the toll-free line each day from 9:00 a.m. until 5:00 p.m. and
provide assistance ranging from information to advocacy materials to
direct legal representation.
The Center offers information and training sessions throughout the
state for older people, health care providers, case managers, Area
Agencies on Aging staff, advocates, and others in the Connecticut elder
network. On many occasions, we have responded to requests from members
of the Connecticut Congressional delegation to participate in health
fairs and to provide assistance to constituents on questions involving
Medicare-covered services.
The Center produces two quarterly newsletters, the Center News and
the Healthcare Rights Review, and maintains a web site at
www.medicareadvocacy.org. Last quarter alone, we had 15,450
``visitors'' to the web site and 12,113 requests for printed
information.
In 1997 the Center was recognized by the Health Care Financing
Administration (HCFA) for its Medicare advocacy when it received HCFA's
Beneficiary Service Certificate of Merit award. In March 2001, the
Connecticut General Assembly issued an official citation commending the
Center for its fifteen years of advocacy on behalf of Connecticut's
elders and people with disabilities.
The Center is a small business located in northeastern Connecticut
where we employ 23 Connecticut residents. The Center is staffed by
attorneys, paralegals, nurses, computer experts, and administrative
support personnel. Funding is secured largely from competitively-
awarded contracts with the Connecticut Department of Social Services,
and from writing, consulting, and training.
Work on Behalf of Medicare Beneficiaries Who Are Not Also
Entitled to Medicaid
Pursuant to grants, won competitively from the Connecticut
Department on Aging and its successor agency, the Department of Social
Services, the Center designed a Medicare advocacy and education
project, which we currently implement.
Through our Medicare Advocacy Project, from 1986 through February
2001, the Center responded to more than 69,910 WATS calls, formally
opened 3,772 cases, and recovered more than $12,512,476 in previously-
denied Medicare benefits. This work was all performed on behalf of
individuals who are not entitled to Medicaid and who rely upon Medicare
as their primary source of health insurance.
Work on Behalf of Dually-Eligible Medicare Beneficiaries
Since 1988, the Center has also worked with the State of
Connecticut to assure that dually-eligible Connecticut residents have
full access to the Medicare benefits to which they are legally
entitled. By virtue of their low income, dually-eligible beneficiaries
are entitled to Medicaid as well as to Medicare. Federal law makes
Medicaid the payer of last resort and requires state Medicaid programs
to assure that other payers, including Medicare, pay for health care
services first. 42 U.S.C. Sec. 1396a(a)(25)(A); 42 C.F.R. Sec. 433.138.
Under contract with the State of Connecticut, the Center pursues
Medicare coverage for certain skilled nursing facility, chronic disease
hospital, and home health care services which were provided to dually-
eligible beneficiaries and paid for by Medicaid. The Center chooses
cases for Medicare appeals on the basis of a selection process that
involves careful analysis of legal merit and medical facts. These cases
are identified from a larger set of dually-eligible cases referred to
the Center by the Department of Social Services. Another group of cases
has been considered coverable by the providers and is submitted by them
for Medicare coverage. The process for home health care appeals was
reviewed and approved by the United States District Court in
Connecticut:
. . . . Given the reversal rate to which the defendant
[Secretary of the US Department of Health and Human Services]
admits, . . . the steps taken by plaintiffs to ascertain
liability meet the standard of ``all reasonable measures.''
Therefore, plaintiffs are not barred from administrative review
of these claims by reason of failure to abide by third party
liability provisions of Medicaid.
. . . Medicare must provide the administrative review
necessary to determine ultimate liability . . ., if its
providers choose not to submit claims for payment and if the
state reasonably determines that there is a high likelihood
their Medicare coverage was improperly denied.
DIM v. Shalala, CA No. 2:91CV00546, 25-26 (AHN) (D. Conn. 1994).
Connecticut's efforts to obtain proper coverage for dually-eligible
beneficiaries have been extremely successful. Significantly, in the
majority of cases, benefits are won at the initial stage of review,
which is performed by the Fiscal Intermediary. From the inception of
the Center's dually eligible work through February 28, 2001, the
organization's Medicare appeal efforts have resulted in recovery of
$162,246,776. These were funds originally paid by Connecticut's
Medicaid program. Of this total, $133,277,840 are attributable to home
health cases. According to figures from the Connecticut Department of
Social Services, the sources of the favorable decisions resulting in
these recoveries are as follows:
80% from Fiscal Intermediaries
20% from Administrative Law Judges
In addition, Connecticut's activities to obtain proper Medicare for
dually-eligible clients have always included efforts to obtain
appropriate benefits in the first instance. Through provider education,
the advocacy programs described above, and the long-standing CHOICES
program, the State of Connecticut and the Center have taken many steps
to assure that Medicare meets its legal obligation to Connecticut's
dually-eligible population. For example, in 2000-2001, the Center and
the Department of Social Services provided three Medicare coverage
training seminars, one for home health agencies and two for skilled
nursing facility staff. Another seminar is scheduled for May 2001.
The ultimate goal of the Department's Medicare maximization efforts
is to increase the number of cases properly submitted for Medicare
initially, thereby reducing the need for a Medicare advocacy effort. It
is our hope that training efforts and a history of successful appeals
will serve to change provider claims submission practices. Since so
many of the cases are covered at the Fiscal Intermediary review stages,
providers should feel increasingly comfortable submitting similar cases
for Medicare coverage themselves, making appeals in those cases
unnecessary.
Connecticut's Medicare advocacy has meant very significant
financial savings for the State's Medicaid program and has increased
access to Medicare and to medically necessary care for Connecticut's
elders and disabled citizens.
As in the past, the Center for Medicare Advocacy is ready to do all
it can to provide training and to help increase the proper submission
and initial coverage of meritorious claims for Medicare. When pursuing
Medicare coverage remains necessary and appropriate, the Center will
continue to make every effort to perform these tasks as effectively and
efficiently as possible. We welcome the opportunity to work with
providers and HCFA towards accomplishing these goals.
Demand bill process
The federal Medicare statute and implementing regulations
require providers to give beneficiaries advance notice of non-
coverage.
When a Medicare health care provider makes a determination that a
particular home health service will not be covered by the Medicare
program, the Medicare statute requires that the provider give the
beneficiary notice. 42 U.S.C. Sec. 1395bbb(a)(1)(A) (Medicare
beneficiaries have ``the right to be fully informed in advance of any
changes in the care or treatment to be provided by the agency that may
affect the individual's well-being . . .'').
In implementation of the Medicare statute, HCFA requires that
providers give beneficiaries advance notice of changes in care. 42
C.F.R. Sec. 484.10(c)(1). The notice must be ``fair and reasonable.''
Healey v. Shalala, 68 Soc. Sec. Rep. Ser. 212, 2000 WL 303439 (D.Conn.
Feb. 11, 2000).
Official Medicare coverage decisions are made by Medicare's
Fiscal Intermediaries and can only be made upon submission of
claims, including demand bills.
Only a Medicare Fiscal Intermediary can decide whether a particular
service is covered by the Medicare program; the provider's
determination of non-coverage is not conclusive. However, in order for
a Home Health Fiscal Intermediary to review a home health care claim
that the provider believes is not covered by the Medicare program, a
bill must be submitted to the Intermediary.
Only health care providers can legally submit claims to Medicare
for payment. Therefore, in order to obtain an official Medicare
determination, beneficiaries must depend upon their health care
providers to submit claims. Medicare regulations and policy require
Medicare providers to submit claims and documentation when requested by
a beneficiary. Beneficiaries are said to request submission of a
``demand bill.'' The demand bill process is the vehicle that is used to
obtain official review of beneficiary-initiated coverage and claims
disputes.
A further limitation on the demand bill process is that
beneficiaries can request that a demand bill be submitted to an
Intermediary only if they pay for the health care service.
Beneficiaries cannot appeal provider denials of coverage unless they
first receive and pay for the health care service. Reimbursement to
beneficiaries under the Medicare program is made only on a
retrospective basis.
The requirement for health care providers to give beneficiaries
advance notice of non-coverage, which informs them of the demand bill
process, has existed since at least 1975.
Success rates are high when demand bills are submitted to
Fiscal Intermediaries.
When demand bills are submitted to Fiscal Intermediaries,
beneficiaries are often successful. According to data from the Health
Care Financing Administration, between 1994 and the first three months
of 1998, ``the success (full or partial) rate for all demand bills
submitted at the request of home health care beneficiaries was 50.2%.''
Healey v. Shalala, 68 Soc. Sec. Rep. Ser. 212, 2000 WL 303439, page 4
(D.Conn. Feb. 11, 2000), approved by the judge March 7, 2000.
Health care providers frequently fail to give beneficiaries
advance notice of non-coverage.
Although the requirement for health care providers to give
beneficiaries advance notice of non-coverage has existed for more than
25 years, the available evidence, from beneficiaries themselves,
complaint logs, contact reports, and deficiency reports, indicates that
providers frequently fail to give beneficiaries written advance notice
and often give no notice at all.
Moreover, since beneficiaries must pay for the health care services
in order to request submission of a demand bill, relatively few
beneficiaries request that demand bills be submitted. Demand bills are
a minuscule portion of claims processed for home health beneficiaries.
From 1994 through 2000, demand bills represented less than one-half of
one percent of claims submitted to Fiscal Intermediaries.
Successful litigation by the Center for Medicare Advocacy
assures that Medicare beneficiaries receive notice of their
right to have demand bills submitted on their behalf.
A nationwide class of homebound elderly and disabled Medicare
beneficiaries, represented by the Center for Medicare Advocacy, the
National Senior Citizens' Law Center, AARP, Greater Boston Legal
Services, and Northern California Lawyers for Civil Justice, filed a
lawsuit in 1998 alleging that beneficiaries did not receive meaningful
notice and appeal rights when their home health care benefits were
reduced or terminated. Healey v. Shalala, supra.
The court granted plaintiffs a declaratory judgment stating that
. . . plaintiffs have a legal right to a written: ``(1) pre-
deprivation statement why the HHA believes Medicare may not or
may no longer cover their services; (2) explanation of the
circumstances in which a beneficiary has the right to have a
demand bill submitted, and (3) disclosure of information
regarding a patient's right to appeal . . .''
Id. 2.
The court also recognized that a ``demand bill is the key to the
administrative process.'' Id. 4.
The court declined to issue an injunction because the Secretary of
the Department of Health and Human Services advised the court that she
was ```in the process of developing and implementing mandatory notice
language which all HHAs will be required to use and which will provide
beneficiaries with all the information that even plaintiffs insist is
required as a constitutional mandate.''' Id. 9.
The home health advance beneficiary notice (HHABN) clarifies
health care providers' Medicare notice responsibilities and
makes the specific text of the notice mandatory, but creates no
new obligations on providers.
HCFA has been developing the mandatory notice language for the home
health advance beneficiary notice (HHABN) since September 1999. Home
health agencies have been fully involved in the public process of
developing the text of the notice.
On September 29, 2000, HCFA published its proposed HHABNs in the
Federal Register (65 Fed. Reg. 57,821). HCFA solicited public comments
through the public process required by the Paperwork Reduction Act. On
December 1, 2000, the Office of Management and Budget, exercising its
authority under the Paperwork Reduction Act, approved the HHABNs.
During this period, HCFA also continued to affirm home health
agencies' obligation to provide beneficiaries with advance notice of
changes or termination of benefits. For example, on September 29, 2000,
HCFA sent the Regional Home Health Intermediaries a memorandum
clarifying that home health agencies remain obligated to provide
advance beneficiary notices, including an explanation of the demand
bill process as set forth in HCFA Program Memorandum Transmittals A-99-
52 and A-99-54. HCFA provided additional clarification on this
obligation at 65 Federal Register 58,858 (Oct. 6, 2000).
Conclusion
The Center has a 15-year history providing effective assistance and
representation to Medicare beneficiaries in Connecticut and nationwide.
The demand bill process is the method that enables Medicare
beneficiaries to receive appropriate Medicare coverage of their health
care services.
Chairwoman Johnson. Mr. Grob.
STATEMENT OF GEORGE F. GROB, DEPUTY INSPECTOR GENERAL FOR
EVALUATION AND INSPECTIONS, OFFICE OF INSPECTOR GENERAL, U.S.
DEPARTMENT OF HEALTH AND HUMAN SERVICES
Mr. Grob. Madam Chairman, thank you so much for the
invitation to come before this Committee and to present our
views on a daunting challenge that you placed before us, which
was to make specific recommendations on how to make the
Medicare program better, without increasing, and possibly
simultaneously decreasing the burden on our medical care
providers. We have taken your charge seriously, and my
testimony contains many such specific recommendations. Let me
highlight just a few for you right now.
The first recommendation that we have concerns the payment
error rate, a subject which you yourself raised in introducing
the subject of this hearing. Our office has just reported that
the Medicare payment error rate for the year 2000 was
approximately $11.9 billion, with a 6.8-percent error rate, a
quite significant reduction from the first year in which we
prepared the study, where we had a $23.2 billion problem and a
14-percent rate. And I would like to emphasize--I think I said
it in my testimony, but you said it, too--that the best way to
solve that problem is to reduce the error. And where we have
made this kind of accomplishment, the hassle has gone down
along with the reduction, and let me give you one example from
that.
Out of the 5 years in which we conducted that study, in the
last two we did not detect in the hospital industry any payment
error that was due to improper documentation. It did not happen
that we detected in the last 2 years that the hospital industry
was deprived of one dime because their documentation wasn't
correct. They got all the money that was due to them, and
Medicare did not have to hassle anybody about that. It was a
savings to Medicare, and the hassle factor was reduced. And I
am absolutely convinced that if we could reduce that hospital
error rate by half, and if we can solve the documentation
problem through education and discussion with the hospital
industry, then we can solve each and every one of the problems
that we have identified for that payment error rate, and that
will reduce a lot of hassle for everyone and save us all a lot
of money.
We also raised in our report some severe problems with the
accounting systems that are used by the contractors. Elementary
accounting systems, such as double-entry accounting and use of
integrated supporting documents, are missing for this very
expensive program. That should be fixed. This controls perhaps
$8 billion a year of expenditures, which are not under the
control that they should be placed under.
If these accounting systems were fixed, there would be much
better control, and that kind of control and that kind of
professionalism would not create a single more moment of hassle
for any Medicare provider, but it would greatly improve the
Medicare Program.
Another thing which I would like to call attention to that
has come up in the testimony of several of our speakers has
been problems with the appeals process, and in legislation now
before the Committee, there are different provisions, and in
recent legislation to put tighter time periods on the time that
it would take to consider appeals at various levels of appeal,
different processes for perhaps skipping a step in order to get
things looked at.
We really believe that a major problem in the Medicare
program right now is the appeals process, and in my testimony
you will see that we lay forth some rather major reforms to
that appeals process that go far beyond the changes that are
advocated in the legislation that you have before you. And, in
fact, they go in a somewhat different direction.
We believe that the major problem with the appeals process
right now is that there are not adequate resources to consider
the appeals, that the administrative law judges who are
responsible for that do not even work for the Medicare program;
they work for the Social Security Administration. The guidance
that they follow is not as uniform as it should be. The way
patients are treated in their appeals and the way providers are
treated should not be the same, and currently it is. And there
are other such reforms that need to be made.
We believe that what the appeal system needs right now is
not more deadlines. The problem isn't lack of deadlines. The
problem is its inability to meet the deadlines. And if we can
meet the deadlines with understandable and more uniform
provisions, then the hassle will go away, and then the payments
will be made right, and everyone will be in much better shape.
We also believe that HCFA ought to have much more
flexibility in how it chooses its contractors and how it
manages them.
I would like to raise now a more fundamental issue which
has to do with the infrastructure. I do believe that we should
not skimp on the infrastructure as we look at reforms to be
made, and I believe that there has been some skimping on that,
particularly in the field of survey and certification. I
believe that there has never been enough resources for the
reviews of the nursing homes to be carried out as well as it
should, or home health or other providers. In fact, nursing
homes are reviewed every year, as they should be. But in order
to make that happen, we had to reduce the reviews of home
health agencies from every year to every 3 years, for example.
And in the nursing home field, there are often delays in
conducting follow-up visits to nursing homes after deficiencies
have been found.
I believe that the best thing to do to reduce the hassle in
the nursing home arena is not to provide more venues for
appeals and more litigation but, rather, to establish better
standards and training for the people who conduct the reviews
so that there is not as much dispute about them to begin with,
to find those deficiencies, to raise them quickly, to resolve
them rapidly, and then to have the survey teams get back in
there and find out if they have been corrected. It is like the
payment error rate. The best way to reduce the hassle is to
eliminate the deficiencies, to correct the ones that are there,
and to resolve problems as they arise quickly.
There are other problems with the infrastructure as well
which I will not have time to discuss in the 5 minutes that I
have.
I would like to make one matter of clarification now with
regard to the pending legislation. I had planned to spend more
time in the time that I have right now to go over the pending
bill, because we were asked to please give our comments on that
bill, and our comments are there. But perhaps it would be
better if I were to use this opportunity to introduce to you
the notion of what we were trying to do in our comments.
With the Inspector General's Office, we do, in fact, have
an obligation to look at fraud, waste, and abuse. But we have
broader responsibilities in there, too. Our responsibilities
include--and they are in the Inspector General Act--to evaluate
the various processes which the Medicare Program and other
programs use to be managed and integrity processes that we
ourselves don't run but that others do run. We are obligated to
review them and evaluate them and make sure that they work very
well.
A lot of the studies that we do then, and a lot of the
comments that we have, don't go so much to our own authority as
they do to our evaluation of what is happening in the
Department. And some of the comments that you will see in there
about our concerns about granting people immunity and not being
able to get the return of money we have is not simply because
of the investigations that we conduct, but we are worried that
that immunity may be lost in the appeals process for the
contractors as well.
Perhaps with more time or in another circumstance we can
provide much more detail and explanation here to solve a
problem which I think we all see as a common one.
Thank you so much.
[The prepared statement of Mr. Grob follows:]
Statement of George F. Grob, Deputy Inspector General for Evaluation
and Inspections, Office of Inspector General, U.S. Department of Health
and Human Services
Good morning, Madam Chairman. I want to thank you for your
invitation to address this panel on Medicare reform. You asked us to
discuss how the government can do its job better, to ensure that
beneficiaries are protected and that tax payer dollars are used wisely
and responsibly without placing undue burdens on providers. I am very
pleased to do so.
Medicare is a national treasure. But it would be even more valuable
if it were operating more efficiently and effectively. Despite
herculean efforts to modernize it and recent success in doing so, there
is a sentiment, especially among health care providers, that it is not
as efficient as it should be. In fact, discussions in policy circles
and in the national and professional media emphasize its administrative
burdens, inefficiencies, and aggravations. There is some talk of major
reforms.
The Medicare program has been evolving since its creation. It has
been ``reformed'' and modernized many times--including the gradual
abandonment of cost and charge based reimbursement in favor of
prospective payment systems and fee schedules, and the introduction of
managed care. The Balanced Budget Act of 1997, with its new payment
systems for nursing homes, home health agencies, and hospital
outpatient departments and the new beneficiary options and protections
in Medicare+Choice, is the most recent and substantial reflection of
these movements. The program as it is, including the most recent
reforms, which are not yet fully implemented, is our starting point for
further reforms.
It is with this history in mind, and with insights drawn from more
than twenty years of audits, program evaluations, and investigations
conducted by the Office of Inspector General (OIG) that I would like to
offer our own suggestions on where to go from here.
First, I will identify facets of Medicare program administration
which require immediate and continuing attention; then I would like to
address some concerns which have been raised about recent initiatives
to address waste, fraud, and abuse.
PROGRAM ADMINISTRATION
Following are the recommendations of the Office of Inspector
General (OIG) to promote the efficient and effective operations of the
Medicare program. We believe that these proposals will also reduce
administrative burdens and frustrations for providers. You asked us to
be specific; I hope this is helpful.
Further Reduce and Control Improper Payments. Continue, even
intensify, ongoing efforts to help further reduce improper Medicare
fee-for-service payments. Billions of dollars are at stake, and years
of Medicare solvency will be lost if oversight is reduced. As we
announced last week in our most recent annual report on this subject,
Medicare made $11.9 billion in improper payments in FY 2000, 6.8
percent of all Medicare fee-for-service payments. This is down
substantially from the $23.2 billion, or 14 percent, first reported for
1996. But it is still too high. Then as now, most of the error is due
to unsupported services and lack of medical necessity for services
rendered.
The reasons for these improper payments could range from
inadvertent mistakes to outright fraud and abuse. We cannot quantify
what portion of the error rate is attributable to fraud. The vast
majority of health care providers are honest, hard working
professionals dedicated to the care of their patients. I will repeat
this later in my testimony, since it deserves emphasis.
Reducing errors would be one of the best ways to turn down the
frustration and sense of hassle felt by health care providers and the
Medicare contractors who administer the program. For example, our
annual reports show that hospital documentation errors have been
completely eliminated for the last two years. This not only shows that
such improvements can be made, but it also illustrates how one source
of controversy and irritation can be minimized for all parties
involved. To further achieve such improvements, we recommend more
training for providers, further refinement of Medicare guidelines and
regulations where needed, concerted efforts to reduce errors with
respect to specific codes most frequently found in error, selected
surveillance by peer review organizations (PROs) of high risk areas,
and adoption by health care providers of compliance plans that promote
adherence to Medicare program requirements.
Overhaul Medicare Contractor Structures and Authorities. Allow the
Health Care Financing Administration (HCFA) greater flexibility in the
methods it uses to select, organize, and supervise the contractors who
handle the day-to-day operations of the Medicare program. This includes
authorities to use entities other than insurance companies, select them
competitively, pay them on other than a cost basis, organize them
according to functions or benefits areas, and hold them accountable for
performance.
The Medicare program is administered by the Health Care Financing
Administration with the help of 50 contractors (Part A intermediaries
and Part B carriers) that handle claims processing and administration.
Over the years we have detected serious problems with contractor
operations, including fundamental problems with accounting, electronic
data processing, and fraud control. We have even uncovered integrity
problems with some of the contractors themselves--altering documents
and falsifying statements that specific work was performed. In some
cases, contractors prepared bogus documents to demonstrate superior
performance, which Medicare then rewarded with bonuses and additional
contracts. Our investigations have resulted in 15 civil settlements and
criminal convictions since 1993, with total settlement amounts
exceeding $350 million. Two contractors pled guilty to obstruction of
Federal audits. A number of investigations are ongoing. HCFA has been
working to correct problems with contractors. However, some serious
concerns remain.
Under the Health Insurance Portability and Accountability Act of
1996 (HIPPA), HCFA was granted new authority and flexibility in
contracting for program integrity functions. It may enter into
contracts or work orders for specific program safeguard functions, such
as medical review, fraud detection, cost report audits, and reviews to
identify primary payers to whom Medicare is the secondary payer. We
support this authority and look forward to the changes in Medicare
contracting that are taking place under the new Medicare Integrity
Program.
In contrast to these new and promising developments for integrity
functions, the Medicare statute places substantial limits on how HCFA
obtains contractor assistance to administer the Medicare program. For
example, it limits HCFA to choosing only insurance companies to process
Part B claims. As for intermediaries, most of them are selected by the
National Blue Cross/Blue Shield Association from companies nominated by
providers (e.g., hospitals). All contracts must be cost based; other
reimbursement methods such as firm fixed price cannot be used.
Furthermore, beyond the program integrity functions mentioned above,
HCFA is not allowed to let contractors specialize according to
function.
HCFA has proposed broader, more flexible contracting authority in
the past, but these proposals were not approved. Intrinsically, more
flexibility makes sense and we support it. So does the General
Accounting Office.
Another promising development is the designation of specialty
contractors such as the durable medical equipment regional carriers.
They review and pay all claims for medical equipment and supplies.
There are only four of them, which appropriately concentrates their
expertise in this complex area. They are bolstered by a data analysis
unit, staffed by one of these carriers but supporting them all. This
enables them to analyze payment and usage patterns which may suggest
possible improper or questionable conduct. They are also able to
effectively collaborate on the formulation of national coverage
policies and payment control systems. A recent OIG evaluation found
that these entities are effective. This approach, however, has not been
used elsewhere, except for home health and hospice care. However, even
these specialized intermediaries are not supported by the kind of data
analysis unit that the medical equipment carrier utilize. We believe
that specialty contractors, with a supporting analytic unit, would make
sense for problematic areas and recommend that they be more widely
used.
More flexibility and specialization will, we believe, bring greater
expertise and efficiency to contractor operations. This will, in turn,
improve their relations with providers and facilitate provider
education and understanding of Medicare rules and regulations.
Improve Accounting Systems. Speed up current efforts to establish a
modern, integrated, dual entry accounting system for accounts
receivable to accurately portray and control the billions of dollars in
transactions in this category annually.
Medicare accounts receivable primarily represent overpayments owed
by health care providers to the Health Care Financing Administration
and funds due from other insurers when Medicare is the secondary payer.
For FY 2000, HCFA reported a net accounts receivable balance of $3.8
billion, comprised of gross outstanding receivables of $8.1 billion and
an aggregate allowance for uncollectible accounts of $4.3 billion.
In FY 1998, we had to qualify our audit opinion on the Department-
wide financial statements, primarily because of serious problems in
Medicare contractors' ability to report accounts receivable. For
example, they could not support beginning accounts receivable balances;
they reported incorrect activity and collections; and they could not
reconcile reported ending balances with subsidiary records. We reported
Medicare accounts receivable as a material internal control weakness
because Medicare contractors used rudimentary, single-entry accounting
systems that lacked general ledger capabilities for Medicare program
activity and reported receivable activity to HCFA based on ad hoc
spreadsheets.
In collaboration with the Office of Inspector General, HCFA
initiated a major effort in FY 1999 to address these deficiencies. As a
result of this effort, the receivables balance was fairly presented as
of the end of FY 1999. However, internal controls are still not
adequate to ensure that future receivables would be properly reflected
in Medicare financial reports. The contractors still use ad hoc,
single-entry accounting systems, do not accrue liabilities in
accordance with generally accepted accounting principles, and do not
use proper cutoff procedures.
A project team, formed under the guidance of HCFA's Chief Financial
Officer and Chief Information Officer, expect to complete the
development and implementation of an integrated system by the year
2007. Every effort should be made to advance this expected completion
date.
Improving the accounting systems will reduce financial errors,
thereby improving the soundness of the trust funds, with no additional
burden on providers.
Adequately Support the Infrastructure. Do not skimp on resources
needed to ensure efficient and effective claims processing, policy
development and regulation, and quality assurance. Make a top-to-bottom
review of the adequacy and use of currently available resources, seek
realistic budgets for the Medicare infrastructure, and maintain
reliable funding in the future. Establish reasonable time frames for
implementing new reforms to balance the need for consultation with
stakeholders and timely introduction of new systems and benefits. Some
areas deserving special attention are:
Policy Development and Regulation. The Medicare program has always
been subject to considerable legislative change as it has evolved over
the years. But the legislative changes in the last several years,
particularly those in the Balanced Budget Act of 1997 and the two
subsequent years of amendments, have been especially extensive and
complex. The HCFA staff scrambled to implement regulations timely,
consulting with industry and beneficiary representatives in the
process. Their achievements in meeting this work load is impressive.
But their limited resources will always place them in an unenviable
dilemma. To issue the regulations timely they may have to curtail
consultation; to carefully consider industry and beneficiary concerns
they may have to miss deadlines. The third alternative is to fall
behind on other administrative responsibilities. No matter which path
they choose, frustrations will abound among all parties. Ironically,
HCFA's requests for staff increases are sometimes portrayed as wasteful
bureaucratic layering. Clearly, adequate resources need to be provided
and effectively utilized.
Quality Assurance Reviews. More troubling, perhaps, has been the
unreliability of resources for quality assurance. There have never been
adequate resources to meet the needs for State run but federally
supplemented survey and certification reviews of nursing homes, home
health agencies, end stage renal dialysis facilities, and the 20
percent of Medicare certified hospitals not accredited by the Joint
Commission. Only nursing homes are generally reviewed yearly. But this
has been at the expense of the other institutions whose reviews have
been curtailed in order to shift survey and certification resources to
address the severe problems that were becoming apparent there. For
example, home health agencies which were once reviewed annually are now
reviewed every three years. This change occurred at the same time that
the payment system was being reformed. We have documented gaps in the
reviews of psychiatric hospitals and dialysis facilities. Even for
nursing homes, which get the annual reviews, follow-up visits when
deficiencies are found are often delayed. And above and beyond periodic
reviews, resources to investigate complaints in all types of facilities
are inadequate.
Patient Care Data Sets. The introduction of prospective payment as
the method that Medicare will use for paying skilled nursing homes adds
incentives and complications to the medical care system. For example,
the calculation of the prospective payment is derived from a patient
assessment tool called the Minimum Data Set. This tool has been under
development for many years, primarily as a patient care planning
system. Now that it is being used to calculate Medicare payments, a
financial incentive to control data entry is now present. We recently
studied this system and found a significant number of coding problems
which could adversely affect both care planning and reimbursement.
Nevertheless, nursing homes seem to be trying to learn to use the
system, which if properly implemented will be quite useful. A
commitment to the refinement and implementation of this system and
other systems like it is needed to improve patient care and ensure
accurate billing and payment.
Claims Processing Systems. Additional improvements are needed for
HCFA data systems used to process claims. For example, studies by our
office have found excessive numbers of unused but un-retired provider
identification numbers, which increase Medicare's vulnerabilities to
false claims. Routine maintenance of data systems could remove such
vulnerabilities, but such ``household'' chores are naturally accorded
low priority and are not tended to.
Providing HCFA with the staff that is needed to operate the program
will not result in more hassle for providers. It will enable HCFA to
respond better to their needs. Improving the critical data systems will
reduce payment errors, improve patient care, and make program
operations more efficient.
Fully Implement Recently Enacted Payment Reforms. Do not let the
growing interest in new reforms distract Departmental policy makers and
program administrators from systematically completing the
implementation of Medicare+Choice and other reforms, such as those
related to nursing homes and home health care. Monitor, and take
appropriate actions to correct, any deficiencies discovered along the
way regarding payment integrity and beneficiary protections, including
access to services.
While providers worry about being swamped by Medicare rules,
beneficiaries and their advocates worry about barriers to service
access and poor quality care. This concern stems partially from the
growth of managed care (discussed later) and from the new prospective
payment systems for nursing homes, home health agencies, and hospital
outpatient departments. They also fear that the fixed rates discourage
treatment of individuals with complex, expensive medical problems.
Structural shifts in the health care industry, including the withdrawal
of thousands of home health agencies from the program and announcement
of actual or pending bankruptcies in the nursing home industry, have
added to the concerns of all parties.
It is overly simplistic to put all the blame on the Medicare
program. Prior to the reform of the home health payment system, OIG
studies had found a steep rate of improper payments (40 percent) in
Medicare home health payments, and investigations had turned up massive
fraud involving millions of dollars among some home health agencies at
that time. The industry, through its own actions, coupled with reforms
of the Medicare payment method and actions taken by HCFA, has done much
to address this problem, although the percent of services for which
improper payments are made is still too high at 19 percent.
The nursing home industry's financial problems were due, in part,
to imprudent, and excessive purchases of nursing homes by private
chains. They were expecting continued high profits under predecessor
Medicare payment systems. Thus, many of the industry problems resulted
from actions taken prior to the reforms taking place. Furthermore,
Medicare pays only about 10 percent of the cost of the nation's nursing
home care. The remaining 90 percent is funded through Medicaid and
private pay sources.
In response to concerns about availability of care under these
circumstances, we undertook systematic studies in the last two years to
measure access to care. These studies found that few Medicare patients
being discharged from hospitals were unable to get home health care or
nursing care when they needed it. There was no evidence of patients
backing up in hospitals waiting for a home health or nursing home
treatment slot. However, some patients with complex and expensive
medical conditions did experience some delays. In the last two sessions
of Congress, legislation was enacted to increase payment rates for
these programs.
Overall, the nursing home and home health program reforms enacted
by the Balanced Budget Act of 1997 seem well suited to the problems
they attempted to address. For both programs, payments for patients
with expensive, complex problems are higher than those for patients
with less severe problems. Home care is paid on a 60 day cycle, so
there is no limit to the care of individuals with longer term problems.
For nursing homes, the payment is made on a daily rate basis, again
providing adaptation for patients with longer term needs. The new
payment systems reduce vulnerabilities inherent in the previous
systems, which promoted unnecessary care in some cases. But these
reforms are not yet fully implemented. The danger to avoid is that with
new policy initiatives on the front burner, policy makers and
administrators may get distracted from the management of previously
legislated reforms.
HCFA needs to monitor these changes carefully, particularly to
insure that payments are made timely and correctly. We will continue
and even expand our own annual reviews, particularly those intended to
ensure that beneficiaries have access to nursing home and home health
care and receive quality services while the new payment systems take
hold. We will report what we find, one way or the other, so that the
Congress, HCFA, and the medical care industries involved can respond
accordingly.
The most chaotic phase of program implementation--the initial one--
is now nearly over. Methodical completion of implementation can be done
smoothly if the health care industry and Medicare program
administrators monitor developments and are open to adjustments when
needed.
Follow Through on Quality of Care Initiatives. In particular,
carefully monitor nursing home reforms to insure a safe environment and
high quality of care for residents.
Not all quality of care problems are related to recent changes in
payment systems. The Omnibus Budget Reconciliation Act of 1987
contained a major section on nursing home reforms intended to address
longstanding patient care issues. Unfortunately, ten years later the
Office of Inspector General as well as the General Accounting Office
continue to expose serious quality of care problems. We found increases
in the incidence of bed sores, nutrition problems, and conditions
conducive to accidents. The survey and certification system was found
to be fundamentally flawed, allowing nursing homes with serious
deficiencies to continue operations despite repeated violations. The
methods used to schedule visits eliminated the element of surprise,
making it possible for nursing homes to prevent discovery of
deficiencies.
Quality of care problems are not limited to nursing homes. Recent
national studies identified troubling levels of medical errors in
hospitals. Our own program evaluation studies revealed weaknesses in
the review system used by the Joint Commission on Accreditation of
HealthCare Organizations (JAHCO), which Medicare relies on for quality
oversight of 80 percent of participating hospitals. We found that their
surveys are unlikely to detect substandard patterns of care or
individual practitioners with questionable skills. There were few
random, unannounced reviews and little opportunity for surveyors on
site to probe hospital conditions or practices. The whole review
process was more collegial than independent and objective. For the 20
percent of Medicare certified hospitals which are not accredited by
JAHCO, we found that half had gone without a State survey for more than
3 years (the industry standard) and some for as long as 8 years.
Troubling shortcomings have also been discovered in quality oversight
systems for psychiatric hospitals, again highlighted in OIG reports.
The Department and the Joint Commission have prepared responsive
initiatives to correct the problems identified. However, the corrective
actions are complex and have not yet been fully implemented.
Furthermore, these problems are the kind that require constant
vigilance.
For nursing homes, this means more unannounced onsite reviews, more
frequent and intensive reviews of repeat offenders, more follow-up on
serious deficiencies, imposition of fines and penalties for serious
offenders, with fewer ``second chances'' to correct their problems,
special initiatives to focus on selected serious problems like
bedsores, and general improvements in training of State reviewers. For
hospitals this means public accountability for JAHCO and State agencies
for their performance and determining the minimum appropriate cycle for
conducting surveys of nonaccredited hospitals and special reviews by
contracted psychiatric review teams for psychiatric hospitals.
Continuous quality oversight does not burden providers the way
inconsistent, sporadic, infrequent, and unfamiliar oversight does.
Patient care is enhanced, reducing disputes between providers, advocacy
groups, and Medicare administrators on the most fundamental aspects of
the program.
Restructure Appeals and Grievance Systems. Overhaul Medicare
appeals and grievance systems by establishing a dedicated corps of
Medicare Administrative Law Judges (ALJs); providing adequate resources
to handle current and projected caseload; making guidelines more
uniform; adopting separate procedures for beneficiaries and providers;
making Departmental Appeals Boards decisions precedential; and
improving timeliness of reviews.
Current Medicare appeals and grievances systems are not
sufficiently responsive to the needs of beneficiaries, health care
providers, or the Medicare program itself. Originally designed with
beneficiaries in mind, most appeals are now generated by providers. The
non-adversarial nature of the procedures, which were originally
intended to simplify matters for beneficiaries, leaves the Medicare
program with no representative once the appeal process starts.
The current system was started when the program first began. At
that time, Medicare was in the same Department as the Social Security
Administration (SSA) and was relatively small in comparison to the
Social Security program. It made perfect sense to use the appeals and
grievance system of SSA to handle Medicare's needs. Since then, the SSA
became an independent agency, and Medicare has grown in size and
complexity. But the ALJs who handle Medicare are still attached to SSA
with only a small corps dedicated to Medicare. Many ALJs who handle
Medicare cases do so in addition to their duties as SSA judges.
These two features of the original appeals and grievance system--
its focus on beneficiary complaints, and its status as an adjunct to
SSA--have left it ill prepared to deal with the growth and complexity
of Medicare and the prominent role, needs, and expectations of
providers. As a result, providers experience delays and inconsistent
rulings. Medicare has a very limited role in representing the interests
of the program.
Compounding the intrinsic weakness of the system is a recent
significant growth in workload. For example, the number of ALJ hearings
increased from 28,515 in 1996 to 49,253 in 1998. The Departmental
Appeals Board reports that appeals to it rose from 46 in 1994 to 670 in
200. Yet, minimal resources have been allocated to this hearing
function.
Overall, the system has few champions and needs a top to bottom
overhaul.
The recently enacted Benefits Improvement and Protection Act of 200
(BIPA) modified the appeals process by establishing time limits on
earlier stages of the appeals process which, if breached, provided for
automatic referral to the next higher level. These new provisions,
which will go into effect on October 1, 2002, could lead to
inappropriate decisions due to unrealistic time spans to address
complex questions, a clogging of the appeals channels, and an inability
to prioritize decision making.
The BIPA provisions were intended to address legitimate concerns of
providers to get prompt answers to their appeals and coverage
questions. However, these new procedures are likely to cause additional
rather than fewer burdens and aggravations by overwhelming the appeals
and review channels. While well intended, they do not address the
weaknesses in the fundamentals of the appeals and grievance systems--
resources, guidance and standards, organizational locus of ALJs, rules
of precedence, appropriate adaptation of procedures to beneficiaries
and providers, and timeliness of reviews. A better approach, we
believe, would be to conduct a more comprehensive study of the entire
process with input from all the affected parties. New recommendations
can be considered and implement before the BIPA provisions take effect.
The latter can be modified through legislation based on the results of
the study.
Build the Monitoring and Assessment Tools Into Future Reforms.
Specify the cost and encounter data that the Department, the Congress,
and health care industry and Medicare beneficiary stakeholders will
need to annually assess the cost, effectiveness, and efficiency of any
new reforms enacted. Establish a new independent body, or use an
existing one, to analyze and periodically make public reports and
recommendations regarding adjustments needed for new programs.
Managed care options have been available to Medicare beneficiaries
in some areas since 1982. The original ideas behind this concept were
that a single organization being responsible for a patient's care, with
financing in the form of capitation payments, would create incentives
for preventive care, elimination of unnecessary services, and more
efficient administration. Managed care providers would compete for
Medicare business by offering Medicare beneficiaries additional
benefits beyond those available under the regular fee-for-service
Medicare program. The result would be better health care and improved
health status, at lower costs.
At the end of each of the last three years, a significant number of
health maintenance organizations (HMOs) have withdrawn from the program
or reduced their coverage areas. Many have also restructured their
benefit and coinsurance provisions. For example, at the end of the year
2000, 65 HMOs chose not to renew their contracts and 53 reduced service
areas, affecting more than 934,000 beneficiaries. Approximately 83
percent of affected beneficiaries were able to enroll in another HMO;
the remainder had no choice but to return to Medicare-fee-for-service
coverage.
There are other issues connected with managed care options,
including shortcomings in the understandability of marketing materials
and handbooks of information provided to beneficiaries, and issues
surrounding appeals and grievance processes.
The Medicare+Choice legislation improved data and information
collection aimed at assessing the costs of managed care. Managed care
plans are now reporting actual costs in a way that for the first time
makes it possible to assess the reasonableness of their cost rates and
benefit packages.
Some of the key lessons learned from the current Medicare managed
care program are that: market forces alone cannot be depended upon to
ensure reliable benefits at reasonable cost; accurate cost is essential
for the analysis of proposed new contracts; and reliable, easy to
understand member materials are essential to ensure intelligent choice
by beneficiaries. Any future Medicare reforms designed to offer
additional flexibility to Medicare beneficiaries will need to provide
similar transparency about costs and benefits to both beneficiaries and
Medicare administrators.
This will enable Medicare to avoid the kind of turmoil recently
experienced in managed care, thereby preventing administrative burdens
and aggravations for both providers and beneficiaries.
PAYMENT CONTROLS: PROVIDERS' CONCERNS
As previously noted, the OIG annual Medicare payment error rate
audit does not determine whether an inappropriate provider payment
request is the result of an innocent error, a misunderstanding of
Medicare coverage, pricing, or payment rules, carelessness,
mismanagement, or outright fraud. It is not a ``fraud error'' rate and
should not be construed as such.
Despite our best and continued efforts to emphasize the nature of
the payment error rate and our respect for the integrity of health care
providers, some of them have become more vocal in their objections to
what they regard as overzealous scrutiny. Particularly in the physician
community, some providers express fear that they will be prosecuted as
criminals for making honest billing errors while trying to interpret
regulations of an increasingly complex Medicare program.
Let me repeat what I said earlier. The vast majority of physicians
and other health care providers are honest, dedicated individuals who
work hard for their patients. Their concerns deserve our attention. I
would like to take advantage of this opportunity to respond to them. To
do so, I must first explain the nature of the Federal fraud and abuse
control program, and I need to put it into the context of broader
reforms that have been occurring in the Medicare program.
Fraud and Abuse Control Program. To address fraud and abuse, a
Health Care Fraud and Abuse Control Program (HCFAC), jointly
administered by the Secretary of the Health and Human Services (HHS)
through the Office of Inspector General and the Justice Department, was
enacted into law as part of the Health Insurance Portability and
Accountability Act of 1996. That same law provided HCFA with increased
funding for a Medicare Integrity Program (MIP).
The Act provided both new authorities and critical resources to
enable HHS, the Justice Department, and the many Federal, State, and
local programs and agencies engaged in health care fraud enforcement to
better detect, investigate, prosecute, and prevent fraud and abuse. In
Fiscal Year 2000 alone, the Federal Government won or negotiated more
than $1.2 billion in judgments, settlements, and administrative
impositions in health care fraud cases. Actual collections for the year
in health care cases exceeded $715 million, with more than $577 million
returned to the Medicare Trust Fund. Since inception of the program in
October 1997, over $2.1 billion has been returned to the Trust Fund.
The program has also enabled this Department to step up its efforts
to exclude from Medicare, Medicaid, and other Federal health care
programs providers and suppliers that engage in certain prohibited
conduct. During Fiscal Year 2000, over 3,300 individuals and entities
were excluded from program participation. Exclusions were based on
criminal convictions for crimes related to Medicare or other health
care programs, patient abuse or neglect, license revocation, and other
misconduct.
Program Structure and Controls. Perhaps more important than
fraudulent billings are large but unnecessary payments stemming from
perverse incentives and weak controls. For example, much of the
historical double digit growth rates of hospital payments in the late
1970's was the product of government policy to pay on the basis of
costs and charges, not the result of provider misconduct. Those
excessive growth rates were curbed not so much by audits and payment
controls but by changing to a new reimbursement model, the prospective
payment system. More recently, the Balanced Budget Act of 1997 mandated
prospective payment systems for home health care, nursing home
services, and hospital outpatient services. These program reforms,
along with tougher scrutiny of providers seeking to enroll in the
program, increased audit and medical necessity reviews, and provider
education reduced Medicare payments by tens of billions of dollars. For
example, home health expenditures dropped from $18 billion in 1996 to
$9.5 billion in FY 1999.
Provider Concerns. Continued participation of health care providers
of all kinds--physicians and other health care professionals,
hospitals, nursing homes, home health agencies, laboratories, equipment
manufacturers and suppliers--is crucial to the success of the Medicare
program. All of them have been profoundly affected by recent Medicare
reforms. They are also affected by current regulations and
administrative procedures.
However, provider concerns relating to inappropriate investigations
are unfounded and both HCFA and the Office of Inspector General are
reaching out to physician groups to reassure them. First, under the
law, physicians and other health care providers are not subject to
civil or criminal penalties for honest mistakes, errors, or even
negligence. The government's primary enforcement tool, the civil False
Claims Act, covers only offenses which are committed with actual
knowledge, reckless disregard, or deliberate ignorance of the falsity
of the claim.
The False Claims Act simply does not cover mistakes, errors, or
negligence. The other major civil remedy available to the Office of
Inspector General, the Civil Monetary Penalties law, has exactly the
same standard of proof. For a criminal case, the standard is higher.
The Office of Inspector General is very mindful of the difference
between negligent errors and mistakes on one hand, and reckless or
intentional misconduct on the other. As a result of the relatively high
standards of proof needed to establish liability, the number of civil
and criminal penalty actions initiated against physicians is fairly
small, averaging less than 50 penalty actions per year. Last year, as a
result of OIG efforts, only 12 of the more than 600,000 physicians who
participate in the Medicare program were convicted of health care
related crimes.
Both HCFA and the Office of Inspector General have also been
engaging health care providers to join in a national effort to
eliminate fraud and abuse and have undertaken numerous outreach efforts
to help the medical care industry avoid getting into trouble. The
cornerstone of OIG efforts has been the publication of voluntary
compliance program guidances (developed with industry input) to assist
and encourage the various sectors of the private health care industry
to voluntarily fight fraud and abuse. In addition, we issue special
fraud alerts and advisory bulletins advising medical care providers on
topics that warrant their attention. All this information, as well as
the results of our audits, investigations, and evaluations, are
routinely made available through public presentations and on our web
site.
HCFA too has enhanced its provider education efforts and has
expedited its process for issuing new regulations, such as those
required by numerous program changes mandated by the Balanced Budget
Act and subsequent legislation. Their web site has been upgraded to
make program information more widely and quickly available than ever
before. And they use numerous technical advisory boards made up of
health care professionals to advise on policy. In addition, HCFA has
organized a ``Physician Regulatory Issues Team'' to assess the weight
of Medicare regulatory burden on physicians. Its goal is to recommend
changes to reduce administrative burden.
Program Complexity. Providers are concerned about the complexity of
Medicare, even without reference to their potential liability for
fraudulent or abusive behavior. Since the inception of Medicare,
numerous legislative changes have been made and amendments added to the
Social Security Act which have led to substantial changes to the
Medicare program. With each addition, HCFA is required to develop new
regulations as well as update its contractor and provider rules and
guidelines. For example, the Balanced Budget Act of 1997 contained 335
provisions related to Medicare programs, which required the development
of a substantial number of new regulations.
Much of the complexity in the Medicare program is not inherent in
the program itself, but rather it parallels the ever increasing
complexity of our health care system. For example, the development of
various forms of managed care and new kinds of vertical and horizontal
integration have led to the need for Medicare rules and regulations to
evolve along with them.
As noted earlier, the way Medicare pays for health care has
changed, through time, from primarily cost/charge based payment systems
to new fee-schedule and prospective based arrangements. For example,
hospital inpatient, physician, then lab and durable medical equipment
services were the first areas of the program to switch to prospective
payment or fee-schedule based payment systems. More recently, skilled
nursing facility, home health, and hospital outpatient services have
moved or are moving to prospective payment systems as well. This
transitioning from one payment system to another inevitably involves an
intensive and somewhat uncomfortable learning period. In the long run,
it is hoped that these new payment systems will simplify and reduce the
administrative burdens of providers.
Is the Medicare payment system too difficult to understand? In some
cases, our audits and evaluations do indicate that some rules are
unnecessarily complex and burdensome. In such cases, we make
recommendations for simplification. However, our recent error rate
review indicates that providers are doing a very good job of
negotiating their way through Medicare payment systems, and we
estimated 93 percent of all Medicare payments to health care providers
were free of error. In the substantial majority of cases, legitimate
providers are billing for legitimate services.
Nevertheless, providers remain concerned. Their legitimate concerns
about program complexity, inconsistency, burdens, and hassles need to
be considered. Providers need high level reassurances that they will
not be assessed penalties for honest errors. At the same time,
regulations to implement new programs need to be issued in a timely
manner, and program integrity concerns need to be addressed.
PROPOSED LEGISLATION
The Medicare Education and Regulatory Fairness Act of 2001 (HR 868)
has just been introduced to address some of the concerns of providers
which were discussed in the previous section. I was asked to comment on
this bill in my testimony, and appreciate the opportunity to do so.
Given what I just said about our appreciation of providers'
concerns, we would support some action by HCFA and possibly the
Congress to address valid problem areas. However, the Office of
Inspector General cannot support this bill as written. While its
objectives are worthy, we are concerned that many of the provisions
will subject the Medicare Trust Funds to a high level of risk and
possibly result in harm to beneficiaries. I will provide summary
comments here, but hope that our staffs can meet to discuss these
provisions in greater detail. Hopefully, we can find ways to address
the concerns that this bill was meant to address without endangering
the integrity of the Medicare program, as this bill would.
First, I will identify the provisions which we believe are most
problematic. Then I will identify some provisions which appear to us to
be more promising and which merit additional consideration. Our primary
concerns are related to:
Judicial and Regulatory Challenges
The bill would nullify longstanding legal doctrines requiring
``exhaustion of administrative remedies'' and a ``case or controversy''
in order to appeal matters to Federal court. It would eliminate these
requirements for cases challenging the constitutionality and statutory
authority of HCFA regulations. This would clutter the Federal courts
with hypothetical, possibly trivial cases and deny the courts the
advice, insight, and judgement of Federal agencies and administrative
appeals bodies in making decisions.
The bill would establish of unreasonable timeframes for hearings by
ALJs and the Departmental Appeals Board. While the goal of this
proposal may be to expedite the review process, it is highly unlikely
that this result will be achieved. In all likelihood, the result will
be the premature elevation of appeals to the Departmental Appeals Board
and Federal courts, which are not in a position to conduct ``de novo''
fact finding hearings on an expedited basis.
The bill also requires an additional layer of review or
reconsideration if a provider is dissatisfied with a finding that the
provider is out of compliance with a particular standard or condition
of participation. This would delay the imposition of sanctions and
would increase the risk of jeopardizing the health and safety of
Medicare beneficiaries.
Repayment Period
The bill would entitle providers to a three year repayment period
for overpayments. While repayment plans make sense in some cases (and
are already allowed under current law), they could greatly reduce the
ability of Medicare to recover overpayments in others. An exception for
cases where the Secretary finds clear and convincing evidence of fraud
would be difficult to administer and could allow offenders to flee,
declare bankruptcy, or otherwise place funds out of reach until such a
determination can be made.
Repayments During Appeal
The bill would prohibit recovering past overpayments if appeal is
pending. This has the same risks as the previous provision.
Document Requests
The bill would prohibit the carriers from requesting the production
of records or documents prior to payment absent cause. This would
prevent review of documents supporting the claim prior to payment, even
in programmatic areas where past histories of abuse are present.
Without this well established and recognized tool the integrity of the
Medicare program would be seriously jeopardized.
Voluntary Repayment
The bill would establish an unprecedented new form of immunity from
investigations to a provider who voluntarily returns overpayments. The
intent of this provision is understandable. Providers who make
unintentional errors or discover overpayments which they had not sought
should be encouraged, not penalized, for voluntarily returning them
without fear of penalty or prosecution. However, there is no need for
new legislation in this regard. As I mentioned earlier, physicians and
other health care providers are not subject to civil or criminal
penalties for honest mistakes, errors, or even negligence. However,
those relatively few providers who would deliberately and fraudulently
steal from the Medicare program would not hesitate to use this
provision to immunize themselves from investigation and prosecution,
and, in essence, obtain interest free loans from Medicare.
Extrapolation
Extrapolation is the scientifically valid method of statistical
sampling, and has been fully accepted by the Federal courts as a method
of estimating liability for overpayments. The bill would prohibit
recoupments or offset payment amounts based on extrapolation for the
first time that a provider is alleged to have received overpayments or
when a provider submits a claim for advice of suitability (as provided
for later in the bill in the section on education components). These
provisions would eliminate an important tool in evaluating overpayments
and deprive the trust fund of the full amount owed to it. Ironically,
the bill would greatly increase the burden on providers if, instead of
using scientifically drawn samples of claims to determine the amount of
overpayment, carriers and intermediaries would be required to review
the entire universe of suspect claims of a provider. This would also
increase Medicare's administrative costs. The provisions would also
increase the amount the provider would have to repay, since when
scientific samples are used instead of universe reviews, the amount of
the overpayment to be collected is often based on the lower end of the
sample's confidence level rather than the midpoint, the most likely
estimate of the overpayment amount. Most importantly, it provides an
inappropriate ``safe harbor'' immunizing a provider from full
liability. Finally, the few fraudulent providers that there are would
not hesitate to use these provisions to protect their ill gotten gains
from recovery and themselves from surveillance or prosecution.
Claims Processing Screens
The bill would require HCFA to reveal claims processing screens to
providers. Honest providers do not need to know the screens. Explaining
them to dishonest providers is the equivalent of instructing them how
to avoid detection and successfully exploit the program. Fraud
detection through prepayment review would be nullified.
Advisory Services
The bill would give providers immunization from investigation as a
result of seeking advice on billing and cost reporting provisions of
the Medicare program. It is reasonable for honest providers to be able
to seek advice about their claims without fear of investigation or
prosecution. However, this provision would provide a dishonest provider
immunization from investigation, a result which is not at all
desirable.
Long Term Care
The various provisions relating to appeals in connection with long
term quality improvements cause us to have many of the same kinds of
concerns raised in the sections above--unnecessary, additional levels
of review, unrealistic timeframes for moving to the next higher level
of review, and suspension of remedies. All of these could seriously
jeopardize patient safety and quality of care.
Promising Proposals
It is obvious that parts of the proposed bill are intended to
assure honest providers that they will not be subject to investigation,
prosecution, or harassment as a result of good faith efforts to comply
with Medicare requirements. Unfortunately, many of these same
provisions would play into the hands of the small number of
unscrupulous individuals who use sophisticated means to exploit
weaknesses in the Medicare program. Honest providers do not need the
additional protections provided here. However, they certainly deserve
practical assurances that their good efforts will not result in their
being punished.
While I believe that most providers concerns can be addressed
through administrative rather than legislative means, those sections of
the bill relating to educational programs, advisory services, deferral
of penalties until exhaustion of appeals, repayment periods, and
appeals and grievances are worthy of additional review.
More provider education would be especially valuable. We have
already seen the beneficial effects of HCFA educational initiatives.
They have a lot to do with the substantial drop in the payment error
rate and clarification of documentation standards. Our own efforts in
working with the provider community in developing compliance guidelines
have convinced us of the usefulness of outreach and education.
Similarly, providers ought to be able to get answers when they have
questions about submitting their bills. A program through which HCFA
can provide them advisory services would be very useful. Our own
experience in administering such a program has convinced us of the
benefits. We urge that any such initiative be fully funded. As noted
earlier, however, we would not support the granting of immunity in
connection with requests for advice.
Other provisions of the bill could be helpful if substantial
changes were made to them. For example, extended payback periods would
make sense if they were necessary to prevent bankruptcy or severe
hardship to a provider who received overpayments innocently. However,
an automatic three year privilege would not be appropriate in all
cases. Similarly, while deferral of penalties until final
determinations are made could be reasonable in many cases, this would
not be desirable if patient care were placed at risk. For both of these
provisions, consideration should be given to the payment of interest to
the Medicare Trust Funds--for example, for overpayment amounts
sustained after appeal and during a repayment period.
As noted earlier, the Office of Inspector General fully understands
the need to improve the appeals and grievance system. However, we
propose a thorough overhaul of this system. Simply specifying time
limits for review, especially unrealistic ones, will not correct the
underlying problems, as described earlier.
Finally, I would also point to the various recommendations which
are included in the first part of my testimony. Their implementation
would reduce frustrations and improve Medicare payment systems.
I hope that we can find ways, primarily through education and
communication, to provide the honest providers with the understanding
and assurance they deserve in their medical practice. We look forward
to working with the medical care community in finding ways to do this.
CONCLUSION
Medicare is important to all of us. I hope that the suggestions
provided here from the Office of Inspector General will be useful in
streamlining the program, reducing frustrations of providers and
administrators alike, and making the program better for Medicare
beneficiaries. We are ready to help this committee and all parties
involved to find a better way to manage this program. Thank you for the
opportunity to present these ideas to you.
Chairwoman Johnson. Thank you.
Dr. Moffit.
STATEMENT OF ROBERT E. MOFFIT, PH.D., DIRECTOR, DOMESTIC POLICY
STUDIES, HERITAGE FOUNDATION
Dr. Moffit. Madam Chair, my name is Robert Moffit. I am the
director of Domestic Policy Studies at the Heritage Foundation.
I want to express my sincere appreciation to you for the honor
to testify before the House Ways and Means Subcommittee on
Health. I want to stress that the views that I am expressing
today are entirely my own and should not be construed as
representing any official position of the Heritage Foundation.
My professional interest in Medicare and the delivery of
health care services is more than academic, although I spend an
awful lot of time studying health care policy. I served as
Deputy Assistant Secretary for Legislation at the Department of
Health and Human Services during the Reagan administration, and
I also served as Congressional Relations Director at the Office
of Personnel Management, the agency that runs the Federal
Employee Health Benefits Program, which, as you know, is a
prominent model for Medicare reform. So I have practical
experience in dealing with both programs and responding to
congressional inquiries on problems in both health care
systems.
I want to make a few observations on this conversation we
are having this morning. One of them is obvious. It is that
Medicare's regulatory complexity is not the fault of the Health
Care Financing Administration, the agency that administers
Medicare. On this I agree with Congressman Stark.
Parenthetically, it is a Historic occasion when the Heritage
Foundation and Congressman Stark find themselves in agreement.
Perhaps a solar eclipse will shortly follow. But the criticism
of the Medicare regime should not be a criticism of the career
staff of HCFA or HCFA as an agency of the Federal government.
The reason why we are having these discussions is because
of the structure of the Medicare Program. Medicare is an
entitlement program. More importantly, it is a defined benefits
program. If you have a defined benefits program, Congress must
determine what benefits Medicare patients will get, and
subsequent to congressional authority, HCFA and its contractors
determine what is or is not covered for purposes of
reimbursement, and what specific medical services, treatments,
and procedures Medicare patients will get and how and under
what circumstances they will get them.
This is endemic to today's Medicare Program. It means that
HCFA must write increasingly detailed rules to the extent to
which medical benefits modify or change. If Congress doesn't
want to change this structure, there is no simple way around
these regulatory problems.
A second observation: HCFA is overwhelmed by the size and
scope of its current regulatory responsibilities and is in a
state of managerial crisis. HCFA also has responsibilities
beyond Medicare: for Medicaid, the State Children's Health
Insurance Program, and enforcing provisions of the Health
Insurance Portability and Accountability Act. HCFA oversaw a
total estimate payment of about $370 billion for health
services last year. As GAO and others have noted, it is
becoming progressively harder for HCFA to fulfill all of these
responsibilities.
This managerial crisis has been developing over time. Our
colleague, Lynn Etheredge, at George Washington University,
wrote in the October 2000 edition of Health Affairs that the
management crisis at HCFA has arrived.
A third observation: Medicare's regulatory complexity is
compromising the quality and delivery of medical services and
insurance products. In my written testimony, I detail this. But
this is becoming evident in at least two areas: the access to
medical technology and the use of private plans in the Medicare
Plus Choice program.
Fourth: Medicare's regulatory complexity is bound to get
worse. With the rising demand for medical services by a rapidly
aging population, a Medicare-eligible population that will
double over the next three decades, the pressures to
accommodate those increased demands and increased costs within
the existing framework of administrative pricing and benefit
setting will intensify. Congressional debates over physician
and hospital payment or reimbursement for home health care or
skilled nursing facilities or prescription drugs, or how to
cover or whether to cover new medical devices or procedures, is
going to require even more congressional time and attention and
will require even greater administrative effort and even more
detailed rule-making on the part of the Health Care Financing
Administration.
Finally, the expansion of Medicare benefits, including the
addition of a prescription drug benefit, without addressing the
managerial and regulatory problems plaguing the program, I
think, would be a profound mistake. We have managerial problems
in Medicare part A, B, and C right now. If you had a
prescription drug benefit, without dealing with the current
regulatory regime, you are asking for much more trouble.
My colleagues at the Heritage Foundation think that the
best way to solve this problem is to change the program's
structure, and the way to do that is to go to a tested model
that has been proposed by the President and by the Bipartisan
Commission, and that is the Federal Employee Health Benefits
Program (FEHBP).
I just would like to make one observation before I close on
the governance of the FEHBP. Students of the Federal employee
program have found that among its most attractive features is
the brevity and simplicity of its statutory authority. The
program is characterized by a notable absence of heavy
regulatory control, the relative ease with which the program
adopts new health care benefits and absorbs new medical
technologies, its relative flexibility in benefit setting. From
the standpoint of governance, the Federal employees' system
also enjoys a relative freedom from the bitter politics of
administrative pricing, the medical income redistribution, and
the attendant congressional micromanagement that afflicts the
traditional Medicare Program. And the major reason is, in stark
contrast to the Medicare Program, the Federal Employees Program
is largely a market-driven system, which relies on private
sector plans to structure their offerings each year to satisfy
consumer demand and compete with each other directly in
promoting patient satisfaction. This is in sharp contrast to
Medicare. The crucial decisionmaking in the FEHB is not
centralized; it is diffuse.
While there are negotiations between OPM staff and major
plans, and hundreds of routine transactions between OPM and
private plans in the several States, there are literally
millions of decision points in the system governed by the
diverse wants and needs of Federal employees and their families
and the dynamic conditions of supply and demand.
I would close, Madam Chairman, by emphasizing that you are
going to have a major political challenge with Medicare reform.
But there are going to be technical difficulties no matter what
you do. If you decide that you do not want to reform the
Medicare system, that is your decision. But all of these
regulatory and managerial problems that you heard about this
morning are going to intensify and they are going to get worse.
If you decide to go to a new system, you are going to have new
problems. But you are also going to have a lot of new
opportunities as well.
Thank you very much.
[The prepared statement of Dr. Moffit follows:]
Statement of Robert E. Moffit, Ph.D., Director, Domestic Policy
Studies, Heritage Foundation
Madame Chair, Members of the Subcommittee:
My name is Robert E. Moffit. I am Director of Domestic Policy
Studies at the Heritage Foundation. I wish to express my sincere
appreciation to you and Members of the Subcommittee for the opportunity
to testify on the subject of Medicare regulations. I must stress,
however, that the views I express are entirely my own, and should not
be construed as representing any official position of the Heritage
Foundation.
My professional interest in Medicare regulation, and how to improve
the financing and delivery of medical services to American citizens, is
far from academic. During the Reagan Administration, I not only served
as Deputy Assistant Secretary for legislation at the Department of
Health and Human Services (1986-1989), handling congressional requests
and constituent problems related to Medicare, but I also served as the
Director of Congressional Relations at the United States Office of
Personnel Management (1981-1986), the agency that administers the
Federal Employees Health Benefits program (FEHBP), the model for reform
embraced by the Bush Administration, the majority of the National
Bipartisan Commission on the Future of Medicare and the model embodied
in the legislative reform proposals recently introduced by Senators
John Breaux (D-LA) and Bill Frist (R-TN). I have thus had a practical
experience in monitoring and responding to congressional inquiries on
both programs.
Concerning the Medicare's regulatory problems, I have several
observations.
First, Medicare's regulatory complexity is not the fault of the
Health Care Financing Administration (HCFA), the agency that
administers Medicare. Criticism of the Medicare's regulatory regime
should not be a criticism either of the career staff or HCFA as an
agency of the federal government. This is not to exonerate the agency
or its officials from some serious mistakes, or lapses in judgment. But
much of the understandable anger directed at HCFA by doctors and
medical specialists, and even Members of Congress is too often
misplaced.
Growing dissatisfaction among providers over Medicare's regulatory
burdens is not merely attributable to HCFA's managerial efficiency, or
its lack of managerial efficiency. Rather, it is attributable to the
seemingly incessant Congressional delegation of ever greater regulatory
responsibilities to the agency, and, more importantly, to the very
structure of the Medicare program itself. Medicare is an entitlement
program; it is a defined benefits program, where Congress determines
what benefits Medicare patients will get; and, subsequent to
Congressional authority, HCFA and its contractors, determines what is
or is not covered for purposes of reimbursement, and what specific
medical services, and treatments and procedures Medicare patients will
get and how, and under what circumstances they will get them. HCFA,
again subject to Congressional authority, determines what is or is not
appropriate or medically necessary. This is formidable regulatory
authority. But it is difficult to imagine how Medicare, given its
current structure, could function otherwise. Surely, HCFA's most severe
critics would not want to surrender to the agency unlimited flexibility
to carry out its mandate. If Congress wishes to retain this structure,
then Congress must authorize, and HCFA must implement and enforce
increasingly detailed regulations that guarantee universal access to a
set of legislatively or administratively defined benefits, medical
treatments or procedures.
Given this structure and this process, there will be numerous
disagreements, powerful and angry dissents, and strong objections from
medical providers, seeking exceptions or expansions to these rules. The
regulatory exceptions simply complicate the regulatory environment.
So, HCFA's problems are not rooted simply in the absence of a
superhuman wisdom, or any inherent deficiencies in HCFA staff to do the
necessary regulatory job, or because the agency suffers from an absence
of information technology specialists, or aging and outdated
information systems unable to cope with the rapidly changing
conditions. It is rooted in a work overload that, given the
Congressional authorization, is unavoidable. These problems are not
going to be solved simply by appropriating funds so that HCFA can
acquire the right software or the right hardware, or the right
specialists in whatever field of health care policy that is required.
Given the current structure of the Medicare program, there is simply no
way to avoid these difficulties.
Congress specifies what it will pay for benefits and services, and
authorizes HCFA to make any adjustments in accordance with its
legislative determinations, or the formulas, that govern Medicare's
complex system of administrative pricing plus price caps, including the
Prospective Payment System (PPS) for hospital payment and the Resource
Based Relative Value Scale (RB-RVS) for physician reimbursement. As my
colleague Dr. Len Nichols, a senior economist and health care policy
analyst at the Urban Institute has noted, the task imposed on HCFA is
to set roughly 10,000 prices in 3000 counties across the United States,
a task which it does not, and cannot, do very efficiently or
effectively.
On payment issues, as on the benefit issues, as Members of this
Subcommittee know, far better than I would even be able to imagine,
there are intense pressures to readjust constantly this formula driven
Medicare payment system; carve out exceptions; and revise and refine
the reimbursements upward. These pressures are invariably intensified
after Congress has taken actions to reformulate reimbursements
downward, in perennial attempt to control costs in the program. This
annual political process also invariably adds to the growing complexity
of the system, and makes it progressively less comprehensible for
doctors, hospitals and other providers, and, of course, patients.
For the most part, Medicare patients are the passive recipients of
this arcane and complicated decision-making process. Medicare's
regulatory regime directly impacts only doctors, hospitals and other
providers. Compared with the private sector, Medicare's administrative
costs, as a percentage of payment for benefits, appears very low,
roughly between 1 and 2 percent. But this calculation does not take
into account the transactional costs of health providers in complying
with this regulatory regime. A major econometric analysis of these
costs, and their impact on patients, would be welcome.
Altogether, this process not only frustrates providers--doctors,
hospital administrators or home health care officials--but also yields
some very odd economic results. The General Accounting Office has done
a number of studies on the subject, which make for interesting reading.
Once again, if Congress retains the current structure of Medicare,
there is simply no way around these problems or political pressures.
Second, HCFA is overwhelmed by the size and scope of its regulatory
responsibilities, and is in a state of managerial crisis. Once again,
the regulatory responsibilities of HCFA are not, of course, generated
by HCFA; they are imposed by Congress. And, as noted, they are
elemental to the very structure of Medicare as a defined benefit
entitlement program.
Medicare today covers almost 40 million persons, at an estimated
cost of $220 billion. As the General Accounting Office and others have
pointed out, HCFA also administers the Medicare Plus Choice program
with over 300 managed care plans, and contracts out for the services of
others, particularly intermediaries or insurance carriers, in every
state in the union. HCFA pays approximately 6000 hospitals, and roughly
700,000 physicians and other providers. Moreover, HCFA must write
standards, as a condition for participating in the Medicare program for
a variety of institutions and specialties, such as hospitals, home
health care agencies, clinical laboratories, nursing homes, skilled
nursing facilities, among others. And beyond Medicare, HCFA also has
responsibilities for running Medicaid, overseeing the State Children's
Health Insurance Program, and enforcing certain provisions of the
Health Insurance Portability and Accountability Act. Altogether, HCFA
oversaw a total estimated payment of almost $370 billion for health
care services last year. As GAO and others have also noted, it is
progressively harder for HCFA to fulfill all of these responsibilities.
This managerial crisis has been developing over time. The General
Accounting Office (GAO) told Congress in 1998 that ``. . . substantial
program growth and greater responsibilities appear to be outstripping
HCFA's capacity to manage its existing workload.'' In 1999, 14
prominent health care policy experts, including Dr. Stuart M. Butler,
my superior at the Heritage Foundation, and three former directors of
HCFA published an open letter to Congress and the White House in the
1999 Winter issue of Health Affairs warning of an impending management
crisis at HCFA. While these analysts differed on what was the best
approach to Medicare reform, they were all agreed on one point: HCFA
is, as an institution, in very serious trouble. Following up on this
notice, in the October 2000 edition of Health Affairs, Dr. Lynn
Etheredge of George Washington University, wrote, ``The management
crisis has arrived. . . It is now widely recognized that HCFA has many
problems. Reformers are frustrated, whether their goals are a
successful Medicare + Choice Market, modernization of fee for service
Medicare, enrollment of eligible children in SCHIP, improved computer
systems, new chronic care programs, or better staff morale. Nearly
everyone who works with the Medicare or Medicaid programs now
understands that something needs to be done about HCFA.'' While there
is an urgent need for action, there is an even more urgent need to do
it right.
Third, Medicare's regulatory complexity compromises the quality and
delivery of medical services and insurance products. This is becoming
evident in at least two areas: access to medical technology and in the
use of private plans in the Medicare + Choice program.
In the area of medical technology, there is solid evidence that
Medicare's processes are painfully slow and compromising patient access
to technology that is available to patients in the private sector. Last
year, the Lewin Group, a Virginia based econometrics firm modeling
health care policy initiatives, conducted a major study on behalf of
the Advanced Medical Technology Association that found that Medicare's
processes of coverage, coding and payment decisions delay patient
access to medical technology. The study found that it takes between 15
months to over 5 years or more to add new medical technologies to
Medicare program. Moreover, according to the Lewin study, Medicare's
processes for coverage, coding and payment is time consuming and
complicated, and impedes patient access and discourages innovation in
breakthrough medical technologies.
Likewise, the current regulatory regime has damaged the Medicare +
Choice program. In their 2000 analysis of the Medicare + Choice
program, The Medicare + Choice Program: Is It Code Blue? Janice Ziegler
and Bruce Fried, a former Director of the Center for Health Plans and
Providers at HCFA, wrote, ``The regulatory complexity of the M+C
program has taken on mammoth proportions and made it difficult for
M+Cos to comply with all of the many program requirements. Moreover the
breadth and depth of regulatory requirements have imposed a level of
micro-management that significantly hampers--or, in some instances,
restricts altogether--the ability of M+COs to make essential business
decisions regarding how care should be financed and operations
structured. This level of micro-management, when coupled with
constantly changing nature of the program requirements and conflicting
directions from HCFA, creates a significant disincentive for M+COs to
remain in the program or become new entrants.''
As Fried and Ziegler report, beyond the issuance of detailed
regulations and ``guidance'' and Medicare manual changes, HCFA has
already issued well over 100 ``operational policy letters'' (OPLs), the
specific directives governing various aspects of plan administration.
Moreover, plans have had to meet HCFA's tight deadlines for compliance
as well as various state regulatory standards, while wrestling with
conflicting federal and state rules. Fried and Ziegler further note
that HCFA issues these rules and letters often with little or no
thought about how they will impact costs. But, of course, every dollar
required to comply with HCFA's increasingly complex administration of
the program means one less dollar for drug benefit increases or premium
reductions for senior citizens.
Fourth, Medicare's regulatory complexity must get worse. With the
rising demand for even more specialized and complex medical procedures
within the current framework of the defined benefits system, the
regulatory complexity will worsen. With the rising demand for medical
services by a rapidly aging population, a Medicare eligible population
that will double over the next three decades, the pressures to
accommodate those increased costs within the existing framework of
administrative pricing will intensify. Congressional debates over
physician or hospital payment or reimbursement for home health or
skilled nursing facilities, or whether or how to cover new medical
devices or procedures, prescription drugs will require more
Congressional time and attention and even greater administrative effort
on the part of HCFA.
Fifth, the addition or expansion Medicare benefits, including a
prescription drug benefit, without addressing the managerial and
regulatory problems plaguing the program would be a profound mistake.
HCFA already faces serious challenges in running the traditional
Medicare program and the beleaguered Medicare + Choice program, which
is processing roughly a billion claims each year. The addition of a
Medicare prescription drug benefit to the current structure, whatever
merits that may have, would also dramatically increase the number of
transactions HCFA must oversee and thus add to the program's already
formidable managerial burdens.
WHY STRUCTURAL REFORM EQUALS REGULATORY REFORM
If Congress wants to strike at the root of the regulatory problems
that affect the current Medicare program, then the remedy of choice is
choice itself; a structural reform that preserves a Medicare
entitlement to a basic or core set of health benefits, but transfers
the lion's share of decision-making in the system over to Medicare
patients and the private plans that they personally choose for
themselves.
The best working model for such a structural reform, as the
majority of the National Bipartisan Commission on The Future of
Medicare have advised, is a program that is older than the Medicare
program: the Federal Employees Health Benefits Program (FEHBP), which
has been serving federal workers and retirees and their families since
1960. Because the government contributes to the cost of the enrollees
premium, rather than trying to pay medical providers directly or
determine the details of health benefits or the precise level of
medical services, the FEHBP is the quintessential ``premium support''
program.
Having been enrolled in the program personally and having been
associated with the program professionally in my capacity as an
Assistant Director at the United States Office of Personnel Management,
I am acutely aware of the weaknesses of that program, specifically, a
lack of variation in premiums or government contributions for younger
workers and older workers and retirees or the absence of any risk
adjustment mechanism to cope with periodically troublesome problems of
adverse selection. Moreover, FEHBP does not yet accommodate flexible
spending accounts, widely available to workers in the private sector,
and OPM has had an institutional bias against lower cost, high
deductible options for employees who might want them. There are also
irrational statutory restrictions on market entry of fee for service
plans, even though these plans tend to be more popular than HMOs.
Nonetheless the 40 year record of the FEHBP has been exceptionally
good. This is particularly so in the area of governance. In 1989, in
perhaps the most comprehensive analysis of the FEHBP ever undertaken,
the Congressional Research Service noted that historically, the OPM has
governed the FEHBP in a fashion that is best described as ``passive
management''. While some might object to such managerial passivity, a
positive by-product of OPM's historically light touch has been a
progressive evolution of benefits packages, that have become richer and
more varied with the passage of time.
Other students of the program--ranging from Professor Alain
Enthoven of the University of California to analysts from the
Progressive Policy Institute--have found that among its most attractive
features is the brevity and relative simplicity of its statutory
authority. The program is also characterized by the notable absence of
heavily prescriptive regulation, the relative ease with which the
program adopts new health benefits and absorbs new medical
technologies, and its relative flexibility in benefit setting. From the
vantage point of governance, the FEHBP also enjoys a relative freedom
from the bitter politics of administrative pricing, the medical income
redistribution and attendant Congressional micro-management that
afflicts the traditional Medicare program. The major reason: In stark
contrast to the Medicare program, the FEHBP is a largely market driven
system, which relies on private sector plans to structure their
offering each year to satisfy consumer demand and compete with each
other directly in promoting patient satisfaction. Thus, in sharp
contrast to Medicare, the crucial decision-making in the FEHBP is
diffuse. While there are negotiations between OPM staff and major
plans, and hundreds of routine transactions between OPM and private
plans in the several states, there are literally millions of decision
points in the system, governed by the diverse wants and needs of
federal employees and their families and the dynamic conditions of
supply and demand. Consider the main features of the program:
Broad Choice of Plans. Over 300 plans are competing
for consumers' business. Unlike the rest of working Americans,
federal workers and retirees will have a broad choice of
private plans from which to choose. These plans may be fee for
service plans, preferred provider plans, (PPOs) or health
maintenance organizations (HMOs). Unlike many workers in
private sector, federal workers are not forced into one type of
coverage, such as HMOs, on a ``take or leave it'' basis, and
federal workers and their families can normally choose between
a dozen and a dozen and a half plans in most places in America.
Unlike Medicare enrollees, their private plans include
prescription drug and catastrophic coverage. In fact, virtually
all plans cover between 80 and 90 percent of prescription drug
costs.
HMOs attract federal employees and retirees, and they are not
forced into them. Consider the pattern of choices among federal
retirees, many of whom are covered by Medicare as well. In a
recent presentation on FEHBP for the National Academy of Social
Insurance, Dr. Kenneth Thorpe and Dr. Curtis Florence, found
that 83.3 percent of single retirees chose fee for service
plans, while only 16.7 percent chose HMOs; for retired couples,
84.2 percent chose fee for service plans, while 15.8 percent
chose HMOs.
Paradoxically, the pluralistic system of competing private
plans in the FEHBP is operationally simpler for enrollees than
the current Medicare program. Unlike the overwhelming majority
of Medicare beneficiaries, Federal workers do not have to go
outside of the system to buy supplemental coverage for drugs
and catastrophic protection, and pay two premiums for two
different plans. Medicare beneficiaries, unlike enrollees in
the FEHBP, will end up spending roughly half of their health
bills in out of pocket costs.
Rational Financing. While the government spends
about $220 billion for the Medicare program, covering almost 40
million retirees, the same government spends about $20 billion
for the FEHBP, covering 9 million persons. But FEHBP is a
program with a more rational payment system, a form of premium
support for individuals and families, and a richer, more
progressive and more varied health benefits package than
Medicare. Under current law, the government pays 75 percent of
the cost of any plan up to a maximum amount, set by formula.
For 2001, that amount is up to $2250 for single individuals or
$5090 for families. If individuals or families want to buy a
more expensive plan, they can, but they will pay more for the
richer plan. If they want to buy a less expensive plan, they
can do that also. It's their choice.
Less Bureaucracy, More information, and Higher
Satisfaction. Unlike Medicare, which spells out in detail what
benefits, treatments or procedures are to be covered, and what
prices is to be paid for each medical service, the FEHBP is far
less bureaucratic. Within the framework of annual negotiations,
private plans present their combinations of benefits and
premiums and co-payments to the federal workforce. Plans only
do well when they sell a package of benefits at a price people
want. Within statutory requirements and OPM approval, plan
benefit packages differ, and so do their premiums, co-payments,
co-insurance and deductibles. The government does not make
everybody pay the same for the same package of benefits.
Persons can enroll in any plan they wish; they have access to
solid information, not only from the federal government, but
also from a variety of private sector sources beyond the plans
themselves.
Not surprisingly, levels of consumer satisfaction in the
FEHBP are high. According to a 1997 survey of FEHBP policy
holders who rated their plans as good, very good or excellent,
87 percent of fee for service policyholders described their
plans this way, but 84 percent of HMO enrollees also did so.
Not surprisingly, also, enrollees tend to stick with their
plans. Based on previous experience, it is likely that no more
than 5 percent of FEHBP enrollees will change their plans in a
typical year. They pick plans they like, and tend to stay with
them, as long as their plans perform on the market basis of
price, quality and performance.
HOW SYSTEMIC CHANGE CAN LEAD TO REGULATORY RELIEF
At least for new retirees, there is no reason why Congress could
not improve upon the record of the FEHBP and create a superior system
for America's senior citizens, largely free of the regulatory
complexities that trouble the current Medicare program. At the same
time, recognizing there are significant differences between the
Medicare population and the current federal workforce, the Congress
would want to make sure that the transition to such a system should be
undertaken carefully. In the creation of such a system, Congress should
consider taking the following steps:
1. Make sure that the newly created administrative agency
that oversees a reformed Medicare program--whether it is an
independent board or an agency of the Executive branch of the
federal government--functions in a fashion broadly similar to
the Office of Personnel Management, which administers the
FEHBP. The agency should negotiate rates and benefits on behalf
of retirees; guarantee that plans offer the statutorily
required benefits package; make sure that plans meet fiscal
solvency requirements; make sure that plans comply with any
statutorily prescribed underwriting rules, including guaranteed
issue or renewability requirements; make sure that plans meet
consumer protection requirements, including protections against
fraud and misleading advertising, and ensure that competing
plans provide plan information in plain English. For the FEHBP,
OPM performs these functions today, and acts as a referee in
setting and enforcing the ground rules among plans. Competing
plans themselves do not have to wrestle with an overly
burdensome regulatory system in complying with this consumer
protection regime.
If Congress should decide to adopt a new competitive system,
Congress may wish to protect the system itself from regulatory
erosion. Regulatory creep can undermine legislative intent. In
order to prevent the devolution of a competitive system into a
powerful regulatory regime like that administered today by
HCFA, Congress should consider enacting statutory prohibitions
against any such agency from imposing government fee schedules,
price controls, or premium caps on plans or providers
participating in the new competitive system. Moreover, the
Congress should make it statutorily clear that practice
guidelines on doctors and hospitals, the adoption of quality
standards, or the provision of lawful benefits or medical
procedures that private plans may offer, over and above any
statutorily required benefits package, are issues to be
resolved in the competitive private market.
2. Promote Plan Flexibility in Benefit Setting. There are a
variety of ways to do this. First, Congress could adopt the
model that currently exists in the FEHBP. The Office of
Personnel Management (OPM) sends out a call letter in the
Spring of each year, outlining what it wants to see included in
the plan benefit submission for the coming Fall ``Open
Season'', when federal workers and retirees make their plan
choices. OPM often specifies what benefit additions it would
like to see in the plan submissions. And these plan submissions
are the subject of sensitive and confidential negotiations
between the representatives of the private plans and OPM
officials during the summer of each year.
While OPM has broad authority to negotiate rates and benefits
for each year, OPM is governed by specific statutory
requirement in Title V of the United States Code that spells
out the categories of benefits-such as physician and hospital
services--that must be included by law in private plan
offering. The law does not specify, however, the precise level
of benefit, the duration of medical treatments or procedures,
or the mix of premiums, co-payments, coinsurance and
deductibles. All of these items are subject to negotiation, and
OPM historically, has been flexible on these matters. In
creating a new competitive system, instead of setting forth
detailed benefits in legislation, Congress could replicate the
FEHBP model, and confine itself to setting forth the broad
categories of benefits, including catastrophic and prescription
drug coverage that private plans competing in the new system
must offer.
There are other possible options. Congress could set forth a
core package of benefits that must be required, say, based on
the current Medicare benefits package, with a further
requirement for catastrophic and prescription drug coverage.
But then, Congress could authorize the new administrative
agency to allow the plans to offer the actuarial equivalent of
that benefits package, with a differing mix of medical
treatments or a different combination of benefits, co-payments
or, deductibles. Congress could also authorize the new
administrative agency to accept automatically, (assuming the
inclusion of catastrophic or prescription drug coverage), a new
retiree's employment based plan as an approved plan in the new
competitive system, thus allowing workers to take their state
or ERISA certified employer based plans with them into
retirement as their primary coverage and get a government
contribution to offset its cost, assuming that the employer
would also be amenable to such an arrangement.
3. Authorize sophisticated information collection. Before
entering into negotiations with private plans, the new
administrative agency should conduct regular surveys among
enrollees to get a clearer idea of what Medicare patients want
in their insurance packages. With the coming eligibility of the
77 million strong baby boom generation for Medicare coverage,
there is likely to be a rich diversity of demand for new and
increasingly varied medical services. The new administrative
agency should take advantage of sophisticated information
technology to assess more accurately the precise nature of this
demand, discerning what, precisely, individual enrollees want
in terms of access to physicians and specialists, different
types of coverage, and different types of benefits and
different levels of premium payment and co-payment. This would
help the officials to negotiate solid benefits on behalf of
retirees at an affordable price. These information programs are
already coming to fruition in the private sector. Just as they
can be of immense value to employers in fashioning their own
health insurance offerings, they could also be invaluable to a
new government agency administering a pluralistic system of
competing private plans for senior citizens. In this new
environment, consumer based information would be the touchstone
of all administration decision-making; and persuasion and
friendly negotiation would replace regulation.
4. Ensure a smooth transition to a new competitive system by
phasing it in, allowing plenty of time for mid-course
corrections, and enabling private plans to adjust to the
enrollment of new retirees. If there is any lesson that could
be drawn from the damaged ``Medicare+Choice'' experiment, it is
the crucial need for a well planned transition. There should be
a high level of predictability for private plans, who must
develop business plans to accommodate the changes in the
system, without the fear that what they are attempting to do
will be undercut by precipitous changes in federal regulatory
policy. Perhaps the best way to accomplish this objective is to
make sure that any new competitive system would be open only to
new retirees, allowing it to grow on a year by year bases, and
enabling the market to respond and mature. If, after a few
years, when the system is up and running, the inevitable
wrinkles have been ironed out, the Congress could open the new
system up to enrollees in the traditional Medicare program.
5. Stop overloading HCFA. If Congress does create a new
competitive system, HCFA should not be tasked with
administering it. Given the culture of HCFA as a regulatory
agency, it is not in any case the best candidate for partnering
with private firms and administering a new market driven
system. HCFA should be confined to administering the
traditional Medicare program, and given the managerial
flexibility to compete with private plan options for the
allegiance of retirees. Congress should also consider creating
alternative managerial structures for the administration of
Medicaid, SCHIP and enforcement responsibilities under the
Health Insurance Portability and Accountability Act.
A final thought. Reforming the Medicare program will be technically
difficult, particularly in developing a transition to a new competitive
system, and it will be politically challenging. But the alternative is
to continue to manage Medicare through an increasingly complex body of
statutory law, expanded judicial decision-making, and increasingly
detailed regulation. Meanwhile, Medicare will face an unprecedented
demand for medical services within this decade from an increasingly
well educated, diverse and rapidly growing retiree population.
Insisting on the status quo, and nourishing the inevitable regulatory
growth of a fundamentally unchanged Medicare program could prove even
more difficult and politically challenging.
Thank you.
Members of The Heritage Foundation staff testify as individuals
discussing their own independent research. The views expressed are
their own, and do not reflect an institutional position for The
Heritage Foundation or its board of trustees.
Chairwoman Johnson. Thanks very much, Dr. Moffit.
Hon. Ms. Wilensky.
STATEMENT OF THE HON. GAIL R. WILENSKY, PH.D., JOHN M. OLIN
SENIOR FELLOW, PROJECT HOPE, BETHESDA, MARYLAND; CHAIR,
MEDICARE PAYMENT ADVISORY COMMISSION; AND FORMER ADMINISTRATOR,
HEALTH CARE FINANCING ADMINISTRATION
Ms. Wilensky. Thank you, Madam Chair and Members of the
Subcommittee. I am here as a senior fellow from Project HOPE
and a former HCFA Administrator. Listening to today's
discussion makes me glad to emphasize the former.
I am not here, however, to bash HCFA. What I would like to
do is to share with you ways in which I believe the regulatory
environment might be changed so as to reduce some of the
burdens that we have been hearing about on providers without
abdicating the fiduciary responsibility of HCFA to be prudent
stewards of the Medicare trust funds.
We need to recognize that there is a fundamental tension
inherent in HCFA's roles. HCFA needs to establish a user-
friendly environment, making sure that seniors get access to
high-quality health care, but HCFA also needs to be financially
prudent with the taxpayers' moneys.
You have been hearing about the increased levels of
frustration that have been reported by providers regarding
billing complexities and fears of the billing complexities
compounded by integrity activities.
Recently, there has been some empirical evidence that,
after years of upcoding--that is, billing for more services
than was provided--there is now some indication of downcoding--
that is, billing for less intense services that were actually
provided. This is not a good sign for the program or for the
seniors that are served by Medicare.
What I would like to do is share with you a few strategies
that I believe could help reduce provider frustration and also
some steps that would help HCFA be able to deliver services, by
restructuring the agency, and, finally, to discuss how to get
from here to there.
In the first place, I think it is clear we need to have
better education for providers; we need to have clearer billing
procedures and protocols; and we need to have billing
procedures and protocols changed less frequently and on a more
regularized basis.
The second area that I want to mention relates to the
presumption as to how bills are paid. We have heard this
morning about some of the variations that are used by the
carriers and the fiscal intermediaries. But, in general, there
is a presumption or default that bills are not being submitted
accurately. That is a presumption that could be changed in much
the way that there was a change in the Peer Review
Organization. The presumption would become that bills are
properly submitted. Then there would be a search for patterns
of abuse based on statistical analyses.
Prior to the early nineties, the PROs used to perform a
case-by-case, retrospective analysis, looking for bad outcomes.
But once they found one, it was very difficult to figure out
what it meant. As a result, and in an effort to focus more on
quality improvement, there was a movement to looking to
patterns of care and patterns of outcome that differed from
what their peers experienced. It is precisely this, that kind
of a change that I think would go a long way to reducing the
kinds of frustration that we have heard described this morning.
Finally, I believe that HCFA needs to be more mindful of
the time and burden imposed on providers from its various
assessment and data collection efforts. We heard some mention
made of the minimum data set, the MDS. There is a new data set
now called the minimum data set post-acute care, MDS-PAC. The
MDS has 350 items. The MDS-PAC has more than 400 items, with
seven different timeframes for patient assessment. The MedPAC
report that was recently delivered to the Congress, indicated
MedPAC's concern about the amount of time taken away from
patient care that these assessments tools would require and has
suggested that for inpatient rehabilitation that the primary
assessment tool, the functional independence measure (FIM),
continue to be used. The FIM is much shorter and has been used
for a number of years.
Second, restructuring HCFA so that it can focus on
Medicare. That would mean taking some of the current
enforcement functions, the survey and certification, the
clinical lab certification, and the conditions of participation
and putting them either with the CDC or with the FDA. Second,
moving either all of Medicaid, or at least that portion
relating to moms and kids, and the Children's Health Insurance
Program with the agency that runs welfare. These are all State-
based, income-related programs. Whether or not to move the
long-term care portion of Medicaid is a little more
complicated.
Whether or not the section of HCFA that runs the Medical
Plus Choice Program should be moved depends somewhat on the
kind of Medicare reform the Congress chooses to do. As you
know, I am also a supporter of a Federal Employees Health Care
model as a reform for Medicare. This would require a number of
administrative changes. If Medicare does not begin to move
toward an FEHBP model, the Medicare Plus Choice might remain a
direct part of HCFA. If the reform does not occur, the
administration of the Medicare+Choice program should be moved
to another agency that is within HHS or an expanded part of the
Office of Personnel Management although there would clearly
need to be some coordination with HCFA.
Third, if you choose to use PBMs, the pharmacy benefit
management groups, to run a pharmacy program for seniors, there
will have to be much greater clarity about how much independent
power PBM's are to have, where their oversight should be
lodged, and resolve many other administrative issues.
Fourth, a word about getting from here to there. Phase-ins
for Medicare usually occur over some time when they relate to
changes in payment and coverage. My advice is that any
restructuring of Medicare should also be phased in. It is best
to restructure at the beginning of a term or at the end of a
term. Moving relatively separable parts of HCFA is less
disruptive than reorganizing all the people within the agency.
But even moving separable parts will be disruptive.
And, finally, Congress and the administration need to
recognize that there has been a serious mismatch between HCFA
responsibilities and HCFA resources. HCFA clearly needs to do
better, but with all due respect, Congress needs to do better
with HCFA as well.
Thank you.
[The prepared statement of Ms. Wilensky follows:]
Statement of the Hon. Gail R. Wilensky, Ph.D., John M. Olin Senior
Fellow, Project HOPE, Bethesda, Maryland; Chair, Medicare Payment
Advisory Commission; and former Administrator, Health Care Financing
Administration
Madam Chairwoman and members of the subcommittee: Thank you for
inviting me to appear before you. My name is Gail Wilensky. I am the
John M. Olin Senior Fellow at Project HOPE, an international health
education foundation and I chair the Medicare Payment Advisory
Commission. I am also a former Administrator of the Health Care
Financing Administration. My testimony today primarily reflects my
experiences as a HCFA Administrator as well as my views as a health
economist. I am not here in any official capacity and should not be
regarded as representing the positions of either Project HOPE or
MedPAC.
I am here today to discuss ways in which the regulatory environment
might be changed so as to reduce some of the regulatory burdens on
providers without abdicating the fiduciary responsibility of HCFA to be
prudent stewards of the Medicare trust funds. I would also like to
discuss possible ways to reallocate some of the functions that
historically have been assigned to HCFA in order to make the agency
function more effectively. I believe such a reallocation would be
desirable, irrespective of reforms to the Medicare program but would be
particularly important with some of the reforms under consideration. It
would also allow HCFA to concentrate its energies on running Medicare
more efficiently and effectively.
Fundamental Tensions Faced by HCFA
HCFA faces certain fundamental tensions with its goals of
establishing a user-friendly Medicare, and assuring that seniors can
get access to high quality health care while also being financially
prudent with the taxpayers' monies. The frustration being reported by
many physicians and other health care providers because of confusion
about billing procedures and fears of being charged by HCFA and/or the
Inspector General with submitting false claims is, in part, a
reflection of these tensions. Some of the tensions are inherent to a
program as large and complicated as the current Medicare program, but
if left unchecked, can mean an important diversion of time away from
patient care and ultimately, become a threat to the future availability
of high quality care.
Last year, MedPAC reported evidence of some ``down-coding'' in both
the hospital and physician settings. This finding is consistent with
reports by various types of providers regarding their uncertainty about
how to bill Medicare appropriately and their concerns about being
charged with making false claims against the Medicare program. While
government officials should not countenance abusive behavior by
providers, it should be equally worrisome to the Government that
providers may be deliberately under-billing Medicare in an attempt to
stay clear of the HCFA or the IG. Such behavior will not be to the
long-term benefit of Medicare or the seniors it serves.
Strategies to Reduce Provider Frustrations
Among the many complaints raised by providers, uncertainty about
proper billing and coding and discrepancies in treatment by various
contractors seem to be at the top of most lists. Better education
sessions, clearer billing procedures and protocols, less frequent and
more regularized periods for changing billing procedures would
represent important steps in reducing these legitimate frustrations. As
is true for many aspects of HCFA reform, some of these changes will
require greater flexibility from the Congress than has usually been
granted to HCFA and may require additional resources as well.
The tension between the desirability of national uniformity for a
Federal program like Medicare and the importance of allowing for some
local discretion to reflect the different ways medicine is practiced
around the country has been a part of Medicare since the program began.
The granting of limited discretion to local contractors with regards to
coverage and payment was also a part of the original Medicare
legislation. This discretion makes Medicare less conservative with
regard to the coverage of new treatments and technology than would
occur with a program requiring national uniformity.
While local discretion in payment and coverage may be the cause of
some provider frustration, the more significant source of frustration
comes from discrepancies in the program integrity portion of Medicare.
Theses tensions occur because of the discrepancies in policies and
behavior between HCFA central-office, the ten regional offices and the
more than fifty private contractors that carry out the actual payment,
claims processing and audit operations for Medicare. Unlike
discrepancies in coverage, which are actually quite limited, these
discrepancies primarily involve differences in the amount, duration and
scope of covered benefits. They produce little gain and a lot of
provider confusion and frustration.
The importance of the program integrity activities has clearly
increased, partly as a result of recommendations from the OIG audit on
financial management and partly as a result of the Health Insurance
Portability and Accountability Act (HIPAA) and the Balanced Budget Act
(BBA). Both HIPAA and BBA focused attention on fraud and abuse and
provided increased resources for program integrity. But the increased
emphasis on program integrity didn't have to have produced the level of
frustration that has resulted. This frustration is more a reflection of
the prevailing attitude towards Medicare providers, namely that they
are not to be trusted.
The default position of the current environment presumes billing
may be incorrect or inappropriate. In such an environment, program
integrity requires heavy reliance on documentation. This presumption
combined with limited funding for contractors has led contractors to
develop a series of automated strategies that deny claims. This has
limited the amount of editing that needs to be done after-the-fact and
also reduces the need to ``pay and chase.'' But it has also led to an
explosion of medical review polices, policies that differ from
contractor to contractor and with it, a heavy reliance on
documentation.
A different strategy, reflecting a different attitude and default
position, would be to pay properly submitted bills and search for
patterns of abuse based on statistical analyses. This change in focus
would mirror a change that began taking place with the Professional
Review Organizations (PRO's) in the early to mid 1990's. Prior to that
time, activities by the PRO's focused on a case-by-case, retrospective
review of medical records. The problem was that when a ``bad'' or
undesirable outcome occurred, it was very difficult to tell whether it
was a single, idiosyncratic occurrence or whether it indicated a
problem worthy of pursuit. This behavior limited the effectiveness of
the PRO's and made them intensely disliked by the physicians.
As part of a more general emphasis on quality improvement, PRO's
began to focus on patterns of care and patterns of outcomes, rather
than individual case review. Physicians and institutions that have
patterns of care and patterns of outcomes that differ from their peers
are more readily identifiable as potential problems and can be dealt
with more directly. A move to this type of model would have the
statistical-analyst contractors become the focus of program integrity
rather than the medical directors and carriers and have the medical
directors refocused on quality improvement efforts.
Another way to reduce provider frustration is for HCFA to be more
mindful of the time and burden imposed on providers by various
assessment and data collection efforts. The Beneficiary Improvement and
Protection Act (BIPA) required the development of patient assessment
instruments that use common data elements. This requirement provides
HCFA with an opportunity to focus on the development of instruments
that emphasis brevity and simplicity, collecting only those data
elements needed for payment or quality monitoring. It is not obvious
this requirement has driven past efforts. As an example, the MDS
(Minimum Data Set), developed to guide care planning for nursing home
resident care planning, has more than 350 items to be filled out.
Instruments of this nature may not only compromise data accuracy and
take valuable time away from patient care, but are also likely to
increase provider frustration.
In a similar vein, concern has been raised in MedPAC's March 2001
report about use of the Minimum Data Set for Post-Acute Care (MDS-PAC)
as the basis for collecting data for quality monitoring and payment
purposes across all post-acute care settings. While this instrument has
the advantage of potentially providing a more coordinated approach
across all post-acute care settings, which is clearly a plus, it has
the disadvantage of being lengthy and complex. MDS-PAC covers more than
400 items, with at least seven different time frames for patient
assessment. Collecting the same information in the same way across
settings is important but focusing on the precise purposes for which
the data will be used and defining the minimum set of information
needed to accomplish this goal is equally important.
HCFA's Current Functions
Reviewing HCFA's current responsibilities and reallocating some of
these functions to other parts of HHS represents another strategy that
may help HCFA focus on efforts to reduce provider burden and
frustration.
HCFA's foremost responsibility is administering the Medicare
program. Medicare covers 39 million people and is expected to cost
around $240 billion in FY2001. The agency employs approximately 4200
individuals in central and regional offices but has contracted
indirectly for the services of about 38,000 FTEs through its network of
over 50 private contractors who act as its fiscal intermediaries and
carriers. These include the people referenced earlier that actually pay
the bills and provide financial oversight for the services provided. In
addition, HCFA manages the participation of more than 260 plans
involved in the Medicare+Choice program. This makes HCFA bigger than
most cabinet level departments in terms of both money and personnel.
The proper oversight and administration of Medicare is a full-time
job for any agency. The problem is that HCFA is also responsible for
providing oversight to the Medicaid program, conducting surveys and
certification of certain types of health facilities, approving the
Children's Health Insurance Program (CHIP) proposals submitted by the
states, enforcing federal health insurance portability laws and some
fraud and abuse prevention activities. These activities require a wide
variety of talents, skills and experience and present a management
problem for even the most talented administrator. HCFA's problems will
only get worse as the baby-boomers start to retire and the number of
people on Medicare increases dramatically, making the world's largest
insurance company, HCFA, even more difficult to manage.
Administrative Issues Supporting a Reformed Medicare with Prescription
Drugs
There are a variety of administrative issues that need to be
considered prior to the implementation of Medicare reform. What
functions should be included in a reorganized HCFA? How should HCFA be
restructured so that it can effectively manage a modernized fee-for-
service Medicare program? What type of administrative structure makes
sense for the private plans that participate in Medicare, either as
Medicare+Choice or potentially as separate prescription drug programs?
What role will PBM's have in a reformed Medicare program and how will
they be administered?
The first step, at least in principle, should be to move non-
Medicare related functions as well as some quality assurance functions
currently in HCFA elsewhere within the Department of Health and Human
Services. The functions relating to conditions of participation and
quality assurance such as the survey and certification of nursing
homes, the conditions of participation for hospitals, and the
certification of clinical labs should be housed either in CDC or FDA or
potentially, a new authority that houses both of these agencies.
The oversight of the Medicaid program, which has always been
somewhat the stepchild of HCFA, should be moved elsewhere and given
appropriate resources and leadership. Where coordination with Medicare
is needed, such as for the dually eligible population, interagency
agreements can provide the needed exchanges of information and
coordination. Putting Medicaid and the approval of proposals submitted
by the states under CHIP together also makes sense. One consideration
would be to put these programs together with the Administration for
Children, Youth and Families, the agency that runs the welfare program.
Another consideration would be to put all of these programs together in
a new entity that also included other state health programs like HRSA
(Health Resources and Services Administration), and SAMSA (Substance
Abuse and Mental Services Administration).
HCFA needs to focus on running a modernized fee-for-service
program. A series of changes would be needed to modernize the
traditional Medicare program. These include the authority to use
selective contracting, centers of excellence, disease management
programs, best-practice programs and other changes commonplace in
better-run private sector plans. The question is whether HCFA will be
allowed to administer a modernized fee-for-service program. Will
Congress allow HCFA the flexibility that will be needed to run such a
program and will Congress and the Administration provide HCFA with the
resources needed to carry out such a task. History is not encouraging
on either of these issues.
If HCFA or any governmental agency is to run a modernized fee-for-
service program, Congress will need to change its relationship with
HCFA and retreat from it very micro-prescriptive directives. Changes in
attitude and behavior will also be required from HCFA employees. HCFA
has been slow to undertake demonstrations or adopt promising ideas from
the private sector. If HCFA is to run a modernized fee-for-service
program, the organization will need to be more responsive, more
pragmatic and more creative in its behavior than it has been in the
past.
The appropriate administrative structure for the private plans that
participate in Medicare in part depends on how Congress chooses to
further reform Medicare. I believe that the current combination of a
Medicare+Choice program, which provides a highly regulated environment,
with payments set independent from the traditional program and a
traditional Medicare program, is not a stable, long-term option. I am
already on record as supporting a reform modeled after the Federal
Employees Health Benefits Program. This type of program, particularly
if some provisions were made to protect the frailest and most
vulnerable seniors, would allow seniors to choose between competing
private plans and a modernized fee-for-service Medicare program for the
plan that best suits their needs.
I am well aware that the FEHBP model remains controversial among
some Members of the subcommittee. However, I think it's important that
committee members recognize that many of the most vexing issues that
need to be resolved for a premium support program must also be resolved
with Medicare as it is currently structured. These issues include risk
adjustment, providing understandable and user-friendly information to
seniors, assuring that quality care is being delivered, providing
safeguards for frail and vulnerable populations and given the strong
interest in prescription drug coverage, the design of a prescription
drug benefit that doesn't depend on administered pricing to moderate
spending.
Some attention has been given to the potential use of a Medicare
Board to provide oversight for private plans and to negotiate with
private plans as well as to provide the administrative structure for a
premium-support type of reform, if that is the direction of reform
Congress chooses to take. However, potential problems of accountability
of a board plus the difficulties of using a board-structure for an
entity that has significant administrative and operational
responsibilities make the Board concept a less attractive
administrative structure. A better choice would be a separate agency
within HHS, such as was proposed last year in H.R. 4680 or an expanded
version of the Office of Personnel Management, which negotiates with
health plans on behalf of the Federal Employees and resides in the
executive office of the President. The most important functions of this
new entity would be to review and approve benefit packages, make
payment modifications (to reflect risk adjustment, etc.), direct open
enrollment periods, provide information about plan choices and either
structure competitive bids or be empowered to negotiate premiums.
I recognize this type of structure would divide the responsibility
of administering the overall program between two entities but I believe
this is far preferable than lodging both with HCFA. HCFA has little
experience in negotiating with outside entities. The functions and role
for government in running and monitoring competing private plans are
fundamentally different from the experiences and mind-set of HCFA
employees. Also, separating these function would help HCFA focus on
administering a more modernized fee-for-service program.
Finally, we need to be clearer about the role PBM's will play in
administering the prescription drug program for traditional or
modernized Medicare and the type of leadership that will be needed to
manage such a program. Almost all of the prescription drug proposals
have invoked the concept of PBM's as the appropriate administrative
structure to administer an outpatient drug benefit. In large part, this
reflects the belief that administered pricing, the main instrument of
cost-containment for other parts of traditional Medicare, will not be
used for prescription drugs. Since PBM's have had some success
historically in moderating spending in the private sector, it has been
assumed that they will be able to do so in the public sector as well.
But many unanswered questions remain about how the PBM's will
function, how much independent power they will be granted and where the
government oversight function of the PBM's will be lodged. Will there
be competing PBM's within an area, how will they be chosen, how much
power will they have to devise formularies, encourage generics, impose
tiered co-payments, will they be allowed to take financial risk, will
they be encouraged to take financial risk and so forth. If there is a
new administrative agency providing oversight for private health plans,
that would be the logical place to provide oversight for the drug
benefit as well. In any case, the management of this benefit will
require leadership and private sector experience not currently
available in HCFA.
Getting From ``Here'' to ``There''
Historically, changes in Medicare reimbursement policy and
structure have been phased in over several years. This has helped to
cushion the disruption that abrupt changes could cause. It also makes
sense to consider phasing-in changes in the structure or organization
of a reformed Medicare program that requires substantially different
roles for government or substantially different roles for the
administrative institutions supporting the program. Any interest in
experimenting with various strategies for reform or the administrative
structures supporting reform makes it important that we begin the
process.
But the Congress needs to be clear that there are risks and
potential costs involved with any restructuring of HCFA. The
reorganization of HCFA several years ago affected most individuals
within the agency and caused significant disruptions in workflow.
Reorganizing HCFA would best be done at the beginning of a new
administration or at the end of a presidential term. Reorganizations
that move relatively separable parts of the agency will be less
disruptive than reorganizations that move large numbers to new
positions.
Whatever the decision on reorganizing and restructuring HCFA,
Congress needs to recognize that there has been a serious mismatch
between the responsibilities given to HCFA and the resources the agency
has been granted. HCFA needs to find ways to reduce the burdens being
placed on providers and to function better as an administrative agency.
Congress needs to be more realistic in terms of the demands it places
on the agency and with the support it provides. Both need to happen
together; neither is likely to happen alone.
Chairwoman Johnson. Thank you very much, everyone, for your
testimony. It has been very helpful, and some of it will
require, as some of you have noted, further discussion beyond
this morning's endeavors.
I did want to ask you, Ms. Edelman, aren't there some home
care services that our home health agencies provide that are
clearly, absolutely not covered by Medicare?
Ms. Edelman. Yes, that certainly would be true. But there
are so many instances where the home health care agencies are
making incorrect assumptions or incorrect determinations that
coverage is not there. More than 50 percent of the time, they
are incorrect. That is very troubling. The only way that
beneficiaries can get into the appeals process is through a
demand bill. And so people do need an opportunity to do that.
Chairwoman Johnson. I appreciate that, but there are whole
categories of services that Medicare doesn't cover at all:
services to families with psychiatric problems, home health
aides.
Now, there is a category, a group of patients, about which
there is no possible controversy. I understand the gray-line
area. But I don't know that you really understand what it means
to an agency to now give out a form and the choices on the form
are: you pay, you stop the services, or you ask for a demand
bill.
Now, anybody in their right mind, any senior, is going to
ask for a demand bill. So it means that agencies have to go
through the demand bill process and submit the bill to
Medicare--no, submit to Medicare knowing that they are not ever
going to get paid by Medicare. And so it involves not only the
paperwork going to Medicare, waiting for Medicare's decision.
In Connecticut, it involves your agency then challenging that
bill, and most all of them get challenged. This is a 2-month,
4-month, 6-month, 8-month, year, year-and-a-half process.
And all that time the agency gets paid partially by
Medicare, then Medicare decides that they aren't going to pay,
so they get their money back. And then the agency is bare and
unable to bill any other payer, especially Medicaid, which is
the primary payer for the dual eligibles, until the thing is
resolved, which may be many, many months.
Now, for a small agency, this cash flow problem--never mind
the volume of just xeroxing is extraordinary. And I think if
you sat down and sat with our agencies--although, actually, in
Connecticut, I hate to say that your organization seems more
interested in money than patient care. It is just appalling
what has gone on. But it is different than other States. I
appreciate that.
But we really have to look at the patient getting service.
And when our agencies--now, it is true, the intermediary gave
us different direction than the rest of the country. But,
truthfully, there are services, there are patients in which
there is absolutely a clear-cut case that Medicare won't cover
it. And yet to have no line at all, no way for the agency to
move ahead, is in my estimation an example of Medicare not
being able to be rational.
Now, truthfully, when we talked with them about this, we
hoped to draw some of those lines, but I think you
underestimate both the burdensomeness in terms of sheer cost of
time and money and the irrationality of this process for small
agencies that serve a lot of dual eligibles.
Unfortunately, I have to let you comment on that later
because I need to just mention to Mr. Grob, I like very much
what I hear you saying, and I think most of what you said I
don't disagree with. I do think in your comments about the
appeals process, you are not noticing that there is a whole
level of dialog that needs to go on between you and the people
you are overseeing so that we don't have appeals for certain
reasons.
There should be a way that a physician can say, wait a
minute, you are coding it this way and I am coding it this way
and this is why. There should be a level of collaborative
discussion before you come to your final conclusions. And
certainly when you look at the appeals process, it currently
takes a year to have an appeal adjudicated under Part A, and
557 days to have it adjudicated under Part B.
Now, that is what we were trying to address in that bill,
and I can't believe you would think that tighter time frames
than that would be a problem for anyone.
Mr. Grob. First of all, I absolutely agree with what you
are saying about the need for the discourse. And as far as the
tighter timeframes are concerned, I think that there certainly
can be tighter time frames, with two things in mind. One, would
there really be adequate resources for dedicated and
professional people to meet those time lines? And, second,
would the time lines be reasonable?
I think the ones that are in there now might be a little
too tight, just given, you know, what the normal process is.
But the concept of time lines is not at all bothersome. The
question is: Are they reasonable? Are there resources to meet
it? And then going back to your point about the discourse so
that we don't have so many arguments, I really agree with that.
Chairwoman Johnson. Then we would like--probably you
wouldn't want to comment right now, but if you would comment on
Gail Wilensky's recommendations, it would be very helpful. I
think this kind of view of the system could be far more
fruitful to us than some of the activities we are involving
ourselves in.
Mr. Grob. I would welcome the opportunity, and I really
have to tell you that just in listening to all the testimony
that I have heard today, I was impressed on how thoughtful it
was, covering a wide range of issues. Many subjects that we
have been studying in our office have come out on the table,
and I am just delighted to see that they are out here on the
table.
Chairwoman Johnson. Mr. Stark.
Mr. Stark. Thank you, Madam Chair.
Gail, I think we agree and the Committee agrees that there
are changes that need to be made, and I am aware of changes
that were made when you ran HCFA and changes before that, and I
suppose subsequent to that. In many instances, what we do in
HCFA leads to changes in the private insurance market. I
believe that you were there, I think, when we did physician
reimbursement. Right?
Ms. Wilensky. Correct.
Mr. Stark. And I think most private insurance companies now
take that and use it as a physician reimbursement structure--
not the rates, obviously--in their fee-for-service payment, for
better or for worse. And I don't know whether imitation is a
form of flattery or not.
But, on the other hand, it seems to me that HCFA sometimes
follows along. Arguably, the way the intermediaries pay is kind
of left over from the way Blue Cross used to pay before
Medicare came into existence. They tend in the different areas
of the country to pay for the procedures in much the way they
used to.
In your experience, either with Project HOPE or at MedPAC,
could you say that there is any one major program-Medicare,
Medicaid, private insurance? And I will mention the names, but
I don't know as you have to. But Aetna, one of the--I can't
think of the largest one now in California, Physician Care, or
whatever the heck their name is, HCFA. Medicaid I think is
generally considered to be more frustrating to the hospitals
and physicians and doesn't pay enough.
But is there any one that stands out as being outstandingly
better or worse than another in terms of reimbursing hospitals
and physicians and clinical labs, in your opinion?
Ms. Wilensky. I think it depends on what level. When it
comes to payment, the payment level----
Mr. Stark. I am thinking of the procedure. I think mostly
we are talking here about hassle factor----
Ms. Wilensky. Because I think actually Medicare pays pretty
well. I think Medicare is one of the better payers when it
comes to the level of payment.
My sense is that in the hassle factor there is at least one
clear difference with the private sector, and that is the local
discretion that is granted to the carriers and intermediaries,
which means how rules are interpreted differs significantly
among carriers.
When it is for coverage of some new medical procedure or
technology, there are both positives and negatives. When it
comes to interpreting amount, duration, and scope, which goes
to a lot of program integrity and billing activity, I don't see
much value to discretion. This type of variation is quite
different for private plans. Private plans may have good rules
or bad rules, but they don't vary the interpretation. This is
an example where Medicare causes a lot of uncertainty and
frustration.
Another source of frustration is that HCFA makes amendments
on a far more frequent basis, sometimes in response to
congressional legislation, sometimes just as a way to roll out
these changes, far more than private plans. Private plans tend
to make changes in line with their benefit year, unless a major
employer comes in midyear and negotiates a different package.
Frequent billing changes are very disruptive and confusing. It
is very hard on small physician's offices in rural areas. These
practices don't have a lot of administrative support. And it is
also disruptive in very large institutions.
On the other hand, I am not sure that Medicare pays slower.
Mr. Stark. Well, to follow along, you recognize the
resources that we have at our disposal, and it would seem to me
that we could not fulfill our responsibilities by letting the
American Hospital Association or the AMA write the rules. They
certainly should be able to help us. But if we follow along, as
the chairman I think is doing correctly, to set up a program of
reforms--I think you are advising us that maybe we ought to
take a piece at a time.
Could you suggest, a format that we might follow? For
example, could we give temporarily additional resources to
MedPAC or to CRS or to GAO or a consortium who have the
technicians. We don't have the capacity here--even the majority
doesn't have that much staff, I don't think--to come back to us
with suggestions? Can you suggest a procedure we might follow
to get at taking the most critical reforms first and going down
the line? Where do we turn to learn that?
Ms. Wilensky. I think you need to have the individuals who
are actively involved in actually running practices or
institutions involved, which is unlikely to be the chairman/CEO
of major institutions. It will be somebody within the
organization. It may take a bit of searching to designate the
right person to bring them together, working perhaps with a
consortium of CRS, MedPAC, or GAO individuals.
Mr. Stark. Could MedPAC take the lead on that with
additional resources?
Ms. Wilensky. I should probably check whether our executive
director thinks he has the talent, and the expertise.
There is some operational expertise in MedPAC, but I will
certainly be glad to get back to you.
Mr. Stark. OK, yes.
Ms. Wilensky. I have found it difficult in the past to get
specific recommendations from provider groups that complain
about the regulatory burden. I will be eager to read the
testimony from the previous panel to see if you have been able
to get more specific ideas. It was why I tried working with
some senior career employees at HCFA to see if they could come
up with two or three very specific ideas. That is why you need
to have people who are involved in the working operations
working to try and attack various pieces of the problem.
I do think there is a lot of complexity inherent to
traditional Medicare. The Federal government needs to decide on
the definition of the benefit, the appropriate price for the
unit or the bundle, the quality and whether it should have
occurred. The amount of change that resulted from BBA, BBRA,
and then the Beneficiary Improvement and Protection Act has
been extraordinary. I don't know whether it is correct, but I
have heard that there were 700 specific directives to HCFA over
those pieces of legislation.
Mr. Stark. From us.
Ms. Wilensky. From you.
Mr. Stark. Yes. I have heard that it is a large amount,
too.
May I extend for one question to Mr. Grob, Madam Chair?
Chairwoman Johnson. I thought maybe I would let the other
two question, and then I am going to come back and you can come
back.
Mr. Stark. OK. Thank you.
Chairwoman Johnson. Mr. McCrery.
Mr. McCrery. Dr. Moffit, you have said that this burden or
hassle factor is going to intensify if the basic structure of
Medicare is not changed.
Dr. Moffit. Correct.
Mr. McCrery. I think you were here earlier, and you heard
the testimony of the earlier panel, and you have heard Dr.
Wilensky kind of give a middle road of, well, some things could
be better, but, you know, private sector is not so hot, either.
Where do you get your conclusion that HCFA and Medicare is
just really worse than the private sector in terms of the
hassle factor?
Dr. Moffit. Well, in terms of the testimony this morning,
you have heard testimony from private sector providers who have
told you that Medicare is, in fact, more burdensome than
private insurance. In my capacity as a policy analyst, I hear
from doctors almost every week who complain about Medicare.
Now, they complain about managed care, too, but they also
complain about Medicare. And in having an opportunity to speak
and debate about this subject across the country, I have
opportunities to talk before forums sponsored by Members of the
medical profession or hospital staffs. My concern is, after
talking to them, that there is a profound sense of
demoralization among Members of the medical profession. That is
to say, they feel that they are losing control over major
decisions that affect their professional lives. And they are
also concerned about the requirements that they have to comply
with just the sheer volume of Medicare rules and regulations.
I am not certain, however, that Medicare should be isolated
from the general private health insurance system. Our colleague
Professor Uwe Reinhardt, at Princeton University, has said it
best: that we right now have perhaps the most bureaucratic
health care system perhaps in the world. And the reason: you
have large employer-based health insurance arrangements as
well. But the real difficulty is that individual patients have
less and less control in this system.
Of course, you can go to any doctor that you want in
Medicare, assuming he takes Medicare. But that doctor is
constrained by the rules and regulations of Medicare, and that
is what the physicians have been complaining about this
morning.
Medicine is undergoing a rapid change. We are seeing a
dramatic change. Biomedical research is advancing rapidly.
Medical technology is also advancing rapidly. And this is going
to mean that the pressures on Medicare are going to increase to
accommodate these changes; and at the same time, Congress is
going to have to deal with the addition of new benefits
reflecting scientific changes, but at the same time add such
new benefits in a cost-effective manner. And the way Congress
is going to do this is to establish a new administrative
payment systems or adapt old payment systems to these new
medical technologies or services. There will be a resulting
political response by physicians or providers that these new
payment applications are inequitable, and there will be a
tendency either for Congress or the Health Care Financing
Administration, to be under new pressures to make more
exceptions. The more exceptions you make, the more complex the
regulatory system becomes.
My view of the Medicare regulatory system is that it
resembles the reproductive behavior of rabbits. The rules will
continue to multiply.
Mr. McCrery. And is it your conclusion that, left unchanged
and allowing the hassle factor to intensify, providers,
particularly physicians, will find it less and less attractive
to practice medicine and that that may discourage bright young
people from even going to medical school? I mean, do you see it
as precipitating that kind of reaction?
Dr. Moffit. Congressman Stark said this morning that there
is no solid statistical evidence that doctors are dropping out
of Medicare. The real concern that I have is that doctors will
not give up Medicare patients, their current Medicare patients,
but they are going to be loathe to take on new Medicare
patients.
In the past, we have been able to stem that. We have been
able to prevent that from happening by readjusting the payment
systems. But we are in the midst of a demographic revolution
unlike anything we have ever seen. Within the next 10 years, 77
million baby boomers are going to start to retire, and the
demand for medical services is going to be unlike anything we
have ever seen before.
Now, certainly physicians depend heavily on Medicare simply
because of the size of the Medicare population. So I don't
expect a mass exodus. What I do see, and what I am really
concerned about, is the consequence of this demoralization that
I talked about. I submit to you, at least from my personal
experience, that it is very real. Frankly, I think it is one of
the more serious problems facing the Medicare system, and I
think it is one of the more serious problems facing the
country. We have to take this very, very seriously.
What happens when, the medical profession is demoralized? I
think you can tolerate some demoralization in many professions.
Among health care economists or policy wonks, that is fine.
Among college professors, it is a shame, but if they are
demoralized, that is not catastrophic. I don't think you can
afford demoralization on the police force or in the Marine
Corps or in surgery. This is something that this Committee is
going to have to address.
Mr. McCrery. Thank you.
Chairwoman Johnson. That was a very, very excellent answer,
according to the demoralization, and it is frankly why we are
having this hearing. I think the demoralization is profound. I
think it is a very much bigger part of the nursing shortage
than we are going to be able to document or that we are willing
to acknowledge. You cannot treat people whose job it is to
provide love and skilled care the way we are treating medical
personnel from bottom to top. Mrs. Thurman.
Mrs. Thurman. Madam Chairman, let me also say from somebody
who is from the State of Florida, where we have a higher
population of seniors, that, you know, part of the thing that
we are seeing--and maybe it is not going into the practice,
maybe it is because of Medicare choice. I mean, I think there
are a lot of other issues going on out there besides Medicare.
But, you know, we are seeing in many cases where we just don't
have the physicians to take on new patients. It doesn't have
anything to do with that they are stopping to see them. It is
just there is no room in their practices left because of the
overburden and the demographic shifts that are happening in
this country. And I think that is part of the issue.
Ms. Wilensky, let me ask you a couple of questions, because
I think it is important having you here, both in what you have
done with health care but also as a former HCFA Administrator.
In your time, did we have hearings like this about
overburdened regulations? And do you remember any time when you
served that, in fact, we had as much change, the 700 ideas that
were talked about, rules and regulations that had to be put in,
or that policies were being driven because we were cutting
budgets? I am just kind of curious to know. This is a framework
that, you know, I don't believe has always not been there, but
I do think we have added some burden on it in this last years.
Ms. Wilensky. I think you have characterized it well. HCFA
is and always has been a very difficult job. You are under
intense pressure. Providers--the nature of the program is to
have pressure to have more payment and less regulation and to
make sure that seniors feel like they are getting good care.
That tension is inherent in the program.
The amount of complaint, the frustration by hospitals and
physicians, the fact that we were able to document some
evidence of downcoding and billing by hospitals is really quite
extraordinary, and I think it has to do with the pace of change
that has occurred since 1997. I think it has to do with very
grave concern by physicians and institutions over being charged
with civil monetary penalties and with potential criminal
penalties, very aggressive moves to try to go after
undocumented billing. I think it is partly an attitude, it is
partly a level of change, and it is the pace of changing
regulations and the inconsistency.
When you put all of those together, what you are hearing
now is a level of frustration that is quite extraordinary, and
the fact that you have as much interest being expressed by
various Committees of the Congress is very different. There was
always some level of interest in this issue by this Committee
and by the Finance Committee in the Senate, but the level of
interest among a wide variety of Subcommittees in the Congress
is extraordinary.
Mrs. Thurman. Why do you think that is true today than it
was before?
Ms. Wilensky. I think it is----
Mrs. Thurman. I mean, there has got to be a key reason.
Ms. Wilensky. I think that it is the amount of change that
has gone on in the last 3 years, and I believe it is very
aggressive efforts by the inspector general, by HCFA itself in
terms of program integrity, by the----
Mrs. Thurman. Directed by----
Ms. Wilensky. Department of Justice, by the State attorneys
general in going after abusive practices, in some cases unclear
practices. I think there is the belief on the provider
community that they are being charged as being criminals in
what is a very complex and unclear program, and it has raised
levels of frustration. But the sheer enormity of the change and
the regulations and the billing procedures that that has
engendered is different from anything that existed.
Mr. Stark mentioned when I was at HCFA we were focusing on
changing the way physicians were reimbursed, and we worked very
hard to make sure that that occurred on time, January 1, 1992,
reasonably accurately. But when BBA came through, HCFA had to
worry about having prospective payment for skilled nursing
facilities or home care or outpatient and doing all the other
changes that went along at a time where what I have been told
is the administrative budget increased approximately 5 percent
during a period when the demands were just enormous.
Mrs. Thurman. And if I remember correctly, there was very
little time given to HCFA----
Ms. Wilensky. Very little.
Mrs. Thurman. To do those regulations before they were
going to be brought back up here as to why aren't these things
being done. And it is my understanding from past situations we
have actually tried to give HCFA the amount of time to actually
implement.
The reason I go along this line of questioning is because I
don't want us to be misled that HCFA and Medicare are in
trouble. I mean, I actually think they have done some pretty
good jobs. I think Medicare, whether you all believe it or not,
has done a good job, and I think people depend on it, and they
like the program. And, in fact, HCFA has gotten great reviews
through some surveys saying that beneficiaries have been happy
with the explanations that they have been given, and they felt
like they were courteous and got answers.
But, you know, I am worried that we are setting a stage
here that is doing something for Medicare reform, maybe just in
the name of Medicare reform to change the system, that while
there may be some problems in it and, yes, we have to look at
it, but we also need to be careful that we don't undo a system
out there that people are comfortable with in the most part.
Problems? Absolutely. I mean, we just got done voting on
paperwork reduction on the floor for small businesses. So we
know that that is a problem throughout the system. But I just
want us to be careful that we are not totally throwing out
something to put something else in and building the case here.
Ms. Wilensky. I think there is a real--one of the things
that I worry about is I think there is a major morale problem
at HCFA, in part because HCFA bashing has been very popular.
Mrs. Thurman. Absolutely.
Ms. Wilensky. And I think as much as I have recommended
restructuring, I hope very carefully, the fact that HCFA had
just gone through an enormous restructuring before BBA occurred
meant that the agency was in a very difficult position to
respond to what was the biggest workload it had ever had placed
on it.
But having said that, Medicare is a very important program.
I believe it can be made better. I believe that it can better
suit the 78 million baby boomers that are going to start to
retire. We just have to make sure it is done in a way that
doesn't put the existing seniors at risk.
Mrs. Thurman. And the last comment is I know that in both
BBA and the last one, we have also asked MedPAC to do some
studies. And we probably ought to also give them the
opportunity to respond to some of this.
Ms. Wilensky. MedPAC has been impressed by the number of
new assignments from BBRA and BIPA.
Chairwoman Johnson. Thank you, and I appreciate the
gentlelady from Florida pointing out that this is not about
HCFA. We have some very, very good people at HCFA. It is also,
to some degree, about Congress responding to the problems the
program faced in 1997 with a very, very big bill.
I think the other thing here--and I think it is important
for us to acknowledge--we did not anticipate the unintended
consequences of putting in place criminal penalties, and
especially putting them in place at a time when loads of new
regulations were going to come out, where judgments were going
to be very difficult to make. So now you have people trying to
make very difficult judgments. They are bound to commit errors,
and the penalties are their license, their livelihood, and
their reputation in the community.
So I think in the 1997 legislation, which we passed and I
helped write--and I recognize the problems. I remember when Sam
Gibbons proposed the $800 million more for fraud and abuse, and
we were able with that money to set up a center in every State.
We needed to do that. God knows we needed to do that. But I
don't think we had a chance to really think through what was
going to be the interaction.
Now, that leads me to a question I do want to ask, and we
will do a second round now. In the area of workplace safety,
some States have used a method where OSHA comes in and can do
an inspection with you, tell you exactly what you need to do,
and then they come back in a month or two, and if you have done
it, fine, there are no penalties.
Given the enormous complexity of the laws at this time, do
you think there is any role for an OSHA-type education process
that would do an inspection, go around with a nursing home or
work with a home health agency on their billing and so on, and
then if they clean it up, then that is fine?
Now, clearly, if you came in successive years and found
exactly the same problems, you know, that would be a problem.
But this is a variant of what Dr. Wilensky has talked about.
And it also picks up on the incredible lack of education that
we do out there.
Do you think there is a role for this kind of an oversight
process as a program integrity component?
Mr. Grob. I really appreciate your asking that question. I
absolutely do think there is room--in fact, I actually think
that for nursing homes, for example, the current rules that
pertain to the discovery of deficiencies in treatment is very
much along those lines. And I think where it has fallen short
is that they simply have not had the resources to meet the kind
of deadlines that you are talking about and get back out there
right away----
Chairwoman Johnson. No, no. The spirit of what has gone on
in nursing homes is not along the line that I am suggesting at
all. That is not a problem.
Mr. Grob. Could I address the question then of spirit,
since the question of demoralization and the question of
criminalization has frequently arisen? I really do think it is
vital, and could I take a minute on that?
Chairwoman Johnson. Sure.
Mr. Grob. I do think that there is concern--and I have
heard it over and over--that physicians are afraid and other
health care providers are very much afraid of criminalization.
But I do wish to emphasize that the word can mean many things
to many people.
Last year, 12 physicians were found guilty of a crime. One
of them performed operations, cataract surgery, on people who
didn't need it.
Chairwoman Johnson. I am not denying the important role of
oversight in criminal prosecution.
Mr. Grob. Agreed. But a lot of what happens is that other
things that are done get brushed with that brush of
criminalization. And if I could, I would like to give you an
example or two.
Mr. McDermott is not here, but he did ask a question, and
he was wondering why the inspector general turned down a claim
for a preventive health office visit. And it was explained, of
course, that this is not covered by Medicare. But throughout
that discussion, it never was said that the inspector general
did not turn down that claim--this was an audit that we did to
determine the error rate--nor did the inspector general's
office ever classify any action like that as being criminal.
But Mr. McDermott thought we did. People are finding that when
we have our error rate study that we are saying that this is
all criminal. No. Every time we issue it we say that it is not,
that it could be a mistake, or it could be criminal.
The thing that I am afraid of is that we are seeing here a
self-fulfilling--not prophecy but assessment.
Chairwoman Johnson. But that is true. I agree with you
absolutely. There has never been any willingness, from the very
first time you put out the $34 billion, to talk about what the
$34 billion really--but that tells you, you must change your
process so that the message that goes out will be more
accurate.
Mr. Grob. Yes. We agree with that, and we have been trying
very hard to find the words to do that. What I think we would
like to do is ask for help. We would like everybody here to be
saying that we are not talking about criminal behavior when we
check the payment error rate. We would like others to join us
in saying we are not trying to get you from a criminal point of
view. We are trying to make the Medicare Program work better.
And I think if everybody begins talking about it like that,
that will diminish the feeling that somehow police are looking
out to find a doctor making a mistake. I think all of us really
need to help just tone that down. That is a plea that I would
make in coming before the panel today.
Chairwoman Johnson. Just let me ask you briefly, why is it
that HCFA has not used the dual-entry accounting system? In one
word or less.
Mr. Grob. I am sorry. I could not hear.
Chairwoman Johnson. Why is it that HCFA has not adopted a
dual-entry accounting system?
Mr. Grob. We are amazed at that. We have been raising this
point since, I think, the early 1990s. We know that it is a
very complex matter, but it is just one of these anomalies that
is very strange. There is not a reputable business in the
country that wouldn't have it.
Chairwoman Johnson. Thank you. Mr. Stark.
Mr. Stark. Well, I think Mr. Grob touched on the issue that
I wanted to ask him to repeat. I am looking at a letter from a
county medical society, which probably I should not identify,
but they are complaining to me about methods used to go after
fraud. Do your guys wear black leather coats when they go in?
Mr. Grob. Today, I wore my best----
Mr. Stark. This letter says they stormed in and arrested
some physicians. It uses inflammatory language but, as a
practical matter, it goes on to say that they were arrested and
they were not aware they were committing a crime, as indicated
by their attorneys.
Now, I understand, in checking on this, that there was a
group of physicians here, and several of them have already been
convicted of a crime. And I don't believe you could convict
somebody of a crime if there isn't intent. I am not a lawyer,
but I somehow remember that intent is required to these
charges.
Mr. Grob. We cannot do that. The law will not allow it. The
intent must be proven.
Mr. Stark. And I don't think that happens a lot, but we do
have the Prudential Life Insurance Co. who paid hundreds of
millions of dollars of felony fines for copping a plea of
stealing billions of dollars from their clients, or Columbia
HCA who paid, I think, about $300 million in fines for stealing
from the Government.
Crime is not something that we should be shocked about when
it happens. But it does seem to me that--just like, I suppose,
for those of us who have been audited by the IRS, rarely is
there a criminal element, but often they want a lot of money
out of us. And they may start out a little higher than what
they expect to get. That seems to be aggressive but, I gather,
successful in most cases.
I guess what I want to know, and you touched on it, are the
facts on arrests. There are arrests from time to time. But
there has to be a criminal indictment, right?
Mr. Grob. Yes, a warrant.
Mr. Stark. You have got to go to either a Federal grand
jury or--you have got to turn it over the Justice Department.
Is that not correct?
Mr. Grob. That is right. We do the investigation and
coordinate with the Justice Department as far as----
Mr. Stark. So, basically, you don't arrest anybody?
Mr. Grob. We do, with deputation.
Mr. Stark. So this is like the Attorney General.
Mr. Grob. The Attorney General, FBI.
Mr. Stark. Who has decided that based on the evidence----
Mr. Grob. Yes.
Mr. Stark. So if the doctors are upset, or the hospitals,
about being, quote, arrested as it were, their beef is with the
Attorney General----
Mr. Grob. Well, I think there are many law enforcement
agencies involved. It could even include local law enforcement
agencies.
Mr. Stark. OK.
Mr. Grob. But I think the point you are trying to make is
the very same point that I was making. I think that when our
office, the inspector general's office, becomes involved,
people think that what we are doing is a criminal kind of
thing. We also have auditors, and they do auditing.
Also, if I could comment, a lot of times when the carriers
take action, they think that the inspector general has shown up
in their office. Compared to the carriers, the inspector
general rarely shows up in the physician's office to examine a
claim, for example. And they are rarely involved in determining
how much the physician owes that should be paid back to the
Medicare Program. That is almost always done by the carriers.
But, yet, people will report that these happen, and they
will say, well, the inspector general came--I am not trying to
distinguish our office from all the others. That is not my
intent. My intent is to show that in the telling of the
stories, we are adding to the story, that the story-telling
itself is part of the process of criminalizing things, and all
I am wishing is--I think we can do it all. I think we can do
the crime part. I think we can do the accounting mistakes. And
I think we can do the education.
I really do think that all of us can do it, and we can all
keep the crime issue separate. I am just hoping that we all
talk like we all know that we can keep it separate.
Mr. Stark. I think that there is this misunderstanding, and
I hope that we can, both from our side of the podium and your
side and the providers' side, not decide that each anecdote is
an indication that we are becoming heavy-handed. It is complex,
and everybody has added to the complexity, in my opinion. The
providers have added to the complexity, happily, because they
have got all kinds of exciting new treatments, much of which is
new to HCFA, and you have to figure out how to pay for it or
whether to pay for it. Indeed, how many claims are processed
each year?
Ms. Wilensky. I think it is close to a billion. I think
about a billion.
Mr. Grob. Eight hundred million.
Ms. Wilensky. It is close to a billion.
Mr. Stark. Eight hundred million.
Ms. Wilensky. More than 800 million.
Mr. Stark. I mean, that is a lot of claims to grind
through, and we are probably talking about a million out of--if
that, 500,000, maybe, where they go awry. So I look forward--
and thank you, again, Madam Chairman. I think we can do
something, and I think that if we just decide we are going to
make the system----
Mr. Grob. Mr. Stark, could I quickly clarify a statement I
made? We do participate in making the arrests, the IG's Office.
Mr. Stark. Do you carry a gun?
Mr. Grob. I do not carry a gun.
Mr. Stark. OK.
Mr. Grob. But our agents do when the proper procedures have
been followed.
Mr. Stark. Is that true? You really do? That is scary. You
ought to get hazard pay, it seems to me, but OK. I stand
corrected. Thank you.
Chairwoman Johnson. Mr. McCrery.
Mr. McCrery. Well, the physicians that I have talked with--
and there are numerous physicians--don't just zero in on the
criminality element. The hassle factor includes a lot more than
just the criminal penalties that are in the law.
Much of it is just the paperwork that they have to do. They
have to hire people to do the paperwork, or they have to assign
nurses to do it, and that takes them away from the patient
care. So it is a lot more than just the criminal element.
Mr. Grob. Yes. I completely agree.
Mr. McCrery. And I think Mr. Stark hit on part of the
problem, and so did Dr. Moffit, which is just the sheer size of
Medicare and the tremendous burden that HCFA has in
administering that size program. Even though it is dispersed
somewhat among a number of intermediaries, still, it is
probably not as dispersed as the private sector, as Dr. Moffit
pointed out. And that is why I want to get back to Dr. Moffit's
idea that we can't solve this problem within the current
structure, we need to change the structure.
I am sure, Dr. Moffit, you have given some thought as to
how we transition from the current system to the new system
that would be more private sector oriented and all these
decisions would be much more greatly dispersed around the
country.
Can you share with us some of your thoughts on how we
transition to that?
Dr. Moffit. Yes, I can, Congressman. In my testimony, I
have outlined certain steps that we ought to take if we pursue
Medicare reform. The most important is to create a structure,
as I said, that broadly resembles that of the Federal Employee
Health Benefits Program, with which I am intimately familiar.
That system works extremely well.
However, having said that, I think that because of the
enormous technical and political challenges that are involved
in moving toward a reform of the Medicare system, as envisioned
by Senator Breaux and President Bush and many Members of
Congress, this ought to be done in a phased-in fashion. If
there is any lesson we have learned from the Medicare Choice
experiment, it is that this cannot be rushed; it cannot be
turned over to an agency whose whole institutional culture is
to regulate; but, rather, we have to create a relationship
where there is a culture of friendliness toward private firms
as competing interests.
But to answer your specific question, there are two ways,
to do this. One, is basically insulate the entire current
Medicare population from Medicare reform; in other words, just
basically confine Medicare reform to the next generation of
retirees. Those people who are currently in the Medicare system
should be treated entirely different than the future
generation. We should then phase the new system in on a year-
by-year basis, enabling people when they retire to make a
decision about whether or not they want to go into a new
competitive system that looks like the Federal Employee Health
Benefits Program.
In that transition, they could make a decision about
whether they want to pick and choose one of the competing plans
in the new competitive system or whether, they would want to
keep their current employment-based retirement coverage and
bring it with them into retirement as their primary coverage
and get a Government contribution to help offset the cost.
This approach is very non-threatening. It is the least
disruptive. But by moving toward a phase-in like that, it would
enable the new administrative agency-- I don't think that HCFA
should run a new competitive system--to make the mid-course
corrections over time that are going to be necessary. There is
going to be a lot of wrinkles in moving to a new competitive
system. But at the same time, with a smaller and growing number
of people in the system, it would give a new agency an
opportunity to properly manage without a great deal of
disruption. This way we can avoid the kinds of problems we have
had in the past with the ``Medicare+Choice'' program.
You talked earlier about fraud and abuse. There is nothing
in the Federal Employee Health Benefits Program in terms of
those problems--the size of the problems in fraud and abuse--
that you have had in Medicare. You do not have the same kinds
of problems with claims disputes that you have in Medicare. You
don't have the same kinds of grievance difficulties. And, as a
former Congressional Relations Director for the Office of
Personnel Management, I dealt with probably the most highly
educated and sensitive constituency in the world, Federal
retirees and Federal employees, who know how the system works
and who write their Members of Congress. And I can tell you
from my experience, I very rarely was summoned to a
congressional office where a Congressman sat me down and said,
``Moffit, you better do something about the Federal Employee
Health Benefits Program because it is not delivering the kinds
of services that my constituents want.'' Rarely did that
conversation happen.
We had a lot of debates about retirement. We had a lot of
debates about labor-management relations. We had a lot of
questions in those areas. But the point is, if you want
consumer satisfaction and you want good administration, move
into the new system slowly; phase it in year by year, and give
the new administrative agency the flexibility to make the mid-
course corrections that will be necessary.
Mr. McCrery. Well, the fact is that under FEHBP, each
individual insurance company providing those benefits is going
to provide the fraud and abuse protection.
Dr. Moffit. That is right.
Mr. McCrery. It is in their own selfish interest to do
that, and they do it.
Dr. Moffit. That is right.
Mr. McCrery. I can assure you they do.
Dr. Moffit. They police it very closely, Congressman.
Mr. McCrery. And whether they do a better job than HHS or
HCFA, I don't know. We could have a hearing on that.
Dr. Moffit. I think that is an excellent idea. Let me just
make the point, though, that one of the problems you have here
is that the very structure of the Medicare system does not have
the same incentives on the part of the carriers to root out
fraud and abuse in the same way that private sector companies
competing for consumers' dollars have.
Mr. McCrery. Right.
Dr. Moffit. I mean, that is the point. You have Medicare
contractors, 55 of them around the country. If there is fraud
and abuse, they don't actually lose the money on their bottom
line.
Mr. McCrery. Right. I agree. And I also want to point out,
Dr. Moffit, that there are certainly in the private insurance
industry complaints and grievances. As a former practicing
attorney, I can tell you that there are people who don't think
they are being treated fairly by a private sector insurance
company, and there are grievances. Fortunately, they do have
procedures to go through, and often we can resolve those. But
to say that there is not any of those I think is probably an
overstatement. There are a lot----
Dr. Moffit. Let me offer a point, a response to that,
though, Congressman. In most private insurance, the employer
picks your insurance. The employer owns the policy, and if you
don't like the employer's policy, you cannot do anything about
it.
Mr. McCrery. Right.
Dr. Moffit. In the Federal employees' system, if you do not
like the rates or the benefits or the premiums or the payments
or the deductibles or the way in which a plan handles your
claims, you can fire that insurance plan.
Mr. McCrery. That is right. Absolutely. Your points about
the value of consumer choice are well taken, and if we had a
better health care system in terms of delivering and paying for
health care than we do--and you know my views on that--then I
think we would solve a lot of the problem that physicians are
concerned about and prompts them to push us to do more
regulation on the Patient's Bill of Rights and things like
that. Those problems would be solved by the consumer and by
physicians working with consumers. But that is another hearing
and another day I hope we will eventually have to restructure
the entire health care system, but not today. Thanks.
Chairwoman Johnson. Thanks, Mr. McCrery.
I did read that recommendation in your testimony, Dr.
Moffit, about phasing this in slowly. The question that
occurred to me was that insurance plans depend on a certain
volume of premium in order to stably offer coverage. If you
open this as slowly as you are recommending, only to incoming
seniors, will we have the same kinds of problems we had with
Medicare Plus Choice? Because that was one of the problems,
that the Choice programs had no ramp-up time, no consideration
for the period when they would not have enough enrollees to
cover their obligations.
So how do you ramp it up as slowly as you are recommending?
Dr. Moffit. Well, I agree that is a technical problem, and
we have to address it.
Chairwoman Johnson. Well, we can talk about this later, I
guess.
Dr. Moffit. Let me say this. I have talked to the Blue
Cross/Blue Shield people. I have talked to insurance
representatives from the American Association of Health Plans.
And the one thing that they stressed to me in terms of the
Medicare Plus Choice program and Medicare reform is that, if we
are going to have a Medicare reform, what they need most is
they need predictability. They need to know how many people are
going to come on. They want to be able to absorb them. And at
the same time, they want a sound business relationship with the
government which is stable, where they can make sound business
planning decisions.
So the question is how you phase it in. I suggested perhaps
on a year-by-year basis. That is also, of course, linked to a
suggestion that I had made earlier in my testimony, which is
give Americans who have employer-based health insurance that
they like the opportunity to take that into a new competitive
system with them as their primary coverage in retirement, if
they wish to do so.
Chairwoman Johnson. Thank you. Well, we do look forward to
working with all of you as we move ahead. As should be very
clear by now, we are keenly aware that the explosion of changes
in the law since 1997 and the remarkable changes in medicine in
the last 5 or 6 years are all part of having created some new
problems. But we do need to understand these new problems
because they are very significant. They are going to put small
providers out of business, without question in my mind. I don't
think little can survive with this level of regulatory weight.
And that would actually have a terrible impact for seniors.
So this is about senior access to care. It is about the
quality of care the seniors have access to. And if we don't
deal with the structural, bureaucratic problems of Medicare and
don't begin to think about what kind of system can serve the
retirees as the number doubles, then we will not have done our
duty.
So this is not about blame. There is plenty of that to go
around in life. This is about the prospects of strengthening
Medicare for the future. And I thank you for your very good
testimony and look forward to working with you all as we move
through these issues.
Thank you.
[Whereupon, at 1:15 p.m., the hearing was adjourned.]
[Submissions for the record follow:]
Statement of American Association of Homes and Services For the Aging
The American Association of Homes and Services for the Aging
appreciates the opportunity to submit this statement for the record of
the Subcommittee's hearing on March 15, 2001 on essential regulatory
relief for health care providers who participate in the Medicare
program.
AAHSA is a national organization whose more than 5,600 not-for-
profit providers serve over 1,000,000 individuals on a daily basis.
Approximately seventy-five percent of AAHSA members are affiliated with
religious organizations; the other are sponsored by private
foundations, fraternal organizations, government agencies, and
community groups. Our members include not only nursing facilities, but
also independent senior housing, assisted living, continuing care
retirement communities, and providers of home health care, adult day
care, respite care, meals on wheels, and other services. AAHSA members
are characterized by long-standing ties to their communities and a firm
commitment to quality.
Although AAHSA's membership spans the continuum of long term care,
the majority of our members continue to provide nursing care to
residents, either alone or in combination with other services. We
actively participated in the development of federal quality standards
for nursing home care under the Omnibus Budget Reconciliation Act of
1987 (OBRA), and we continue to support these standards. We were one of
the initial members of the Campaign for Quality Care, the coalition of
organizations coordinated by the National Citizens' Coalition for
Nursing Home Reform (NCCNHR), that worked to reach consensus on twelve
key areas of nursing home reform. AAHSA has continued to serve on
various committees and workgroups convened by the Health Care Financing
Administration to work toward a reasonable and equitable implementation
of the regulations and interpretive guidance resulting from the OBRA
requirements.
AAHSA has several concerns, however, about the ways in which these
standards have been implemented under regulations promulgated by the
Health Care Financing Administration (HCFA) and have been enforced
under the joint state and federal survey and certification system.
Assessments for purposes of Medicare reimbursement
OBRA '87 requires a full assessment of a resident's condition upon
entry and at specific intervals thereafter, recorded on the minimum
data set (MDS). The prospective payment system instituted under the
Balanced Budget Act requires additional assessments for Medicare
payment purposes.
HCFA has determined that these additional assessments must be done
according to the full MDS, rather than just according to the specific
treatments for which reimbursement is claimed. HCFA developed a short
form of the MDS specifically for the RUG-III prospective payment
system. It is a subset of the full MDS, and it has every item needed to
calculate the appropriate RUG class under the Medicare regulations.
HCFA should permit facilities to use this shorter MDS, instead of
completing the entire MDS, which means filling out items that are not
needed for reimbursement and are not collected for reasons of quality
assurance.
The full MDS is a detailed and time-consuming process, as it should
be, and requiring the full MDS for Medicare payment purposes when it is
not required or needed for care planning is an excessive paperwork
burden that does not contribute in any way to quality of care. The
current requirements are such that facilities with average Medicare
volume are forced, as a practical matter, to dedicate the equivalent of
a full-time RN to completing assessments rather than providing care if
the facilities are to get all of the paperwork completed and submitted
on the time schedule required.
Solution: Allow nursing homes to file the short-form MDS for
reimbursement purposes under the prospective payment system, while
continuing to complete the full MDS for care planning and quality
assurance purposes.
Posting of staffing levels
The recent requirement in Section 941 of the Benefits Improvement
and Protection Act, that nursing facilities post numbers of nursing
staff for each shift, is potentially misleading and administratively
burdensome. The new law requires nursing homes to post daily for each
shift the current number of licensed and unlicensed nursing staff, in a
uniform manner to be designated by HCFA and in a clearly visible place.
AAHSA members are acutely aware of consumers' need for information
on indicators of quality care; however, the posting requirement
provides information that is of minimal to no actual value to the
consumer. Without any reference to the acuity of the residents being
served, or an established criterion for appropriate staffing levels
based on resident acuity, simple staff numbers are meaningless. The
assumption that quality can be determined by numbers of nursing staff
rather than by the efficient use of nursing staff and resident outcomes
is both simplistic and potentially deceptive. Such a policy runs
completely counter to the philosophy of outcome-based measurement of
the quality of care.
Solution: AAHSA strongly urges the repeal of the staff posting
requirements under BIPA.
Other regulatory agency requirements
In addition to regulations promulgated by OBRA, nursing facilities
must comply with worker protection regulations issued by the
Occupational Safety and Health Administration, wage and hour laws
enforced by the Department of Labor, environmental requirements
promulgated by the Environmental Protection Agency, and with
regulations imposed by a variety of state agencies. All of these
regulations do not necessarily coordinate with one another, and there
may even be conflicts among them.
As an example, OBRA restricts the use of physical or chemical
restraints on nursing home residents. The Food and Drug Administration
defines a restraint as something that is attached to the body, while
HCFA defines a restraint as something attached to or adjacent to the
body. These differing definitions have created an issue with respect to
bed siderails. HCFA views siderails as a restraint, while manufacturers
see no need to label siderails as restraints or provide instructions or
warnings about their use, since siderails do not fit the FDA's
definition of a restraint.
Solution: AAHSA is working with the Medicare Payment Advisory
Commission (MEDPAC), which is studying the combined impact of federal
regulations on health care providers, including nursing facilities.
Survey and enforcement
Besides paperwork reduction, nursing facilities need a more
balanced and thoughtful system for recognizing and encouraging
excellence. The current survey system that has developed under OBRA
forces oversight authorities to expend the same amount of time and
resources on facilities with exemplary records as they do on those
demonstrating chronic or serious quality of care problems. Given the
limitations on resources available for enforcement, the mandate that
all nursing homes receive surveys of equal frequency and intensity
effectively means that facilities that consistently fail to provide
quality care do not receive the attention they need from state and
federal regulators.
In addition, the system is plagued with inconsistencies in survey
results and the imposition of remedies, which nursing facilities have
only a limited right to appeal. Determinations of the severity and
scope of an OBRA violation are subjective and vary from state to state
and from region to region. Nursing homes in one area of the country may
be severely penalized for infractions that bring far lighter remedies
in other regions. This subjectivity and inconsistency prevent the
survey process from serving as an accurate measurement of the quality
of nursing home care.
Furthermore, the present regulatory system has developed into an
adversarial process that pits surveyors against nursing homes, rather
than allowing them to work together to improve quality. HCFA and state
survey agencies actively discourage surveyors from discussing their
findings with nursing facilities or advising facilities how care might
be improved. Even a deficiency-free survey is no longer necessarily
accepted as a sign that a nursing home is providing good care. Instead,
the assumption often is made that the surveyor simply didn't try hard
enough to find out what the facility was doing wrong. In the current
environment, it has become almost impossible for a good surveyor and a
good facility to coexist.
This negative environment damages employee morale and makes it all
the harder for nursing facilities to recruit and retain qualified staff
at every level. As will be discussed below, nursing facilities in all
areas of the country face a crisis in attracting sufficient numbers of
certified nursing assistants, who provide the bulk of hands-on care to
nursing home residents. Moreover, nursing homes are losing substantial
numbers of directors of nursing, and the decline in new administrators
is equally alarming. In the last two years the numbers of candidates
sitting for the nursing home licensure examination in many states have
dropped by as much as 25%. If nursing homes are unable to recruit and
keep dedicated professional staff, the quality of care for residents is
bound to suffer.
Our present regulatory system recognizes only adequate levels of
care, not excellence. A perfect inspection simply means that no
mistakes or violations of the law were observed. It says nothing about
whatever positive actions the facility is taking for its residents or
any innovative programs it may have put in place for residents or
staff. Our current inspection and enforcement system for nursing homes
cannot give consumers the information they want and need on which are
the best facilities, and there is no consideration being given to
developing better measures. To the contrary, the answer to every
question about quality in nursing homes now is more regulation and
greater penalties.
In the short term, a more collaborative approach to surveys needs
to be developed, one that allows surveyors and caregiving staff to work
not only on promoting and achieving sustained compliance, but on
meeting individual care needs and expectations to improve care. In the
long term, we must create a new system; one focused on outcomes and
continuous quality improvement, rather than process. The focus of the
survey and enforcement process should be on fixing problems and
offering expert guidance rather than on punishment.
Solutions: AAHSA recommends the following changes in the nursing home
survey and certification process:
Less frequent or less intense surveys for good-performing
facilities: Flexibility is needed to allow facilities with good records
to be surveyed at intervals beyond the current fifteen-month statutory
limit. States should also be given the option of doing shorter, less
intense surveys of facilities that have demonstrated good quality care
on previous surveys. This would allow over-sight authorities to better
target their resources on facilities with chronic or serious quality of
care problems.
Alternative approaches to enforcement of nursing home
quality standards: States should be given greater flexibility to
develop and explore innovative approaches to measuring quality of care
through state waivers for demonstration projects. These efforts should
be directed toward increased use of outcome measures, greater
incorporation of quality of life, and improving consistency in
deficiency determinations and survey results.
Informal dispute resolution process: Since severity and
scope determinations ultimately lead to the imposition of remedies, the
inability to challenge these determinations under the informal dispute
resolution process unfairly limits a nursing facility's ability to
obtain redress for inappropriate penalties. This process must be open
to consideration of severity and scope for any deficiency as well as to
the existence of a deficiency. Facilities should also have the right to
review before an independent, impartial decision-maker and the
opportunity to request a face-to-face review for those deficiencies
that cannot be adequately addressed by telephone or in writing.
Civil Monetary Penalties should be used to enhance quality
care: States are required to use funds to improve resident care, yet
many states have not adopted programs to use the funds. In addition,
HCFA maintains that states cannot use CMPs to provide technical
assistance or consultation. Funds should be allowed for surveyor
training, consultation and technical assistance to facilities in
developing and implementing quality improvement or resident care
protocols.
Nursing assistant training lockout
Medicare and Medicaid prohibit nurse aide training by or in a
nursing facility if the facility within the last two years has: (1)
operated under a (staffing) waiver; (2) has been subject to an extended
or partial extended survey; (3) has been assessed a civil money penalty
of $5000 or more; or (4) has been subject to certain remedies (i.e.,
denial of payment for new admissions, or temporary management,
termination of provider agreement due to a finding of immediate
jeopardy, and/or closure of a facility, transfer of residents, or
both). These provisions are severely restricting the ability of nursing
facilities to train nurse aides and have proved counterproductive to
improving quality of care.
There is little argument for approval of a nurse aide training
program by a facility that is providing substandard quality of care.
However, the prohibition on training once compliance has been achieved
and demonstrated is problematic for providers and residents alike. The
two-year duration of the nurse aide training ``lock-out'' severely
impedes the facility's ability to recruit and retain adequate and
qualified staff, and to assure provision of quality care.
Opportunities to access alternative training programs are
frequently limited and many facilities, even after achieving and
demonstrating compliance, find it difficult, if not impossible, to
secure training for their aides. The end result can be either new
compromises to quality of care or a recurrence of the problems that
initiated the disqualification from training. The effect of this
particular sanction is counterproductive to the improvement of quality,
and to the intent of the law that facilities achieve and maintain
sustained compliance.
Facilities that correct their deficiencies and demonstrate
compliance should be permitted to resume their nurse aide training
programs. Elimination of the 2-year prohibition on providing nurse aide
training will preserve the ability of the facility to assure the
ongoing provision of required training and competency evaluation of its
nurse aides.
Solution: AAHSA urges the elimination of the present two-year
prohibition on nurse aide training by or in nursing facilities that are
found to be out of compliance with certain federal long term care
requirements [Section(s) 1819 and 1919(f)(2)(B)(iii)(I)(b) of the Act].
Once facilities have corrected their deficiencies and demonstrated
compliance, they should be permitted to resume their nurse-aide
training programs.
Single task workers
Nursing facilities across the country are experiencing a staffing
crisis. Insufficient numbers of staff--licensed vocational nurses
(LVNs), licensed practical nurses (LPNs) and registered nurses (RNs)--
can endanger quality care for residents. However, one of the greatest
challenges currently faced by nursing facilities in assuring quality of
life and care outcomes to residents is the ongoing shortage of nursing
assistants (CNAs). Higher acuity levels among nursing facility
residents as well as projected aging demographics point to a demand for
paraprofessional staff in nursing facilities that will continue to
escalate. Cornell University's Applied Gerontology Research reports
that some 600,000 new nursing assistants will be needed within the next
10 years.
Current law defines a nursing assistant as ``any individual
providing nursing or nursing-related services to residents in a skilled
nursing facility or a nursing facility.'' The statute requires that
nurse aides successfully complete a training and competency evaluation
program. The law does not define which specific tasks are considered to
be ``nursing or nursing-related''; HCFA has determined, under its State
Operations Manual, which tasks should be so designated. According to
the State Operations Manual, assisting residents with eating or
drinking is considered to be a nursing-related task.
In the nursing home environment, many employees who are neither
nurse aides nor licensed health professionals also have frequent and
regular contact with residents. Permitting these individuals to be
trained to perform certain tasks determined to present little or no
risk to the resident can offer partial relief to the nurse aide
shortage and provide more individual attention to residents.
The area where trained non-nursing assistance is most needed is
assistance with eating. In addition to providing assistance at regular
mealtimes, examples include a dietary aide who might be permitted to
help residents eat birthday cake at a party, or office personnel and
activity assistants who might assist with eating during a special event
or outing. The ability to provide assistance would be based on a
comprehensive assessment of the needs and potential risks to the
resident. The personnel performing these tasks could be required to
complete in-service training in dining skills and assistance with
eating, and demonstrate competence in the duties assigned.
Solution: AAHSA supports legislation to permit nursing facilities
to provide specialized or ``single-task'' training to personnel other
than certified nursing assistants. These employees should augment, but
not replace existing staff and be allowed to perform certain specific
resident-centered tasks without having to complete the full nurse aide
training and competency evaluation program. The interdisciplinary team
responsible for the care of the resident should determine resident
appropriateness and employee competence and ability to perform these
tasks. The training programs should be reviewed and approved by the
state regulatory authority.
Conclusion
AAHSA appreciates the Subcommittee's willingness to explore
regulatory relief that would continue to ensure high quality care while
allowing nursing homes to maximize the financial and human resources
devoted to caring for their residents. We want to continue working with
the Subcommittee on regulatory reform that will recognize the high-
quality care that already is being provided in many nursing homes and
use them as models for what this field can become.
Statement of the American College of Physicians--American Society of
Internal Medicine
The American College of Physicians--American Society of Internal
Medicine (ACP-ASIM) which, representing 115,000 physicians and medical
students, is the largest medical specialty society and the second
largest medical organization in the United States, congratulates the
Subcommittee for holding this hearing. Internists provide care for more
Medicare patients than any other medical specialty. The most frequent
complaint received by the organization is that internists are subject
to too much paperwork and, as a result, do not have enough time to
devote to patients.
Impact of Medicare Paperwork on Clinical Practice
Time is the most valuable resource in diagnosing and caring for
older adults, but it's in short supply due to unnecessary paperwork.
Research breakthroughs, new pharmaceuticals and improved diagnostic
equipment are of limited value if doctors lack the time to spend with
patients.
Visits from Medicare patients typically begin with a surprisingly
complex and time-consuming paperwork process. Medicare requires that
the physicians and their staffs complete a claim form with diagnosis
and service codes and authorizations for items such as wheelchairs and
services such as home health care. The Medicare program assumes
physicians know what it will and will not cover. There is no single
place to find Medicare's rules, however. The regulations are more than
100,000 pages long and different carriers, who process paperwork for
Medicare across the country, have their own rules.
Once a claim is filed, Medicare might hold it because it tripped
some random criteria. If Medicare finally pays the claim, carriers have
four years to change their minds and demand that the physician repay
it. Appeals require more paperwork and time to present the case.
Medicare can sample physician's records to determine if certain
services, such as office visits, were paid incorrectly. If a certain
percentage were paid wrong, the carrier will demand repayment for
similar claims--without looking at the records.
To keep their practices running, many internists simply repay these
claims. Opening their practices to a post-payment audit can tie them up
for days--essentially shutting down patient care activities.
Medicare patients are the ones who suffer when physicians and their
office staff are diverted from patient care activities to unnecessary
paperwork. The result can be longer waiting time before being seen by
the physician, because he or she is busy answering a demand from
Medicare for more information at a time that could have been spent with
patients. It can result in the physician seeing fewer patients each
day--meaning a longer time for a patient to get an appointment. It can
mean having less time with elderly patients and less time to answer
questions and discuss new treatments with them. And in the worst cases,
it can literally shut down a practice for days. Is it any wonder that
more physicians are deciding that they will no longer see new Medicare
patients?
The Need for Legislative Relief
Fortunately, bipartisan legislation, the Medicare Education and
Regulatory Fairness Act of 2001 (MERFA), H.R. 868/S. 452, has been
introduced in both houses of Congress that would greatly improve this
state of affairs. ACP-ASIM has strongly endorsed the MERFA legislation
and urges Congress to give it prompt and favorable consideration. The
bill, introduced by Representatives Toomey and Berkley and Senators
Murkowski and Kerry would address these problems by better targeting
current Medicare education dollars to provide needed outreach and
education to physicians and by instituting common-sense reforms:
1. Medicare rules and policies and answers to frequently asked
questions would be made more accessible. The bill would require that
carriers respond in writing to requests for guidance on how to bill for
services. The written advice provided by the carrier would be binding
in any subsequent reviews. (This means that if the carrier told a
physician how to bill a service correctly, it couldn't later deny
payment or audit the physician's practice because he or she did it
wrong based on the carrier's original advice). Similarly, the bill
would allow physicians to voluntarily send medical records to the
carrier to get a ruling from the carrier on whether or not the
documentation is adequate to support the billed service, and carriers
could not use this to subsequently target the physician for review.
Carrier employees would also be required to give their true names
(first and last) when answering questions to assure accountability. HHS
would be required to post responses to ``frequently asked questions''
submitted by health associations in a way that is readily accessible to
physicians. Carriers would be required to make prepayment review
criteria (screens) and other coverage and audit criteria available to
physicians. Physicians would be given a minimum of 30 days advance
notice about changes in rules.
2. Medicare would be required to pay claims, without demanding more
paperwork, unless there is evidence that the bill is incorrect. Random
audits and pre-payment screens that trigger further review would be
prohibited.
3. For a first time post-payment audit, Medicare would be required
to actually look at the records, rather than making an assumption that
some claims were billed incorrectly based on a statistical sample.
(Carriers would be allowed to use statistical sampling--or
extrapolation--for subsequent reviews of the same physician.)
4. Medicare and its carriers would be required to invest
substantially more money in physician education and outreach.
5. Medicare's ability to investigate fraudulent claims would be
preserved--the bill specifically applies only to audits in which there
is no allegation of fraud. Inadvertent overpayments due to errors or
misunderstanding of the rules would be reduced by educating physicians
on how to prevent mistakes in the first place, rather than auditing
them after the fact.
6. Medicare would be prohibited from collecting alleged
overpayments until all appeals are exhausted and a final determination
is made. Physicians would also have the option of entering into several
different type of re-payment plans if a final determination is made
that they billed incorrectly for certain services (rather than
automatically having to pay the money all at once within 30 days, or
alternatively, having the money taken out as a reduction in payments
for future claims).
7. Medicare would be required to conduct at least four pilot tests
of the evaluation and management documentation guidelines that would
include a variety of settings. The bill specifies that one of the goals
of the pilot tests should be to reduce the need to document non-
clinically relevant information.
The Need for Administrative Relief
There are other changes that can and should be made by the
administration to reduce administrative red tape, changes that can be
implemented by HHS--directly or through instructions to its
contractors--without the need for new legislation. The following is a
list of recommendations that fall outside the scope of MERFA and can be
implemented by HHS Secretary Thompson:
1. The Secretary of the Department of Health and Human Services
should create a single source document explaining Medicare regulations
that combines the Medicare provider manual, Medicare operational policy
letters, and other regulatory documents to clearly communicate to
physicians and other medical providers the rules of the Medicare
program. This document should be made publicly available via the
internet and contain links to local Medicare carrier policies as well.
2. The Secretary of the Department of Health and Human Services
should develop a clear mechanism to assess complaints about Medicare
policies, make the complaints subject to public scrutiny, and address
these complaints in a timely manner. The complaints should be cataloged
by type and regulatory response to measure frequency of problems and
their solutions.
3. The Secretary of the Department of Health and Human Services
should change the regulations governing Medicare post-payment review to
reflect the following:
Review procedures should provide the audited physician the
right to review the post-payment audit sample with the actual personnel
responsible for the review.
HCFA should encourage Medicare carriers to utilize as
Hearing Officers, licensed physicians of the same specialty and in the
same geographical area as that of the physician who requests a Fair
Hearing, and to make known to the requesting physician prior to the
Fair Hearing the educational and medical credentials of the Hearing
Officer.
HCFA should prohibit carriers from seeking recoupments on
``overpayments'' made more than two years earlier except in cases of
fraud.
4. HCFA should establish a single Medicare liaison office in each
region for medical societies and consumer organizations to work with in
order to facilitate communication within the existing Medicare regions.
5. State medical societies and Medicare Carrier Advisory Committees
(CACs) should be invited to place items on the agendas for CAC
meetings--sufficiently in advance of the CAC meeting--to allow for
sufficient discussion and resolution of valid physician problems with
their Medicare carrier's application of medical review criteria and
related issues.
6. Carriers should provide a 60-day public comment period for all
proposed policy changes. (The comment period provided by carriers is
now limited to 45 days.) Once the comment period is over, the carrier
should be required to state, in writing, its reasons for accepting or
rejecting the comments made in making the final policy. The written
rationale should be shared with the CAC and be made publicly available
via the internet.
7. Once a policy is made final, the carrier should release it to
the medical community before it takes effect and conduct educational
forums, when necessary, to ensure proper implementation of the new
policy. Adequate notice (a minimum of 90 days) also should be given
before the policy is effective.
8. If local medical review policies (LMRPs) continue to be
proposed, they should be required to go through Carrier Advisory
Committees to allow for proper input of practicing physicians.
9. HCFA should create a mechanism to coordinate information sharing
between the regional Medicare Carrier Advisory Committees. All CAC
meeting agendas and minutes should be posted to a single HCFA-
maintained website within five business days of the publication of the
written materials. This website should also give CAC members in
different regions the ability to query each other about carrier
policies.
10. The Health Care Financing Administration (HCFA) must ensure
that its carriers are held accountable to established Medicare criteria
and standards, especially in the areas of claims processing and
customer satisfaction, after carrier responsibilities for claims
processing and payment safeguards (program integrity) are split under
the Medicare Integrity Program (MIP).
11. HCFA should increase surveillance and monitoring of the
performance of carriers to assure their accountability to questions and
concerns raised by patients and physicians about coverage and other
issues.
12. HCFA should enforce its power to penalize carriers for failing
to meet established criteria and standards
13. HCFA should solicit local physician input on the adequacy of
carrier performance--for both claims processing and program integrity.
14. Physicians should be allowed to request and receive an
administrative law hearing to challenge carrier performance of
administrative and other policy requirements if earlier resolution
attempts cannot solve the problem.
15. Carriers should use color-coded communications. (e.g. red
envelop for extremely urgent requests that require a response).
16. Carrier staff must be better trained; HCFA should consider
mandating that claims processors be required to be certified and pass a
course in applying HCFA payment rules.
ACP--ASIM will be seeking an opportunity to discuss our proposals
for administratrative relief with Secretary Thompson, and once
confirmed, a new HCFA administrator. We are encouraged that Secretary
Thompson has expressed agreement on the need for HCFA to reduce
unnecessary red tape.
Conclusion
ACP--ASIM is pleased that the subcommittee is addressing the
serious problems that the Medicare regulatory burden poses for
physicians and others attempting to care for patients. We strongly urge
the Subcommittee to report MERFA to the full Ways and Means Committee
for action. We also urge the Subcommittee to exercise oversight over
HCFA to assure that necessary administrative changes are also made.
Statement of American Occupational Therapy Association, Inc., Bethesda,
Maryland
The American Occupational Therapy Association (AOTA) represents
nearly 50,000 occupational therapists, occupational therapy assistants,
and students of occupational therapy to promote the interests of the
profession and patients. AOTA submits this statement for the record of
the hearing on March 15, 2001 on Medicare reform and ways to bring
regulatory relief to beneficiaries and providers and restructuring the
Health Care Financing Administration (HCFA) in the context of efforts
to improve the Medicare program.
AOTA focuses these comments on the issue of the inconsistency of
local medical review policies (LMRPs) and the processes by which they
are developed and interpreted by fiscal intermediaries and carriers
across the nation. AOTA has experienced considerable difficulties with
the variability of these local policies, in the context of Medicare
being a national program with national standards and goals. We urge the
Committee to consider these concerns and as part of the effort to
modernize the Medicare program and improve the efficiency of HCFA and
its contractors. We believe this issue has significant impact on both
providers and, more importantly, beneficiaries who are unsure of
coverage from one area to the next and therefore suffer unequal
treatment.
COVERAGE OF OCCUPATIONAL THERAPY IN LAW AND REGULATIONS
Occupational therapy is covered under Medicare Part A and under
Medicare Part B as an outpatient service. Under both Part A and Part B,
occupational therapy is provided based on coverage criteria which allow
for the provision of therapy which is ``medically prescribed treatment
concerned with improving or restoring functions which have been
impaired by illness or injury or, where function has been permanently
lost or reduced by illness or injury, to improve the individual's
ability to perform those tasks required for independent functioning.''
(Carriers Manual, Sec 2217, Intermediary Manual (Sec. 3101.9). Further,
occupational therapy is considered reasonable and necessary only where
an expectation exists that the therapy will result in a significant
practical improvement in the individual's level of functioning within a
reasonable period of time. Where an individual's improvement potential
is insignificant in relation to the extent and duration of occupational
therapy services required to achieve improvement, such services would
not be considered reasonable and necessary and would thus be excluded
from coverage by Sec. 1862(a)(1) of the Social Security Act.
LOCAL AUTHORITY, LIMITED HCFA OVERSIGHT
While this coverage criteria is established by HCFA, the fiscal
intermediaries and carriers have authority from HCFA to develop more
explicit local medical review policies (LMRPs). Many attribute this
approach to a view that there are regional differences in medical care
that should not be overruled by national coverage policy.
HCFA is also supposed to review and approve LMRPs for
appropriateness and adequacy. HCFA has not, in our view, exercised
sufficient oversight and regulation of the activities of its
contractors in the medical review area. AOTA believes that, at a
minimum, the authority and latitude of the fiscal intermediaries or
other contractors should be supervised and monitored to make these
LMRPs consistent.
AOTA understands that the fiscal intermediaries and contractors
have the authority to develop LMRPs to describe when and under what
circumstances an item or service(s) will be covered and to clarify or
provide guidance on national coverage guidelines. Conferring this
discretion upon contractors does not, we believe, vest them with the
authority to supplant pertinent statutory provisions, regulations, and
national coverage policies (which include manual issuances) with
informal presumptions. Yet HCFA's oversight and willingness to overrule
or moderate LMRP's is limited. AOTA has had many discussions and
meetings with HCFA and its contractors over LMRPs to try to assure that
the process and resulting products adhere to the overarching principles
laid out in Medicare law for benefits and coverage criteria.
HCFA's laissez faire attitude has been attributed both to an
interest in allowing local variation as well as to an historical limit
on HCFA staffing capacity. However, if HCFA would adopt national
guidelines, the redundant (and inadequate) work of fiscal
intermediaries in developing these LMRPs would be eliminated. Cost
savings in administration should accrue from such streamlining.
RESULTS: INCONSISTENT COVERAGE
In addition, beneficiaries would be assured that occupational
therapy is the same service under Medicare in Connecticut as it is in
Louisiana as it is in California. Today, this is not the case.
An example that is clear is the coverage of rehabilitation services
for individuals who have vision impairments. Coverage for these
services is not allowed under many LMRPs around the country, despite
the fact that as recently as the Balanced Budget Refinement Act
Congress has reaffirmed, by extending referral privileges for these
services to optometrists, that coverage for rehabilitation for
diagnoses of vision impairment are allowed.
As an example of a broad set of problems with LMRPs, we offer the
example of a recently issued LMRP from the Noridian Mutual Insurance
Company, Fargo, North Dakota. At present AOTA is developing comments on
a draft policy put forward by Noridian, a Medicare contractor. In
reviewing the proposed policy, many of the problems that have occurred
in other policies are evident:
The LMRP does not use current research and state of the art
information. Some of the language used in Noridian's OT LMRP is
confusing or does not reflect current OT practice. This may be due, in
part, to use of out-of-date sources of information, as listed in the
document. Using materials that are not state of practice results in
inappropriate terminology and focus of the LMRP, not reflecting a clear
picture of contemporary OT practice.
Furthermore, this proposed LMRP does not even reference Medicare
manual citations that are correct. Reference to obsolete Medicare
policies is absurd coming from a Medicare contractor bound to implement
the program under current guidelines.
In addition, the Noridian LMRP, like many others is overly
prescriptive. It uses diagnosis codes that do not appropriately
recognize the difference between the underlying condition (e.g.,
stroke) and the therapy treatment diagnosis (e.g., limitations in self-
care and toileting skills), it leaves out coverage for certain
diagnoses (e.g., Alzheimer's disease and dementia) for which Medicare
coverage of occupational therapy is allowed, and generally presents a
narrow area of interpretation of individual condition for the
practitioner, be it a physician prescribing treatment or a therapist
providing treatment.
NATIONAL LEADERSHIP NEEDED
The problems presented by Noridian's policy are not isolated. AOTA
has seen many cases in which the LMRPs contain significant and
unsupported deviations from the national medical review guidelines
contained in the Medicare Intermediary Manual. AOTA has worked to
correct many policies' inappropriate and arbitrary restrictions on
access to therapy and other services but this should be corrected with
a national approach for fairness and consistency. AOTA recognizes the
importance of defining scope of benefits and appropriate
interpretations of Medicare allowances of coverage, but this patchwork
system wastes time and money and does not serve a national program. We
believe the LMRP's should be replaced with a broad and open public
process to establish more detailed national coverage criteria.
HCFA should be required to set a national standard to assure
beneficiaries consistent coverage wherever they live or receive
services. A national standard would assist occupational therapists to
furnish skilled occupational therapy services based on an evaluation of
individual need and rehabilitation potential within the reasonable and
necessary guidance of the Social Security Act.
Such national coverage criteria would assure Medicare beneficiaries
equal access to services across the nation. National coverage criteria
would replace the process now in which contractors ``adopt'' other
contractors policies, even if those policies conflict with overall
Medicare requirements. Thus, an erroneous and improper ``national''
policy can become established merely by the spread of LMRPs from one
contractor to another, by entities that are not publicly accountable,
with limited public review and without sufficient intervention or
oversight by HCFA. While the Medicare Intermediary Manual does provide
LMRP development guidelines, AOTA's experience is that these are not
always followed. Relief is limited.
Furthermore, while AOTA may be able to intervene in some of these,
many beneficiaries and beneficiary advocates find the existence of
multiple LMRPs and standards hinder appropriate access to services.
Even if a national policy is not developed, HCFA could oversee and
regulate the activities of its contractors in the medical review area
far more than is currently the practice. For instance, HCFA should
narrow the fiscal intermediaries' latitude to develop broad, wide-
ranging LMRPs without oversight by HCFA. This is rarely done at
present.
Indeed, HCFA has contracted under its program integrity efforts for
a contractor to review local medical review policies to determine
variations. This is being done as part of HCFA's efforts to investigate
coverage limitations that could be developed to substitute for the
annual cap placed on outpatient rehabilitation by the Balanced Budget
Act. AOTA supports efforts of any kind to make these policies
consistent and appropriate.
APPEALS
Furthermore, HCFA has just issued the following which further
constrains provider and beneficiary rights to consistent policy:
HCFA Pub. 60AB, Trans. No. AB-01-44, March 15, 2001-- Binding
Effect of LMRP's
(Intermediaries/Carriers),
CHANGE REQUEST 1540
SUBJECT: Binding Contractor Hearing Officers to Local and Regional
Medical Review Policies (L/RMRP)
This Program Memorandum (PM) serves to bind contractor hearing
officers (HOs) to contractor--issued L/RMRP). This PM is being issued
to expedite distribution of the instructions and will be incorporated
permanently through revisions to the Medicare Carrier Manual (MCM), the
Medicare Intermediary Manual (MIM) and the Medicare Program Integrity
Manual (PIM).
HOs must comply with L/RMRP. (See Chapter 1 of PIM, 2.3.2.3 for
procedures for developing and adopting L/RMRPs.) Binding an HO to L/
RMRP means that the HO must apply pertinent L/RMRP to the facts of a
given claim and that the HO may not disregard or override an applicable
L/RMRP. This PM affects MCM 12016 and MIM 3794.4. Authority for this PM
is found at 42CFR 405.836, the regulation delineating the authority of
HOs.
The effective date for this PM is March 15, 2001.
The implementation date for this PM is March 15, 2001.
These instructions should be implemented within your current
operating budget.
This PM may be discarded after December 31, 2002.
If you have any questions, contact Rosalind Little at (410) 786-
6972, e-mail [email protected] or Steve Miller at (410) 786-6656, e-mail
[email protected].
This policy is in effect a ``gag rule'' on hearing officers. It
further harms both beneficiaries and providers by preventing a full
examination of the facts with regard to coverage denials. This
memorandum creates unreasonable and unfair practices restricting the
purview of an administrative hearing officer. This is demonstrable
administrative overreaching, especially when this procedural restraint
serves to further compound the problems in the LMRPs content as
discussed earlier.
MAKE MEDICARE A NATIONALLY CONSISTENT PROGRAM
In legislation introduced in the 106th Congress, (now) Chairman
Bill Thomas, with (now) Subcommittee Chairwoman Nancy Johnson among
others, sought to assure that coverage policy determinations were made
more consistent, equitable and efficient. We believe the goals of H.R.
2356 of 1999 remain important and ought to be considered by the
Subcommittee on Health and the Ways and Means Committee as part of
efforts to reform Medicare.
Beneficiaries and providers deserve consistency in the benefits and
providers deserve fair guidance in all areas of the country. The
reasonableness and necessity of services should be largely determined
by national coverage criteria and should not vary significantly from
one region to another. We have also found that many LMRPs, especially
in the amount, frequency and duration parameters, are so prescriptive
as to impinge upon the ability of professionals to provide care that
addresses the medical condition, functional level and rehabilitation
possibilities of individual beneficiaries.
We thank the Subcommittee for the opportunity to express our
concerns and look forward to aiding efforts to correct these problems
and improve the effectiveness of the Medicare program.
Statement of American Physical Therapy Association, Alexandria,
Virginia
Madam Chairwoman and members of the Subcommittee, the American
Physical Therapy Association (APTA) is pleased to provide written
comment for your consideration regarding the important task of
reforming the Medicare program. APTA sincerely appreciates your efforts
this Congress to explore this issue in greater detail and hold
necessary hearings to ensure all views are heard on the matter.
Tommy Thompson, the newly appointed Secretary of Health and Human
Services, summarized the feelings of the physical therapy community in
a speech given to the American Association of Health Plans on February
26, 2001. The former governor of Wisconsin stated, ``Patients and
providers alike are fed up with excessive and complex paperwork. Rules
are constantly changing. Complexity is overloading the system,
criminalizing honest mistakes and driving doctors, nurses and other
health care professionals out of the program.''
There are a number of regulations that are unnecessary and take
away vital time and resources from patient care. These regulations
impact physical therapists working in a variety of settings, which
include: hospitals, skilled nursing, facilities, home health agencies,
comprehensive outpatient rehabilitation facilities, rehabilitation
agencies, and physical therapy private practice offices. If necessary
deregulation can take place, physical therapists will be able to
provide care to Medicare patients in these settings in a more timely
manner, which will speed recovery.
The following are problematic regulations and policies under the
Medicare program that impact physical therapy. APTA has notified HCFA
that these regulations and policies need to be eliminated, revised, or
clarified. In most cases, we are still awaiting action.
Certification/Recertification
Section 1861 (p) of the Social Security Act requires that
outpatient physical therapy, occupational therapy, or speech-language
pathology services be furnished only to an individual who is under the
care of a physician. According to Medicare regulations, for outpatient
physical therapy services furnished in rehabilitation agencies,
physical therapist private practice offices, outpatient hospital
departments, and skilled nursing facilities (Part B), there must be
evidence in the patient's clinical record that he or she has been seen
by the physician every 30 days. In addition, the clinical record must
show that the physician reviewed the plan of care and recertified the
need for that care every 30 days. For home health agencies and
comprehensive outpatient rehabilitation facilities, the physician is
required to review the plan of care and recertify the need for care
every 62 days.
The need for a physician visit every 30 days is problematic. In
many instances, it takes a week or two before the patient goes to
receive his or her outpatient physical therapy treatment. After
receiving two weeks of treatment, the 30 days expires, and the patient
then needs to see the physician again in order to continue treatment.
Returning to the physician's office in this time frame is an
inconvenience to the patient and the physician. It is particularly
problematic in rural areas, where the patient may have to travel a long
distance to get to a physician's office.
Physician signature on plan of treatment
Medicare requires that the physician recertify the need for therapy
services every 30 days. Because this policy is not written clearly in
HCFA's manuals, there is considerable confusion with respect to when
the 30-day time frame begins and at what point the physician signature
has to be on the plan of care. It is not clear whether the 30-day time
frame begins after the physical therapist conducts an evaluation, after
the initial physician visit, or when the physical therapy treatment
actually begins. It is also not clear whether the physician signature
has to be on the plan of treatment before therapy begins, before the
claim is submitted to Medicare, or shortly after therapy begins.
APTA has tried unsuccessfully to obtain clarification from HCFA on
these issues. Because there has been no clarification, carriers and
fiscal intermediaries throughout the country are interpreting this
provision differently. APTA's recommends that the 30-day time frame
begin when the therapist sees the patient, and that the physician
signature be on the plan before the claim is submitted to Medicare.
Because it can often be difficult to obtain physician signatures,
requiring the signature before treatment begins would result in delays
in needed patient care.
Home Health Agency Prospective Payment System and Medicare Part B
On October 1, 2000, HCFA implemented the Medicare home health
agency (HHA) prospective payment system (PPS). The HHA PPS includes a
consolidated billing requirement, which mandates that home health
agencies must bill and receive payment for all home health services,
including physical therapy services, during a 60-day episode of care.
Once the patient is discharged from the home health plan of care and is
no longer eligible for the home health benefit, an outpatient
rehabilitation provider may treat and bill for the services under
Medicare Part B.
Since the inception of the HHA PPS, physical therapists have had
numerous problems receiving payment under Medicare Part B for services
provided to patients recently discharged from a home health plan of
care. This is due to the fact that HCFA is unable to track patient
discharges until final payment claims have been submitted by the HHA.
As a result, the carriers and intermediaries are rejecting Part B
claims because the computer edits flag the file as being open under the
Part A HHA PPS.
At a meeting with APTA, HCFA staff indicated that there is no
immediate solution to this problem. Therefore, APTA respectfully
requests that the home health consolidated billing provision be
suspended until this computer problem can be corrected. It is unfair to
penalize providers because HCFA does not have the adequate resources to
operationally implement the consolidated billing policy.
``In Room'' Supervision Requirement of Physical Therapist Assistants in
Physical Therapist Private Practice Offices
HCFA's final rule, published in the November 2, 1998 Federal
Register, HCFA required that a licensed physical therapist in private
practice (PTPP) must personally supervise the physical therapist
assistants and physical therapy aides. HCFA defines personal
supervision to mean the physical therapist must be in the room during
the performance of the service. Prior to that date, the standard for
supervision was ``direct supervision.'' In our view, the ``in the
room'' supervision requirement is too strict and unnecessary. PTAs are
state regulated practitioners, who can safely and effectively furnish
therapy services under a less stringent supervision standard. The
personal supervision requirement imposes a level of supervision higher
than that required for PTAs furnishing services in other Medicare
settings.
APTA has provided written opposition to the ``in-the-room''
requirement in its comments on the Medicare physician fee schedule for
the last 2 years, and in numerous other correspondences. APTA has also
had several meetings with HCFA on this issue. Most recently, HCFA
stated in the final physician fee schedule rule that they are carefully
examining the issue. We are still awaiting action.
Correct Coding Initiative Edits
On January 1, 1996, the Health Care Financing Administration (HCFA)
implemented a national Medicare policy involving more than 80,000
coding edits that restricted certain coding combinations. AdminaStar
Federal developed these code edits under a contract with HCFA. These
code pair edits are combinations of two CPT codes that cannot be billed
together because either the code pair represents services that are
considered mutually exclusive or one code in the pair is considered a
component of a more comprehensive procedure code. The CCI edits are
applied to services furnished in physical therapist private practice
offices and in outpatient hospitals.
APTA recognizes the need for HCFA to create edits in their systems
to detect inappropriate billing. However, HCFA has created a number of
edits that do not make clinical sense, and therefore are inappropriate.
APTA has requested that HCFA delete the problematic code pair edits,
but is still awaiting such deletion.
Clarification of Use and Documentation of Timed Codes
In March of 2000, HCFA issued program memorandum AB-00-14,
``Questions and Answers Regarding the Prospective Payment System (PPS)
for Outpatient Rehabilitation Services and Physical Medicine Current
Procedural Terminology (CPT) Coding Guidance.'' This program memorandum
answers questions related to Medicare outpatient therapy policies and
provides guidance regarding coding therapy services. Because most
physical medicine and rehabilitation codes are 15 minute timed codes,
the memorandum defines how to bill for a 15 minute unit and how to
determine what services count as time. Specifically, in AB-00-14, HCFA
states that when billing units of therapy, one unit is equal to or
greater than 8 minutes but less than 23 minutes of care. Two units are
equal to or greater than 3 minutes but less than 38 minutes, and so on.
Providers are instructed not to bill for anything less than 8 minutes
of care. HCFA also states ``pre-and post--delivery services are not to
be counted in determining the treatment service time.
The language regarding counting minutes of therapy has caused
considerable confusion. APTA, along with other rehabilitation
organizations, met with HCFA in June 2000, to discuss the policy and
clarify any confusion associated with it. At that meeting, HCFA agreed
to develop a question and answer program memorandum that would further
clarify how to determine what time counts as a 15-minute unit and how
to bill for units of service. In this program memorandum, HCFA would
respond to questions developed by the organizations. The questions were
submitted to HCFA on July 21, 2000, and APTA is still waiting for HCFA
to issue this program memorandum.
Stark II law
HCFA published an interim final rule (66 Fed. Reg. 856) on January
4, 2001, which incorporates into regulations the provisions in
paragraphs (a), (b), and (h) of section 1877 of the Social Security
Act. This law, referred to as the ``Stark II'' law, prohibits
physicians from referring Medicare and Medicaid patients for designated
health services'' to health care entities in which they have a
financial relationship, unless an exception applies. According to the
law, physical therapy is a ``designated health service.''
APTA was pleased to see that HCFA published a final rule and
supports the intent of the Stark II regulations. Physical therapists
and patients needing physical therapy services are adversely impacted
by physicians that obtain financial gain by referring patients to their
own clinic for physical therapy services.
Although we are pleased to see that these issues are being
addressed in HCFA's regulations, we are seriously concerned that some
of the provisions in the interim final rule weaken the Stark II law and
open the door for physician abuses in the provision of physical therapy
services.
HIPAA: Final Rule on Privacy of Individually Identifiable Health
Information
The Department of Health and Human Services released the long
awaited final privacy regulations on December 20. The Final rule
implements the privacy provisions of the Health Insurance Portability
and Accountability Act (HIPAA) and sets forth complex limitations on
the use of individually identifiable health information by most health
care providers (including physical therapists), health plans, and
clearinghouses.
While APTA supports the protection of individually identifiable
health information, the regulation that was issued is extremely
cumbersome for our membership. For example, providers have to ensure
the compliance of their business associates and have a new duty to
mitigate known privacy violations by third party contractors. Many of
our members are small business providers and the cost for implementing
the requirements of the privacy regulations will be too onerous.
Reimbursement for Physical Therapy Students
There is considerable confusion regarding HCFA's policy on
supervision and reimbursement for therapy student services under
Medicare in the outpatient therapy setting. The American Physical
Therapy Association (APTA), American Speech Language Hearing
Association (ASHA), and American Occupational Therapy Association
(AOTA) met with HCFA to discuss this problem in March 2001. After this
meeting, HCFA began working on a program memorandum regarding
reimbursement of services for students under Medicare Part B. The
therapy associations are still awaiting issuance of this program
memorandum. We are hoping that the issuance can be expedited. It is our
hope that HCFA's policies will ensure that students can continue to
obtain the clinical training they need to better serve Medicare
beneficiaries in the future.
Provider Education
Many physical therapists have difficulty finding the ``right''
answer to questions regarding Medicare requirements. Carriers and
intermediaries often give incorrect information to providers. There
appears to be a lack of communication of information between HCFA
national and the carriers and fiscal intermediaries.
In addition to receiving incorrect information from carriers and
fiscal intermediaries, providers find that carriers and fiscal
intermediaries are interpreting HCFA regulations and policies
differently throughout the country. As a result, providers in different
regions are subject to different standards for Medicare coverage and
reimbursement. There is a need for uniformity. Physical therapists are
trying to provide good patient care while complying with Medicare
regulations, but because of the confusing and conflicting information
they are provided, this has become more difficult.
There is a need for HCFA national to provide clear, concise
guidance on its Medicare policies to its fiscal intermediaries and
carriers, to national associations, and to providers. This guidance
would ensure providers receive accurate and timely information to
assist them in complying with Medicare requirements.
HCFA recently contracted with DynCorp to examine inconsistencies
throughout the country with respect to Medicare coverage and
reimbursement of occupational therapy, physical therapy, and speech-
language pathology services. It is our hope that DynCorp and HCFA can
remedy this problem through their work on this project.
Alternative Payment Methodology
The Balanced Budget Act of 1997 mandated an alternative payment
policy be implemented for outpatient therapy services. Originally, a
$1500 limit was placed on outpatient therapy services until an
alternative payment policy was developed and implemented. This
arbitrary limitation on services proved to have an adverse impact on
patients, and in 1999, Congress placed a 2-year moratorium on the
$1,500 limit. HCFA is still required to develop the alternative payment
policy for outpatient therapy services and report to Congress on an
alternative by January 1, 2001.
Due to a provision in the BBA of 1997, beginning January 1, 1999
all outpatient therapy providers, are reimbursed according to the
physician fee schedule instead of a cost-based system. Therefore, APTA
does not believe its necessary to develop an alternative payment
methodology because the needed savings are achieved under the physician
fee schedule.
Practice Expense Methodology
In determining payment under the physician fee schedule, there are
three relative values: 1) relative value (RVU) for clinical work, 2)
RVU for practice expense, and 3) RVU for malpractice expense. In
January 1999, the practice expense RVU was revised to be resource based
rather than charge based. In the November 1998 Medicare Fee Schedule
rule, HCFA discussed its methodology for developing these resource
based practice expenses. We believe that the methodology used to
determine the physical therapy practice expenses is flawed.
APTA believes that the administrative payroll, office, and other
practice expenses per hour used by HCFA in computing the practice
expense component of RBRVS under the Medicare Physician Fee Schedule is
not sufficient to reflect expenses of physical therapists in private
practice. APTA urges HCFA to adopt data from a survey conducted by the
APTA during 2000. In the alternative, APTA believes that the ``all
physician'' category more accurately reflects practice expense costs
for physical therapists in private practice.
Medical Review and Audits
There are many problems with the current medical review and audit
process. In many instances, the auditors do not understand the
regulations that apply to physical therapy providers, and thus
inappropriately seek overpayments. In addition, providers find that
they are not given a reason for the overpayment determination, and
carriers and intermediaries are unwilling to answer provider questions
about the overpayment determination. Therefore, providers are forced to
devote considerable time and resources to defend themselves.
In a number of cases, carriers and fiscal intermediaries seek
overpayments based on a ``technicality''. For example, the physical
therapy service was provided, was medically necessary, there is
documentation in the file to support the medical necessity of the
service provided, and a physician signed the order for services.
Despite proof of medical necessity in the clinical record, the auditor
still seeks the overpayment because the physician did not date the
order. Thus, the provider is required to pay the money back to the
Medicare program, because of this missing information.
APTA recommends that HCFA educate its auditors about its policies
and regulations pertaining to physical therapy services, and ensure
that providers are given sufficient rationale for the overpayment
determinations.
Appeals
Approximately, 85% of the appeals that come before the
Administrative Law Judges are overturned. When Medicare determines that
there is an overpayment, the provider often must pay the overpayment
before the appeal is heard. Many physical therapy providers who have
received overpayment determinations are small business owners. To
require the return of the overpayment when the provider believes the
determination was made in error is extremely costly and a violation of
due process. Therefore, APTA recommends that HCFA prohibit recovery of
alleged overpayments until appeals have been exhausted.
Additionally, APTA believes that HCFA should permit physical
therapists to appeal an alleged overpayment without waiving their
administrative appeal rights. In many instances, a therapist will
receive a consent letter informing them of an overpayment
determination. The letter provides three choices: pay back the money
and forego any appeal rights; provide additional documentation and
forego any appeal rights; or appeal the overpayment determination but
subject the company to a full blown investigation. APTA believes that
these choices are unfair and deny providers due process.
Conclusion
We appreciate your serious consideration of APTA's concerns and
recommendations. We recognize that HCFA has numerous regulations that
need to be implemented as a result of the Balanced Budget Act of 1997,
the Balanced Budget Refinement Act (BBRA), and BIPA. Because of the
major impact of these regulations on the provision of critical
rehabilitation services to Medicare beneficiaries, it is our hope that
HCFA addresses these issues expeditiously.
We frequently hear from physical therapists that they can no longer
provide services to Medicare patients because of the onerous
regulations and unfair review processes. The purpose of the Medicare
program is to provide access to quality health care services for senior
citizens. Unfortunately, due to the number and complexity of Medicare
regulations, beneficiaries may have difficult getting access to the
rehabilitation services that they need.
The APTA looks forward to working with you and the rest of the
Committee members to address these concerns on behalf of the physical
therapy community and the patients they serve. For more information,
please contact Patrick Cooney at (703) 769-0020. Thank you for your
consideration of these comments.
APTA represents more than 68,000 physical therapists, physical
therapist assistants, and students of physical therapy. The goal of
APTA is to foster physical therapy practice, education, and research.
Mayo Foundation
Washington, DC 20036
March 23, 2001
Representative Nancy L. Johnson
Chair, Subcommittee on Health
House Committee on Ways and Means
1136 Longworth House Office Building
Washington, DC 20515-6349
Dear Representative Johnson:
On behalf of Mayo Foundation, I would like to submit this
information for the record of the Health Subcommittee hearing of March
15, 2001: ``Medicare Reform: Bringing Regulatory Relief to
Beneficiaries and Providers.''
At the hearing, Representatives Stark and Kleczka raised questions
relating to the number of pages of Medicare rules and regulations. The
source of the numbers referenced in the testimony of several witnesses
is an estimate made by Mayo in 1998. The original breakdown of the
numbers of pages of regulations and supporting documents, as estimated
by Mayo, is attached for the record. This estimate was made in 1998, so
it does not include most of the thousands of pages of rules
implementing the Balanced Budget Act of 1997. Nor does the total
include any number for some of the listed categories for which we were
unable to make estimates. We therefore believe this estimate
significantly underestimates the real number.
Questions were raised at the hearing concerning the accuracy of the
Mayo numbers, and it was stated that HCFA estimated a much smaller
number of pages-- in the range of 35,000. We stand by the accuracy of
our estimate, noting as we have in the past that we are including all
Medicare rules, manuals, and other guidance documents that are
necessary for providers to deal with the Medicare program. We have
circulated our list publicly, and in fact it was included in a
publication of the House Budget Committee in May 2000 (``Budget
Committee Task Force on Health: Medicare's Regulatory Burden on
Providers'', Hearing Press Kit, May 18, 2000).
We also believe that there is no point in engaging in an argument
with HCFA or anyone else over the definitions of ``rules'' or the exact
number of pages of such. The important points we intended to raise with
this count are:
(1) There is a major regulatory overload in Medicare.
(2) The rules are spread out over numerous sources, making it even
more difficult to know all the rules that may apply.
(3) Many carrier and intermediary rules vary among the different
areas of the country.
Rather than debating the numbers, we believe it is time to move
forward to finding solutions to these problems. For that reason, we
salute your efforts in holding the hearing: ``Medicare Reform: Bringing
Regulatory Relief to Beneficiaries and Providers.'' We are ready to
assist you and the Health Subcommittee in any way to improve the
Medicare program for beneficiaries and providers alike.
Sincerely,
Bruce M. Kelly
Director of Government Relations
Medicare Regulations and Supporting Documents
Medicare Laws and Related Laws (SSA and 350 Amendments)....... 706
Fraud and Abuse Regulation.................................... 14,500
BBA of 1997 (statute only).................................... 800
Medicare Regulations (42 CFR)................................. 3,574
21 HCFA Manuals............................................... 10,500
HCFA Federal Registers........................................ 30,000
('94-'98)
('87-'93)................................................. 2,000
('82-'86)................................................. 2,000
Carrier Part B Manuals........................................ 500
Correct Coding Manual......................................... 340
Carrier Newsletters........................................... 4,320
Intermediary Communicators.................................... 2,880
Intermediary Medicare Bulletins............................... 2,250
Medicare Administrative Bulletins............................. 5,000
BCA Administrative Bulletins.................................. 2,500
HCFA Intermediary Letters
HCFA Carrier Letters
HCFA Intermediary/Carrier Letters
DMERC Manuals................................................. 418
HCFA Rulings
PRRB Decisions................................................ 24,000
HCFA Administrator Decisions.................................. 2,000
Court Decisions............................................... 1,000
HCFA Correspondence
Carrier Correspondence
OIG Federal Registers ('94-'98)............................... 1,000
OIG Workplan and Compliance Program Guidance.................. 170
RHC Billing Carrier Instruction manual........................ 300
HCFA Advisory Opinions
TOTAL..................................................... 110,758
--------------------------------------------------------------
____________________________________________________
Non-HCFA HHS
ICD9-Code Book................................................ 1,680
AHA Coding Clinics for ICD.................................... 1,920
CPT Coding Book............................................... 588
DRG Guidebook................................................. 558
CPT Assistant................................................. 480
State Department of Health Interpretive Guidelines............ 30
GAO Reports on Medicare....................................... 2,000
UB92.......................................................... 600
HCPCS......................................................... 276
CLIA
JCAHO
TOTAL..................................................... 8,132
--------------------------------------------------------------
____________________________________________________
Other Government Agencies
Laws, Regulations, Manuals, State Registers, Enrollment
Agreements
CHAMPUS....................................................... 7,500
VA
Medicaid...................................................... 6,000
FDA
PHS
TOTAL..................................................... 13,500
--------------------------------------------------------------
____________________________________________________
GRAND TOTAL............................................... 132,390
Statement of National Association of Chain Drug Stores, Alexandria,
Virginia
Madam Chairman and Members of the Subcommittee. The National
Association of Chain Drug Stores (NACDS) appreciates the opportunity to
submit a statement for the record regarding reform of the Health Care
Financing Administration (HCFA), and the agency's major programs,
policies, and operations.
We hope that this review will result in a more streamlined
administration of the Medicare, Medicaid and S-CHIP programs, and
improve the quality of health care delivered to these programs'
beneficiaries, eliminate the onerous bureaucracy at the agency, and
modernize HCFA's infrastructure. We support your goals, and pledge to
work with you to see that the agency begins the process of being more
responsive to the needs of beneficiaries and providers.
NACDS represents about 170 chain pharmacy companies that operate
about 33,000 retail pharmacies all across the United States. Chain
pharmacy is the single largest segment of pharmacy practice. We filled
about 60 percent of the 3.1 billion prescriptions provided across the
nation last year. Chain community pharmacy has extensive interaction
with programs that are administered by HCFA, and is significantly
affected by the agency's policies and procedures. Thus, we have a
vested interest in the outcome of any major HCFA review and
restructuring. Here's how community retail pharmacy participates in
these programs.
Medicaid: Community retail pharmacies provide
prescription services to millions of Medicaid recipients each
year. In fact about 15 percent of all retail pharmacy
prescriptions are paid for by Medicaid. Even though many
specific Medicaid policies are controlled by states, HCFA has
an important role in setting and enforcing broad policies and
procedures through Federal law, regulation, and the state plan
amendment (SPA) process. For example, HCFA sets maximum
Medicaid reimbursement rates for generic drugs through their
Federal Upper Limit (FUL) program, which can have a significant
impact on the utilization of lower-cost generic drugs
throughout the entire market. All providers, including
pharmacies, are significantly affected by state-based waivers
approved by HCFA, including those that expand health care
services to low-income populations that are not traditionally
Medicaid recipients. We will elaborate more on this and other
Medicaid program issues later in this statement.
Medicare: While Medicare does not yet have a
prescription drug benefit, many community pharmacies already
serve as suppliers of Medicare-covered items. For example,
pharmacies provide select prescription drugs, such as
immunosuppressive and oral cancer drugs; provide durable
medical equipment, such as canes, walkers, crutches and ostomy
supplies; and provide important diabetic care items, such as
test strips and glucose meters. Upon enactment of a
prescription drug benefit for seniors, HCFA may have some role
in the administration of the benefit. Policies and procedures
adopted by HCFA in this regard will have a substantial impact
on chain community pharmacy.
State-Based Children Health Insurance Program:
Community pharmacies also provide prescription drugs to parents
and children enrolled in state S-CHIP programs.
We appreciate the responsiveness of many HCFA staff to our ongoing
questions and concerns regarding the operations of these programs.
However, we wanted to offer our perspectives on how we believe the
agency can improve the administration of certain programs under its
jurisdiction to make them more valuable for patients, reduce costs for
the system, and facilitate participation of pharmacy providers.
Medicaid Prescription Copays
Some states impose prescription copays as a way of reducing their
Medicaid prescription drug expenditures. While these copays only range
from 50 cents to $3 per prescription (and some eligible groups are
exempted from paying these copays), they can create burdens on Medicaid
recipients with limited means, especially those taking multiple
prescriptions. Sometimes, the recipient cannot afford the copay, but
the pharmacist is obligated under law to provide the prescription
anyway. In some states, however, recipients are being actively told to
just say that they cannot afford the copay, and that the pharmacist
will still have to provide the prescription. HCFA has restricted
states' ability to compensate pharmacies for these uncollected copays.
This is unfair to pharmacies, and essentially represents a
reimbursement reduction, since the state is not allowed by HCFA to
compensate the pharmacist for the value of the uncollected copays. In
addition, these unpaid copays represent unfunded mandates on
pharmacies, and a reduction in reimbursement to provide the
prescription. In some states, these uncollected copays could cost the
average pharmacy thousands of dollars each year.
These copay losses are obviously higher for pharmacies in areas
that serve a significant number of Medicaid recipients. We believe that
the Medicaid program should compensate pharmacies for the value of
these lost copays.
Medicaid Federal Upper Limits (FULs) for Generic Pharmaceuticals
Community retail pharmacy was significantly frustrated with HCFA
this past year as the agency attempted to develop a credible, reliable,
valid Federal Upper Limit (FUL) list for generic drugs. This list
represents the maximum amount of Federal matching funds that states
will receive for a marketbasket of generic drugs that meet certain
Federal criteria.
Not all generics have an FUL, but the accuracy and integrity of
this list is important because almost all private third party
prescription payors use this list to set their maximum reimbursement
amounts for generics. Moreover, more than half the states use these
Federal FULs to set their own ``maximum allowable costs'' for generic
drugs in their own Medicaid programs. Thus, the impact of the list
extends well beyond Medicaid. If the list is not accurate, and does not
reflect current market realities, it will discourage utilization of
lower-cost generics in favor or higher-priced brand name drugs.
HCFA is supposed to publish an updated and current FUL list every
six months. However, the first major substantial overhaul to the list
in almost two years was published by the agency in April 2000. The two-
year lag between updates was a serious problem. That is because there
were substantial price increases on many generic drugs during this
time, which were not reflected on the outdated FUL list, and
significant changes in the number of manufacturers in the generic
marketplace.
Unfortunately, the April list contained hundreds of inaccuracies,
and several more iterations were needed over a period of eight months
before the agency published a final list in December that appears to be
reasonably accurate. Many of the FULs on the original April list were
determined with the prices of products that had been discontinued for
many years.
We believe that many of these problems could have been avoided had
the agency been more diligent in collecting the appropriate data and
assessing the realities of the generic drug marketplace.
Nevertheless, we believe that the agency did work in good faith
with Medicaid directors, pharmacy providers, and other affected
parties, in identifying and correcting errors with the list. We
appreciate that the agency delayed implementation of the list until
such a time that most of the problems were corrected.
Assuring the accuracy of this list is critical. In addition to
providing the pricing ``reference source'' that HCFA used to set the
FUL, we believe that HCFA should also be required to release the
corresponding National Drug Code (NDC) numbers used to establish the
FUL. In our opinion, this is the only way that the accuracy and the
integrity of the list can be validated. Without this information, there
is absolutely no way for providers to know if HCFA is using reliable,
valid information to set its FULs.
Medicaid State Plan Amendment Approvals
The federal government gives billions of dollars to state Medicaid
programs, and federal law requires HCFA to review state Medicaid plans
to ensure that state Medicaid programs are spending that money in
accordance with federal law. Unfortunately, HCFA has repeatedly refused
to conduct thorough reviews of amendments to state Medicaid plans to
make sure that they comply with federal law.
HCFA simply accepts assurances from a state Medicaid agency without
investigating whether those assurances are accurate. The result is that
HCFA approves clearly illegal state plan amendments. For example, last
year a federal court ruled a HCFA-approved state plan amendment
discriminating against chain pharmacies to be in violation of the US
Constitution, federal statutes, and HCFA's own regulations.
Moreover, Federal law requires Medicaid payment rates to be
consistent with efficiency, economy, and quality of care. States cannot
arbitrarily reduce Medicaid pharmacy reimbursement to balance their
Medicaid prescription drug budgets. States have to comply with several
Federal standards when setting Medicaid pharmacy reimbursement. For
example, Federal Medicaid law establishes standards for payment rates
to providers in state Medicaid programs. See 42 U.S.C.
Sec. 1396a(a)(30)(A).
Payments have to be ``consistent with efficiency, economy, and
quality of care . . . and sufficient to enlist enough providers so that
care and services are available under the plan at least to the extent
that . . . they are available to the general public . . .''. In
addition, a 1994 memo from HCFA to state Medicaid directors requiring
states to justify whether payment rates to pharmacies are
``reasonable'' and in compliance with Federal law, said:
States wishing to modify their EAC (Estimated Acquisition Cost)
levels may, among other methods of verification, audit an
appropriate number of pharmacies to determine current
acquisition costs before making modifications to the EAC
levels. . . . we still expect that States will continue their
present activities to establish a reasonable dispensing fee
level and will document them in their State Plan. Such
activities could include: (1) audits and surveys of operational
costs; (2) compilation of data regarding professional salaries
and fees; and (3) analysis of compiled data regarding pharmacy
overhead costs, profits, etc. . . . The methods or standards
they utilize to establish such fees are at the discretion of
the individual State but should be documented in support of the
State plan.
Yet, we have seen case after case where HCFA simply approves
pharmacy payment reductions proposed by the states for budgetary
reasons, or the agency fails to adequately assess the evidence
presented by the state to justify the reimbursement change. Many of the
studies that are submitted to HCFA are deeply flawed, yet the agency
relies on these studies to approve state plan amendment changes.
Adding insult to injury is the fact that these pharmacy
reimbursement reductions do little to control escalating Medicaid
prescription drug program expenditures. Expenditures for prescription
drugs in the U.S. Medicaid program increased from $8 billion to about
$13.5 billion, or about 69 percent in the last five years (1993-1998).
Reasons include:
More Prescription Use per Medicaid Recipient: The
number of prescriptions used by each Medicaid recipient
increased by 23 percent from 1993 through 1998.
Medicaid Recipients Using Higher-Priced Prescription
Drugs: The average Medicaid prescription price increased 70
percent between 1993 and 1998. However, of this amount, there
was an 85 percent increase in the pharmacist's cost of
purchasing the drug from the manufacturer. In real dollar
terms, the amount that the state pays the pharmacist to
dispense the prescription increased by only 0.6 percent--which
did not even keep pace with the rate of inflation, which was
about 13 percent.
None of these factors can be addressed by reducing pharmacy
reimbursement. Yet, HCFA continues to approve these SPAs, knowing full
well that experience has shown that pharmacy reimbursement reductions
have negligible impact on reducing Medicaid prescription drug spending.
The process by which HCFA assess and approves SPAs must change.
Inappropriate Use of Medicaid as Leverage for Pharmacy Price Controls
We are also seriously concerned that states are using pharmacy's
Medicaid participation as leverage to extend retail prescription
pricing discounts to populations that are not Medicaid eligible. For
example, some states, such as California, have added a new material
requirement to a pharmacy's participation in the state's Medicaid
program. That is, pharmacies are required to charge all Medicare
beneficiaries no more than the Medicaid prescription rate, regardless
of the beneficiary's income, if they want to participate in Medicaid.
We understand the states' interest in reducing the cost of
prescription drugs to seniors. However, we strongly object to arbitrary
controls on our prices, especially since these programs do nothing to
reduce our cost of buying the drug, which is the overwhelming major
cost factor in any prescription. Thus, pharmacies must absorb the
entire cost of this discount.
Furthermore, NACDS opposes state efforts to tie participation in
these price control discount programs to the Medicaid program. No
pharmacy that agreed to participate in the Medicaid program did so with
the expectation that it would be required to offer a discounted retail
price to populations that were not originally covered by Medicaid.
We also question whether a pharmacy's willingness to provide
discounts to senior citizens is germane to its overall fitness to
participate in the state's Medicaid program. NACDS recognizes that
states have an interest to ensure pharmacy providers are legitimate
businesses, are unlikely to engage in fraud, and employ pharmacists and
other personnel who are qualified to safely dispense medications and
counsel Medicaid recipients. However, requiring pharmacies to provide
prescription drugs at discounts to senior citizens, which may
jeopardize their long-term viability, does not seem to be reasonable
criteria for participation in state Medicaid programs.
HCFA apparently is unaware that states are tying pharmacy
participation in Medicaid to participation in non-Medicaid programs. We
find it difficult to believe that HCFA is not aware of how states are
using the Medicaid program in ways that are unconventional or
inappropriate. We believe that the agency should unequivocally tell
states that participation in the Medicaid program should not be used as
leverage to force pharmacies to participate in programs that do not
serve Medicaid populations. If states want to increase access to
prescription drugs for seniors, they should establish meaningful
prescription drug coverage programs, not retail pharmacy price
controls.
Medicaid Prescription Drug Waiver Programs
We are concerned about certain Federal Medicaid waivers that have
been approved that extend Medicaid prescription pricing--including drug
manufacturers' rebates--to certain low-income populations. Once again,
we understand the states' interest in providing reduced priced
prescription drugs to low income seniors. We continue to support
prescription drug coverage programs as the best method to achieve this
goal.
However, these programs simply require the pharmacy to discount the
retail prescription price by the cumulative Medicaid manufacturer
rebate amount and the Medicaid pharmacy reimbursement discount amount.
Pharmacies are then compensated for the retail price reduction amount
equal to the manufacturers' rebate by the state, who collects these
rebates from the manufacturers.
We do not believe that pharmacies should be required to participate
in these programs as a condition of Medicaid participation. We are also
concerned about requiring pharmacies to pass along the additional
manufacturers' discount at the retail pharmacy counter, without some
assurance from the state that they will be able to collect all the
rebates from the manufacturer, and provide them to the pharmacies in a
timely and consistent manner to compensate for this price reduction.
Medicare Diabetes Education and Training Program
The 1997 Balanced Budget Act (BBA) created a new diabetes education
and training benefit for ambulatory Medicare beneficiaries. The intent
of the new benefit was to allow ambulatory Medicare beneficiaries with
adult-onset (Type II) diabetes to receive important education and
training from health professionals, on such aspects as diet, exercise,
glucose monitoring and drug therapy--to help them better manage their
condition.
These preventive health care services have been proven to improve
quality of life and reduce health care costs. Many community pharmacies
provide diabetes self-management benefits. These pharmacy-based
programs work. NACDS members provided HCFA extensive evidence during
the regulation's comment period with significant evidence of patient
satisfaction with these programs. Private payors are increasingly
recognizing pharmacy's role in diabetes management programs, and
studies have demonstrated the value of these programs.
The BBA allowed pharmacy providers to participate as providers in
this program by virtue of the fact that pharmacies already provide
diabetic supplies and products to Medicare beneficiaries.
Unfortunately, the final rule that HCFA promulgated in December 2000--
over three years after the enactment of BBA--did not recognize the
value of pharmacy-based diabetes self-management services. The rule
established restrictive, onerous, and unnecessary standards for
provider participation. The result is that community pharmacies will
most likely be unable to provide diabetes self-management benefits to
Medicare beneficiaries. The many senior citizens with diabetes who
could have been helped by visiting their conveniently-located community
pharmacy will now have to find an outpatient hospital or a clinic that
can comply with the HCFA regulations.
Many community pharmacies that currently do not provide such
benefits viewed the BBA reforms as an opportunity to expand the
services they provide may not initiate diabetes self-management
programs. There is no logical reason why the most accessible health
care professionals--pharmacists--and the provider from which diabetics
purchase most of their supplies should be logistically excluded from
participating in this program. It is a disservice to Medicare
beneficiaries and community pharmacies.
Medicare Supplier Issues
Community pharmacies are suppliers of Medicare Part B covered
durable medical equipment (DME) and select prescription drugs. NACDS
members' frustration with HCFA's inability to administer these benefits
knows no bounds. The Agency has been unwilling to adopt computerized
on-line systems that almost every other health care payor has used for
years.
These on-line claims adjudication systems save health care payors
money by assuring eligibility and coverage; preventing fraud, abuse,
and over-utilization; and improving customer service by allowing the
pharmacy to more efficiently process their claims. Yet HCFA refuses to
even consider the value of an on-line claims adjudication system.
HCFA currently contracts with four durable medical equipment
regional carriers (DMERCs) to process Medicare Part B claims. The
customer service that the DMERCs provide leaves much to be desired.
``Provider relations'' staff members are often difficult to reach, may
not return phone calls, and deliver inconsistent directions to
community pharmacies. Moreover, the DMERCs do not communicate changes
to the program in a prompt and effective manner.
The recent requirement that Medicare Part B suppliers accept
assignment for all covered prescription drugs is a case in point. The
requirement went into effect on February 1, 2001. Yet, the DMERCs did
not directly communicate this change to our members. In fact, when
several chain pharmacies called DMERC staff after February 1, many did
not know of this change in policy. In addition, because Medicare does
not operate an ``on line'' claims system, it is impossible for the
pharmacy provider to know if the beneficiary has reached their $100
annual Part B deductible, or the ``Medicare allowable'' amount for a
particular product being provided. It is extremely difficult for
pharmacies to comply with changes in Medicare policy when DMERC staff
are so poorly informed, and when the technology is such that simple,
basic information cannot be provided to pharmacies to help them better
serve Medicare beneficiaries.
If the DMERCs operated in the private marketplace, these failures
would not be tolerated. HCFA would have replaced the insurance
companies that perform the DMERC function years ago. Yet, despite the
concerns NACDS and other provider groups have expressed to HCFA, the
problems with the DMERCs persist. HCFA needs to be reformed to be more
responsive to provider-related concerns.
Conclusion
NACDS supports Congressional action to evaluate HCFA policies and
programs, and how the agency's administration of these programs impacts
beneficiary access to quality health care and the ability of providers
to effectively and efficiently participate in the programs.
HCFA often times appears to make decisions contrary to its own
rules and regulations. Moreover, it often fails to understand, or
simply ignores, the impact of its decisions on the health care
marketplace. Or, more critically, it just doesn't understand the
marketplace. We recognize that HCFA may be overworked and understaffed.
Congress and the Administration will have to decide how best to
structure the agency for the 21st century, and the role that HCFA might
have in administering any new prescription drug benefit for seniors. We
look forward to working with you in addressing these issues in this
Congress to make HCFA more responsive to the patients and providers
that it serves. Thank you.