[House Hearing, 106 Congress]
[From the U.S. Government Publishing Office]
WASTE, FRAUD, ABUSE, AND MISMANAGEMENT
=======================================================================
HEARINGS
before the
TASK FORCE ON HEALTH
of the
COMMITTEE ON THE BUDGET
HOUSE OF REPRESENTATIVES
ONE HUNDRED SIXTH CONGRESS
SECOND SESSION
__________
HEARINGS HELD IN WASHINGTON, DC: MAY 18, JUNE 14, JULY 12, AND
AUGUST 9, 2000
__________
Serial No. 10-2
Printed for the use of the Committee on the Budget
________
U.S. GOVERNMENT PRINTING OFFICE
64-510cc WASHINGTON : 2000
COMMITTEE ON THE BUDGET
JOHN R. KASICH, Ohio, Chairman
SAXBY CHAMBLISS, Georgia, JOHN M. SPRATT, Jr., South
Speaker's Designee Carolina,
CHRISTOPHER SHAYS, Connecticut Ranking Minority Member
WALLY HERGER, California JIM McDERMOTT, Washington,
BOB FRANKS, New Jersey Leadership Designee
NICK SMITH, Michigan LYNN N. RIVERS, Michigan
JIM NUSSLE, Iowa BENNIE G. THOMPSON, Mississippi
PETER HOEKSTRA, Michigan DAVID MINGE, Minnesota
GEORGE P. RADANOVICH, California KEN BENTSEN, Texas
CHARLES F. BASS, New Hampshire JIM DAVIS, Florida
GIL GUTKNECHT, Minnesota ROBERT A. WEYGAND, Rhode Island
VAN HILLEARY, Tennessee EVA M. CLAYTON, North Carolina
JOHN E. SUNUNU, New Hampshire DAVID E. PRICE, North Carolina
JOSEPH PITTS, Pennsylvania EDWARD J. MARKEY, Massachusetts
JOE KNOLLENBERG, Michigan GERALD D. KLECZKA, Wisconsin
MAC THORNBERRY, Texas BOB CLEMENT, Tennessee
JIM RYUN, Kansas JAMES P. MORAN, Virginia
MAC COLLINS, Georgia DARLENE HOOLEY, Oregon
ZACH WAMP, Tennessee KEN LUCAS, Kentucky
MARK GREEN, Wisconsin RUSH D. HOLT, New Jersey
ERNIE FLETCHER, Kentucky JOSEPH M. HOEFFEL III,
GARY MILLER, California Pennsylvania
PAUL RYAN, Wisconsin TAMMY BALDWIN, Wisconsin
PAT TOOMEY, Pennsylvania
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Task Force on Health
SAXBY CHAMBLISS, Georgia, Chairman
ERNIE FLETCHER, Kentucky, JIM McDERMOTT, Washington,
Vice Chairman Ranking Minority Member
BOB FRANKS, New Jersey JIM DAVIS, Florida
JIM NUSSLE, Iowa ROBERT A. WEYGAND, Rhode Island
GIL GUTKNECHT, Minnesota KEN LUCAS, Kentucky
------
Professional Staff
Wayne T. Struble, Staff Director
Thomas S. Kahn, Minority Staff Director and Chief Counsel
C O N T E N T S
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Page
Hearing held in Washington, DC, May 18, 2000: Medicare's
Regulatory Burden on Providers (Part 1)........................ 1
Statement of:
Joe Sam Robinson, Jr., M.D., President, the Neurological
Institute of Central Georgia........................... 7
Kathleen G. Murray, Executive Vice President and Chief
Operating Officer, Northwestern Memorial Hospital...... 12
Page Vaughan, Executive Director, East Georgia Regional
Medical Center......................................... 22
Prepared statement of:
Hon. Saxby Chambliss, a Representative in Congress from
the State of Georgia................................... 2
Hon. Jim McDermott, a Representative in Congress from the
State of Washington.................................... 5
Dr. Robinson............................................. 11
Ms. Murray............................................... 15
Mr. Vaughan.............................................. 23
The American Association for Homecare.................... 25
The American College of Physicians--American Society of
Internal Medicine...................................... 30
The American Medical Association......................... 35
The National Association for Home Care................... 38
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Hearing held in Washington, DC, June 14, 2000: Medicare's
Regulatory Burden on Providers (Part 2)........................ 69
Statement of:
Robert Berenson, M.D., Director, Center for Health Plans
and Providers.......................................... 73
Robert P. Charrow, Esq., Crowell & Moring................ 106
Prepared statement of:
Mr. Chambliss............................................ 70
Mr. McDermott............................................ 72
Dr. Berenson............................................. 75
Mr. Charrow.............................................. 110
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Hearing held in Washington, DC, July 12, 2000: Blowing Smoke on
the Invisible Man--Measuring Fraud, Payment Errors in Medicare
and Medicaid................................................... 123
Statement of:
Gloria Jarmon, Director, Health, Education, and Human
Services Accounting and Financial Management Issues,
Accounting and Information Management Division, U.S.
General Accounting Office.............................. 127
Penny Thompson, Director, Program Integrity Group of
Office of Financial Management, Health Care Financing
Administration......................................... 158
Robb Miller, Inspector General, Department of Public Aid,
State of Illinois...................................... 166
Prepared statement of:
Mr. Chambliss............................................ 124
Ms. Jarmon............................................... 129
Ms. Thompson............................................. 159
Mr. Miller............................................... 169
Office of Inspector General, Department of Health and
Human Services......................................... 177
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Hearing held in Washington, DC, August 9, 2000: HCFA and Health--
The Impact of Medicare Regulation on Health Care Delivery...... 187
Statement of:
Harry W. Carloss, Jr., M.D., FACP, President, Kentucky
Medical Association.................................... 190
Robert D. Fraraccio, Chief Executive Officer, Clark
Regional Medical Center................................ 200
Barbara J. Reynolds, M.D., President-Elect, Kentucky
Chapter, American College of Emergency Physicians...... 207
William E. Stauter, Administrator, Sayre Christian
Village Nursing Home, Inc.............................. 213
Lennie G. House, Chief Executive Officer, Nurses Registry
and Home Health........................................ 221
Robert J. Hudson, Chief Financial Officer, Pattie A. Clay
Regional Medical Center................................ 223
Charles Shelton, Lexington Psychiatric Group............. 227
Prepared statement of:
Hon. Ernie Fletcher, a Representative in Congress from
the State of Kentucky.................................. 189
Dr. Carloss.............................................. 193
Mr. Fraraccio............................................ 203
Dr. Reynolds............................................. 211
Mr. Stauter.............................................. 219
Mr. House................................................ 223
Medicare's Regulatory Burden on Providers
(Part 1)
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THURSDAY, MAY 18, 2000
House of Representatives,
Committee on the Budget,
Task Force on Health,
Washington, DC.
The Task Force met, pursuant to call, at 10:15 a.m. in room
210, Cannon House Office Building, Hon. Saxby Chambliss
(chairman of the Task Force) presiding.
Members present: Representatives Chambliss, Fletcher,
Gutknecht, Spratt, McDermott, and Lucas.
Chairman Chambliss. We can come to order here and we will
go ahead and begin our hearing. Let me just say that I am very
pleased to see this number of folks here because there is no
more important issue, in my opinion, that the Budget Committee
can carry out than its function of oversight, particularly in
the area of waste, fraud, and abuse in the Federal Government.
Let me also say that we are not here to throw stones and
throw darts at anybody. Instead our purpose in this is going to
be is, at least as far as the Health Care Task Force is
concerned, is to try to find the deficiencies in the system,
try to find the areas where the health care delivery system
from a Federal perspective is not working the way that it was
intended to work, or as Congress envisioned it to work. We also
expect to find some areas that we can make recommendations
either to the Appropriations Committee or to the government
agencies that are responsible for the health care aspect of the
Federal Government to not only improve the system but also to
save money. And if we can do that, then I think we will
accomplish an awful lot and I certainly hope that that goal is
going to be achieved.
I have a statement for the record that I am going to
submit, and I don't want to sit here and read all of that
statement but let me just say that first of all, I appreciate
our witnesses being here today. Dr. Robinson, Ms. Murray, Mr.
Vaughan, we are very appreciative of you all for giving your
time and lending your talents to the exercise that we are going
to be carrying out. I can't introduce the panel without looking
at my good friend, Joe Sam Robinson, who I have known for many
years and who is not just an excellent individual but he is a
great American, and he is somebody who cares about not just
good delivery of health care but cares about the way the system
operates. And I am confident that our other two witnesses feel
that same way and that this is going to be a very beneficial
hearing this morning.
[The prepared statement of Saxby Chambliss follows:]
Prepared Statement of Hon. Saxby Chambliss, a Representative in
Congress From the State of Georgia
As part of a comprehensive effort in the House of Representatives
to provide increased oversight and scrutiny of how our tax dollars are
spent in Washington and how those decisions effect the daily lives of
all Americans, the House Budget Committee recently created six
bipartisan task forces to investigate instances of waste, fraud, abuse,
and mismanagement in Federal programs.
Specifically, the Health Task Force will examine issues reaching
across all health-related accounts of the Federal budget. Today, we
turn our attention to the waste of resources associated with the
burdens that Medicare's complex regulatory system imposes on the health
care community and the patients they serve. Such attention may be
appropriate, as a college professor was recently quoted in the Wall
Street Journal as saying that the statutes and rules governing Medicare
* * * now run the risk of becoming themselves a form of waste, fraud,
and abuse.
While I want to ensure this Task Force's focus remains on
eliminating wasteful Federal programs or practices and identifying
illegitimate and fraudulent actors stealing taxpayer dollars, it is
equally important that America's program for providing seniors'
healthcare does not penalize honest providers struggling to comply with
and meet the frustrating bureaucratic maze of Federal health care
regulations.
Currently, there is no comprehensive estimate of the regulatory
burdens and costs imposed on providers by the Medicare Program,
resulting from either laws passed by Congress or regulations
implemented by the Health Care Financing Administration (HCFA). In an
effort to determine the depth of this problem, last year in the
Balanced Budget Refinement Act, Congress required the Medicare Payment
Advisory Committee (MedPAC) to conduct ``a study on the complexity of
the Medicare Program and the levels of burdens placed on providers
through Federal regulations. While the MedPAC report isn't due until
December 2001, forums such as this one can offer illustrations of the
impact of Medicare regulations in the real world of medicine.
Although much of the evidence of Medicare's regulatory burden on
providers is anecdotal, it known that providers must comply with almost
111,000 pages of Medicare regulations and supporting documents.
According to the Heritage Foundation, this is roughly six times the
size of the impossibly complex Internal Revenue Service code and its
Federal tax regulations.
In fact, before coming to Washington this week, one of our
witnesses, Dr. Joe Sam Robinson, actually weighed the amount of HCFA
regulations his practice receives every year. The result: a whopping 35
pounds of regulations arrive in his office each year!
The purpose of today's hearing is to hear firsthand testimony from
individuals such as Dr. Robinson on how those 35 pounds of new
regulations each year, as well as the existing ones, effect his ability
to provide care to his patients. After all, if the billions of tax
dollars spent each year on the worthwhile Medicare Program are not
meeting the needs of the taxpayers the program was designed to benefit,
a real problem exists.
We will also hear today that the problem at 'ground zero' in
healthcare delivery is not isolated to the content of regulations
emanating from Washington. Ms. Kathleen Murray will offer testimony
regarding the morass of duplicative and counterproductive healthcare
regulations that exist among 29 different Federal organizations,
ranging from the Internal Revenue Service to the Occupational Safety
and Health Administration (OSHA) to the Environmental Protection Agency
(EPA).
While we will no doubt hear compelling testimony from the witnesses
before the Health Task Force today, it has become clear that they are
not the lone voices in the wilderness on the complexity and burdensome
nature of Medicare. In just a few short months my office has heard from
numerous providers in Georgia alone about the burden of Medicare
regulations on their ability to provide care. I would like to share
just a few of those examples at this time.
Before citing one specific burdensome example, I would like to
share the comments of an e-mail I recently received from a constituent
on this matter that seems to succinctly sum up sentiment on this issue
in Georgia:
Dear Sir:
I got out of medicine recently because I couldn't take the
government interference any more--and it is much worse now. My
colleagues tell me I better be glad I got out when I did. How
sad--we go to school for years and then cannot practice
medicine and provide care for people because we spend so much
time and money complying with frustrating bureaucratic
regulations. It's a crying shame.
Retired physician,
Macon, GA.
A major regulatory headache commonly cited that constantly
frustrates hospital providers and annoys Medicare beneficiaries is the
Medicare Secondary Payer Questionnaire (MSPQ). The purpose of the MSPQ
is sound as it is to ensure that Medicare does not pay for services
that another payer is responsible for (e.g. auto insurance covering
injuries sustained in auto accident). However, in practice, the MSPQ
has become an unnecessarily complex and unreasonable approach to
determining whether or not there is another payer that should be
primary.
Two examples underlie the problems of the MSPQ. One, is its
duplicative and repetitive nature because HCFA requires the MSPQ to be
completed on each encounter, regardless of the service provided. Given
that many Medicare beneficiaries often suffer from chronic illnesses
that require ongoing diagnostic monitoring and treatment, recurring
patients must answer MSPQ questions on a weekly, or even a daily,
basis. As one can imagine, this is quite frustrating to a beneficiary
who does not understand why the hospital must ask the same questions it
did only a week ago--questions that generally take anywhere from 30 to
40 minutes to process and answer. Not only is it frustrating to the
beneficiary, but it is an unnecessary waste of the provider's resources
to waste valuable staff time that could be better spent attending to
other patients' needs.
A second problem with the MSPQ is the information it requires the
provider to seek. For example, the beneficiary's retirement date must
be included. According to Georgia providers, patients are often
elderly, sick, and/or confused and cannot remember their retirement
date. Their fiscal intermediary has instructed hospitals in Georgia
that in those cases, they should get the information from a family
member. If a family member isn't available, they are to contact the
beneficiary's previous employer to get the retirement date. Sometimes,
these beneficiaries have been retired for 25 years or more, and the
employer may not even be in business, or be in another state. How
nonsensical is it for hospital employees to spend their time tracking
down former employers across the nation. Such a policy is not only
unnecessarily time consuming, but it borders on an invasion of privacy
and causes concern and potential embarrassment for all involved.
The above example is but one of many my office has received
detailing the complexity and burdensome nature of Medicare. The bottom
line is whether both the American taxpayer and Medicare beneficiaries
are getting the best bang for their buck when it comes to Medicare and
the regulations that govern its implementation.
Not only do I look forward to testimony from our witnesses who
engage in the health care arena on a daily basis, but I look forward to
a follow-up hearing in which various administrative agencies will have
an opportunity to respond to comments made today as well as answer
questions from Members of this panel on how their regulatory structure
best meets the needs of beneficiaries and taxpayers.
Chairman Chambliss. I want to take an opportunity to let my
friend, Mr. McDermott, as well as Mr. Spratt make any opening
remarks that they would like to make this morning.
Mr. McDermott. Thank you, Mr. Chairman. I want to thank you
for having this hearing today to discuss Medicare's regulatory
burden on providers. I look forward to really working on this
issue because I am one of those people who believes that
Medicare is a good program. I think it is an enormous benefit
for the country and for the elderly in this country, and I will
always be interested in hearing ways in which we can improve
the program.
I hope that today's testimony will be more than just
telling us all the problems with Medicare, but you will also
have suggestions about ways in which the program can be
improved. I sit on the Ways and Means Committee and I am on the
Health Subcommittee that has jurisdiction over Medicare and I
know a good bit about it. Also, being a physician, I have
experienced lots of things as a provider and recently having
been a patient, I understand a little bit about the
reimbursement system that goes on in this country in the
private sector.
Medicare's error rate has been cut in half over the past
few years and I think we will hope to hear ways in which we can
make it be even better. But one of the problems I see--and this
committee hearing is interesting to me because on the one hand
we want to cut waste, fraud, and abuse. Everybody agrees to
that. There isn't anybody in the Congress, all 435 Members, who
would say, I want there to be more waste, fraud, and abuse out
there. So we always say we want to cut it. And we write bills,
some of which I voted against, like the balanced budget
amendments in 1997, because I knew what it would do to
Medicare. And we write all kinds of regulations as an outgrowth
of the bills that we pass.
These regulations don't come from God or from the sky. They
come from the Congress, through the regulatory process. And
sometimes we get, when Murphy's law takes over, something we
did not really intend. So I hope that we can hear about that.
But what troubles me in looking at the appropriations
process this year is that the 2001 budget is 6 percent less
than it was last year. That is a real cut of $127 million, and
$220 million below the President's request. Now, if you are
serious about finding waste, fraud, and abuse you have to look
for it, and you won't take away HCFA's people and money and
expect it to happen. I think that that is one of the problems
we really have in looking at this whole issue.
The second one is that HCFA is the largest health insurer
in the Nation. We cover 74 million Americans through Medicare,
Medicaid and the children's--the CHIP program, the health
program for children. And we are spending $368 billion of
taxpayers' money. So we have a responsibility to be sure that
it is spent adequately and effectively for good health care. It
is not an easy process to run something like that. We have
delegated it to private insurance companies.
Having been a physician and having had to deal with private
insurance companies as well as Medicare, I find it hard to see
that Medicare is any worse than dealing with the private
insurers. So I would like to hear in your testimony whatever
you have to say about how the private sector does it better
than the government does it, using private sector
intermediaries.
I think that it is easy to rant and rave about the
problems, but having been in the medical profession since 1968,
I know enough about what goes on in the private sector to know
that that is not without its problems also. I had an aortic
valve replaced and I was sitting at home, and you are
recovering from something like that, you have nothing to do but
go and get the mail. So I get the mail and look at all these
bills and here comes a bill for a consultant who saw me and
they denied the payment. So I picked up the phone and called
and said, ``why you are denying the payment?'' They said,
``well, we have no record that you were in the hospital.'' And
I said, ``well, I don't know where you think they did the
aortic valve replacement--in the parking lot?'' They said,
``well, the hospital hasn't sent in their report yet, so as
soon as they send in their report we will resubmit the bill on
the doctor's consultation record.''
Now, the waste in the health care system is, I think, on
both sides and I want to hear--because I know that some of the
intermediaries are taking the regulations of HCFA and using
them. And so I see some real problems here and I am really
eager to hear what people have to say about how we can improve
or simplify and still guarantee to the American public that we
have looked at where their money is going. Because there is
certainly money in the system that is not being well spent, and
I think no one who looks at the system would say that it is
otherwise. It is the same in the defense industry or in a lot
of other major expenditure areas of the United States
Government. And I think we need to be mindful that we have to
find it, but how can we do it in a less burdensome way? I think
we are all open to hear. So I look forward to this testimony
and I ask unanimous consent to put my whole statement in the
record.
Chairman Chambliss. Without objection.
[The prepared statement of Jim McDermott follows:]
Prepared Statement of Hon. Jim McDermott, a Representative in Congress
From the State of Washington
Chairman Chambliss, thank you for having this hearing today to
discuss Medicare's regulatory burden on providers. I look forward to
working with you and other members of the Health Task Force to address
the challenges facing Medicare, which will celebrate its 35th birthday
this year. I believe we share the goals of improving the program's
level of efficiency while ensuring access to high-quality and
accessible services for all beneficiaries. We may not always agree on
how to achieve those goals, but I do think we share the same ultimate
goals.
When Chairman Kasich created these Task Forces on Fraud, Waste, and
Abuse, the stated purpose for their creation was to enable Congress to
have greater oversight to prevent and detect fraud, waste, and abuse. I
am sympathetic to the concerns of legitimate providers who believe they
are burdened by Medicare's regulations, but I am not sure how these
concerns fit the purpose of the Task Forces. Medicare's error rate has
been cut in half over the past few years. I hope we will hear how we
can help the agency responsible for administering Medicare, the Health
Care Financing Administration (HCFA), keep reducing the error rate
while we diminish the burden on legitimate providers.
Because Medicare is so important to the 39 million seniors and
disabled persons who rely on it to provide health care coverage, I look
forward to hearing from our witnesses today. I hope they will provide
us with clear examples from the private sector or other government
programs for improving Medicare without jeopardizing efforts to provide
quality care for seniors. I hope the models they provide will allow us
to strengthen our efforts to prevent and detect fraud, waste, and abuse
by unscrupulous providers without impeding the care provided by
legitimate health care providers.
Medicare is an exceedingly complex program and its administration
is complex. According to recent congressional testimony by the
Administrator of the Health Care Financing Administration (HCFA),
Nancy-Ann DeParle, HCFA ``contracts with 55 private health insurers to
process nearly 1 billion Medicare fee-for-service claims each year, and
with 346 private health plans that provide managed care. For Medicare
alone, the agency pays more than $210 billion in claims to some 700,000
physicians, 6,000 hospitals, and thousands of other providers and
suppliers each year. HCFA is the largest health insurer in the nation,
providing coverage for some 74 million Americans through Medicare,
Medicaid, and the State Children's Health Insurance Program, and paying
about $368 billion for health care services this year.''
The statutory language related to all HCFA programs, not just
Medicare, encompasses 900 pages. HCFA's implementing regulations
encompass 1,700 pages. However, it is not the number of statutes or the
number of regulations that should guide us. We want the programs to be
effective and regulated effectively. Undoubtedly, there are areas that
could be clarified and strengthened to make it easier for legitimate
providers to document legitimate claims for timely payment. We do not
want to punish the legitimate provider.
During the last 3 years, significant improvements were made in
reducing Medicare's improper payment rate. Between 1996 and 1998, the
error rate was cut almost in half (a 45 percent reduction). Medicare's
payment error rate declined from 14 percent to 7.97 percent. However,
the amount of payment errors is still too high (about $13 billion
annually). HCFA is ahead of its Government Performance Review Act goal
of 9 percent by 1999 and is committed to its strategy to again cut the
payment error rate in about half and reduce it to 5 percent by 2002.
Clearly, reduction of these payment errors, protection of the integrity
of the Medicare Trust Fund, provision of appropriate coverage to
beneficiaries, and provision of appropriate payment to providers are
daunting tasks. I hope our witnesses can give us their insights as to
how we can achieve all of the goals.
I think the testimony we receive today can give us a preview of
what we might expect when MedPAC completes the study Congress required
in the Balanced Budget Refinement Act (BBRA) of 1999. This
comprehensive review of all providers and recommendations for
simplification of many of Medicare's complexities will be available to
us by December 31, 2001. In the meantime, today's testimony will shine
some light on these areas for us to consider.
I look forward to hearing from all of you. Thank you, Mr. Chairman.
Chairman Chambliss. Mr. Spratt.
Mr. Spratt. Mr. Chairman, I thank you for calling the
hearing and I really think that oversight is the second most
important function of this committee, and I am glad to see us
undertaking it particularly in this area.
I simply want to speak--to welcome one of my former
constituents. When we invited him, I think he was my
constituent, but he is now in your constituency, Mr. Chairman--
Page Vaughan, who was with the Carolina Pines Hospital, a
brand-new hospital in Hartsville, SC, and now is in Statesboro,
GA. His parent firm is Health Management Associates. He comes
here to bring a point of view that I think we need to hear.
We need to talk to HCFA about the administration of these
programs but we also need to talk to those hospitals who are on
the receiving end--and in this particular case, a hospital in
small town to rural area setting--about the particular problems
they face. So, Page, we are glad that you are here. We
appreciate you coming.
Chairman Chambliss. Thank you, Mr. Spratt. Does any other
member wish to make a statement?
Mr. Gutknecht. I promise to be brief. I would agree that I
think this is an area where we need more congressional
oversight. I think every Member who spends any time in their
district visiting with people in the health care delivery
system recognizes that this system has become so clumsy and so
burdensome that sometimes it seems as if the system consumes
the participants. Using the good doctor's own numbers if they
are correct, and I believe they are, we are spending
approximately $5,000 per person on Medicare and Medicaid
coverage. And if you talk to the providers, they are hard-
pressed to see that they get that in kinds of benefits from the
amount of money that we spend.
I hear from my nursing homes, I hear from my hospitals, I
hear from providers of all kinds, home health care, that the
paperwork and the nitpicking that goes on is just unbearable.
And it seems to me that we must find a simpler system for the
providers so that we continue to be able to take care of the
people who need the help; but at the same time, we don't
continue to reinforce what I believe is one of the unwritten
rules of Washington, and that is that no good deed goes
unpunished. The providers that are doing a good job should not
continually be held up as criminals. While we want to stop
waste, fraud, and abuse, I think that there has got to be some
kind of a happy medium. So I appreciate this hearing and I look
forward to the testimony.
Chairman Chambliss. Thank you, sir. Mr. Lucas.
Mr. Lucas. Mr. Chairman, I am looking forward to the
hearing today to see what we might do to improve our system. I
am very open and hopeful that today will be very constructive.
Chairman Chambliss. Great. Just for the sake of scheduling,
let me tell our members as well as our witnesses that we are
going to have a series of votes beginning somewhere around
10:45. We are going to have a break at that point in time to go
vote and come back and resume our hearing. I think we will have
time to get through at least our opening statements. And we
will ask your patience through this process as there are times
when we have to go do what we get paid to do, which is to carry
out the legislative business of the country.
I will tell our witnesses, also by way of schedule, that
our next hearing is going to be in a couple of weeks and the
witnesses at that hearing will be the folks from Medicare, from
HCFA, from the payer side, who are going to come in and explain
from their perspective how the system is working. And if there
are things that this panel thinks that we particularly need to
be on the lookout for, we need to have responsive questions or
responsive answers on, it would be important to us to know that
so that as we go into that next phase we are prepared for that.
We are now joined by the vice chairman of the Task Force,
Dr. Fletcher. Other members have given their statements. If you
have anything you want to say before we begin we will be glad
to hear from you.
Mr. Fletcher. Thank you, Mr. Chairman. I appreciate you
holding these hearings. I think it is very important. You know,
I met with a physician yesterday and we were discussing HCFA
and some of the oversight, and one of the concerns was raised
in that meeting of the fact that sometimes the way HCFA
implements fraud and abuse and other regulations, certainly
impairs I think sometimes a provider's ability to really
provide the care and encumbers them with a great deal of
bureaucracy. And sometimes I am not sure we are targeted as
well on fraud and abuse.
So I think it is going to be an excellent opportunity to
oversee the actions of HCFA and to make sure that we work to
provide better health care for all of our constituents. Thank
you, Mr. Chairman.
Chairman Chambliss. Thank you, Dr. Fletcher. We will begin
the testimony and, Dr. Robinson, we will go to you, go to Ms.
Murray, then Mr. Vaughan.
STATEMENT OF JOE SAM ROBINSON, JR., M.D., PRESIDENT, THE
NEUROLOGICAL INSTITUTE OF CENTRAL GEORGIA, MACON, GA
Dr. Robinson. Thank you, Mr. Chambliss. Good morning. My
name is Joe Sam Robinson and I am a practicing neurosurgeon
from the beautiful city of Macon, GA. And I would like to say I
am honored to be here today to discuss some of these issues;
more exactly, the impact that HCFA regulation has upon
practicing physicians and, more importantly, upon their
patients.
I think there are two general comments I would like to make
before I get started. The first one is that I think practicing
physicians basically respect HCFA and the task that it has been
charged with performing. It is a very complicated situation. We
have an aging population. There is an increasing technology,
evolving technology, that these patients need access to, and
their budgetary restraints. So it is natural there is going to
be some tension and conflict in this realm. So I can appreciate
that.
The next issue I would like to just make reference to is
the spirit of my remarks are going to be as much nonpartisan as
I can make them. And I think one of the difficulties that
happens, and I think physicians are upset about this, is they
see issues involving health care being politicized and the
differing parties attempting to gain some leverage for one
reason or another. And I just think health care is too
important to let this happen. So we shouldn't be in that
domain.
I have five random comments I would like to make just from
my point as sort of a ground zero of the health care delivery
system. I don't have any special expertise in a lot of the
bureaucratic issues involved here but I can make some remarks
about how some of these regulations have impacted upon my
patients and the health care delivery system.
My first comment is the HCFA regulations are excessively
complicated, voluminous, and changeable. They are just
absolutely amazing. I asked my office manager to bring in the
documents we had received from HCFA in the past year or so, so
I could look them over. And she came into my office, I was
concerned she might get a little low back injury; might have a
Workmen's Compensation problem on our hands because they were
so heavy.
So rather than going through them, I had them weighed, and
she reported back to me they weighed 35 pounds. So 35 pounds of
regulations have come upon our small practice in Macon, GA,
from HCFA in the course of a year. And as a practicing
physician, I am responsible for making sure those regulations
are effectuated. There are all kinds of nuances about patient
care documentation, and what happens is it is just impossible
for me to do that. It is just past my abilities. So I have to
depend on people in my office to make sure these regulations
are complied with and I am responsible for those, for the
compliance with these incredible regulations.
So what that means is I am always nervous, and as far as I
know all the other health care providers I know are nervous
that they may not be in compliance with these regulations, and
that is not a good situation.
Which brings me to my second point, which is the sense of
intimidation and fear which HCFA has fostered among physicians.
It is a very troubling situation. When I came to Washington, to
the big city from our beautiful, bucolic town of Macon, GA,
people warned me, my God, you are going up there? The black
helicopter may come after you if you speak against HCFA. It is
very dangerous what might happen. And this is a very, to me,
upsetting situation. And I think there is--I have to say that
regrettably this is part, in my opinion, of HCFA's policies.
I have got something that actually came off the HCFA Web
site, it is dated March 17, 1998, and they are talking about
fraud and abuse in there. And it is--one of their purposes is
to encourage a fear of prosecution and punishment for
unscrupulous providers. Well, I don't know any unscrupulous
providers, but I do know plenty of doctors that are nervous
that their office staff has complied with these complicated
regulations. And some of the things HCFA does or they suggest
doing in this Web site are, number one, to publicize the
punishments to achieve a sentinel effect. Need to create a fear
of being detected. Random on-site aggressive reviews. Number
three, well-focused random reviews and audits. And number four,
unannounced auditor visits.
So this is sort of the spirit with which HCFA is
approaching the 500,000 physicians in the country that ought to
be their natural allies in administering this program. So it is
not a good way to start things going.
The third comment I'd like to make is that there is a lot
of evolving, changing technology out there, and it is
particularly present in neurosurgery, and that it is important
for the elder citizens of this country to have access to that
technology. So it is particularly important that HCFA doesn't
hinder their access. And I know of several examples when that
basically happens. One of them involves EMG monitoring of cases
where there is neurosurgical intervention around spinal nerve
roots. This is an important safety precaution. It is good for
patients, it is well recognized. And HCFA compensated this
technology up until 1999. Then, when for what I can determine
no good reason, they stopped compensation. Other third-party
payers continue to compensate physicians for this technology.
There is some expense in performing the test. It is a useful
test. In our practice we have elected to continue giving all
our patients this modality.
Basically, sort of the message that HCFA is sending out is
that the compensation for our senior citizens is not going to
be as great, and one could make the case their access to health
care is not as great as other citizens. And I think that is not
a good situation.
The fourth issue I'd like to talk about involves organ
donation. And this is an example of one of the numerous
regulations that are being propagated that have tremendous
impacts on many parts of many, many issues. Organ donation is a
big issue and there are many who need--full transplant
recipients out there. They need these organs. And so as a
neurosurgeon, I thought it my responsibility to have
conversations with patients' families after a loved one has
expired, and initiate some kind of interchange and say what
many people might: Your father or your child is dead, there is
an issue here about maybe letting someone else make use of his
organs. It may be a kind, nice thing that your child or parents
would want to have happen. And then if the family has said OK,
then it has been our custom to have an organ transplant
professional discuss this with the family.
It has worked out very well. Our hospital has been number
one in the State of Georgia in organ donation. And I feel that
that is good.
In 1999 HCFA propagated a regulation which demanded that a
treating physician could not initiate this kind of conversation
unless he went--he or she went to a 2-day course to learn the
right way to do it. And, in general, what HCFA has done is
essentially stopped that kind of communication, and I think
that is awful. I think that is reprehensible. It is a violation
of patient rights, free speech, and everything else I can think
of. And it is just not the kind of thing that should be going
on in this country.
My fifth comment involves patients that are in our tertiary
care center that have brain damage and they need to go to some
kind of extended care facility. That is the best place for
them. It is going to be better on their families and it also is
the most--it is the best use of health care resources. The
expenses won't be as great. They just don't need a tertiary
care center.
What has happened is the compensation package that these
extended care facilities receive is not adequate to allow them
to accept the patient. So what happens is these patients--or if
I could use this phrase, ``shipwreck''--are in a tertiary care
center for months at a time, very inappropriately. And this is
not a good--this is bad. This is wasteful display of
regulations. Then when the transfer is finally arranged, it is
often at a great distance from the patient's family, sometimes
even another State, which causes significant emotional distress
and expensive commuting back and forth. This is something that
Congress should check on.
Those are my five comments.
I now have three sort of general remarks. And this, the
basic point I would like to make is that there should be better
outcome analysis of the thousands of decisions that HCFA is
making. It is a question of outcome analysis. When HCFA makes a
decision, it shouldn't be a blind shot in the dark but its
implications should be known and monitored.
The first of those is the impact on the patient's health.
When HCFA denies an elderly patient very advanced technology,
they need to be able to tell Congress what happens. If a
dialysis patient can't get a nephrologist consult because of
HCFA compensation policies and that is affecting that patient
population, HCFA needs to be able to say, this is what happened
to patients because of that.
The second general issue is that the financial impact of
these decisions needs to be more broadly stated. It shouldn't
be that HCFA merely saves the government $2, but it should be
how much is this costing society? If $2 are saved and it costs
$10 in compliance costs, patient inconveniences, how much is it
costing for families to travel 250 miles, take time off from
work to see their elderly relative in a distant nursing home?
That is something that ought to be looked into, and HCFA needs
to tell Congress what those numbers are.
The third thing that HCFA should tell Congress about or be
able to answer to is the impact of their regulations on the
health care professions, particularly among physicians.
Physicians are growing increasingly timorous and intimidated by
HCFA policies, and that is not in the best interest of the
patients in this country. There needs to be a strong and
independent medical profession that can stand up for their
patient rights against any comer, including third-party payers
of all types, the government, insurance companies. Whatever it
takes to protect their patient's rights, physicians need to
feel like they can do it independently and they should not be
intimidated or terrorized by HCFA. Thank you.
Chairman Chambliss. Thank you, Dr. Robinson.
[The prepared statement of Joe Sam Robinson follows:]
Prepared Statement of Joe Sam Robinson, M.D., Neurosurgeon From Macon,
GA
My name is Joe Sam Robinson, and I am a practicing neurosurgeon
from Macon, GA. I am pleased to have this opportunity to appear before
the committee today to speak to you about the regulatory burdens that
the Health Care Financing Administration (HCFA) places on physicians.
From the perspective of a practicing physician, the task of HCFA seems
immense. Its broad, overarching power makes it the dominant influence
upon the American healthcare system. Its routine decisions and
judgments touch the lives, either directly or indirectly, of nearly all
Americans. Its work will not grow any easier, as budgetary restraints
collide with an aging population whose health and well-being can often
be preserved only by the judicious application of expensive and
evolving medical technologies.
This aside, I find considerable room for improvement in the
administration of HCFA. I do not wish to offer my comments in a
partisan spirit, nor do I claim any special expertise in the
intricacies of such a vastly complicated structure. But in the busy
clinical setting in which I labor (the metaphorical ``ground zero'' of
healthcare delivery), the actions of HCFA, despite its generally good
intentions, often seem quite wrong.
Regrettably, I lack the ability to say what fully should be said,
but I can offer a few random observations.
1. The sense of intimidation and fear of HCFA among physicians is
widespread and troubling. Physicians of my acquaintance, though upset
and concerned, recoil from any outright public criticism of HCFA. They
fear that such testimony will evoke an audit by HCFA, or even worse, by
the Internal Revenue Service. ``Who knows,'' they ask, ``what demons
will be directed against you and your family as revenge for testimony
in Washington?'' I regret such fears are present, but in my opinion the
agency has engendered these fears among well meaning healthcare
providers in many locations all across the country.
2. HCFA regulations are so excessively complicated, voluminous, and
changeable that full compliance even among the most motivated is
difficult. My office, for instance, receives about 35 pounds by weight
of HCFA regulations every year. I personally wish to attend to the
medical needs of my patients, which is why I went to medical school. I
am not a professional coder and would rather spend my time discussing
neurosurgical treatment options with patients, not in coding seminars.
I am forced to depend on my office personnel to respond to the
extraordinary amount of government regulations that HCFA has engendered
so I can continue to tend to may patients' needs. If, however, my
office makes some kind of error in following these regulations, I am
the one who bears the responsibility for the error. As no one can be
sure such errors do not exist, every physician fears himself vulnerable
to reprimand, and thus quakes at any HCFA fiat.
For example, a number of years ago when HCFA first instituted new
rules for coding medical office visits--the so-called ``Evaluation and
Management Documentation Guidelines''--I found the rules quite
confusing. Wishing to be in compliance with this regulations, our
office elected to charge every patient the lowest possible level visit,
thus saving the Federal Government a good deal of money. We imagined we
would avoid an audit by this tactic, since we were undercharging the
Medicare program. However, both advisors and fellow physicians warned
us that such conduct was still actionable and would provoke an audit.
We were therefore forced to increase our office charges to attempt to
comply with HCFA's very complicated coding regulations. As an aside,
you may be interested to know that HCFA has yet to finalize these
regulations. In fact, HCFA is currently using two different versions of
these draft rules, making it even more difficult for physicians to
figure out what is required of them, while we remain subject to audits
and sever penalties if we fail to follow these draft regulations. This
is simply unfair.
3. HCFA often restrains the growth of appropriate new medical
technology by refusing to compensate such procedures or compensating
the technology at such a low level that effective application of such
technology is difficult. For instance, there is significant evidence in
the medical literature that electromyographic monitoring of
neurosurgical procedures in which spinal nerves are decompressed
promotes a good clinical outcome. It has been our custom for a number
of years to routinely employ such technology in many operative cases.
Initially, we were reimbursed by HCFA. In 1999, however, for no
apparent reason, the compensation abruptly ceased. Believing it is in
our patients' interest to use this technology, we have elected to bear
the expense of such monitoring rather than deny it to our patients. We
have been told that we can appeal HCFA's decision, but informally have
received information that such appeals are almost never accepted and we
should not count on a reinstatement of the charge.
Another example of such a restriction in our practice is our effort
to develop a functional neurosurgical program in our area of Georgia.
Such a program has the potential to help a good number of patients who
suffer from movement and other disorders, by using deep brain
stimulation devices. While HCFA does pay for these procedures, the
compensation is at such a low level that we simply are unable to make
use of this exciting new technology. Since most third party payers
follow the HCFA coding and reimbursement procedures, all citizens in
our part of the state have basically been denied access to this
technology.
4. Organ donation regulations do not promote discussions with
patients about organ donation options. As a neurosurgeon, it is has
often been my responsibility to inform family members when the earthly
life of a loved one has ceased. In the past, in the course of such a
discussion I have mentioned the usefulness of organ donation. This is a
responsibility that I take quite seriously. Indeed, I have published an
article in the Georgia State Medical Journal on this very subject.
Following a general discussion about the good things that organ
donation can accomplish, I used to refer the affected family to a
representative of an organ retrieval service where detailed questions
could be answered in a kind and gentle way. The families of many of my
patients generally agreed to organ donation based on this local system,
which I believe functioned in a kind, beneficial and humane fashion. In
1999, however, new HCFA regulations forbade any physician who had not
been through a 2-day HCFA approved course on the subject of organ
donation to broach this issue with the patient's family. Such a
regulation effectively curtails useful involvement of the deceased
patient's treating physician and severs the role of someone who is
often a trusted friend, from this important decision. In my opinion,
this new HCFA regulation represents a wrongful intrusion in the doctor/
patient relationship, and displays a cavalier restriction upon the
rights of free American citizens. With such a scarcity of organs and
long organ transplant recipient waiting lists, HCFA should be doing
everything in its power to encourage, not discourage such discussions.
5. HCFA's long-term care facility compensation policies have on
occasion increased healthcare costs and have initiated significant
family distress. A good example is the placement of brain injury
patients in appropriate long-term care facilities. As compensation is
quite inadequate, long-term care facilities are often reluctant to
accept patients, forcing them to remain in far more expensive tertiary
care facilities for often months at a time. When discharge occurs, it
is often to a location at great distance from the patient's family.
This happened to me recently, when one of my patients was discharged to
a facility in another state, over 250 miles from his family.
In many ways, our vast half-public, half-private healthcare system
is the best in the world. Unfortunately, however, over the years HCFA
has come to dominate this healthcare system. While attempting to
maximize efficiency, improve outcomes, equalize treatment costs, and
diminish expenses, its actions have regrettably often had contrary,
unintended effects. I would therefore suggest an increased oversight
and analysis of HCFA policies, rules and regulations. Those policies,
which adversely impact the physician/patient relationship and patient
health, should, in particular, be rigorously assessed. Additionally,
the total expense of such regulations, including total compliance
expenses should be more closely monitored.
Finally, there is another more general issue on this topic that
should be closely monitored by Congress: the effect HCFA policies have
on diminishing the independence of the medical profession. Such
independence is part of a broader system of checks and balances, which
ensures the use of governmental power is judicious and restrained.
Retention of this independence is in the high national interest.
Once again, Mr. Chambliss, and other members of the Committee,
thank you for the chance to meet with you today on this important
issue. My fellow physicians and I want only to do our very best to take
care of our patients. The time is right for Congress to seriously
reevaluate the HCFA rules, regulations and policies that interfere with
this basic goal.
I would be pleased to answer any questions that you may have.
Chairman Chambliss. Ms. Murray.
STATEMENT OF KATHLEEN G. MURRAY, EXECUTIVE VICE PRESIDENT AND
CHIEF OPERATING OFFICER, NORTHWESTERN MEMORIAL HOSPITAL,
CHICAGO, ILLINOIS; ON BEHALF OF THE AMERICAN HOSPITAL
ASSOCIATION
Ms. Murray. Mr. Chairman I am Kathleen Murray, the
executive vice president and chief operating officer of
Northwestern Memorial Hospital in Chicago. I am here today on
behalf of the American Hospital Association's nearly 5,000
hospital, health system, 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.
Because hospitals and health systems are entrusted with the
lives and health of people, we are among the most regulated
fields in America. For example, the Mayo Clinic in Rochester,
Minnesota determined that hospitals are subject to 132,720
pages of Medicare rules. A breakdown of those rules, or the
largest numbers of those rules, is on Chart A in front of us.
This just represents some of the largest categories of the
132,000 pages.
Every day, hospitals and health systems submit about
200,000 Medicare claims. That is roughly 72 million per year.
In 1997, close to 12 million Medicare beneficiaries received
acute care services. For hospitals to be reimbursed for the
care we provide to our Nation's seniors, we must follow the
maze you see here in Chart B. I know you have a copy of this
and can't see it there, but at the very top, on the right-hand
side, it says that we must spend 20 minutes asking questions of
patients about their secondary coverage. A new requirement is
that we have to get this information every single time a
patient presents.
So if you are a cancer patient and you are coming for
radiation therapy three times a week, three times a week we
have to ask you all of these questions and take 20 minutes of
your time to refill out the Medicare secondary payer
questionnaire. Complying with this Medicare billing maze is no
small task. At Northwestern Memorial, the billing department
alone spends more than 3,200 hours per month, or 38,400 hours
per year, sorting through Medicare billing requirements.
In addition to Medicare, hospitals and health systems face
laws, regulations, and instructions from Medicaid, the
Occupational Safety and Health Administration, the
Environmental Protection Agency, the Centers for Disease
Control, the Internal Revenue Service, and numerous other
regulatory agencies. Chart C demonstrates the massive web of
regulators to whom hospitals must answer. As you can see, there
are at least 29 other organizations issuing some type of rules,
regulations, or instructions to hospitals. Hospitals'
regulatory burdens are getting heavier and heavier.
Through the Balanced Budget Act of 1997, Congress sought to
simplify outpatient reimbursement by requiring HCFA to
implement a prospective payment system. The new system, slated
to take effect this July 1, is more complex than the inpatient
PPS system implemented in the early eighties, yet it will be
shoehorned into place over the next few months. For us it means
reviewing over 10,000 new charge codes without any vendor
available to provide billing software to assist us in the over
525,000 outpatient tests we bill for every month.
Recently the AHA sent a letter to HCFA expressing our
concern over inaccurate and misleading HCFA training material
and a lack of detailed information that hospitals need to
properly comply with their directives. It seems that every
regulation HCFA issued was followed by correction notice after
correction notice. This complicates and hinders our ability to
implement the changes in a timely fashion and is impeding the
start-up of outpatient PPS. The outpatient PPS introduced many
new complicated coding requirements that add to those already
in existence.
Worse still, hospitals must continue to operate and
maintain two separate coding systems; this, despite the
recommendation of the National Committee on Vital Health
Statistics which recommended HCFA use only one coding system.
But in order to be reimbursed, hospitals are now required
to collect the old inpatient ICD9 coded diagnoses for a growing
portion of our outpatient services including lab tests. The
vast majority of physicians do not provide ICD9 codes, the
diagnosis information when ordering tests, for the simple
reason that the test itself is needed to make the diagnosis. A
classic Catch-22.
The effort and costs associated with outpatient PPS is
extraordinary and wrong. Hospitals are forced to choose between
providing the care for the patient or delaying the test until
the proper code is received. Our choice has been to provide the
test and risk no reimbursement. In fact we are currently
holding $3 million in Medicare laboratory billing for this
reason, a sum that could destroy a smaller hospital.
On the heels of the new outpatient PPS implementation,
hospitals face the overwhelming task of implementing the
upcoming privacy security and administration simplification
provisions of the Health Insurance Portability and
Accountability Act of 1996, or HIPAA. Some experts estimate
HIPAA implementation will cost $43 billion over 5 years, much
of which will be borne by providers.
Yet another Federal regulation in the pipeline is OSHA's
proposed ergonomics rule. We believe that OSHA's estimate of
the cost of this for hospitals is grossly underestimated. In
addition, there are patient care implications. Complying with
this growing mountain of rules and regulations comes at a high
administrative price tag.
At Northwestern Memorial we have committed a great deal of
time and resources to ensure that we follow State and Federal
regulations. Our culture is to do the right thing. We have a
corporate compliance officer who is also an experienced health
care attorney. The hospital's corporate compliance committee,
which I chair, includes nine other senior officers who meet
monthly to discuss regulatory changes and compliance
initiatives. We have an internal audit department with a staff
of six and a number of outside resources who regularly and
actively focus an increasing amount of time on Medicare-related
compliance issues.
The rules are the same for smaller hospitals. How can they
afford this? Besides the known expense of time and resources,
burdensome regulations include hidden costs, a prime example
being the toll they take on employee morale. Our employees came
to Northwestern to take care of patients. The current
regulatory environment buries good dedicated employees in
bureaucratic paperwork. In today's tight job market, we face
employee exodus to jobs that involve less red tape and hold the
potential for greater job satisfaction.The necessity to
constantly train and educate new staff in the intricacies of
these burdensome regulations is another hidden cost that
hospitals must bear.
In conclusion, hospitals' first priority is to provide
high-quality care to our patients. Only a small percentage of
these voluminous regulations contribute to our efforts to
provide quality patient care. The rest simply drain resources
away from that goal. These burdensome regulatory rules also
place a financial strain on providers who are already reeling
from the drastic provider cuts in the 1997 Balanced Budget Act.
Mr. Chairman, we all agree the health care industry should
be regulated. There is a valid reason why HCFA, the Joint
Commission, IRS, and OSHA should monitor hospitals' activities.
However, the strain of 29 or more organizations issuing rules,
instructions, and laws is hurting the health of our Nation's
hospitals. There is no coordination among agencies that
regulate providers. Rules appear to be issued in a vacuum with
no regard to the fiscal or practical consequences of
compliance.
Most of the examples I have given today come from
Northwestern Memorial's experience. I speak, though, for
hospitals across the country, as these examples apply to all
hospitals whether large or small.
The AHA is ready and willing to continue our work with HCFA
and other agencies to improve the way rules and regulations are
promulgated and implemented. We know that the size and
complexity of the Medicare program is a challenge. 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.
Thank you very much for this opportunity.
Chairman Chambliss. Thank you very much Ms. Murray.
[The prepared statement of Kathleen G. Murray follows:]
Prepared Statement of Kathleen Murray, Member, American Hospital
Association
Mr. Chairman, I am Kathleen Murray, executive vice president and
chief operating officer of Northwestern Memorial Hospital 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 our history dates back to the days of the Civil War, the
Northwestern Memorial of today was created in 1972 when two Chicago
hospitals, Wesley Memorial and Passavant Hospital consolidated their
services. It is the primary teaching hospital for the Northwestern
University Medical School and enjoys a substantial national reputation.
The hospital is staffed by more than 4,000 caregivers, including 1,000
physicians in 30 medical and surgical specialties, all dedicated to the
organization's mission of putting ``Patients First.'' Last year,
Northwestern Memorial provided care for more than 260,000 outpatients
and admitted close to 40,000 patients. The hospital has a diverse
patient population in its urban locale, serving patients with many
ethnic and socioeconomic backgrounds.
maze of regulations
Because hospitals and health systems are entrusted with the lives
and health of people, we are among the most regulated fields in
America. For example, the Mayo Clinic in Rochester, Minnesota
determined that hospitals are subject to 132,720 pages of Medicare
rules. A break down of that overwhelming statistic is provided for you
in Chart A.
CHART A.--REGULATION OVERLOAD
132,720 Pages of Medicare Rules
------------------------------------------------------------------------
No. of pages
------------------------------------------------------------------------
Medicare Laws and Related Laws.......................... 706
Medicare Regulations (42C.F.R.)......................... 3,574
Fraud and Abuse Regulation.............................. 14,500
HCFA Registers ('94-'98)................................ 30,000
Carrier Newsletters..................................... 4,320
Intermediary Communicators.............................. 2,880
HCFA Administrator Decisions............................ 2,000
------------------------------------------------------------------------
Source: Mayo Clinic.
Every day hospitals and health systems submit about 200,000
Medicare claims--that's roughly 72 million per year. In 1997, close
to12 million Medicare beneficiaries received acute care services. For
hospitals to be reimbursed for the care we provide to our nation's
seniors, we must follow the maze known as ``Medicare Inpatient Hospital
Billing System.'' If you look at Chart B, you will begin to understand
the morass of regulations hospitals face.
CHART B
Complying with this Medicare billing maze is no small task. In
fact, some rural hospitals have almost as many billing clerks as they
do beds. In Gonzales, Texas, Memorial Hospital has 25 beds and a
billing staff of 20 employees. At Northwestern Memorial, our patient
financial services department alone spends more than 3,200 man hours
per month, or 38,400 man hours per year sorting through Medicare
billing requirements alone.
This volume of staff time is necessary because hospitals, health
systems and other health care providers must comply with instructions
from 43 different Medicare Part A fiscal intermediaries, and 28
Medicare Part B fiscal intermediaries. These are private insurance
companies that contract with the Health Care Financing Administration
(HCFA) to process Medicare claims.
HCFA has delegated the responsibility of determining medical
necessity to these local fiscal intermediaries. The vehicle for this
determination is a publication called the local medical review policy
(LMRP). An LMRP may be issued for diagnostic services, surgical
procedures, lab tests, etc. Northwestern Memorial's fiscal
intermediary, Administar, currently has 60 LMRPs, of which 35 are
either new or significantly revised and reissued since January 1, 2000.
Administar and Wisconsin Physician Service, the Part B fiscal
intermediary, have only one LMRP in common. This indicates that
physician practices, which have office-based diagnostic services, may
not be subject to the same medical necessity standards as hospitals
rendering the same service for the same reason. This has ramifications
for patient care consistency and quality.
In addition to Medicare, hospitals and health systems face laws,
regulations and instructions from Medicaid, the Occupational Safety and
Health Administration (OSHA), the Environmental Protection Agency, the
Centers for Disease Control, the Internal Revenue Service (IRS), and
other regulatory agencies. Chart C clearly demonstrates the massive web
of regulators to whom hospitals must answer. There are at least 29
organizations issuing some type of rules, regulations or instructions
to hospitals. Depending on the type of facility and its location, there
could be more than 29.
CHART C
To make matters more troublesome, many of our regulators issue
conflicting and confusing rules. For example, the Joint Commission on
Accreditation of Healthcare Organizations (JCAHO) recently issued
revised standards for the use of physical restraints and patient
seclusion that differ from government requirements. JCAHO requires that
an in-person evaluation by a health care provider be done within 4
hours of the beginning of restraint and seclusion. HCFA, on the other
hand, requires that a face-to-face evaluation must occur within 1 hour.
regulatory burden increases
Hospitals' regulatory burdens are getting heavier and heavier.
Using a patchwork of 13 different payment formulas, Medicare outpatient
reimbursement is complicated and administratively costly for hospitals
and the Medicare program. Through the Balanced Budget Act of 1997,
Congress sought to simplify outpatient reimbursement by requiring HCFA
to implement a prospective payment system (PPS).
The AHA supports an outpatient prospective payment system that is
simple, predictable and fair. Unfortunately, between the enactment of
the law and the drafting of the regulatory language, the new system is
anything but. The new system, slated to take effect July 1, is more
complex than the inpatient PPS implemented in the early 1980's, yet it
will be shoehorned into place over the next few months. Ten thousand
existing charge codes are being reviewed for appropriateness while
upwards of 1,000 new codes may need to be opened. Additional
documentation and coding will be required. Coinsurance and deductible
determinations will be multivariable calculations that will inevitably
lead to errors for hospitals and confusion for patients. Detailed
billing requirements and error reporting procedures that are not fully
tested will be implemented simultaneously. Software support from
vendors has not been finalized and the system will have little or no
lead-time before going live.
Recently, the AHA sent a letter to HCFA expressing our concern over
inaccurate and misleading HCFA training material, and a lack of
detailed information that hospitals need to properly comply with their
directives. It seems that every regulation HCFA issues is followed by
correction notice after correction notice. This complicates and hinders
our ability to implement changes in a timely fashion and is impeding
the start up of the outpatient PPS.
The outpatient PPS introduced many new complicated coding
requirements that augment those already in existence. Worse still,
hospitals must operate and maintain two separate coding systems--this
despite the recommendation of the National Committee on Vital Health
Statistics, which recommended HCFA use only one coding system. In order
to be reimbursed, hospitals are required to collect ICD9 coded
diagnoses for a growing portion of our outpatient services, including
tests. The vast majority of physicians do not provide ICD9 coded
diagnosis information when ordering tests for the simple reason that
the test itself is needed to make the diagnosis. Hospitals must spend
inordinate amounts of time and money tracking down physicians for the
appropriate ICD9 codes, or not be paid at all, as Medicare often
rejects the general ICD9 code. Northwestern Memorial is holding $3
million in Medicare laboratory billing for this reason, a sum that
could destroy a smaller institution.
The effort and costs associated with outpatient PPS is
extraordinary--and wrong. It forces hospitals to make decisions that
could negatively impact patient care. Our only options are to absorb
the costs of the tests without any possibility of reimbursement or to
bear the costs of resubmitting the bills multiple times with no
guarantee of payment.
The prospective payment system has implications for home health
agencies, too, a branch of providers already at serious financial risk.
The increase in required paperwork under PPS necessitated that
Northwestern Memorial's home health agency hire an additional fulltime
employee. These same reporting requirements reduce field nurse
productivity and increase costs by $3.03 per visit. HCFA responded by
increasing reimbursement by a mere twelve cents per visit.
On the heels of the new outpatient PPS implementation, hospitals
will face the monstrous task of implementing the upcoming privacy,
security and administrative simplification provisions of the Health
Insurance Portability and Accountability Act of 1996 (HIPAA). Without
significant alterations, implementation of this regulation could be
extremely costly in terms of both dollars and increased liability. The
Health and Human Services Secretary estimated that the regulation would
cost $3.8 billion over 5 years, with the bulk of the costs being borne
by providers. However, that estimate includes the costs of only a few
of the provisions. An earlier study based on similar policies estimated
costs at $43 billion over 5 years. The AHA has not done a formal cost
estimate, but we believe the costs will be significant.
Yet another Federal regulation in the pipeline is OSHA's proposed
ergonomics rule. Excluding the expense of retrofitting hospitals to
eliminate and minimize patient lifting, OSHA's proposal is
administratively pricey. Hospitals would need at least one new
management position at each hospital. They would have to create a
monitoring system and launch a massive employee education campaign. The
AHA estimates that OSHA's ergonomics standard would cost hospitals and
health system millions of dollars to implement--all with no sound
scientific evidence that employee safety would increase or that
injuries would drop.
compliance costs are high
Complying with this growing mountain of rules and regulations comes
with a high administrative price tag. In HCFA's most recent comparison
of wages, medical records and administrative cost centers showed the
largest increases between 1996 and 1997, the period for which the most
recent data is available.
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, which I chair, includes nine other senior officers who meet
monthly to discuss regulatory changes and compliance initiatives. We
have an internal audit department with a staff of six, who regularly
and actively focus an increasing amount of their 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
good, dedicated employees in bureaucratic paperwork. In today's tight
job market, we face employee exodus to jobs that involve less red tape
and hold the potential for greater job satisfaction. The necessity to
constantly train and educate 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. Only a small percentage of these voluminous regulations
contribute to our efforts to provide quality patient care. The rest
simply drain resources away from that goal. These burdensome regulatory
rules place a financial strain on providers, who are already reeling
from the drastic provider cuts included in the 1997 Balanced Budget
Act. And as I said earlier, in addition to Medicare we face laws,
regulations and instructions from some 29 other regulatory agencies.
Mr. Chairman, we all agree the health care industry should be
regulated. There are valid reasons why HCFA, JCAHO, the IRS and OSHA
should monitor hospitals' activities. However, the strain of 29 or more
organizations issuing thousands and thousands of pages of rules,
instructions and laws is hurting the health of our nation's hospitals.
There is no coordination among agencies that regulate providers. Rules
appear to be issued in a vacuum with no regard to the fiscal
consequences of compliance.
Though most of the examples I have given today come from
Northwestern Memorial's experience, I speak for hospitals across the
country as these examples apply to hospitals whether large or small.
The AHA is ready and willing to continue our work with HCFA and other
agencies to improve the way rules and regulations are promulgated and
implemented. We know that the size and complexity of the Medicare
program is a challenge. 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.
I thank the Committee again for the opportunity to describe the
difficulties hospitals are facing. I welcome any questions you may
have.
Chairman Chambliss. Before we go to Mr. Vaughan, just so we
will know as a matter of comparison, Northwestern Hospital,
what is the number of beds at that facility?
Ms. Murray. We have 700 beds.
Chairman Chambliss. Mr. Vaughan, if you will tell us how
many have you as you begin your statement and we will turn it
over to you.
STATEMENT OF PAGE VAUGHAN, EXECUTIVE DIRECTOR, EAST GEORGIA
REGIONAL MEDICAL CENTER
Mr. Vaughan. Good morning Mr. Chairman and members of the
House Budget Committee. I appreciate the opportunity to
highlight the challenging regulatory environment hospitals are
facing in these tough times. My name is Page Vaughan. For the
last 5 years I have served as the executive director of
Carolina Pines Regional Medical Center, a 116-bed facility. I
have recently been appointed as the executive director of the
East Georgia Regional Medical Center in Statesboro, GA, which
is a 150-bed facility.
The negative budgetary consequences of the Balanced Budget
Act, together with the industry's increased regulatory burden,
have eroded the financial underpinnings of the Nation's
Medicare program. Combined with the current enforcement
environment, hospital CEO's fear that they are being treated as
guilty until proven innocent. A specific recent regulatory
change illustrates hospitals' frustration with the outpatient
perspective payment system. HCFA has indicated for a year that
these new changes would be effective in July 2000. The
guidelines were only published several weeks ago. Clearly we
understand HCFA's need to meet a deadline given. However, we
are very concerned that hospitals and the Medicare contractors
that actually make these payments to us will have insufficient
time to implement this complex change.
The industry is working diligently with HCFA in an
accelerated implementation time frame. We are very concerned
that this effort will not be successful. While it is important
that providers be held accountable, the constant
reinterpretation of existing regulations that have been
mirrored by my colleagues make it virtually impossible to
always be accurate.
As a hospital CEO, I have significant staff hours, not only
myself but many of my staff people, including clinical
directors, invested in trying to keep up with the increasing
and complex HCFA interpretations. Caregivers should focus on
patients and not, again, on paperwork. And I think in a rural
facility such as mine, we have less economy of scale of people
and staffers to take care of these things. Quite often it does
fall onto the shoulders of clinical people.
Despite the hard work of Congressman Spratt and others, the
Balanced Budget Act of 1997 significantly reduced the amount of
Medicaid patients' payments to disproportionate share of
hospitals. For Carolina Pines, this reduction totaled
approximately $1.1 million last year. This cut plus the BBA-
imposed reduction in our Medicare bad debt has severely hurt
our efforts to reach out to the community to meet the very
complex needs of the area's indigent.
The focus in Congress should be on how to reform the
Medicare program and away from persistent cutting of provider
reimbursements. Bottom line, we lose money on a lot of Medicare
services to Medicare patients, and no other health care
provider can be expected to continue to perform quality
services, again with negative reimbursement.
This country is faced with an increasingly older population
with more complex needs as the years go by. We are serving
these individuals with a beleaguered delivery system. The
regulatory and financial burden that I must operate under as a
hospital administrator is driving too many of my resources
away, again, from patient care and toward paperwork and, again,
the other activities involved in regulation. This, again, is
not good for my patients or these people who, again, are your
constituents.
I appreciate the opportunity to testify and your interest
in enhancing the quality, again, of our Nation's health care
system, which personally I believe, as most people in this
room, is the best in the world. I welcome any questions that
you may have at the appropriate time.
Chairman Chambliss. Thank you very much Mr. Vaughan.
[The prepared statement of Page H. Vaughan follows:]
Prepared Statement of Page H. Vaughan, Executive Director, Carolina
Pines Regional Medical Center
Good morning, Mr. Chairman and members of the House Budget
Committee, I appreciate the opportunity to highlight the challenging
regulatory environment hospitals are facing in these tough financial
times.
My name is Page H. Vaughan, for the last several years, I have
served as the Executive Director of Carolina Pines Regional Medical
Center a 116 bed facility that provided more than 45,000 outpatient
visits and had more than 6,000 inpatient admissions last year. Our
patient mix at Carolina Pines is approximately 40 percent Medicare, 20
percent Medicaid, 30 percent private pay or ``commercial;'' the
remaining 10 percent are indigent care patients for whom we receive no
compensation (obviously a significant fiscal issue). I have just been
appointed to be Executive Director of the East Georgia Regional Medical
Center in Statesboro, GA.
The community we serve at Carolina Pines Hartsville--is largely
rural with some manufacturing. We have industries as diverse as the
world headquarters of Sunoco, to a ``Sting Ray'' sports boat
manufacturing facility, to South Carolina's traditional textile
industry, and the highly regarded Coker College. In short, we are
``middle America.''
From the pending implementation of the prospective payment system
for outpatient services, to the ongoing and unintended negative impact
of the Balanced Budget Act of 1997, one thing is very clear to those of
us delivering health care on the front line: policies and regulations
appear more often than not to be coming out of Washington, DC, without
serious concern for hospitals' ability to implement these changes in
the time frame necessary, and seemingly without regard to how the
changes may affect the quality of patient care. Washington appears to
be focused only on the budgetary bottomline. The current crop of
policies and regulations has shown us this in spades!
This is not to suggest that some regulations haven't succeeded in
clamping down on some ``waste, fraud and abuse'' in the Medicare
program. No one, least of all providers and beneficiaries, want to see
any fraud take place. However, the unfolding negative budgetary
consequences of the Balanced Budget Act, together with the industry's
increased regulatory burden, have eroded the financial underpinnings of
the nation's Medicare program. Combined with the current enforcement
environment, hospital CEO's fear that they are being treated as
``guilty until proven innocent.''
Let me highlight two specific recent regulatory changes that
illustrate hospitals' frustration.
The first involves the Hospital Outpatient Prospective Payment
System (HOPD PPS), and the encouraged use of Advanced Beneficiary
Notification (ABN) by the intermediaries. The Ambulatory Patient
Groupings (APC's) are a new and unique way to reimburse hospitals for
outpatient services on a prospective basis replacing the old cost-based
system (A $17 billion per year system that accounts for 10-15 percent
of an average hospitals' revenue). HCFA has indicated for a year that
these new changes were coming and that they would be effective in July,
2000. Unfortunately, the guidelines were only published a couple of
weeks ago. Clearly, we understand HCFA's need to meet a deadline.
However, we are very concerned that hospitals and the Medicare
contractors, that actually make payments, will not have sufficient time
to implement this complex major change in the way we conduct business.
HCFA is going forward with critical implementing changes even when
the Medicare fiscal intermediaries have raised concerns that they may
not have their systems in place and tested given the extremely short
implementation time frame. Hospitals run the risk of submitting
incorrect bills due to lack of instructions and implementation time for
training and systems changes. One of our concerns is that these bills,
submitted in a good faith, but never the less possibly in error, could
retroactively be classified as fraudulent by the enforcement community.
The industry is working diligently with HCFA on an accelerated
implementation time frame. And, HCFA to their credit are working very
hard to try to make the best of a difficult situation. We are very
concerned that this effort will not be successful. I would hope that
Members of this Task Force will focus their attention on helping HCFA
to ensure that an infrastructure is in place.
A second major change involves the encouraged use by the HCFA--
through its fiscal intermediaries--of Advanced Beneficiary
Notifications, as a process to inform the patient of those services
provided to Medicare beneficiaries that HCFA has determined to be ``Not
Medically Necessary or Screening,'' and as such not covered under
Medicare.
First, HCFA and our local fiscal intermediary will argue that
nothing has changed, and in fact, the regulations haven't even been
rewritten. HCFA, however, through the fiscal intermediaries (in our
case, Mutual of Omaha) continually issues interpretations, advisories,
alerts and local medical review policies (LMRP) that guide hospitals.
And even if the regulations do not change, it is this guidance that has
completely confused us and has caused hospitals to focus on a more
extensive use of the ABN. It would not be an overstatement to suggest
that it would take a detective to find clearly written policy from HCFA
concerning ABN's, their use and recent changes. The paragraph below
comes directly from existing HCFA policies.
Providers are responsible for knowing the rules and
regulations that apply to all services they are billing
to the Medicare program. According to the Medicare
Intermediary Manual, Section 3432.2, ``Hold the
provider liable for non-coverage of services if it is
determined that the provider: (1) had actual knowledge
of the non-coverage of services in a particular case,
or (2) could reasonably have been expected to have such
knowledge.'' In general, provider should have known a
policy or rule if the policy or rule is in the Federal
Regulation, Medicare Manual governing the provider
type, or is made through publication from the
Intermediary which includes, but are not limited to,
the Part A news and mailings sent periodically to all
or individual providers * * *
This statement is being used to hold providers accountable for all
regulations and the reasonable interpretation of regulations contained
in these more informal advisories before a hospital ever submits a
bill. While it is important that providers be held accountable, the
constant reinterpretation of existing regulations makes it virtually
impossible to always be accurate. As a hospital CEO, I have significant
staff hours invested in trying to keep up with all these HCFA
interpretations. In fact, hospital staff spends increasing amounts of
time dealing with this growing paperwork burden, shifting resources
away from the patient care that should be our focus. Caregivers should
focus on patients not paper.
As the Executive Director of Carolina Pines, two other Federal
issues have had a severe negative impact on the Hartsville community.
First, the Balanced Budget Act of 1997 significantly reduced the
amount of Medicaid payments to disproportionate share hospitals (DSH),
and for Carolina Pines, this reduction totaled more than $1 million
dollars last year--with a significant impact to our bottom line. This
cut, plus the BBA imposed reduction in Medicare Bad Debt, has severely
hurt our efforts to reach out into the community to meet the health
care needs of the area's indigent population. And, I mentioned earlier
about 10 percent of our care is indigent or unreimbursed.
Second, in the Medicare program, hospitals, nursing homes and home
health agencies are all being paid on a per service basis and not a per
cost of delivery. However our suppliers still require us to pay them on
a cost basis, leaving us in a very precarious position.
To illustrate, Medicare pays Carolina Pines, like other hospitals,
approximately $7,000 for a hip replacement. However, the joint implant
costs between $3,000 and $4,000. The average number of hospital days
for a normal recovery for this procedure is 3 days. So, you can see how
little of the total $7,000 can be used to pay the 4-5 person surgical
team that performs the procedure, to pay for the drugs and other
materials used during the procedure, to pay for the associated
rehabilitation of the patient, and to pay the nursing costs spent
during the patient's recovery. Bottom line, we lose money on almost all
Medicare patients, and no health care provider can be expected to
continue to perform quality patient care with negative reimbursement.
There are several other areas where we have serious concerns about
complicated regulatory requirements including: medical records privacy,
filing of cost reports, provider enrollment and changes to the Medicare
``Conditions of Participation.'' The Federation of American Health
Systems or I would be happy to follow-up with you and your staffs on
the regulatory issues associated with our compliance with these Federal
standards.
Health care is changing dramatically and we are living under ever
changing complex regulations. This environment makes it very difficult
for hospitals to function. I know we provide the best health care in
the world. But hospitals lack of appropriate reimbursement has made
them short on capital to invest in technology, and on staff to meet the
needs of both today and tomorrow's Medicare beneficiaries. The primary
reasons for this are the 1997 BBA and the aggressive regulatory
intervention of the Federal Government, both in reimbursement and
compliance.
The focus in Congress should be on how to reform the overall
Medicare Program to bring it into the 21st Century, and away from
persistent cutting of provider reimbursement for budget reasons
unrelated to health policy. This country is faced with an increasingly
older population that is being served by an unstable health care
delivery system. Believe me, as a hospital CEO, my first responsibility
is to my patients, they depend on me. The regulatory and financial
burden that I must operate under is driving too many of my resources
away from patient care and toward paperwork. That is not good for my
patients or your constituents.
I appreciate the opportunity to testify and your interest in
enhancing the quality of our nation's health care system.
Chairman Chambliss. Let me just say that in going over the
schedule again with staff here, I didn't realize that somebody
has this room at 12 o'clock. And we have got a series of one
15-minute vote and five 5-minute votes. So we are probably
looking at almost an hour before we are going to be back. So I
want to take a minute to get into a couple of questions, but
then come back and give those that have questions an
opportunity within the limited time to try to do so. But also,
as I will remind you at the end, anybody who has written
questions you would like to submit to any witness, I would hope
our witnesses would be willing to respond to those in writing
and they will obviously go into the record. I think there will
be a lot of that.
Also we have got a number of both solicited and unsolicited
written testimony coming in for today's hearing and I would
like to ask unanimous consent to ensure that members have up to
7 additional days from the date of this hearing to put into the
record any other testimony that you wish to put in. Is there
any objection? If not, so agreed to.
[The information referred to follows:]
Prepared Statement of the American Association for Homecare
The American Association for Homecare (AAHomecare) appreciates the
opportunity to submit this statement for the record of the Health Care
Task Force of the Budget Committee. AAHomecare is a new national
association resulting from the merger of the Home Care Section of the
Health Industry Distributors Association, the Home Health Services and
Staffing Association and the National Association for Medical Equipment
Services. AAHomecare is the only association representing homecare
providers of all types: home health agencies and home medical equipment
providers, be they not-for-profit, proprietary, facility-based,
freestanding or governmentally owned. As providers of all end-user home
health care services, AAHomecare members are able to provide unique
``ground level'' insights into the impact of Medicare's regulatory
burdens.
home health agencies
Home health agencies (HHAs) provide skilled nursing care, therapy
and home health aide services to individuals recovering from acute
illnesses and living with chronic health care conditions. Health care
services in the home setting provide a continuum of care for
individuals who no longer require hospital or nursing home care, or
seek to avoid hospital or nursing home admission. The range of homecare
services includes skilled nursing; respiratory, occupational, speech,
and physical therapy; intravenous drug therapy; enteral feedings;
hospice care; assistance in the activities of daily living; skilled
assessments; and educational services.
AAHomecare sincerely appreciates the efforts of this Committee and
the Health Care Task Force in recognizing the importance of home health
care. Your leadership in developing and supporting a recommendation to
eliminate the additional 15 percent reduction in Medicare home health
reimbursements was strategic and prudent. Home health reimbursements
have already been reduced by much larger amounts than originally
forecasted. As a result, the most frail elderly are experiencing
problems with access to home health care. As you are aware, the
additional 15 percent reduction will only exacerbate these problems.
The Health Care Financing Administration (HCFA) announced in
January 2000 that home health services had a rate of growth of minus 4
percent, less than any other health care sector. Unfortunately,
reductions this large have an inevitable impact on the availability of
the homecare benefit. The George Washington University's Center for
Health Services Research & Policy has released two studies reviewing
the impact of the Balanced Budget Act of 1997 (BBA97) on home health
patients and providers. The studies show that:
1. The number of Medicare home health patients has declined by 50
percent from 1994 levels and by 21 percent as a percentage of all
patients in 1998 alone.
2. Patients who were most likely to lose access to covered services
included those suffering from complex diabetes, congestive heart
failure, chronic obstructive pulmonary disease, multiple sclerosis,
skin ulcers, arthritis, and mental illness.
3. Physicians are increasingly hesitant to prescribe home health
services even when they are medically necessary for fear of triggering
a review or a penalty under the Medicare program.
Clearly, the current reimbursement environment is creating a
hardship for home health agencies and threatening beneficiary access to
medically necessary healthcare. This situation will only be exacerbated
by a myriad of new Federal regulations imposed on homecare. These
regulations represent real costs to home health providers and decreased
dollars spent on patient care. The cumulative effect of these
regulatory initiatives is to siphon crucial resources away from patient
care.
Expansion of OASIS to Non-Medicare and Non-Medicaid Patients
Medicare has required home health agencies to collect Outcome and
Assessment Information Set (OASIS) survey data from Medicare
beneficiaries for nearly a year. AAHomecare understands the need for a
uniform data set for measuring patient outcomes in home care. We do not
understand, however, why HCFA has recently determined that OASIS data
must be collected from both Medicare and non-Medicare patients.
HCFA estimates that OASIS, as proposed, will impose an additional
$45 million in costs in the first year and $110 million in costs over 5
years. They also concede that 70 percent of agencies will receive no
Medicare reimbursement for these costs and that the new data reporting
measures would require home health agencies to expend 967,600 hours of
effort annually. Thus, already scarce financial and personnel resources
will be further diverted from patient care.
HCFA maintains that OASIS data is needed to implement a prospective
payment system (PPS) for home health agencies. However, HCFA has
recently conceded that only 19 out of 79 OASIS questions are actually
being used for the PPS system that will be implemented on October 1 of
this year. AAHomecare believes that HCFA is already collecting
information on Medicare and Medicaid patients that is more than
adequate for the purposes of implementing the prospective payment
system for Medicare covered services on October 1. In addition, the
relevance of this information is highly questionable since the coverage
and eligibility requirements for Medicare and Medicaid patients are
different than those for non-Medicare and non-Medicaid patients. For
example, patients must meet the complex criteria for being
``homebound'' as a condition of Medicare coverage, but there is no such
requirement for most non-governmental insurance programs or for the
many patients who pay for services privately. In fact, public harm will
result if HCFA imposes an additional administrative burden on home
health agencies to collect and report more information on more patients
at the very time that the finances of home health agencies are being
stretched to the breaking point by the startup costs of the new
prospective payment system.
We also have serious questions about whether HCFA's use of the
information is consistent with the notices sent to the patients.
Patients who do not have Medicare and Medicaid coverage are to be given
a notice which states that the OASIS questions are being asked ``to
make sure that you get quality health care services.'' (64 Fed. Reg. at
32991, June 18, 1999) The notice further states that the information
will be made ``anonymous'' so that HCFA ``cannot know that the
information is about you.'' In reality, it would appear that HCFA as
well as the state agency routinely surveying the home health agency
would have access to unencoded OASIS data. Therefore, the information
is not, in fact, ``anonymous.''
It also seems prudent to defer expanding the government's
collection of OASIS data in view of recent actions by both the
Administration and Congress. On November 3, 1999, the Department of
Health and Human Services published proposed comprehensive medical
information privacy regulations establishing new privacy standards for
medical information that is transmitted electronically. (64 Fed. Reg.
59917) The collection, encoding and transmission of OASIS data would be
encompassed within those standards. The Administration has indicated
that it will publish the final regulations in the latter part of this
year. If those standards impose new privacy protections (which is
likely) home health agencies will have to incur the additional expense
of changing the process for collecting and reporting the expanded OASIS
data.
In the Balanced Budget Refinement Act of 1999, Congress directed
the General Accounting Office (GAO) to study and report back to
Congress (a) on the costs incurred by home health agencies in complying
with OASIS and (b) ``the effect of such data collection requirement on
the privacy interests of patients.'' (See Sec. 301(b)) GAO is just now
in the process of assembling the research team for this project. It
would seem prudent, particularly at a when the home health benefit has
been so severely disrupted, to allow Congress and the Administration to
consider the findings of the GAO report before expanding OASIS.
Home Health Advance Beneficiary Notices
HCFA is also in the process of approving a revised Home Health
Advance Beneficiary Notice (HHABN) to be given to Medicare patients
where the home health agency believes that services prescribed by the
patient's physician would not qualify for coverage under the Medicare
home health benefit. (65 Fed. Reg. 24217) AAHomecare supports the use
of standardized notices accurately informing patients of their Medicare
rights. We have several concerns with the revised notice that HCFA
seeks to have approved.
The notice estimates that complying with the HHABN requirement will
consume 180,000 hours annually. (65 Fed. Reg. at 24217) These hours and
associated costs result in another cut in funds that are already
inadequate to provide the services that beneficiaries have a statutory
right to receive. None of these costs appear to have been included in
the calculation of the PPS base reimbursement rates. The new notice
also appears to require agencies to incur unnecessary and duplicative
costs. For example, a new page has been inserted into the notice that
requires HHAs to inform beneficiaries of where they can obtain ``free
legal services.'' The ``patient rights'' provisions of the conditions
of participation do not contain a requirement of any such notice. Home
health agencies should not be expected to locate legal services for
their patients.
In addition, the additional page requires the HHA to inform the
patient of the number for the Area Agency on Aging and the state's
toll-free home health hot line. The conditions of participation already
require HHAs to notify patients in writing of the state's toll-free
home health hotline number ``when the agency accepts the patient for
treatment or care * * *'' (42 C.F.R. Sec. 484.10(f)) Thus, this notice
requirement is duplicative and should be stricken in accordance with 44
U.S.C. Sec. 3506(c)(3)(B).
The notice states that the patient may submit any additional
information, including additional information from the patient's
physician, to the home health agency, which will then forward it to
Medicare. We question whether the additional cost of collecting and
forwarding this additional information was included in the estimate of
180,00 hours annually to implement this provision. Finally, the notices
do not appear to provide for the situation where some, but not all, of
the services ordered by the physician may not be covered by Medicare.
Surety Bonds
AAHomecare's HHA members strongly supported the enactment of a home
health surety bond at a maximum of $50,000. We supported this provision
in order to ensure that only high-quality home health providers are
given the opportunity to serve Medicare beneficiaries. Congress enacted
the new requirement as a part of the BBA97. When HCFA implemented the
new regulations in early 1998, the requirement was expanded to the
greater of $50,000 or 15 percent of Medicare revenues. The HCFA
requirement also permitted the use of the surety bond for Medicare
recoupments. These requirements made it nearly impossible for a surety
company to develop these bonds, and greatly increased the costs of the
bonds that were available. The cost of securing a surety bond is not an
allowable Medicare cost, which made it very difficult for HHAs to
obtain these bonds. For these reasons, we were not able to support the
surety requirements enacted by HCFA.
Ergonomics
AAHomecare is also concerned about the proposed ergonomics program
regulation recently promulgated by the Occupational Health and Safety
Administration (OSHA). We believe that homecare should be exempted from
the proposed ergonomics standard. OSHA's own cost estimates indicate
that homecare providers would spend $51.5 million in order to comply
with the proposed rule. This places homecare in the fourth highest
compliance cost category as a percent of total revenue out of the 42
affected industries. As stated above, the homecare industry is ill
prepared to absorb these costs at this time.
In addition, homecare providers believe an exemption is necessary
due to the lack of employer control of the work site. A 1993 Seventh
Circuit Court decision in HHSSA v. Martin, 984 F. 2d 823, and the
recent decision by the Secretary of Labor to withdraw the work at home
OSHA policy only further supports the need for a homecare exemption. In
HHSSA v. Martin, the Court found that the Occupational Safety and
Health Act does not authorize OSHA to impose work site related
standards on home work sites that are not under the employer's control.
OSHA recognized the Court's findings in their November 1999 compliance
directive on bloodborne pathogens, but failed to do so in the
ergonomics proposed rule.
AAHomecare also believes that home health meets the standard
qualifications for an exemption. While AAHomecare recognizes the
importance of preventing work place injuries, it is difficult to
understand how a regulation so broad in scope, covering manufacturing
jobs, manual handling jobs, and jobs in which an employee experiences
an OSHA-recordable musculoskeletal disorder (MSD), would be applied to
the unique homecare environment. Homecare services are provided in a
patient's home, which includes a broad range of conditions that
homecare employers can not possibly control.
AAHomecare further believes that the recent withdrawal of the
``work at home'' advisory warrants an exemption for the homecare
industry. The advisory indicates that OSHA will not attempt to impose
OSHA standards on private homes, unless they are being used as a part
of the manufacturing process. It is the Association's understanding
that no further efforts will be made by OSHA to apply these standards
to the home work environment until a national dialogue on the issue
takes place.
Based on these findings, AAHomecare recommends including homecare
on the list of industries exempted from the requirements due to the
unfeasible costs and the lack of employer control in the home work
environment.
home medical equipment
Home medical equipment (HME) providers supply medically necessary
equipment and allied services that help beneficiaries meet their
therapeutic goals. Pursuant to the physician's prescription, HME
providers deliver medical equipment and supplies to a consumer's home,
set it up, maintain it, educate and train the consumer and caregiver in
its use, provide access to trained therapists, monitor patient
compliance with a treatment regimen, and assemble and submit the
considerable paperwork needed for third party reimbursement. HME
providers also coordinate with physicians and other homecare providers
(e.g., home health agencies and family caregivers) as an integral piece
of the homecare delivery team. Specialized home infusion providers
manage complex intravenous services in the home.
Medicare's durable medical equipment, prosthetic, orthotic and
supply (DMEPOS) benefit is administered through four specialized
regional carriers known as Durable Medical Equipment Regional Carriers
(DMERCs). In addition, HCFA officials in Baltimore make national
decisions regarding the administration of the DMEPOS benefit.
AAHomecare's HME members consistently express their frustration with
the inconsistency of the guidelines issued by the four DMERCs and
unpredictable changes in national policies. All too often, these
changes go into effect without any consideration of the operational
impact on providers and with little or no notice. AAHomecare believes
that these problems could largely be eliminated through better and more
frequent communication between HCFA, the DMERCs and industry
representatives.
Possible Solutions
AAHomecare believes that many of the regulatory problems associated
with the Medicare DMEPOS benefit could easily be solved through
increased and improved communication efforts. Specifically, we
recommend that Medicare:
Communicate with providers and provider groups prior to
implementing changes in coverage policy or claims processing
requirements.
Seek comments from the industry with respect to the
operational impact of proposed changes.
Standardize policies and rules across the four DMERCs,
including standardization of documentation requirements.
Consider conducting ``pilots'' of certain operational
changes prior to implementing them nationally.
Improve the training of DMERC staff.
Provide better education opportunities for the DMEPOS
community.
A Particular Concern: CMNs
One particular regulatory burden has caused more consternation
among HME providers than any other has; the certificate of medical
necessity (CMN). The CMN is a form designed by Medicare to document the
medical necessity of certain items of medical equipment. In addition,
the CMN collects information necessary to determine whether the
beneficiary meets Medicare coverage criteria for the DMEPOS item. In
order to receive payment for a covered item of DMEPOS, a provider's
claim (HCFA--Form 1500) must be accompanied by a CMN signed by a
treating physician. The original CMN must be maintained by the supplier
and must be produced upon the request of the DMERC, HCFA, or the Office
of the Inspector General.
Providers often experience long delays in obtaining the completed
CMNs because the provider cannot submit a claim for payment to the
DMERC until the physician returns the completed and signed CMN. These
delays lengthen the payment cycle for the supplier. At the same time,
physicians are not penalized for failing to complete the CMN and often
are unaware of the importance of this document. As a result, the DMEPOS
supplier disproportionately bears the weight of physician noncompliance
with CMN requirements.
The administrative burden that results from HCFA rules and DMERC
policies pertaining to CMNs have been documented by industry and
government studies. For example, the NAMES 1998 Industry Survey shows
that the industry maintains higher than average outstanding accounts
receivables because the medical necessity documentation in support of a
claim often takes several weeks (and at times months) to obtain. The
Industry Survey shows that median days sales outstanding for the
industry ranges from a low of 81 days to a high of 108 days.\1\
Likewise, the 1999 HIDA Home Care Financial Performance Survey reports
that the median number of days outstanding for DMEPOS suppliers'
accounts receivable has been rather steady at 84-87 days for the last 5
years.\2\ In addition, the GAO included Medicare documentation
requirements as one of the factors that account for a 30 percent
difference in the administrative costs of serving Medicare
beneficiaries when compared to individuals served by the Veterans'
Administration (VA).\3\
---------------------------------------------------------------------------
\1\ See NAMES Industry Survey, p. 11.
\2\ See HIDA 1999 Home Care Financial Performance Survey, p.18.
\3\ See letter dated May 15, 1997, Re: Medicare: Comparison of
Medicare and VA Payment Rates for Home Oxygen, from William J. Scanlon,
Director, Health Financing and Systems Issues, GAO, to William V. Roth,
Chairman, Committee on Finance, United States Senate.
---------------------------------------------------------------------------
Possible CMN Remedies
Physician Education: Physicians often fail to understand the legal
ramifications of properly completing and signing a CMN. We continue to
hear from our members that many physicians request compensation for
completing the CMN. We also hear that physicians often tell our members
that they will refer their business to suppliers who are willing to
complete the forms. This is a continuing problem, although we
acknowledge recent efforts to address this issue by the OIG. We urge
HCFA to follow the lead of the OIG and develop an ongoing physician
education program on medical necessity requirements. We believe that
consistent and ongoing communication about the role of the physician in
completing the CMN would promote compliance and improve the efficiency
of the process.
Administrative Simplification: The DMEPOS supplier community has
repeatedly requested permission to accept faxed CMNs from prescribing
physicians to take the place of the original document. HCFA responded
with a program memorandum stating that suppliers may submit a claim to
the DMERC for DMEPOS services, if the supplier has received a completed
CMN from the prescribing physician via facsimile. However, the supplier
must be able to produce the original, hard copy CMN in the case of a
post-payment review. The post payment review provision effectively
negated the ability of the DMEPOS supplier to use the fax to transmit
these documents, as very few suppliers will subject themselves to the
possibility of recoupment. In practice, suppliers still must secure the
original, hard copy CMN in order to avoid liabilities in an audit.
AAHomecare welcomes the opportunity to work with HCFA to develop a
secure and efficient means of transmitting CMNs electronically.
Importantly, the Health Insurance Portability and Accountability Act
requires HCFA to implement administrative simplification for claims
processing and payment and we are prepared to assist HCFA in that
process.
Conclusion
AAHomcare appreciates the interest of the Health Care Task Force in
the considerable administrative burdens that the Medicare Program
places on providers. We look forward to working with you and HCFA
officials to support a strong homecare benefit that protects the
interests of beneficiaries and preserves the integrity of the Medicare
Program.
Prepared Statement of the American College of Physicians--American
Society of Internal Medicine
The American College of Physicians-American Society of Internal
Medicine (ACP-ASIM), representing over 115,000 physicians and medical
students, appreciates the opportunity to submit a statement for the
record to the Health Task Force of the Committee on the Budget on the
regulatory burden the Medicare program imposes on physicians. ACP-ASIM
commends the Task Force for its interest in this issue as it is
imperative that the regulatory environment protect the integrity of the
Medicare program without imposing an undue burden on physicians.
Medicare regulations are vast as physicians must navigate over
100,000 page of regulations pertaining to Medicare alone. A number of
these regulations, such as those issued by Medicare carriers, are
updated frequently. Physicians are concerned that the government's
focus on fraud and abuse has increased at a time when Medicare
regulations are becoming more and more complex. The government needs to
ensure that billing errors are not treated as fraud and abuse.
Internists frequently tell us that they will go to jail for the
simplest of mistakes. Although we explain that the standard for
demonstrating fraud and abuse is much higher, the government should be
troubled that this perception is so widespread.
ACP-ASIM has worked with the Department of Health and Human
Services Office of Inspector General (OIG) over the past year to ensure
an appropriate anti fraud and abuse message. We have also attempt to
allay internists' concerns about overzealous prosecution by presenting
statistics showing that the government prosecutes very few physicians
for fraud and abuse. We believe that we have made significant progress
toward raising awareness among Medicare beneficiaries and the public
regarding fraud and abuse while conveying that the vast majority of
physicians are honest. We expect to continue our on-going dialogue with
the OIG.
However, physicians will remain concerned that they are at risk to
be investigated for fraud and abuse if the complex regulatory
environment, which practically prohibits full compliance, remains
unchanged. The OIG has an obligation to enforce the regulations that
are in effect. We believe that the complexity of the regulatory
environment is the root of the problem and that the government should
commit to simplifying it.
The government can demonstrate its commitment to simplifying the
current regulatory environment by:
1. Streamlining Medicare regulations;
2. Improving how regulations and regulatory updates are
communicated to physicians; and
3. Improve physician education regarding Medicare regulations.
Further, we want to bring a several specific issues that are within
the jurisdiction of the Health Care Financing Administration (HCFA) to
the Health Task Force's attention. These issues are:
1. Documentation guidelines for evaluation and management (E/M)
services;
2. Assessing Medicare carrier performance;
3. The Medicare medical review process; and
4. Proprietary, black box coding edits.
We believe these issues deserve Congressional intention as they are
especially problematic for practicing physicians. We urge HCFA to adopt
our recommendations and ask Congress to provide oversight.
Need to Streamline Regulations
The overall volume of Medicare regulations is tremendous. A
document prepared by the majority staff of the House Committee on
Budget puts the number of regulations at over 110,000 pages. This
figure includes HCFA manuals, carrier Part B manuals and newsletters,
fraud and abuse regulations, etc.
A significant portion of Medicare regulations are updated
regularly. The experience of a physician who practices in Kansas
illustrates the magnitude of the regulatory workload faced by
physicians. The Kansas Medicare carrier regularly communicates policies
to its physicians through: a Part B Physicians' Manual; Local Medical
Review Policies (LMRPs); and Medicare communiques. These communications
are not user friendly and that the sheer volume of regulatory
instructions is overwhelming. The annual volume of regulations can most
easily be measured by their height when stacked together. The Kansas
carrier's Part B Physician's manual is approximately two and a half
inches thick. The compilation of LMRPs totals about four inches. A
binder containing the communiques, which are sent out once or twice a
month, is about three-quarters of an inch thick.
Congress should establish a task force comprised of representatives
from all agencies with Medicare jurisdiction as well as representatives
from the physician community and charge it with compiling all Medicare
directives into one accessible source. Overly burdensome regulations
identified during this comprehensive review could be eliminated. All
Medicare regulations should be contained in a single source (or as few
sources as possible). A single entry could contain references to
multiple laws as appropriate. However, a concentrated source of
information is necessary to ensure consistency of information and to
reduce the burden on physicians-reducing their costs and providing them
more time to treat patients.
Streamlining regulations and compiling them into one accessible
source will make it easier for physicians to adhere to Medicare
directives. We believe that framework could be modeled after the HCFA
Physician Regulatory Issues Team (PRIT). The PRIT is comprised of
individuals from various departments within HCFA. It was formed to
assess the totality of Medicare regulations and issue recommendations
for improvement. However, it is our understanding that the PRIT has yet
to make significant progress.
One of the few finding announced by the PRIT is that physicians
view all Medicare regulations as ``government'' regulations; they do
not associate specific regulations with the agency that promulgates
them. This supports our contention that a review of Medicare
regulations should be coordinated among all agencies with jurisdiction.
The congressionally established interagency task force we are
proposing should be more open than the PRIT. It should seek broader
physician input. We believe that the best way to assess the impact of
regulations is to ask those who must adhere to those regulations. The
inter-agency task force should provide frequent updates to Congress and
the public regarding its progress.
Need to Improve How Information is Disseminated to Physicians
Requirements are communicated to physicians in a disjointed and
ineffective way. Dissemination of LMRPs, which are policies that are
specific to a particular Medicare carrier's area, are especially
problematic. When LMRPs are updated, typically, only the changes are
listed in the materials sent to physicians. The original policy is
rarely updated and published in its entirety. The result is that
individual practices have to update the original policies in their
files to maintain accurate information, which makes it virtually
impossible for physicians to learn LMRPs. Even the most well-informed
physicians have difficulty keeping apprised of changing Medicare
regulations.
Physicians find it extremely difficult to keep track of ever-
changing Medicare regulations while treating patients. The problem is
compounded for physicians in small group and solo practices, which make
up the majority of rural practices. They do not have the staff to keep
up with constantly changing rules. Although physician involvement in
comprehending and applying regulations is likely to vary according to
practice size, all physicians must be mindful of the universe of
Medicare regulations. The magnitude and complexity of regulations is
compounded for physicians that are covered by more than one carrier
jurisdiction. Keeping track of the morass of Medicare regulations
detracts from the time physicians have available to treat patients.
A single source for Medicare regulations that would result from an
inter-agency effort will greatly enhance physicians' ability to adhere
to regulations.
Need to Improve Physician Education
medicare carrier provider education and training
Congress should allocate additional funding for Provider Education
and Training to help physicians adhere to Medicare regulations. We are
concerned that funding for carrier educational activities has failed to
increase as regulations have become more voluminous and complex. The
Administration's proposed fiscal year 2001 budget allocates $15.8
million for Provider Education and Training. The proposed Provider
Education and Training 2001 funding level equals the $15.8 million that
was allocated for fiscal year 2000 and represents approximately 1
percent of the 2001 $1.3 billion contractor budget request.
medicare integrity program physician education contact
ACP-ASIM is pleased that HCFA is addressing physician education
early in its implementation of the Medicare Integrity Program (MIP),
recently selecting a contractor to implement the physician education
task order.
HCFA must use the physician education task order to find mechanisms
to get information to physicians and other providers in a useful and
manageable way. Our understanding is that the contractor plans to
assess current educational efforts and then develop and implement
educational tools. HCFA must maintain its commitment to this process as
it evolves. HCFA must also be committed to adequately funding the
physician education initiative.
Further, it is essential that HCFA coordinate its education efforts
agency-wide. It would be counterproductive for a segment of the
agency's program integrity group to take actions that would undermine
contractor physician education. For example, it would be inappropriate
for the program integrity group to instruct carriers to issue
overpayment requests based on extrapolating the results of a post-
payment medical review if the contractor developed an educational
approach to conducting review on those who have been audited for the
first time. Similarly, other departments within HCFA must avoid
contradicting physician education initiatives.
Specific Regulatory Issues Worthy of Congressional Oversight
documentation requirements for evaluation and management services
Although ACP-ASIM is encouraged that HCFA is attempting to work
with medical societies to improve the documentation guidelines for
evaluation and management (E/M) services, the guidelines that were
released in 1997 and currently in place dramatically increase the
administrative burden.
The guidelines require physicians to spend a significant amount of
time selecting which code to bill and documenting extensively to
satisfy the comprehensive guidelines.
An internist who carefully reviewed the 1997 guidelines calculated
the number of decisions that a physician must make before selecting a
level of E/M service and billing Medicare. There are 11 decision points
in categories to consider before selecting an E/M code. Each decision
point requires several choices. There are 42 choices a physician must
consider before selecting the proper level of E/M service. There are
6,144 possible combinations representing the number of ways an office
visit for a new patient can evolve and be classified.
A physician must spend time documenting in the patient's record in
addition to spending time deciding what is the appropriate level of
service to bill. The guidelines put an undue excessive documentation
burden on physicians for the sole purpose of billing, not for quality
medical care. The guidelines force physicians to spend less time with
their patients and more time with the patients' charts.
We expect that HCFA will soon announce at least its preliminary
intent regarding the content of revised guidelines. Congress should
ensure that the documentation standard selected by HCFA imposes a
minimal regulatory burden. The Medicare Payment Advisory Commission's
(MedPAC) agrees. MedPAC's 2000 report to Congress on Medicare Payment
Policy MedPAC specifically states that ``HCFA will need to consider
avoiding overly complex and burdensome requirements for physicians,
such as counting formulas that assign points for each element of a
physician's service to determine the level at which services can be
billed.'' It recommends that ``HCFA should continue to work with the
medical community in developing guidelines for evaluation and
management services, minimizing their complexity, and exploring
alternative approaches to promote accurate coding for these services.''
HCFA has also committed to pilot testing the guidelines before they
are fully implemented. The agency has yet to announce specific pilot
testing approaches. ACP-ASIM recommends that any HCFA pilot test of the
eventual guidelines should assess the amount of time physicians spend
writing or dictating a patient's chart note to satisfy the guidelines.
Guidelines that require physicians to spend too much time documenting
information (beyond what is necessary for on-going care of the patient)
unnecessarily interfere with patient care.
We also believe that HCFA should pilot test alternatives to the
guidelines, such as allowing physicians to use time spent with the
patient to determine what code to bill (while meeting a less onerous
documentation standard). Academic research on this issue generally
shows that time is a valid proxy for the amount of physician work
involved in providing an E/M service.
In its 2000 report to Congress, MedPAC recommends that HCFA
``should pilot-test documentation guidelines'' and ``continue to work
with the medical community in developing the pilot tests, and should
ensure adequate time for physician education.''
Congress should also investigate as to whether more aggressive
auditing of E/M services coupled with heightened fraud and abuse
concerns have caused physicians to under bill for their E/M services.
The MedPAC report demonstrates how past annual OIG financial audits of
HCFA have led to intensified review requirements on physicians,
possibly leading to undesirable changes in coding. MedPAC notes that
beginning in 1998, ``decreases began to occur for almost all types of
E/M coding. This change occurred simultaneously with several factors,
including heightened attention to the fraud and abuse issues in the
Medicare program and random audits investigating documentation of E/M
claims.'' The report notes that ``results from the Chief Financial
Officer's (CFO) audit of FY 1996 Medicare spending prompted HCFA to
address concerns about the adequacy of documentation for services
billed. Random audits grew from this impetus and the results of this
and the subsequent two CFO audits further focused attention on fraud
and abuse issues.''
MedPAC observes that it is unclear why the change in 1998 occurred,
saying that ``it may reflect a return to a more appropriate level of
coding'' or ``alternatively, the change may indicate the beginning of
downcoding, that is physicians erring on the side of being overly
cautious. This downcoding may be inappropriate, given that the
beneficiary population is older and in poorer health and that
Medicare+Choice programs generally draw low-risk individuals from the
traditional program. These dynamics would predict a trend toward
higher-level E/M codes.''
Physician Input Into Medicare Carrier Performance
HCFA should establish a mechanism to assess valid regulatory
hassles imposed by a specific policy or by carrier misinterpretation of
HCFA policy identified by state and/or national medical societies.
Carrier misinterpretation of national Medicare policy is problematic.
Carriers are unlikely to recognize that their interpretation of a
national policy is incorrect, leaving physicians no outlet to address
their concerns. There are numerous instances in which a carrier(s)
implemented a policy that inappropriately denied or reduced payment for
services that were billed correctly.
We believe that HCFA can best identify hassles imposed by the
current regulatory environment by listening to the concerns of
individual physicians through their state and/or national medical
society. Frustrated, rank-in-file physicians need a mechanism to
address valid concerns. It is imperative that a process be established
to listen and respond to these concerns so that physicians do not feel
that the government is unresponsive to their legitimate concerns.
We envision that medical societies would only bring well-documented
problems and/or carrier misinterpretations of national policy to the
attention of the HCFA central office. We do not envision that frivolous
or trivial policy matters would be brought to the attention of the HCFA
central office. The HCFA central office would only become involved if a
problem could not be resolved at the carrier or regional office level.
As noted above, it is our understanding that the HCFA regional
offices are vital to addressing physician concerns regarding carrier
policy. Individual physicians and their medical society representatives
can have difficulty in locating appropriate regional office staff. The
HCFA central office should designate a Medicare liaison in the each
regional office to serve as a contact for medical societies and
individuals. HCFA should make contact information available through its
http://www.hcfa.gov Internet site. Providing medical societies access
to central and regional office officials encourages dialogue and
collaborative efforts to solve legitimate problems.
Maintaining a mechanism to collect and assess concerns about
carrier actions will enable HCFA to be more informed regarding the
performance of its carriers. The General Accounting Office (GAO)
recently issued reports detailing HCFA's general lack of oversight of
its Medicare carriers and other contractors. HCFA cannot fully evaluate
its carriers if it lacks a mechanism to collect documented
inappropriate carrier actions. Also, the lack of such a mechanism
unnecessarily antagonizes physicians by making it difficult for them to
get relief for their valid concerns.
Further, HCFA communicates policy instructions to its Medicare
carriers through Program Memoranda and other transmittals, which are
then implemented by the carriers. HCFA should ensure that these
instructions are clear to avoid misinterpretations. The instructions
HCFA sends to its Medicare carriers should be reviewed by practicing
physicians to promote clarity and to assure that the regulatory burden
is minimized.
Medicare Medical Review Process
The Medicare medical review process is a major concern of
physicians. ACP-ASIM is encouraged that HCFA has contracted with the
consulting firm of PricewaterhouseCoopers (PwC) to make recommendations
to improve the effectiveness and the efficiency of medical review. We
await the results of the contractor's report. However, the current
medical review process denies physicians their due process. The design
also coerces physicians into entering into a settlement with their
carrier. Physicians often have a disincentive to prove their billing is
appropriate as the legal costs involved in appealing an audit
determination can rival the amount in question as the overpayment
amount is often determined by extrapolating the results of a small
sample.
Carriers should use detailed statistical analyses of severity-
adjusted provider billing patterns to identify true outliers. Outliers
who fail to exhibit egregious behavior should receive educational
coding assistance before being subjected to comprehensive audits. While
improved technology makes this possible, it is essential that carriers
share the results of statistical analyses with providers and use them
in a constructive manner.
HCFA should standardize the process for how carriers conduct
medical review. The process then needs to be clearly communicated to
physicians. Currently, carriers have wide latitude when conducting
physician audits.
Program integrity entails paying claims appropriately in addition
to detecting and preventing fraud and abuse. Carrier-initiated medical
review should be furnished by a physician licensed in the same
specialty as the physician whose claim(s) is under review. Also, appeal
of overpayment requests over a certain monetary threshold should be
conducted by an independent organization, such as the state Peer Review
Organization. These steps would inject fairness and give physicians
more confidence in the Medicare medical review process. HCFA should use
the stable source of funding provided by Congress for the Medicare
Integrity Program to assure fairness in medical review activities.
Physicians should be able to retain their appeal rights without
opening themselves up to a more comprehensive audit. Currently,
physicians must open themselves up to a review of the patient records
pertaining to all claims for the identified service(s) over an open-
ended period of time simply to maintain their appeal rights. In
addition to opening oneself up to such a practice-disrupting audit,
physician can accumulate substantial legal costs.
Physicians should not have to repay carrier-determined overpayment
amounts until they exhaust all appeal rights and an accurate
overpayment amount has been established. Currently, physicians must
repay overpayments within 30 days even if the case is under appeal.
Proprietary, ``Black Box'' Coding Edits
ACP-ASIM opposes the use of proprietary Commercial Off-the-Shelf
Software (COTS), known as ``black box'' coding edit systems. Congress
should instruct HCFA to refrain from entering into contracts with
entities that maintain proprietary editing systems. Also, Congress
should instruct HCFA to disclose all existing proprietary coding edits.
We believe that such a closed edit system is inappropriate. The
Medicare Correct Coding Initiative (CCI) demonstrates the need for a
coding edit system that is open to peer review. ACP-ASIM and other
medical organizations often identify numerous inappropriate coding
edits in each proposed version of the CCI when HCFA distributes it for
public review. Ideally, inappropriate edits are deleted or altered
before they are implemented. The end result is that the claims payment
system is more accurate because it had been appropriately peer
reviewed. Many inappropriate edits would remain if the CCI was a closed
system, which would deny payment for appropriately provided services.
While we understand that proprietary, black box coding edit systems
are used to save money, we point out that the appropriateness of these
edits cannot be judged solely on their ability to generate savings by
denying payments to providers. The OIG report, ``Using Software to
Detect Upcoding of Hospital Bills,'' released August 12, 1998,
questions the ability of commercial software to accurately detect
inappropriate over-billing. The report, which analyzed two off the
shelf software products currently on the market to identify hospital
upcoding, found that only about 20 percent of the Medicare billing
cases that commercially available software identified as being upcoded
were in fact upcoded.
MedPAC takes a similar position. In its 2000 report, MedPAC
recommends that ``HCFA should disclose coding edits to physicians and
should seek review of the appropriateness of those edits by the medical
community.''
There are numerous other issues that impose a regulatory burden on
physicians. Examples include: random prepayment review of E/M claims;
prescribing durable medical equipment and supplies, including
completing certificates of medical necessity forms; and the Medicare
provider enrollment process. The Task Force can contact our Washington,
DC office for specifics.
Thank you for holding this hearing and for the opportunity to
submit a statement for the record. We look forward to working with the
Health Task Force and the entire Committee on Budget to reduce the
Medicare regulatory burden imposed upon physicians.
Prepared Statement of the American Medical Association
On behalf of our 300,000 physician and medical student members, the
American Medical Association (AMA) would like to thank the Budget
Committee for holding this hearing to discuss the proliferation of
Medicare regulations and their impact on health care providers. The
government cannot continue to subject physicians to new Medicare
regulatory requirements and burdens without commensurate reductions in
existing Medicare rules and regulations.
Background
Physicians today are spending far too much time trying to
comprehend and comply with the Health Care Financing Administration
(HCFA) policies and paperwork requirements rather than focusing on
patient care. For the sake of patients, physicians, and the Medicare
program, Congress and the Administration must take immediate action to
simplify Medicare and reduce the excessive regulatory burdens that
currently exist for physicians providing care to seniors.
Numerous examples of these unnecessary regulatory requirements
exist. The following instances are illustrative of existing regulatory
roadblocks for physicians:
A physician was trying to secure a wheelchair for a
quadriplegic patient. The carrier required the physician to supply a
great deal of additional information, beyond the certificate of medical
necessity and the appropriate diagnosis code, to verify that the chair
was medically necessary. The fact that the diagnosis was for a
quadriplegic patient should have sufficed.
Under the Emergency Medical Treatment and Labor Act
(EMTALA), when a patient presents at the emergency room, the physician
must treat the patient without asking about his or her ability to pay.
However, under Medicare if a physician ends up providing services that
are not covered by Medicare, Medicare requires that prior to providing
the service the physician must inform the patient that the service may
not be covered. The physician must ask the patient to sign the Advance
Beneficiary Notice, which says that the patient understands that he or
she may be liable for the cost of the service. Under EMTALA, however, a
physician cannot discuss payment with a patient.
Physicians report that Medicare documentation requirements
impose the greatest burden on their practices and do little to improve
the quality of care. Physicians are forced to spend more time
documenting their medical records and less time on patient care.
Regulatory Overload
In recent years, HCFA has imposed requirement after requirement on
physicians. This is due in large part to the extensive focus that
Congress and the Administration have placed on addressing alleged
``waste, fraud and abuse'' in the Medicare program. Since the early
1980's, Congress has enacted the following fraud and abuse statutes:
``Ticket to Work and Work Incentives Improvement Act of
1999;''
``Balanced Budget Act of 1997;''
``Omnibus Consolidated Appropriation Act of 1997;''
``Health Insurance Portability and Accountability Act of
1996;''
``Medicare and Medicaid Patient and Program Protection Act
of 1987;''
``Health Care Quality Improvement Act of 1986;''
``False Claims Amendments Act of 1986;''
``Medicare and Medicaid Budget Reconciliation Amendments
of 1985;''
``Medicare and Medicaid Budget Reconciliation Amendments
of 1984;''
``Medicare and Medicaid Amendments of 1981;'' and
``Medicare and Medicaid Amendments of 1980.''
Legislation enacted over the last several years has dramatically
escalated the billing and documentation requirements and their
attendant penalties. Consequently, HCFA has been under intense pressure
from Congress, the White House, the Department of Justice (DOJ) and the
Office of the Inspector General (OIG) to promulgate regulations and
policies to address perceived waste, fraud, and abuse problems.
The aforementioned legislation and regulations have had substantial
negative effects on physicians, providers, and patients in the Medicare
program. The cumulative impact of these laws and ensuing regulations
has amounted to an insurmountable morass of bureaucracy, burden, and
hassle for physicians. Physicians are confronted by an extremely
complicated system of regulations with which it is virtually impossible
to comply. In the current environment, it is difficult to know where
billing errors end and fraud begins. Much of what carriers are pursuing
is inadvertent billings errors. Frequently, these involve situations
about which honest people can disagree.
There are more than 100,000 pages of Medicare rules and guidances
with which a physician must comply. Physicians and their office staffs
are absolutely overwhelmed by the current paperwork requirements
generated by often poorly thought out regulations. In fact, physicians
and their staffs have no single guidebook which they can consult for
billing and coding questions. Rather, physicians' offices regularly
receive reams of notices, guidances, and issuances from their carriers
describing ever-changing policies and regulations. Vital information
for the physician is often buried in these carrier communications,
which can contain dozens of pages of new information each month. Not
knowing of the information's existence could result in violations of
new carrier or HCFA regulations or issuances.
In addition to being extremely voluminous, many Medicare policies
frequently are unclear. Medicare billing is subjective in nature and
involves understandable differences in opinion over clinical judgments
or the level of service provided. Physicians have been forced to hire
attorneys, consultants, and compliance experts to attempt to comply
with these complex and continuously-changing regulations. A 1995 OIG
report demonstrated the difficulty of complying with coding
requirements. The report found that carrier personnel even had
difficulty in selecting correct billing codes. Due to the confusion,
physicians and their office staffs spend countless hours attempting to
deal with the denial and resubmission of claims.
To further complicate matters, there is great variation nationwide
in how carriers implement policies and procedures. Medicare coverage
policies are also frequently inconsistent in different regions.
Furthermore, physicians frequently have difficulty securing direct and
consistent answers from carriers. Several years ago, just as the
requirements on physicians dramatically increased, HCFA eliminated its
carrier toll-free line service which had answered physicians' billing
and coding questions. Ever since, the AMA has been urging HCFA to
restore the lines. Although HCFA recently committed to reopening the
toll-free lines, these lines have yet to be restored. Congress should
require HCFA to reestablish these toll-free lines.
Even Federal legislation impacting physicians can be contradictory
and confusing. For instance, the Medicare anti-kickback statute, the
self-referral laws, and the False Claims Act cover the same types of
behavior with different intent standards and different penalty
structures. In addition, the Federal self-referral laws actually
conflict with many state self-referral statutes, making physicians
uncertain as to which standards they should follow.
In response to physician concerns with over-regulation, HCFA
assigned a part-time physician employee to head an internal working
group 2 years ago, known as the Physician Regulatory Initiative Team
(PRIT). PRIT has had one public meeting seeking input but has failed to
reduce the number of rules and regulations that physicians must comply
with when treating Medicare patients or to produce a report that
suggests a meaningful reduction in paperwork will be forthcoming.
Instead, local carriers and HCFA's Central Office continue to
promulgate new initiatives, place new administrative burdens on
physicians, propose new forms for physicians to complete, and
increasingly threaten physicians with audits of their medical practice
if information is not submitted in a satisfactory manner to the
Medicare program.
The AMA has several recommendations that would begin to ameliorate
the regulatory overload most physicians are experiencing:
Congress should take immediate steps to instruct HCFA to
work with physician organizations to streamline and clarify existing
regulations and policies.
The AMA has endorsed H.R. 2651, the `` Physician Self-
Referral Amendments of 1999,'' introduced by Chairman William Thomas
(R-CA), which would reform existing self-referral laws to ensure that
commonplace business practices and group practice arrangements do not
run afoul of the ban on self-referrals.
The AMA has endorsed H.R. 3300, introduced by
Representative Shelley Berkeley (D-NV), which would require HCFA and
the Medicare carriers to educate physicians as to billing and coding
changes. It would also prevent carriers from violating physicians' due
process rights during audits by forcing physicians to settle in order
to avoid expensive and time-consuming audits.
The AMA requests that Congress call on the HCFA
Administrator to report each year first, which regulations that have
been eliminated or reduced, and second, which initiatives will relieve
the administrative burden on the physician community.
Inadequate Physician Education Efforts
With respect to waste, fraud, and abuse, Washington policymakers
continue to focus on enforcement initiatives rather than education.
HCFA's current education efforts are woefully inadequate. The agency's
education initiatives present overly general directions that fail to
aid individual physicians with specific Medicare coding and billing
issues. There is virtually no individual outreach to a physician when
he or she is identified by the carrier as making billing mistakes. In
addition, physicians frequently cannot obtain written opinions from
their carriers regarding their billing and coding questions. They are
forced to rely on carrier personnel's oral advice which will not
suffice if a problem later arises.
Surprisingly, HCFA does not have a program in place to address
systematic billing errors in a region or within a medical specialty.
Rather than education, HCFA's response is to conduct prepayment audits
when an entire group of physicians does not understand the Medicare
billing procedures and are billing incorrectly. In essence, HCFA has
failed to create navigable pathways for physicians who attempt to
understand the most current and appropriate way to bill and document
their Medicare claims. The AMA strongly believes that in this ``zero
tolerance for errors'' environment, the Federal Government has an
obligation to emphasize prevention and education for physicians. The
AMA strongly urges Congress to require HCFA and its carriers to conduct
innovative and extensive education initiatives for individual
physicians and to work with specialty and local medical societies in
education efforts that would address the most widespread billing
errors..
We would also like to note that the Administration has proposed in
its Fiscal Year 2001 budget to allocate $15.8 million in funding for
Provider Education and Training out of a total Medicare contractor
budget of $1.3 billion. The funding level for provider education and
training in Fiscal Year 2000 was also $15.8 million. This funding
level, which represents approximately 1 percent of the carriers' budget
would not ensure that physicians and health care providers learn about
new changes to Medicare laws and billing and coding requirements. It is
particularly striking that HCFA has proposed such a miniscule level of
funding for this activity at the same time that it has implemented new
payment systems for hospitals, nursing homes and home health agencies.
The AMA urges Congress to significantly increase funding for physician/
provider education so that fewer billing errors occur and that the
relationship between HCFA and physicians becomes less adversarial.
Enforcement Activity
The AMA believes that HCFA's actions and those of its contractors
have created a strong fear among honest physicians that they will be
targeted by their carriers with overly aggressive audits. The agency
has transformed itself into the Internal Revenue Service (IRS) that
existed before Congress heeded the demands of taxpayers and forced the
IRS to restructure its policies. Just as the IRS is struggling to
reinvent itself as a ``taxpayer friendly'' agency, HCFA must reassess
its role and relationships with medical professionals who care for
Medicare patients.
As a result of pressure from HCFA, the carriers are now carrying
out a multitude of audits of physicians for alleged billing errors,
with the result being that the Medicare claims submission process has
become legally treacherous for physicians. The carriers and HCFA have
readily acknowledged that these audits almost always involve billing
errors due to the physicians' confusion regarding Medicare regulations.
They do not constitute fraudulent billing. In fact, insurance policies
are now being offered to cover physicians against future government
audits where ``Medicare can conduct an audit and make an affirmative
statement that the physician owes an extreme amount of money for very
little justification at all.'' (Miami Herald, 2/7/00)
The AMA cannot underscore enough the devastating impact these
overzealous actions are having on physicians, patients and the Medicare
program. For example, in Denver, Colorado, many physicians have left
the Medicare program. According to Jack Berry, MD, President of the
Colorado Medical Society, they have done so because of ``the fear of
being targeted by the government's increasingly aggressive anti-fraud
and abuse program.'' Dr. Berry stated further, ``To some doctors, the
final straw came last year when the government and the American
Association of Retired Persons started recruiting seniors to inform on
medical providers they suspected of fraud.'' (Denver Post, 2/13/00)
Physicians across the country routinely have expressed these
sentiments.
The Carriers Manual provisions relating to post-payment audits
serve as an excellent example of rules that have gone awry and have
resulted in the government's heavy-handedness and the deprivation of
physicians' due process rights.\1\ Once a carrier conducts a post-
payment audit on a small number of a physician's claims, the carrier
determines the amount owed to HCFA through extrapolation. As such, the
overpayment calculation can rapidly rise to hundreds of thousands of
dollars. Once the carrier arrives at this overpayment amount, the
carrier gives physicians three options:
---------------------------------------------------------------------------
\1\ The Carriers Manual is a multi-volume, extraordinarily
voluminous text that generally is not subject to the notice and comment
process set forth in the Administrative Procedures Act.
---------------------------------------------------------------------------
1. Repay the extrapolated amount and waive their appeal rights;
2. Repay the extrapolated amount and submit additional information
while waiving their appeal rights; or
3. Open up their practice to a statistically valid random sampling
(SVRS) of claims during the same time period. Thus, to preserve their
appeal rights, physicians would have to agree to shut down their
offices to allow the carrier to conduct the SVRS by auditing hundreds
of charts. It is important to note that most physicians undergo these
pre and post payment audits without the benefit of serious education
efforts.
The AMA believes that HCFA must create an option that first, allows
a physician to submit additional documentation on the cases previously
audited while retaining his or her right to appeal without admitting
liability, and second, does not require that the physician agree to a
SVRS in order to appeal a finding and not admit liability. The AMA has
been working for nearly 2 years to advance this change through
discussions with HCFA. At this date, HCFA has still not agreed to
change the post-payment audit options.
Conclusion
In closing, the AMA implores Congress to carefully scrutinize both
the abundance of regulations impacting physicians and HCFA's and the
carriers' inappropriate targeting of honest physicians. The AMA
strongly believes that HCFA's paradigm for addressing physician billing
errors should shift from its current punitive approach to one that
stresses education. Complex Medicare rules should be simplified,
physician education should be strengthened, and HCFA's oversight of
carriers should substantially improve. The AMA urges Congress to take
prompt action.
Thank you once again for holding this hearing and for the
opportunity to submit testimony for the record. Please feel free to
contact the AMA's Washington DC office with any questions you may have
related to government activity in this area, and we look forward to
working with you and your staff.
Prepared Statement of the National Association for Home Care
Thank you for the opportunity to submit written testimony for the
record on the Medicare program's regulatory burden on home health care
providers. The National Association for Home Care (NAHC) is the largest
national home health trade association representing nearly 6000
organizations. Among our members are Medicare-participating home health
providers, including non-profit providers like the visiting nursing
associations, for-profit home health chains, hospital-based providers
and freestanding providers. We also represent home care aide and
hospice organizations.
NAHC is deeply appreciative of the interest the Chairman and
Members of the Committee and its Health Care Task Force have shown in
recognizing the importance of preserving home health services for
seniors and disabled citizens. Your leadership in establishing and
voting out of Committee, during budget deliberations, a Sense of the
Congress on Access to Home Health Care, specifying the need to avoid
the implementation of the 15 percent reduction scheduled to take effect
October 1, 2001, was strategic and prudent.
Since the enactment of the Balanced Budget Act of 1997 (BBA97) and
imposition of the interim payment system (IPS), the Medicare home
health benefit has been seriously eroded. As documented by several
studies, access to care has become a major problem, particularly for
patients with care-intensive needs. A prospective payment system (PPS)
for home care is scheduled for implementation on October 1, 2000. The
new system has the potential to better provide needed services to
Medicare beneficiaries. However, the PPS will fall short of this goal
if not properly developed and implemented, and adequately funded.
The Congressional Budget Office currently projects that home health
outlays for fiscal years 1998-2002 will be reduced by $69 billion, more
than four times the amount anticipated in 1997 ($16.1 billion). Home
health spending was cut by 45 percent in the last 2 years. As a result,
over 500,000 fewer beneficiaries received home care in 1998 than were
served in calendar year 1997. Estimates for 1999 indicate a
continuation of that downward trend.
Home health agencies, already under severe financial strain due to
the IPS reductions, must also conform to a myriad of burdensome and
costly regulations. Virtually all agencies are being reimbursed less
than the actual costs they incur in providing care to Medicare
beneficiaries. More and more new and costly demands associated with
Medicare regulations are increasing agencies' financial and operational
burdens and are straining agencies' ability to deliver quality care to
their patients. While our testimony and the primary focus of this
hearing is on Medicare regulations that affect and burden health care
providers, it is important to note that the Medicare Conditions of
Participation for home health require agencies to comply with all
applicable federal, state and local laws and regulations. These other
laws and regulations include Federal and state Occupational Safety and
Health Administration requirements, such as standards for prevention of
bloodborne pathogens or preventing transmission of tuberculosis, as
well as reporting and recording work-related injuries and illnesses;
medical device reporting under the Food and Drug Administration
requirements, and state Medicaid statutes, among others. The cumulative
effect of these regulatory initiatives has been devastating to
providers and has siphoned scarce resources away from patient care.
Each year, NAHC identifies important regulatory issues for home
care, hospice and medical equipment providers. NAHC's 2000 Regulatory
Blueprint for Action provides a summary of each issue, recommendations,
and a rationale for the recommendations. Our blueprint may be accessed
at http://www.nahc.org/NAHC/LegReg/blueprints.html. The Committee and
Task Force Members of the Committee are encouraged to view this Web
site for a full and complete analysis of regulatory issues confronting
the home health provider. For the purposes of this written testimony,
NAHC will highlight several of the Medicare regulations that adversely
impact the home health provider. These include requirements associated
with implementation of OASIS, 15-minute visit increment reporting,
increased claims reviews, expanded compliance surveys, surety bonds,
sampling procedures for post-payment and audit reviews, sequential
billing, and branch office restrictions. Many of these changes have
been developed without adherence to regulatory procedural requirements.
regulatory burdens
In addition to the administrative and regulatory burdens listed
below, home health agencies currently are undergoing significant
changes, at great cost, to transition to a prospective payment system
(PPS) and revised Medicare conditions of participation (CoPs) by
October 1, 2000. The PPS requires providers to expand, modify and
replace computer hardware, software and other technology to achieve
compliance and retool operations to address new billing, accounting,
claims management, and financial oversight needs. The CoPs are expected
to significantly modify operations by requiring new quality assurance
systems for home health agencies. The cost of transitioning to PPS and
the new CoPs are not reflected in current payment limits or within the
proposed payment rates under PPS. The changes required by PPS and the
CoPs are unprecedented for home health agencies.
1. 15-minute visit increment reporting
BBA97 required that claims for home health services contain a code
that identifies the length of time for each service visit, measured in
15-minute increments. The Health Care Financing Administration (HCFA)
issued instructions to the home health fiscal intermediaries (FI) on
February 18, 1999, directing them to initiate necessary steps to
implement this new billing requirement for all home health agencies
(HHA) participating in the Medicare program by July 1 of last year
(Transmittal No. A-99).
This new administrative burden imposes a complex time-keeping
requirement for agencies to stop the in-home clock when an interruption
in active treatment occurs. The HCFA transmittal defines the ``time of
service visit'' to begin at the beneficiary's place of residence, when
delivery of services has actively begun.
Since the time counted must be actual treatment time, providers are
expected to discount time spent on non-treatment related interruptions
during the in-home visit. For example, if a beneficiary interrupts a
treatment to talk on the telephone for other than a minimal amount of
time then the time the beneficiary spends on the telephone and not
engaged in therapy does not count in the amount of service time.
In-home time represents only a portion of the total time invested
by an agency in caring for a patient. Numerous activities required by
the Medicare Conditions of Participation and needed to ensure effective
patient care are often performed outside the home, including
communication with physicians and family members, coordination of
services with other home health personnel and community agencies, care
planning, and clinical documentation. In order for home care treatment
time to be meaningfully quantified, visit time must be better defined
and recognized as only part of the resource cost involved in providing
home care services.
Neither Congress nor HCFA has indicated how this information will
be used. Its value is questionable in light of the ongoing move from a
cost-based reimbursement system to a prospectively set per-episode
payment that is not tied to number of visits or visit length. In light
of the substantial financial and administrative strains already being
experienced by agencies, we urge you to revisit this requirement.
2. the outcome and assessment information set (oasis) requirements
NAHC has long supported the use of a uniform data set for
collecting data and measuring, and ultimately improving, patient
outcomes in home care. Over 10 years ago, HCFA proposed the development
of the Outcome and Assessment Information Set (OASIS), a data set aimed
at accomplishing these goals. NAHC has demonstrated its support of
OASIS development and use for outcomes measurement and quality
improvement in its educational programming and publications.
More recently, HCFA determined that OASIS data would be useful in
development of a case-mix adjuster for a home health prospective
payment system (PPS).
While NAHC acknowledges the many benefits that may accrue from
OASIS, we continue to believe that several actions must be taken before
home care providers can adequately undertake OASIS data collection and
reporting requirements.
HCFA has seriously underestimated the costs of OASIS-related
requirements with respect to:
1. Initial start-up (hardware, software, clinical and
administrative staff training);
2. Data collection (additional time required for patient assessment
and reassessment, printing and supply costs);
3. Transmission of OASIS data; and 4) the willingness of third
party payers to share in the burden of OASIS start-up costs.
Home care providers have reported that it costs them from one to
three dollars per visit to comply with the requirement, whereas HCFA
has allowed only three cents per visit by way of reimbursement.
Further, reimbursement is tied to per-visit cost limits. Only agencies
that have not already reached the per beneficiary limits will benefit
from the per-visit adjustment; HCFA estimates that about 70 percent of
agencies will not receive an adjustment for OASIS costs. There has been
no adjustment in the per beneficiary limits to address the increased
costs of OASIS. Agencies are unable to absorb the costs of OASIS, given
that over 90 percent of agencies are being reimbursed less by Medicare
than their actual costs of providing care and, on average, home health
agencies are receiving 30 percent less in reimbursement than they were
prior to implementation of the interim payment system in October 1997.
In addition, third party payers are unaware of the value of OASIS and
are unwilling to compensate agencies the additional cost of OASIS
implementation, data collection and reporting.
Under legislation passed in 1999, Congress acknowledged that
agencies incur significant new administrative costs due to OASIS
requirements and mandated a one-time $10 per patient payment in 2000.
While this additional payment provides some assistance and is greatly
appreciated, the major portion of OASIS costs remains unreimbursed.
By way of comparison, in 1987, HCFA increased the home health cost
limits when changes were made to the forms for home health agency (HHA)
billing and verification. This series of forms is known as the 485
series as it encompasses today's plan of treatment, the medical
information form and the medical information request form (485,
486,487, and 488). In establishing reimbursement rates, HCFA was
required to take into account the cost of this new series of forms by
increasing the base limit values for per-visit reimbursement to the
HHAs beginning July 1, 1986, by $.37, and by $.39 in 1987 (52 Federal
Register 25562, July 7, 1987). The average cost of all Medicare home
health visits in 1987 was $48. The OASIS paperwork burden is greater
than that imposed by the 485 series of forms. But even performing a
simple projection of the 485 series add-on for 1987 to OASIS in 1997,
the increase to HHA reimbursement by HCFA would be, at a minimum, $.61/
visit.
NAHC believes that agencies should be reimbursed the full costs
associated with meeting OASIS requirements. HCFA should conduct further
study regarding costs of OASIS and adapt its reimbursement structure to
reflect the real costs agencies are incurring. If HCFA lacks the
authority to adjust the per-beneficiary limits, Congressional action
should be taken to empower HCFA to make the necessary adjustments. HCFA
and the Congress should also ensure that rates of payment under the
forthcoming home health PPS reflect the costs of OASIS. HCFA should
allow agencies adequate time to ensure payment from third party payers
that will cover the cost of meeting OASIS requirements for non-
Medicare, non-Medicaid patients.
HCFA has determined that OASIS data must be collected and
transmitted for all patients receiving skilled and/or personal care
services, regardless of payer or patient health status. This
determination has added substantially to the regulatory burdens under
which home health agencies are currently operating.
NAHC believes that OASIS data collection requirements should be
limited to Medicare and Medicaid patients who are receiving
intermittent skilled services.
Patient privacy rights remain a serious concern throughout the
country. OASIS represents a vast collection of patient information
that, if used inappropriately, could cause great harm to patients.
Additionally, patients may be at risk of not receiving needed care if
they refuse to supply specific information or provide approval for the
release of this information.
NAHC believes that HCFA should develop privacy protections such
that patients are assured that confidential medical information will
remain confidential. These protections should include the development
of encryption software by HCFA before transmission is required for non-
Medicare, non-Medicaid patient OASIS data. There should be no
transmission of patient-identifiable information by a home health
agency without the written consent of the patient. No patient should be
refused services on the basis of an unwillingness to consent to the
transmission of confidential information.
3. medical claims review/sequential billing
Home health providers are experiencing increasing difficulties in
processing claims through the fiscal intermediaries (FI) for services
provided to Medicare beneficiaries. Problems cited by agencies include
increased inappropriate and excessive random and focused medical
reviews, medical review inconsistencies, technical denials, and
sequential billing.
A wide variety of inconsistencies exist in payment decisions by the
FIs 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 are often more restrictive than the
coverage policy dictates, complicating coverage decisions further.
In response to a growing Medicare home health program, HCFA
earmarked increased funding for medical review activities which have
increased random and focused medical reviews, targeted audits, and
fraud and abuse initiatives, such as Operation Restore Trust (ORT) and
Wedge audits. Providers thought they would receive relief from medical
review levels ranging from 25 percent to 100 percent when they received
a HCFA letter stating that no more than 10 percent of a provider's
claims would be subject to random review edits. At HCFA's urging,
however, FIs have instituted other types of medical review edits. As a
result, agencies are being subjected to multiple edits at one time,
slowing payments significantly and exacerbating financial difficulties
for providers. In addition, many of the denials issued as a result of
medical review are for technical reasons which have no bearing on
patient's eligibility or delivery of medically necessary services.
HCFA instituted the sequential billing policy to ensure proper
allocation of home health expenditures to Medicare A and B. This has
meant that home care agencies have not been reimbursed for services
recently given to a Medicare patient if there are any outstanding
claims, or if a dispute exists over previous services offered to the
same patient. NAHC and others have worked since early 1998 to convince
HCFA to suspend its sequential billing and payment policies on the
grounds that they were unnecessary and caused harmful cash flow
problems for financially strapped home health agencies. Although HCFA
ordered a halt to sequential billing in July 1999, the repercussions of
this ill-advised policy have continued for some time. Agencies have
missed payroll and further damaged their fragile credit ratings.
Given the current financial uncertainties related to intensified
audits and disallowances and inconsistent medical reviews, 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.
4. surety bonds
BBA97 mandated that all home health agencies participating in
Medicare and/or Medicaid secure a minimum surety bond of $50,000 in
order to protect the programs from fraud. HCFA published implementing
regulations that went far beyond the intent of Congress. In the wake of
overwhelming Congressional objection HCFA withdrew its regulations and
agreed to develop new regulations.
The House Government Reform and Oversight Subcommittee on Human
Resources released a report highly critical of the HCFA and its
handling of the BBA97 surety bond requirement for home health agencies.
The report describes HCFA's surety bond rulemaking process as
``inadequate'' and ``technically flawed;'' HCFA, for the most part, did
not take into account recommendations or technical expertise offered by
the home health and surety bond industries. Similarly, the Small
Business Administration (SBA) filed a petition to HCFA that was
extremely critical of the agency's process in developing the surety
bond regulations. In part, the SBA stated that the agency ``changed the
rule into a vehicle for punishing legitimate HHAs and for securing
overpayments to Medicare rather than a vehicle to discourage bad actors
from entering the Medicare program.''
It appears that throughout the regulatory process there has been a
significant lack of understanding of surety companies' practices, the
principles behind surety bonds, and their uses. HCFA should establish
surety bond regulations in accord with the intent of Congress--as a
vehicle to keep ``fly-by-night'' operators from participating in the
Medicare program. Last year Congress acted to bring more reason to the
surety bond requirement for home health agencies by limiting the
requirement to the lesser of $50,000 or 10 percent of Medicare/Medicaid
revenues, to a single bond for Medicare and Medicaid participation, and
to 4 years duration. Additional changes that would make the
requirements more reasonable follow:
1. The bond should not be used as a vehicle to recoup overpayment,
but rather as a means to ensure that an agency does not pose an
unreasonable risk to the program.
2. As the bond requirement is a condition of Medicare
participation, it should be reimbursable.
3. Agencies that have proven track records in the Medicare program
should not be required to purchase bonds on a continuing basis.
4. Statistical sampling methodology for post-payment review
In March 1999, HCFA published an FI 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 FI 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
provider's 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
percent 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 FIs on statistical
sampling of home health claims until appropriate modifications are made
in policy.
5. branch offices
HCFA has established new criteria for branch offices that emphasize
the distance of the branch location 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 communication and supervision. HCFA's branch office policies
are contrary to regulatory reform initiatives and the proposed
conditions of participation which espouse the need to change from
structure-based requirements to a focus on outcomes and quality of
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 over 2 years, HCFA has failed to respond to
this rulemaking petition.
6. physician referrals
The ``Health Insurance Portability and Accountability Act of 1996''
(Public Law 104-191) included a provision that imposes severe civil
monetary penalties on any physician who certifies a patient as eligible
for the Medicare home health benefit who does not meet the eligibility
requirements. This has produced a chilling effect on physician
referrals. Although the statute limits liability only to those cases
where the physician ``knowingly'' certifies an ineligible patient, HCFA
has created such an environment of fear with its overzealous anti-fraud
campaign that doctors are afraid to refer patients for home health
services. NAHC has received numerous reports that for many patients
this is limiting access to home health services for which they are, in
fact, eligible.
HCFA has not adequately informed physicians of their role, coverage
criteria, and clear definitions of the terms ``homebound,'' ``medically
necessary,'' and ``skilled care.'' In order for physicians to take an
active and responsible role in ordering and gatekeeping home health
services, they must be fully informed of the breadth of the benefit and
eligibility requirements.
7. itemized bill on demand
The BBA97 required that home health agencies provide patients with
an itemized bill on demand. The staff time and computer programming
required for this is an additional cost not accounted for in setting
both the per visit cost limits and the per beneficiary limits.
As mentioned previously, Medicare will move to a prospective
payment system for home health in October. We in the home health
community have great fears that the payments made under the new system
may be inadequate to care for some patients, particularly those
patients that are in need of high cost care. The budget for spending
under the new PPS is limited to what would have been spent if the
current IPS system remained in place. Further, individual payments
under the new PPS are based on data from 1997 that fails to take into
account a number of costly regulatory requirements that have been
imposed since that time. Following is an analysis developed earlier
this year by NAHC outlining some of these regulatory requirements and
their impact on home health agencies. We urge that Congress give
serious consideration to increasing the allowable budget for the first
year of home health PPS to help account for some of these increased
costs that have not been included in the PPS base rates.
1997: Electronic Cost Reporting
HCFA initiated a requirement for electronic cost reporting for home
health agencies. Prior to that point, home health agencies submitted
cost reports either on paper or electronically.
impact
Home health agencies were required to purchase necessary hardware
and software to prepare and transmit electronic cost reports. Where
agencies were unable to internally develop the capabilities for
electronic cost reporting, outsourced services had to be acquired.
Site of Service Billing
Under the Balanced Budget Act, home health agencies were required
to modify billing practices to submit bills based upon the site of the
patient as compared to the previous long-standing practice based on the
site of the health care provider.
impact
Home health agencies had to significantly revise billing practices
and supportive software to accommodate service provisions outside of a
single wage index area. In particular, home health agencies with branch
offices in MSAs or geographic areas distinct from the parent location
had to adjust billing practices.
1998: Implementation of Interim Payment System
BBA 1997 dramatically changed the reimbursement system for Medicare
home health services, establishing a new annual, per beneficiary
payment limit. Previously, home health agencies were subject only to a
per visit cost limit.
impact
Management and operations systems had to be significantly modified
to accommodate the monitoring of per patient costs, patient census
calculation, and financial forecasting for annual patient care within
the per beneficiary payment limit. Financial, clinical and operations
staff required intensive education to understand the new interim
payment system. Computer hardware and software adjustments were
required to secure, maintain, and manage the data for program
administration.
Implementation of Surety Bond Mandate
In accordance with BBA 97, HCFA issued regulations on January 5,
1998 requiring all home health agencies to secure a surety bond for
Medicare and Medicaid purposes. While the surety bond requirement was
ultimately suspended pending Congressional review, home health agencies
were required to undertake the effort to secure the surety bond until
the ultimate postponement.
impact
Compliance with the surety bond requirement necessitated efforts by
home health agencies to gain an understanding of the surety bond
marketplace, evaluating potential supply sources, and undertaking the
application process. The application for a surety bond requires a home
health agency to develop and present detailed financial information
regarding the status of the agency, background information regarding
principals associated with the home health agency, securing an
independent financial audit, and the bond cost itself.
Multiple Changes in Billing Requirements
1. Sequential Billing
In the early stages of 1998, HCFA concluded that it needed to
modify the time frame for billing of home health claims in order to
accommodate the switch of a portion of the Medicare Part A home health
benefit to Medicare Part B. HCFA required that home health agencies
bill claims in sequence which meant that a home health agency had to
hold a claim for a month of services if the previous month's claim on
behalf of the same patient had not been fully processed. The sequential
billing requirement was not withdrawn until 1999.
impact
Home health agencies were required to completely alter billing
systems to accommodate the sequential billing requirement. Systems had
been designed to bill on a periodic basis provided that all of the
technical elements for completing the claim were met. With the
sequential billing requirement, screening and monitoring systems had to
be implemented that would hold a sequential claim for an undefined
period of time during the pendency of a proceeding claim. In some
circumstances, the processing of the proceeding claim could be delayed
for months as it was subject to full medical review. In addition, the
sequential billing requirement slowed cash flow necessitating home
health agencies to secure financing simply to meet payroll. The system
changes and financing responsibilities for cash flow led to high cost
for most home health agencies.
2. Line Item Billing
Effective with services provided on or after April 1, 1998, HCFA
required providers to line item date all home health services furnished
during a visit. The service date had to be present or the claim would
be rejected. In addition, the line item dating limited the claim to 55
items, thereby forcing home health agencies to file additional claims
where more than 55 services were provided during that period of time
subject to the claim. The line item dating requirement was intended to
provide further information to support HCFA's management of the Part A
to Part B shift of the home health benefit.
impact
Billing software and operation systems had to be modified to gather
the necessary date related information, transmitted to billing
operations, and properly record these services dates on the billing
forms. The transition to this process forced home health agencies to
incur significant costs to acquire revised software, educate staff on
the new requirement, and monitor compliance.
Institution of Home Health Agency Parent, Branch and Subunit Criteria
In August 1998, HCFA issued a Program Memorandum that consolidated
and clarified guidelines for distinguishing between branch offices and
subunits of parent agencies. While HCFA may have considered its Program
Memorandum to be merely a clarification, it entirely changed the
standards that had been previously applied. With the ``policy
clarification'' HCFA turned its primary focus to the distance that a
home health agency branch was located from its parent in terms of time
and/or miles. In many of the HCFA regions, a home health agency was
precluded from maintaining a branch if the site was located more that
1-hour or more than 60 miles from the parent location. As a result,
several thousand home health agencies were forced to either close
branch office sites, relocate the sites closer to the parent, or
transition the site to the subunit status. A subunit home health agency
must demonstrate that it independently meets the criteria for
participation in the home health agency without services from the
parent. A branch does not have to independently meet the Medicare
conditions of participation.
impact
The cost of transitioning to subunit status, closing a branch, or
relocating a branch can be measured in several ways. A subunit must
have its own administrator, governing board, professional advisory
committee, system of personnel and patient records, billing system, and
cost reporting. Relocation costs of a branch to more proximate site to
the parent, could involve higher space costs, moving expenses,
increased costs for staff travel to patients, and potential penalties
for early termination of a property lease. The closure of a branch
generally would lead to a reduced volume of patient visits, thereby
increasing the unit cost of service as fixed operations costs were
allocated to a smaller universe of visits.
Institution of a Corporate Compliance Plan
While institution of a corporate compliance plan conforming to
guidelines issued by the Office of Inspector General is voluntary, the
OIG and others have strongly encouraged home health agencies to
implement a detailed compliance monitoring system.
impact
A comprehensive corporate compliance plan involves intensive
administrative and management responsibilities. Internally, cost
reporting and claims auditing system must be created, implemented, and
managed. Staff education and direct leadership involvement are crucial
to a compliance plan. The value of a corporate compliance effort is
significant and direct to the Medicare program as claims error rates
under the home health benefit have dropped dramatically.
1999: OASIS Implementation
Effective in June 1999, all Medicare and Medicaid home health
agencies were required to conduct an OASIS assessment on all skilled
care patients and electronically transmit the assessment to a
centralized database within each state. The assessment was required for
all patients; reporting is currently required for only Medicare and
Medicaid patients. It is expected that HCFA will release patient
identity encryption standards that will lead to the expansion of the
reporting requirement to all skilled care patients regardless of payer
source.
impact
Home health agencies were required to engage in an intensive
alteration of their patient assessment operation. The changes required
included staff training, installation of performance monitoring
systems, acquisition of software, creation of electronic transfer
capabilities, and increase of data input resources. Many of these
changes require expenditures both initially to establish the OASIS
system internal to a home health agency and on an ongoing basis to
maintain compliance. In addition, home health agencies are responsible
for allocating significant additional nursing and therapy time to
complete the OASIS assessment thereby increasing the average cost of a
visit.
15-Minute Interval Billing
As part of the BBA 1997, home health agencies are required to
submit home health service bills with the reference to the number of
15-minute intervals of face-to-face care time in each of the billed
visits. The 15-minute billing requirement was instituted by HCFA
effective for all bills after October 1, 1999.
impact
Home health agencies were required to modify all billing processes
to accommodate the 15-minute billing standard. Staff was required to
record, in an auditable fashion, the actual face-to-face time in
service to patients. This recording had to be translated to the number
of 15-minute units. Billing formats and data inputs to support the
formats required adjustments to meet the standard. As a result,
increased service staff time, administrative staff time, and supportive
software was required for compliance.
Medicare Claims Review
During 1999, HCFA increased its efforts in review of home health
claims. These reviews took a variety of forms including prepayment
claim review subject to the intermediary edits-focused medical review
targeting certain providers or types of claims, comprehensive medical
review of claims on a post-payment basis, and the use of statistical
sampling for overpayment estimation.
impact
While HCFA has full authority to engage in claims review, the
increased volume of claims reviews combined with the variety in methods
of claims review have significantly altered administrative
responsibilities within a home health agency. Medical review requires
home health agencies to allocate management, field, and support staff
resources to responding to a claim review. These responsibilities range
from processing the claim review request, securing and copying the
requested patient records, forwarding the records to the intermediary,
and monitoring the claim review results from a financial perspective.
In addition, field staff resources are required for internal analysis
of the claim compliance along with management staff resources to
coordinate all activities related to claims review within the home
health agency. Claims review also impacted on cash flow and
necessitated borrowing to meet ongoing financial obligations such as
payroll.
Beneficiary Notices
In 1999, HCFA issued instructions regarding the notices that home
health agencies must provide the home health beneficiaries in advance
to furnishing what home health agencies believe to be non-covered care,
reducing, or terminating ongoing care. In addition, the instructions
set out the process required for submitting bills to Medicare when the
patient demands that a provider of services submit a claim for care
which the home health agency believes to be non-covered.
impact
Home health agencies had been using a HCFA model beneficiary notice
that had been issued by HCFA in the early 1980's. The new HCFA
instructions recommend using a series of three model notices to replace
the single notice previously in use. In addition, the one page model
notice was revised into a complicated four-page notice. It is also
necessary for home health agencies to secure a written acknowledgement
of receipt of a notice from the beneficiaries.
Home health agencies are required to replace existing notices with
the recommended new model notices. This effort required a combination
of efforts to compose the new notice to properly identify the
particular home health agency along with obtaining printed notices for
use with patients. Home health agencies had to engage in staff training
efforts to familiarize them with the new requirements related to the
notices and the demand billing process. Quality assurance monitoring
systems had to be established to ensure compliance. Finally, increased
staff time was required to respond to the numerous inquiries that came
from beneficiaries who uniformly expressed an inability to understand
the new model HCFA notice.
Y2K Compliance
As with other businesses, private individuals, and the government,
home health agencies were required to undertake efforts to ensure that
their computer systems were Y2K compliant prior to the close of 1999.
Home health agencies are significantly reliant upon computerization for
clinical record keeping, billing, and virtually all other aspects of
their operation.
impact
For some home health agencies, Y2K compliance meant a purchase of
new hardware or software. At a minimum, home health agencies had to
undertake a full assessment of their information technology
capabilities and Y2K compliance.
Thank you, Mr. Chairman, and Members of the Task Force, for the
opportunity to present our views on Medicare's regulatory impact on
patients and home health providers. Your efforts to recognize the costs
of new administrative requirements upon home care providers and your
actions to ease the regulatory burdens can go far to stem the crisis in
home health. Your actions can help ensure that the PPS is established
on firm financial footing and provides access to countless eligible
beneficiaries that might otherwise lose access to needed home care
services.
Chairman Chambliss. Let me just start off by asking Dr.
Robinson, we have been involved in Medicare now for 35 years.
Obviously, I think when you started practicing, Medicare was on
the books and being implemented. But if you will take a minute
to tell us what differences you have seen in the complexity of
dealing with Medicare, particularly from a regulation causation
standpoint over the last 20 years in your medical practice.
Dr. Robinson. Well, I think there has been a cultural
shift, if I could say that, in the practice of medicine. When I
commenced my medical practice, it was--I think the idea that a
physician would know the patient's insurance status and would
know anything about the compensation or billing issues that
would be involved in a particular kind of patient, that was an
anathema. It was a very unseemly thing to do. And there was--I
think that served the patient's interest to have it that way.
And what has happened since that time is that this morass
of regulations and coding issues and potential prosecutions has
totally transformed the circumstances of health care delivery,
and it is a very unwelcome intrusion and I think it has had a
negative impact on patient welfare.
Chairman Chambliss. Let me ask the same question to Ms.
Murray and Mr. Vaughan, if you have any comments that you can
make on that same issue.
Ms. Murray. I would agree absolutely with Dr. Robinson's
comments. I was sitting here thinking about examples in
hospitals. For example, when Medicare started to reimburse for
observation care, we needed patients to stay in the hospital
for maybe a day after a certain procedure or certain surgical
procedure. Medicare said, here are the rules regarding
observation care, here are the rules regarding inpatient care.
And we started classifying patients rather than thinking about
how long do they actually need to be in the hospital. We were
thinking about what is the right reimbursement format and how
do we code these patients, et cetera.
Right now there is a conflict between the PRO and HCFA on
observation care. HCFA rules--or our intermediary for HCFA
rules has stopped paying patient for observation care and told
us to classify these patients as inpatients. The PRO, however,
denies these patients as inpatients because they don't meet the
inpatient criteria established by PRO. Again, our choices are
don't take care of the patient, which of course we couldn't do,
or take care of the patient without reimbursement which is
exactly what we have been doing for some time now on
observation cases.
The other major concern obviously is the tremendous
additional administrative burden in the over 100,000 pages of
Medicare rules and regulations. We try to shield our staff
taking care of patients from this problem, which isn't so easy
in a physician's office. And it isn't always easy on the day-
to-day basis if you don't have sufficient administrative staff
to do all these things, as in the case of Mr. Vaughan. But in
our case, all we do is add costs and that has been a major
problem for us over time.
Chairman Chambliss. Mr. Vaughan.
Mr. Vaughan. Yes, sir. Again, I would agree in full. The
changes I have seen that are the most burdensome, again, are
the paperwork requirements, much more advanced coding. It is
very difficult, very nebulous; also, to a large degree, really
interferes with your ability to treat a patient. As an example,
the laboratory having to have the exact codes for the diagnosis
prior to the diagnosis essentially being made for the patient.
A lot of that is exploratory and a person is coming in with lab
work, say, for an outpatient testing procedure, it ties up the
process of us being able to get that patient in quickly,
possibly for surgery. A lot of things today involve a much more
complex system of reimbursement than it was years ago when I
first started out. And the talk many years ago, again, was
simplifying the system, but I have not--I can't think of any
simplification that I have seen in what we do. The complexity
level now is at a point that regardless of size of a hospital
or a physician's office or any other providers, it is nearly
impossible to comply.
I think you will find that the industry, while there are
problems--and I know a large part of this hearing today
involves compliance and actual regulatory measures there, are
very important. Most of the providers in this country want to
be complaint with the law, make every extra effort possible.
Again, you are dealing with small offices and small hospitals,
and, again, even large hospitals have the same difficulties
when you make the regulations very difficult to interpret.
Again, it is that Catch-22, as was mentioned, it is a formula
for disaster. I think that the true--essentially people that
are breaking the law need to be identified. They are the ones
that need to really be burdened by these things.
On the other side of the coin, the efficient providers of
care are the ones that should be rewarded, those that seek the
highest quality and do it most efficiently. The system doesn't
do that now. There is no reward for a hospital that runs better
than the next, particularly with the evolving legislation that
is out there.
Hospitals--again, just as an example, some of my doctors as
recently as last week talked to me about the amount of time in
their office spent on paperwork, which has gone up as high as
50 percent in some instances. I would estimate my nurses spend
25 percent of their time on paperwork and charting versus
actually hands-on patient care. It is probably one of the
largest complaints a hospital administrator hears today: That
wasn't enough time, really, spent talking to my mother or my
father. You provide good care but you don't have enough nursing
staff. It is essentially a lot of things are taken away of why
that patient is really there.
Again, our organization seeks to be the highest quality. We
were recently surveyed by the Joint Commission and scored
extremely high. We put the effort in, we achieve the things we
want to achieve, not because we are required, but it is so much
more difficult these days. And that is my overall feeling. I
have been in hospital administration about 15 years and it is
vastly different. At some point along the way I thought it
would probably improve and things would level out to a degree,
but at this point it has gotten almost to a destructive nature.
Just by chance I picked up the Savannah News. I have only
been in Georgia one week--and this was two days ago, and on the
front page here is a hospital in rural Georgia that is closing.
In fact, it is already closed. So, again, it is just a good
example. The smaller hospitals, less than 50 beds, are really
up against the wall.
Chairman Chambliss. Thank you. We have got one other change
in schedule that has just come about. The folks that have the
room at 12 o'clock are going to be through at 1 o'clock. We are
going to break now and instead of coming back and rushing
through a few questions, if you all could come back at 1
o'clock, we will start again. Before we break, Mr. McDermott
has a comment.
Mr. McDermott. I have just one question or one request of
you. You have 2 hours which we didn't know you were going to
have. If you would sit among yourselves and write down the 10
things, if you had your wish list, that you would have done. We
will give you 2 hours to think about that. This is a blue book
challenge.
[Recess.]
Chairman Chambliss. We appreciate very much your patience.
And I am sorry instead of 1 it is 1:15, but hopefully we will
be able to complete this hearing without any more
interruptions. I am not sure how many of our folks will be able
to come back. I have talked to a couple of them, who said they
were not going to make it back, that asked me to raise a couple
of questions and ideas which we have previously talked about. I
will let Mr. McDermott get to his David Letterman Top 10 List
when he gets back.
You know, in dealing with some other Federal agencies,
particularly those that have service within their name, we find
that those organizations who are supposed to be service
organizations from the Federal Government standpoint are really
not service organizations. They are more organizations that
tend to try to wield a heavy hammer rather than trying to help
people out, even though they are intended to be a true service
agency. And I am wondering if we have that in Medicare.
For example, if you have a situation in your office that
you are unsure about, whether it is legal, ethical, or whatever
within the rules of Medicare, is there anybody you can pick up
the phone at Medicare and call and say hey, this is a situation
that we are facing; we need some guidance and we need some help
in establishing a program or making sure we are doing the right
thing. What has been your experience that that respect?
Ms. Murray. If I can start, you know we work through
Medicare intermediaries who are the organizations that we work
with to clarify Medicare policies and to make our payments, et
cetera.
Medicare intermediaries can change. And for us, for
example, our Medicare intermediary changed recently and we now
have 30 new policies that came out from our intermediary to
guide their requirements for our payment. They happen to be
different from the physician intermediary policies. So there is
some conflict between the two sets of policies.
We are required to go to the intermediary for questions and
it is often very difficult to get clarification from the
intermediary. For example, there are hospitals who are
occasionally overpaid by Medicare. And we know of instances
where hospitals who have tried to repay the money through the
intermediary and the intermediary will not take the payment.
This reflects poorly on the original intermediary processes, et
cetera, et cetera.
Hospitals then tend to put that money in an escrow account,
hold it, and try to pay it back in some fashion. If, however,
they are audited by the Federal Government, they can be accused
of fraud for keeping an overpayment from the Federal
Government.
These kinds of issues are very difficult to resolve through
an intermediary, if not impossible. So it is just an example of
some of the difficulties that we have. The intermediaries also
interpret the regulations differently on the basis of the
intermediary and sometimes on the basis of the individual that
you talk to with the intermediary on any given day. And that
also makes the situation even more complicated.
Chairman Chambliss. Do you ever get to anybody at the
grass-roots level of Medicare who is making a decision up here
at the top, or do you strictly have to deal through the
intermediary?
Ms. Murray. We generally deal through the intermediary. I
can't answer specifically if we have ever gotten through our
finance office to somebody else, but generally we have to deal
through the intermediary.
Chairman Chambliss. Anybody else?
Mr. Vaughan. I would agree with Kathleen's statement. It is
pretty much the same, but again it would be a possible solution
to have the parties get together. The intermediary has always
been the middle and it is not like you have a local
representative that you can discuss any situation with really.
But if that would be a possibility in the future, it would be
something worth looking at if you have an issue or problem that
can really be worked out on a more local level, but the system
is not designed that way currently. I don't think it is
anybody's particular fault right now; it is the system design
that we have.
Chairman Chambliss. Apparently that kind of problem must
not be an uncommon problem, because in some reading that I have
done I have seen where folks have had some--for some reason,
the figure 11.80 has appeared in three different examples, and
I guess that is coded to something. And they wound up spending
thousands and thousands of dollars in legal fees and accounts
fees plus their time in trying to get it resolved. Maybe that
is something that we can look at on our end to establish some
sort of direct line of connection between you all and HCFA.
Dr. McDermott is back with us. I told them I was saving
your Top 10 David Letterman issues until you got back here. So
I know you have got to leave. I will give you the freedom to
take care of whatever.
Mr. McDermott. First of all, I have a couple things to say.
One is that you must not be doing too bad a job, since I
understand Medicare pays 95 percent of the clean claims without
any questions. So we are talking about 5 percent of the claims
that they are questioning or at least that is the way it looks
to me. And I wonder if I could ask a question of the two
doctors. If you order a chest x-ray, shouldn't you be able to
put down a diagnosis that might be related to that chest x-ray?
Now when I was a medical student we used to have kind of
standing orders; we just ordered a chest x-ray on anybody
whether or not the issue was related to the chest. And I
suspect there have been hundreds of thousands of chest x-rays
done that were not useful in terms of diagnosis.
So what I am interested in is wondering if you--I mean, I
picked this because it is the one specific you gave me. You
said lab tests are being held up because there is no ICD9 code.
If I am going to do a chest x-ray, I probably am looking for
something in the chest. And if I put down carcinoma of the
lung, because that is what I think it is, and it turns out to
be bronchitis, that is not going to invalidate my claim, is it?
Mr. Vaughan. That is directed to me. First of all let me
state I am not a doctor, but I will try to answer your
question. My understanding from the physicians on our clinical
staff, again, is--and your point is valid, I understand what
you are saying, but the regs are nebulous as it stands. If,
say, that diagnosis turns out to be a false negative, say, it
doesn't exist, say, will that claim be paid or not and does the
patient indeed have the responsibility? So again, it is--these
are new regs and they are very difficult to interpret.
In the past, you know, it wasn't the type of system we had.
Again, it is--I think people agree with the intent and, again,
waste in the system and so on. But it is a little bit more
front line right during the time that you are practicing
medicine as a physician and the hospital is trying to respond
by offering you the test that you need. And it is kind of in
the way right now--the way people are interpreting the
regulations.
Again, my statement would be that they need to be looked
at, they are coming on real fast, and very few people are
having a chance to understand the regulations and really
operationally put them in place, because you are talking about
many, many thousands of contacts just in a small hospital with
the lab and x-ray and ultrasound and other things. Laboratories
are particularly complex due to the multitude of tests and the
diagnosis lining up with the test. But, again, I am speaking
not as a physician but as an administrator.
Mr. McDermott. Your response, Ms. Murray.
Ms. Murray. I would agree with what Mr. Vaughan has said. I
think the fear that Dr. Robinson mentioned of potential fraud
accusations contributes to this problem, too. So if you are a
physician and the hospital says you know you've got to put in
ICD9 codes, which by the way is an inpatient diagnostic code,
in there before you order these three lab tests, they are going
to say, well, I don't know what the diagnosis is. And if I put
something down that is wrong, I might be accused of fraud in
the future.
So the physician is in a position of having to supply
information that he doesn't necessarily have, even if he might
have a rule-out diagnosis, which is not acceptable anymore.
Then he has got to put some diagnosis down, might be wrong,
fears fraud, doesn't want to do it, comes to the hospital
without the diagnosis; hospital fears fraud, doesn't want to do
the test. And, as I say, we are doing the test, sometimes we
are going back retrospectively trying to get an ICD9 code once
the patient has the diagnosis information they need. But that
is not what the law requires, the regulation requires the code
in advance.
Mr. McDermott. When was the rule-out diagnosis made
invalid?
Ms. Murray. I can't answer that question. But I am told
that the old, more general, ICD9 codes are no longer
acceptable. It was recent but I am not sure when.
Mr. McDermott. The issue, I guess, you can see it from our
side, that if somebody has a lab in their office and they want
to run everybody through, no matter whether or not and charge
$15 a crack, they can have a good time making a lot of money
but not doing anything for the patients. Obviously no one wants
to deny the test for the patient who needs it, but the question
is how do you determine where some people do a urinalysis on
100 percent of the people who come through their office and
some do it on 20 percent, the question at least could
legitimately be raised, couldn't it?
Ms. Murray. I absolutely agree that there is an issue
there. I would go at it more from a variance reduction in
quality standpoint and perhaps look at self-referral--there is
a strong look being taken at those kind of things. But I think
what we have done instead of going after, say, the 80/20 rule
in the areas where there is self-referral or where there is a
variance from standard, is we have just taken a broad brush and
penalized everybody and caused a problem in actually giving
care.
Mr. McDermott. Dr. Robinson, you raised the issue of fear.
I don't know how you write rules and regulations without
putting the fear of God in people, do you?
Dr. Robinson. Yes.
Mr. McDermott. OK, tell me how.
Dr. Robinson. Well, I think the first thing is to, I think,
consider exactly what kind of conduct you are attempting to
moderate. And so if the conduct that you are attempting to
moderate is merely a misunderstanding of the billing codes--and
that is not an appropriate area in which an American citizen
should fear his government--some dispute over the nuance of a
billing code when there is a motivated practitioner attempting
to do something. So there should not be any criminal penalties,
there should be no sanctions attached to that type of dispute.
There shouldn't be any sanctions attached to it.
Those behaviors that I think every ethical physician
recognizes is egregious and wrong and bad, I think would be
important to identify that particular cohort of people that
behave that way and I then I think try and particularize the
demographics of where these abusive procedures have occurred,
and then that is the place to place sanctions. And also I think
it would be important to try and cooperate with physicians to
accomplish that.
I think it would be an important step forward in this whole
debate to accept the idea that physicians are on the same side
as the objectives of the government in many ways. They want
cost reduction, they want quality of care. The problem is if
the government or HCFA treats them as presumed to be guilty of
some kind of fraudulent behavior, it minimizes their
contribution to this process. So that would be one suggestion I
would have.
Mr. McDermott. So you think that if the doctors felt they
were part of the process, they don't--your medical association
doesn't make input into the rules and regulations, they don't
make comments during the rule period?
Dr. Robinson. Well, you know I am speaking from the point
of view of a person at ground zero. There is a whole apparatus
that exists in Washington. And when I leave here I am going to
go back to my vineyard and do my best for my patients, and I
will leave the apparatus here. But as far as I can tell, the
perception of physicians out in the provinces, if I can say
that, is that they have very little ability to influence HCFA
policies. HCFA policies seem to just be propagated by some
distant czar and they are coming down upon us, raining down
upon us, and there is not the perception that we have any
influence on what is occurring. And many times we see things
that seem to us to be quite outrageous, and there is not any
easy mechanism that the ground zero physician has to do
anything about it.
Mr. McDermott. Interesting fact about what has happened
recently. In the last 4 years you have added 40,000 pages to
that pile you described of 130 pages. Thirty of those have come
in the last 4 years. So it is increasing. That is a 25 percent
increase in a very short period of time. And I suspect that as
we have pressed for more and more looking at fraud and abuse,
that the result is that you get more rules and regulations. And
I am not sure, I would like to hear what you agreed upon as 10
things to get rid of.
Dr. Robinson. Maybe I will just start out by saying it is
interesting that we had sort of a quick little lunch here. In
the course of our quick little lunch--we got a nice Thai
cuisine--we came up with 26 different ways to straighten the
process out.
Mr. McDermott. I hope they are written in legible
handwriting, by somebody other than you as a physician.
Dr. Robinson. We have a very, what can I say, a very nice
scribe here who has actually just written them down, and maybe
she could start by going over hers.
Ms. Murray. Actually he accuses me of being a physician
because of my handwriting. So we cannot answer in the
affirmative to that question. We tried to come up first with
some short-term practical suggestions. And then we have got
some medium-term suggestions and then we have a few comments on
long term. But let's start for me with the short term first.
We think that if we could have our wish list, which is how
we viewed your request, the first thing would be to eliminate
the requirement for physicians to submit inpatient diagnosis
codes before diagnostic tests are done. Just the subject that
you have raised here.
The second would be to eliminate the requirement for
patients to fill out the Medicare secondary payer questionnaire
at every single time of service. This is really a patient care
issue for our patients as well.
Mr. McDermott. I don't understand why that isn't simply
done administratively. What do you think they are trying to get
at? If someone is coming up for their next radiation treatment,
why do you have to go through that? I would think they would
just say to the patient that came into the hospital, would
you--are you--has anything changed since we saw you last? No.
And that would be the end, and you reprint it.
Ms. Murray. That is not my understanding of the
interpretation of the rule. I understand what they are trying
to get at. Maybe you have acquired secondary payer coverage
since you were last seen. And I don't think it was intended to
affect patients who are seen two or three times a week, but
that is really the outcome of it. Whether we can print off the
same form--it has to be signed every time. And if we can print
off the same form every time, then we can take it, but some
more reasonableness about that rule would be helpful.
In addition, it is now a requirement that the physicians
collect the Medicare secondary payment questionnaire for
outpatient work that they refer to the hospital. This requires
that the physicians do the hospital's billing work. And this is
something that just doesn't work. And so this is something else
we would love to see addressed.
Fourth, the intermediaries, as I mentioned, sometimes are
part of our difficulties. The intermediaries all have something
called--they are electronic checks on the claims system. And
this is a check that they use to make sure that our bills meet
the requirements. We would like them to give us that software
so that we can do our checks before we submit the bills so we
can submit a clean bill. Now, we have ways ultimately of
manually finding out what those electronic claims checks are
and then we try to get them into our system, but it would be
much easier if we could simply have access to that and we could
submit a clean bill that meets the requirement that is what
they are looking for.
Mr. McDermott. What percentage of your billings do you have
to resubmit?
Ms. Murray. That is a very good question and I am sorry I
don't have the answer to it. But I will find out.
If you go to a little bit more medium term, we think that
it would be nice to, as the vital statistics organizations have
suggested, have one billing system rather than two.
Mr. McDermott. One billing system meaning A and B?
Ms. Murray. Inpatient, outpatient.
We believe that you have some tools at your disposal,
including the compliance with--including the Paperwork
Reduction Act which also allows for regulatory flexibility for
smaller hospitals. And we think that ensuring that HCFA follows
the suggestions in the Paperwork Reduction Act would also be a
helpful set of activities; and if necessary, use the
Congressional Review Act to review regulations that may be
beyond the intent of the law. And finally, we just have kind of
a general simplicity in the consolidation subject which may get
into a long-term approach.
That is my set of lists and then we each have a few others.
Dr. Robinson. I hope I can read this, Kathleen. I will do
my best. But number 7 was to put in place an outcome analysis
apparatus to evaluate the impact of HCFA regulations on health
care quality. And I think that is a big deal. Quality. We need
to have that in place in HCFA regulations.
Number 8 is a total cost analysis of HCFA regulatory
decisions, the total economic impact on individuals, on the
community, on enforcement and compliance costs. It shouldn't
merely be that the government saves $2 if it costs society $10.
Number 9, there should be hearings with doctors at
hospitals.
Mr. McDermott. Let me ask one thing about that because that
is something from your testimony. If they deny a $2 event, and
the patient has to pay $10 out of their pocket, is that what
you are talking about? Or are you talking about someplace down
the road, the cost of not having dealt with it earlier is more
expensive because it was not early diagnosis or whatever?
Dr. Robinson. I would say the latter. Often HCFA is
exercising a tremendous role in our society. They are making
decisions on a bureaucratic basis that have extraordinary
economic impact. For instance, if someone is--maybe the
regulations don't allow them to get a particular kind of
treatment. The treatment is deferred, the patient gets sick, is
not able to work, not able to--has to go into a nursing home.
That has a very large economic consequence that is past the
micromanagement of HCFA regulations. Or a patient is discharged
to a nursing home a great distance from the family, and that
family has to take--all the family has to get off from work,
they have to drive 200 miles. That is an expensive economic
event that has transpired against the Nation's interest, all
referable to HCFA regulations. So I think that is an approach
that needs to be adhered to by HCFA.
Well, number 9 is hold hearings with doctors in hospitals
who have been audited to hear firsthand their stories. There
are a lot of stories out there that are circulating about very
inflammatory events that have occurred. And I think those
stories need to be aired, and if there is some violation of
good sense that has transpired, the exact causal factors that
allowed that to happen should be dealt with. I think that would
be a useful hearing to have.
Number 10 is a comment about fraud, and I think it is
important to remember. Every ethical physician is against
fraud. They think it is reprehensible, it is bad, it is wrong
when it happens. And I think an effective way for HCFA to
proceed against these cases of fraud would be to isolate those
cases that are egregious, they are obvious, there is just no
doubt there is criminal intent involved, and then see in what
circumstances those criminals actions occur. What were the
demographics of it? Where did this take place? And then
concentrate resources on that particular situation.
And there is some kind of 80/20 rule out there, is there
not? So if you focus your resources on 80 percent of the
problem, you will have a maximum amount of efficiency. So I
think that might be a good suggestion.
Number 11 would be to decriminalize billing errors. So
there ought to be some sense that--and I think this is an
important thing I'd like to stress--is that doctors by their
nature, by their training, by their predispositions, are
ethical people. They try and do their best in often difficult
circumstances. They are not bad people. The regulations are
complicated, and it is an appropriate gesture to recognize that
and not hold them liable for some coding error.
Number 12----
Mr. McDermott. Do you have some kind of threshold about
that? I mean, I understand what you are saying. And having been
a physician and having filled out lots of billings, I
understand one can make mistakes. One mistake is certainly not
a hanging offense; 2, 10, 500, 1,000, always the same, they
have always jacked it up one level. Instead of being a brief
visit it becomes an extended visit. If you hadn't had an
extended visit, you would have to have seen 20 patients in an
hour.
What I am trying to get at is how do you--where do you put
the screen for that issue?
Dr. Robinson. Well, you know, I would let common sense be
my guide. What a reasonable, rational person would say, just
looking at the situation, is that these regulations are
unbelievably complicated and they are changing all the time.
And if there is some kind of just obvious situation where the
physician said, look, these new regulations came in, I am
supposed to do this, I am supposed to do that, I put a 2 down,
I put a 3 down, this is what happens, there should be some way
to balance possibly on the other side under coding that occurs.
So one thing that often happens, you have said, we have got
this type of conduct where things are being overcoded, probably
the more common things are things to be undercoded, because a
physician generally in doubt over any of these issues tends to,
in my opinion, overcode. That has been my experience. The
compensation is not extraordinary. It is a relatively small
difference. And most physicians go out of their way to avoid
any entanglement with the Federal Government. So I just think
common sense would be a guide.
Ms. Murray. If I could just add one thing, I don't think it
is the number of times it occurred, 50 times 1,000 times, I
think it really does come down to intent. For example, there is
a hospital recently who had a billing clerk who was
consistently checking the wrong box. It was an error. It was a
clerk, there was a box, and she checked the wrong box. That
hospital, I think, needs to pay back the government whatever
they owe them but not pay tens of millions of dollars in fines
and penalties because there is an assumption that all of this
was done on purpose.
If you have institutionalized upcoding, you have built it
into your computer systems, you have built it into your
physician capability, they can only check the higher level,
that I think is very different and does provide an opportunity
for penalties, et cetera. But it isn't a matter of how many
times did it occur; it is a matter of how did it occur.
Dr. Robinson. If I might just speak--a lot of times what is
going on here is the documentation issue. I mean, it is very
complicated to know if you are having some kind of coding going
on for a service that has been rendered. The evidence of the
service being rendered is the documentation of a particular
service, if I could say it that way. And the skill and effort
that goes into documenting, that is often a major variable in
how things work out. But it is not necessarily in the patient's
interest that the physician spends his time on trying to
placate HCFA.
In other words, if you are sick in the hospital, a
physician is putting notes on your chart, those notes should be
directed toward your welfare and not these arcane coding
regulations or identification about what service has been
rendered. I think that is often a confusing issue and it is
not--when these coding disputes occur, it is often related to
documentation, documentation dispute, which is I think the
wrong thing to criminalize.
Well, OK. Number--if I may continue. Number 12 is we
suggest that there be an ethical oversight committee to assess
HCFA's micropolicies and to make sure those micropolicies are
not having a negative ethical influence on patient care. I
think we are concerned that there is too much focus by
accountants on micromanaging numbers, and that in the culture
that is present at HCFA, that we are concerned that the
patients may be penalized. There may be ethical lapses that are
occurring.
For instance, if a patient is--the numbers shake out a
certain way in the coding and the patient is denied appropriate
care--there needs to be some kind of overview attached to that;
or if these micropolicies are sabotaging physician independence
or causing an erosion of the quality of people that go into
medicine, if that is what is happening, there need needs to be
a mechanism in place for HCFA to take a look at that. So we
think that might be a good idea.
Mr. McDermott. Sort of a patient's bill of rights.
Dr. Robinson. I certainly think that is not a bad idea.
Mr. McDermott. Or a doctor's bill of rights.
Dr. Robinson. The two are the same. I would like to think
they are the same. It is not that physicians--they are the
agents of the patients. Their attention is focused on the
patients. I think the two are the same.
Let's see. I have now--we put this one in, our 13th one is
there are a lot of individual parts of medicine that are having
a negative--being negatively impacted by HCFA. And we
considered mentioning neurosurgery but we elected to mention
psychiatry, just to throw a pitch at you. But one of the things
that goes on is that frequently it is necessary to send in
confidential records to HCFA in order to receive payment.
We think this is an egregious situation and you should
have--your psychiatric records should be confidential and no
government clerk should have access to them. We hope we will
get some action on that.
Mr. McDermott. That is why I voted against the amendments
actually, because I recognized what was in them, read them, and
said this isn't going to work in the long run, or it shouldn't
work this way in the long run.
Mr. Chairman, unfortunately I have something I must go to.
You have been very generous in letting me ask a long series of
questions. I would hope that you would note those questions and
that, Mr. Chairman, we could submit them to HCFA when they come
before us and let them respond to them as a way of seeing if we
can't actually do something positive about this rather than
just sort of moan about it.
I would like to actually get some action, and maybe if we
present it to them in advance, they could look at them and
respond for our committee, if that is a reasonable suggestion.
I am very sorry I have to go. I appreciate what you did at
lunch in putting your list together. And if you would submit it
to the committee for our consideration and let us try and pass
it on, I would certainly be willing to work with the Chairman
to try and get some answers on the specifics, because that is
really what we hope will come out of this.
Chairman Chambliss. Well, thank you for that suggestion.
That is exactly what we had talked about earlier today of
doing. Once we complete this--and one reason for getting
written responses to questions is that we want to be able to
compile a list to send to them to be prepared to respond to
this set of circumstances or facts when they come before us.
Thank you.
Ms. Murray. We actually hadn't completed our list.
Chairman Chambliss. Why don't you go ahead and complete
your list and we will get it all in the record. Let's go ahead
with it.
Mr. Vaughan. Yes, sir. Mine are fairly brief and not
numerous, to finish the list:
Expedite the processing of provider numbers when the number
exists or the ownership of a hospital or organization changes
and therefore that number needs to change, or if an existing
physician provider moves to another location or works for a
different organization, as many physicians now are employed.
And that causes a great deal of problem. It used to transpire
within a few days; now it is very lengthy. I am not real sure
why the change took place, but a lot of organizations now are
changing ownership so it has even more profound affect.
Prompt payment from government and private payers. It is a
real key issue with any provider, particularly rural hospitals.
Simplify cost reports. Cost reports reimbursement now has
not really driven up costs. Again we still submit a quite
lengthy and involved cost report which involves quite a bit of
work, a lot of interaction with the government getting it
finished up.
Secure the Medicaid DSH program for States. That has been
an issue that is subject to I am sure a lot of discussion. But
in the rural areas, the disproportionate share is very
important. My hospital alone--again, we are a 116-bed hospital,
but we provide over $1 million of indigent charity care each
month. So, again, that DSH payments from the State of South
Carolina in combination with Federal funds assist us in some
level to help offset that, but it is at risk of disappearing.
South Carolina lost over $50 million in the program this year.
Rationalize the geographic system of payment to hospitals.
I don't know, again, when the lines were drawn and the system
worked out. I think today, though, it needs to be reevaluated.
For instance, my new hospital in Georgia is right on the
boundary of the wage market for Savannah. So you know we have a
high-wage bracket, but we are in a rural area and are paid as
such. I am sure that situation exists throughout the country.
I think the advance beneficiary notification needs some
clarification. It is very complex. And it goes back to the
statement I made about the lab and whether the hospital would
be paid or the patient has to pay it. Again it is an extremely
difficult piece of legislation for us to deal with. It is
pretty much an unknown right now for us to be able to handle it
operationally.
Again I'd have to mirror target true fraud and abuse and
come down hard. I think everybody agrees on that. It is a
blight on our system. Again I don't have the suggestion, how do
you pick out that true fraud? But again I think some different
ways of enforcing that need to be looked at. I think where
there is intent it is pretty obvious, and when it is found
out--I think I speak for most of the hospitals I am familiar
with--it needs to be dealt with severely. Reward efficient
hospitals and organizations and physicians but, again, reward
the ones that show a high degree of quality in outcomes.
There are many outcomes measurements out there now with the
Joint Commission and also other organizations, and I think
efficiency is important, but outcomes and quality of care are
the key issue here. Today I can't say that someone that offers
high-quality services is rewarded any differently, other than
their own self-satisfaction in what they do, than, say, an
organization that doesn't. That might ought to be an objective
for the long term. That would complete my statements.
Chairman Chambliss. Did we get them all?
Ms. Murray. We did. Thank you.
Chairman Chambliss. All right. Dr. Fletcher.
Mr. Fletcher. I appreciate your testimonies and your list
also. And having just come recently from practicing medicine, I
know exactly what you are talking about in working with
hospitals.
Chairman Chambliss. Before you get started let me--they
have just called me to the floor. I have got to go over and
participate in a debate that we have got on our defense
authorization bill. I hate to run and leave you, but I will
leave you in good hands with the vice chairman of the Task
Force, Dr. Fletcher.
I want to tell you how much we appreciate your being here.
We thank you for your patience. We want to continue the
dialogue with you on this issue which I think is extremely
important to your profession, but most importantly I think you
would agree it is extremely important to patients out there
that you care for and we try to look after in this level up
here. So thank you all again very much.
Mr. Fletcher [presiding]. As I was saying, I understand
clearly the concerns you have, and I guess I differ with my
other colleague that mentioned how do you write regulations
without instilling fear. I think that is a very wrong approach.
I think, clearly, those folks that are intending to defraud
HCFA and the American taxpayer do need to fear that there will
be punishment and criminal penalties for that. But the
physician that is out there practicing, the nurse that is in
the hospital, and the hospital administrators need to be
focusing on patient care and quality, not on fear of their
payer. And I think that is what is happening.
Whether some of it is warranted or not may be questioned,
but I think there is that feeling out there and I think we have
done a disservice, because I don't think even, though, when we
all have a great deal of complaints about private insurance and
we need patient protection--and there is no question about
that--but I don't think there is the same fear of other folks
that are paying the bills that there is against HCFA.
Let me just say also in light of that, I think regulations
can be promulgated to have HCFA and the administrators help
assist us to make sure that we are doing the kind of jobs we
need. I know they have been helpful in some cases.
I am very concerned that in my own experience--and I would
like for you all to comment on this--two things. One, much of
the time that we spend now and I spent with my office staff was
on just trying to comply with regulations. That took away our
attention and our time toward making sure we kept up on the
latest in what is available to care for our patients, making
sure that we were overseeing the care of our patients; hours in
the evening, making sure that we document everything clearly,
dot every I and cross every T. So there was a lot of continuing
medical education that is focused toward just CPT coding, et
cetera, compliance. We set up a compliance board and structure
just so, if they did come in, they would be assured or at least
more assured that it was our intent to comply. And the very
purpose of that was just to make sure that our intent was
understood.
How much time do you all spend, would you say, in making
sure that you are educated or your staff is educated just to
comply with HCFA regulations?
Ms. Murray. I will lead off. I know we all have answers to
that. At the hospital, we say--I couldn't agree with your
comments more. Let me start there. At the hospital, we say that
every person should serve the patient or serve someone who
serves the patient. And right now----
Mr. Fletcher. Let me interrupt you right now. Could you
tell me how many folks you have in administration versus people
that work for you that touch patients?
Ms. Murray. It is another very good question, but I don't
know that I can add up all the FTEs right now. But I will be
happy to answer that question. But I can give you some
examples.
Mr. Fletcher. That would be fine. If you could look back at
your numbers and forward that to the committee for entry into
the record it would be great.
[The information referred to follows:]
Ms. Murray's Response to Questions From Mr. Fletcher
I thank you and the Health Task Force for the opportunity May 18,
2000 to provide testimony on behalf of the American Hospital
Association and Northwestern Memorial Hospital (NMH) about the burden
of Medicare regulations on providers. Your subsequent request of the
Office of Management and Budget to review the Medicare Secondary
Payment Questionnaire as a possible violation of the Paperwork
Reduction Act is much appreciated. This arduous process requires
providers to ask beneficiaries up to 25 questions each time they
present for a different type of service. A copy of each questionnaire
must then be kept (either electronically or on paper) for 10 years.
Below are responses to questions posed during the hearing for which
I did not have an immediate answer. I have also included suggestions
for change and examples of problems experienced by providers that I
hope will be useful to the Committee in future meetings with the Health
Care Financing Administration on this issue.
Congressman Fletcher inquired as to the number of NMH employees
assigned to patient care activities as opposed to those whose work
entails non-patient care activities. Currently at NMH, 3,084 employees
provide patient services (e.g. nurses, physicians) while 1,563
employees have non-patient care roles (e.g. housekeeping, food service,
billing and accounting, administration, attorneys, facilities
management, etc.) for a total of 4,647 employees.
The Congressman also asked about the necessary staff time and
expense of complying with Medicare regulations. Six departments handle
the bulk of the Medicare compliance and billing: Patient Accounting,
Admissions and Registration, Case Management, Medical Records,
Information Systems and Corporate Compliance. We estimate these
departments (25 FTEs) spend 46,352 hours annually on Medicare
compliance. The estimated annual cost of this, including salaries,
benefits, equipment, materials and vendor fees, is $1,590,747. However,
this is not a complete estimate of the true annual cost of compliance
with existing Medicare regulations. It does not include the work of our
legal team, senior management, and the physician relations department,
nor does it include the cost of conducting a necessary internal audit
to ensure compliance. We are in the process of developing a system to
better track the time and money spent in this regard.
My testimony also included an explanation of the difficulties
surrounding the requirement that claims for certain lab tests include
an ICD9 code diagnosis (inpatient) prior to testing or the claim will
be rejected. The catch 22 here is that the diagnosis cannot be made
without the test results. Congressman McDermott asked when this
requirement became effective. This policy went into effect on January
1, 2000. As I said in my testimony, because of this policy, hospitals
are forced to choose between providing the care or delaying the test
until the proper diagnostic code is received. NMH chooses to provide
the tests and risks not receiving reimbursement. In May I reported to
you that NMH was holding $3 million in Medicare laboratory billing for
this reason. This figure has grown to $4.6 million in just over a
month.
In addition to addressing the above issue, other suggestions for
change include:
I. Medical necessity standard.
The problem is not with Medicare's expectation that physicians and
hospitals provide only medically necessary services to Medicare
beneficiaries, it is with the implementation of the standard. HCFA has
delegated the responsibility of determining medical necessity to the
local fiscal intermediaries. The vehicle for this determination is a
publication called the local medical review policy (LMRP). Medical
necessity standards or LMRPs should not be ``local'', they should be
implemented nationally and for both Part A and Part B for the reasons
listed below:
1. Patients who access services in multiple fiscal intermediary
areas find inconsistencies in the benefits covered.
2. Areas serviced by multiple fiscal intermediaries are subject to
differing policies.
(a) Hospitals (Part A) and Physician Offices (Part B)
offering similar services are not subject to the same
requirements.
(b) Areas where hospitals in close proximity are covered by
two different FIs are not subject to the same requirements.
3. Fiscal Intermediaries are not communicating policies (which
determine whether benefits are paid) to patients, physicians, or
hospitals on a consistent basis.
(a) Part A FI does not distribute draft policies to providers
or physicians for review and comment; they are distributed to
professional organizations, who then distribute them to local
providers (not physicians).
(b) Part B FI does not distribute new Part A policies to
physicians who refer their patients to Part A providers.
(c) Part A FI does not communicate benefit changes (by
service area) to beneficiaries.
Example
Consider three physicians and their patients, noted as physician A,
B, or C. All three physicians' offices are in the same building
(different offices) and each orders a chest x-ray for their patient,
with the exact same reason for the test.
Physician A orders and performs the chest x-ray in his office.
No Part B LMRP exists for chest x-ray.
Physician bills Medicare; claim is paid.
Physician B orders chest x-ray and refers patient to Hospital 1 for
test.
No Part A LMRP exists for chest x-ray
Hospital bills Medicare; claim is paid.
Physician C orders chest x-ray and refers patient to Hospital 2 for
test
Part A LMRP exists for chest x-ray
Diagnosis provided does not meet LMRP requirements
Service considered ``non-covered'' by Medicare
As a result, Hospital 2 is faced with the following possible
scenarios:
1. Prior to rendering care, the hospital explains to the
beneficiary the services are not covered by Medicare and the patient
either:
Agrees to sign the Advanced Beneficiary Notification
(ABN), which makes the patient responsible for the charges.
Insists the provider bill Medicare. This requires manual
intervention on the part of the hospital to ensure the proper coding is
on the claim to indicate the patient's demand for billing, so as not to
be included as an example of a ``false claim''.
2. Hospital 2 is unable to make the determination prior to the
provision of care, and therefore is
Not reimbursed for the service by Medicare and is
prohibited from seeking reimbursement from the patient because it did
not notify the patient in advance, or
Able to follow-up with the ordering physician to determine
if has ``another'' reason for ordering the test, but is prohibited from
providing information regarding the ``acceptable'' reasons for ordering
the test.
A number of problems exist because of this inconsistency in LMRPs:
Beneficiary Perspective
1. Covered Medicare benefits are not consistent from provider to
provider. A beneficiary could interpret this an unequal access to
services among Medicare providers.
2. Medicare patients may interpret these requirements as the
hospital trying to limit access to services, thereby preventing him
from receiving medically necessary treatment.
3. The beneficiary is not aware prior to the point of service that
this very routine test ordered for what appears to be medically
necessary reasons (based on his/her discussion with the physician),
will not be paid for by Medicare. The patient is placed in the
upsetting situation of deciding whether he can or cannot afford to have
the test.
Provider Perspective
1. This situation impacts the facility's ability to meet community
health care needs and impacts the facility's financial viability.
2. Medicare does not save money in this fashion; Medicare pays the
same amount from one provider or another.
3. This situation is not ensuring Medicare beneficiaries receive
medically necessary services, but rather redirects business from one
healthcare facility to another.
4. Providers assume all responsibility for communicating the
coverage limitations under the pertinent LMRP to both physicians and
patients as nedither HCFA nor the fiscal intermediaries do so.
5. Neither the patient nor the physician cares where the patient
has the test done; both are approved/certified/licensed facilities.
Both the physician and the patient want the test so treatment for the
patient's condition can be defined and begun.
6. This situation negatively effects providers' ability to satisfy
their patients' healthcare needs.
Physician Perspective
Though the physician is required to provide coding for services
ordered, but performed outside of his practice,
1. The physician has not been notified by Medicare of the
requirements
2. The physician has not been provided with the applicable policies
associated with the outside referral points
3. The physician's administrative costs are now increased to
provide the necessary coded information for each and every test ordered
(beyond the single reason for visit to his office).
II. HCFA should work in tandem with major patient accounting
systems vendors and hospitals, physicians, independents (e.g., labs,
clinics, etc.) to develop a strategic information technology (IT) plan
that provides for successful implementation of proposed changes.
Essentially, the problem is that HCFA implements process changes
the same way it did 10 years ago despite the automation of today's
information technology. A decade ago, HCFA announced changes that were
then manually managed by providers from paper documentation. Today the
complexity and inter-relatedness of the electronic file layout are
substantial and require numerous verifications to assure accuracy. The
precise manner in which the electronic file layout has changed is
extremely important due to the ramifications to other data.
For instance, when a new code is introduced, it must be determined
whether the code is alpha or numeric, where the characters fall in a
data line, whether it is a new character set or whether characters are
to be reused. Small changes in coding effect numerous ``jobs'' and
reports, all of which must be tested to ensure accuracy and system
balancing. However, implementation is invariably rushed because of the
schedule set by HCFA, and yet hospitals and other providers are subject
to prosecution for fraud and abuse for any errors which occur as a
result.
Thus, a comprehensive, strategic IT plan would include:
1. Full disclosure of complete and accurate code/program changes,
edits, etc.
2. Defined testing periods that include fiscal intermediary
software development and validation testing, provider development and
validation testing, joint validation testing, full production level/
parallel testing between the the provider and the FI.
This would, at its most basic level, require defined periods for
each phase of testing that do not exist today. Providers have found
that FI's are still in the development stages right up to the point of
implementation. Providers are then forced to implement systems that are
neither tested, nor functioning properly and thereby require manual
change resulting in payment delays at the provider level.
Additionally, because these local medical review policies are
implemented in select areas and inconsistently within areas, none of
the major systems vendors see this as a federally mandated change.
Thus,
1. Vendors are unable to plan, develop, test and implement system
solutions to support compliance.
2. Hospitals are unable to implement changes in a timely or
efficient manner to support compliance, thereby resulting in high risk
for reimbursement losses.
HCFA's response has been that hospitals are reimbursed via the cost
report mechanism. However, at its best, the cost report mechanism only
realizes 25-30 percent of actual costs (outpatient) and this practice
is scheduled for elimination within the next 2 to 3 years.
As a result, hospitals bear the public relations, educational, and
financial costs of communicating, educating, implementing, and
enforcing these significant changes for beneficiaries and physicians,
while the Medicare program itself has assumed little responsibility.
III. The Outpatient PPS implementation should be delayed further
due to the fiscal intermediaries inability to test these systems and
reimbursement changes with providers or major hospital system vendors.
1. As of today, our fiscal intermediary has not provided test
capabilities to any of the hospitals it services in the Chicago area,
nor has it tested PPS with any of the major patient accounting software
vendors. Thus we anticipate an increase in the number of claims denied,
payment delays and other problems. Though we are pleased at the Office
of the Inspector General's announcement that OIG will not pursue
providers for fraud and abuse during the outpatient PPS implementation,
a further delay in the implementation would allow for a smoother, less
problematic transition.
2. Medicare has not required Medicare Replacement (e.g. HMOs) or
Supplemental carriers to implement these changes. As a result, neither
group will be ready to accept the expanded line item billing, nor
calculate fees based on the PPS. In addition, Medicare has not been
able to define how beneficiaries will manage multiple Explanation of
Benefits forms that might be received for rejected line items that are
subsequently submitted and processed. Supplemental carriers have
informed Medicare of their inability to process these claims.
IV. HCFA should decriminalize billing errors and release
information that will enable providers to bill for care more accurately
and more efficiently. HCFA should take steps to communicate directly
with all providers (e.g., hospitals, physicians, clinics, etc.) of
impending changes, with plain English definitions of how these changes
will impact their practices in advance of their implementation.
As any billing error in Medicare can be interpreted as a false
claim and thus is subject to criminal penalties, hospitals cannot
submit many claims for legitimately provided care as they are unable to
code and process these claims without risking prosecution for fraud and
abuse.
Ms. Murray. Let me tell you that the fastest growing
segment of our costs is administrative. Despite the fact that
we are maintaining our nurse/patient ratios at their historical
levels, we are having serious difficulty controlling the growth
of our administrative costs, particularly in legal, audit, and
outside consultation, utilization management, corporate
compliance staff, et cetera.
We have whole new staffs now in place to comply with the
new corporate compliance constant issues of fraud and abuse
corporate compliance, Federal audits, et cetera. We too have a
whole corporate compliance program, committee, et cetera, as I
mentioned earlier. Our people who want to either serve a
patient or serve someone who serves a patient are now telling
me, ``But I only get to serve paper, I don't get to serve
someone who serves a patient. I have to serve the paper.'' and
that is extremely demoralizing for people who really want to
take care of patients.
So my committee, my staff, has just incredibly high hopes
that something could be done about this by the testimony at
this hearing. I think it is probably not as easy as that. But
if there were some way that we could get our focus back on
patient care and quality, we should do that.
Mr. Fletcher. Dr. Robinson.
Dr. Robinson. In our situation--well, I will just speak as
the country doctor, if I can say that. Actually I try and avoid
as much entanglement as possible with these regulations. I try
and focus as much as I can on patient care. And so I am a
reluctant, I guess I would say, acolyte to the HCFA's
regulations, in general, and general paperwork. But in our
office we have three employees that are pretty much full-time
people devoted to trying to keep the paperwork straight with
the----
Mr. Fletcher. How many physicians do you have?
Dr. Robinson. We have five. So three of them are
essentially devoted to keeping the HCFA paperwork straight.
There are numerous conferences people go to, there are numerous
bits of information that have to be looked into. The paperwork
that comes my way, there is a big effort on the part of my
office to minimize it, but I still have to spend some--I can't
tell you the exact time, I will say if I work--maybe a workweek
for me might be 60 or 70 hours a week, and maybe 5 to 7 percent
of that would be enmeshed in some kind of bureaucratic
paperwork, some number like that. So, a significant amount of
time and a significant amount of energy trying to keep things
straight.
Mr. Fletcher. Mr. Vaughan.
Mr. Vaughan. I would say in the South Carolina hospital
that I just served, we have 360 FTE and about 200 or so were
nurses and 100 or so were ancillary involved in the lab or what
have you, another 50 that were involved in business functions,
and very few in administration per se but involved in the
business office and accounting and data processing. And then I
would say, of those, the best estimate of those is probably
about 15 people are involved in regulatory. That is FTEs. It is
spread amongst various people, but that would be full-time
equivalents, 40-hour weeks, particularly in a year where you
know you have--you are dealing with the Joint Commission
survey, as we have just had, and getting totally up with the
standards and doing a lot of work and checking yourself.
At any given time, I'd say it is more like 10 FTEs, which
may not sound like a significant percentage, it is like 3.6
percent, but for a smaller hospital when there is really not a
lot of support staff, as I mentioned earlier, it falls on the
shoulders of clinical people.
For instance my lab director with a new lab regulation as I
just mentioned, I recall how hard it was for her to put the
software into the system and deal with the coding, you know,
which is almost a completely different type of thing to use.
And then I have got the physicians, on the other hand, talking
to me about how they comply and remain compliant when they
don't know what the patient has, that is why they are ordering
the lab tests. You can see the frustration on everybody's part.
At least speaking for small hospitals, we don't have as
many staff so the biggest problem is it falls on clinical
people's time and again takes away from things you would rather
have them doing; checking the laboratory as that director, as
she should, you know, for the clinical functions and staffing.
And all my directors are working directors. I don't have a
single director in any hospital that doesn't staff and take a
position on the floor or at a piece of equipment. They back off
and take care of administrative duties as well.
But again, it is not so much that, and I don't feel that,
again, the things that everyone is trying to achieve are not
important, they all are; it is just the method. And maybe more
so the understanding of the day-to-day functions of a doctor's
office, a large hospital--or even a small hospital or nursing
home, it appears to me, and it has over the years--I am not
trying to be critical, but it doesn't seem, the regulations
don't come down with a great deal of knowledge of what the work
flow is really like. In other words, they are not practical. I
think everybody agrees on the intent.
Hospitals I can speak for go to great lengths to comply and
really, as I say, look down on anyone that is not. If you look
out there, I think the bad reputation is again on a few. But
everyone now is burdened significantly by the few that really
have gotten us into this framework within the regulations. But
there is probably more tension on a small hospital.
Mr. Fletcher. Well, thank you all for your testimonies. I
think you know, I clearly know, we all share the concern that
we don't want dollars wasted and especially wasted on
individuals or entities that clearly have the intent to defraud
HCFA and the taxpayers. And so I think we all want very good
efforts to make sure that the bad players are identified, that
they are stopped and they are penalized, so that there is
certainly a deterrent for that kind of action. So I think, you
know, among the colleagues I have worked with, most of the
providers, an overwhelming proportion of the providers want to
do a good job, are not out there to increase their billings
unlawfully, but it becomes very difficult.
And let me ask Dr. Robinson one more question, then we are
going to close out the hearing, and that is the problem that I
found to be frequent was the fact that there are so many
requirements on the specifics of documentation for a particular
code that sometimes you tend even not to code things. You
downcode, actually, is what we found when we reviewed many of
our charts, because of the fear of overcoding and because of
documentation. Just share with me a little bit of your concern
on that personally, if you could.
Dr. Robinson. Well I will throw out maybe one or two
examples. Some years ago, when the initial coding regulations
were promulgated by HCFA in regards to office visits, as to how
you would code those, it would be a complicated visit or not a
complicated visit we, were totally befuddled about the correct
thing to do, so we just basically elected to make everything
the same. So we downcoded everything, and in fact then we were
told this would be a terrible mistake, we would be audited, and
we were forced to upcode. But we are still very nervous about
it.
So the tendency is always to downcode. I mean, the thrust
of every doctor I know of is to just avoid any kind of conflict
with HCFA and to never do anything that is inflammatory. And if
there is any dispute we would downcode.
One story involves a neurology group in my town who are
very reputable, diligent, splendid physicians who do a good
job. And they had a series of patients that they all undercoded
upon. And there is a reason for it. They just felt that was the
right thing to do. These patients were essentially extended
care patients in a nursing home environment. But in any event,
they put--all their codes were put in as the lowest possible
code.
Then what happened was--they fell out of--the HCFA computer
picked them up as undercoders. So out of the blue, the black
helicopters arrived and they swooped in and they went through a
pretty extraordinary ordeal. The reviewers came in and took
random charts and they found documentation--there were
documentation disputes about this. And these neurologists are
very reputable, very compulsive, very uptight people. This was
very upsetting experience for them. They retained an attorney,
they got an accountant in there. They had numerous meetings,
lost sleep, and this process went on for months. And they
counteracted the accusations that the documentation wasn't
correct, and there was back and forth.
The process went along for about 10 months. They then had a
quick visit, they gave their--they gave their report, and they
are still in limbo. So it hasn't been as if this process has
been easily terminated. They said the difficulty that happened
was that we made the mistake of undercoding. And if we had only
charged the government more money, we would have been spared
this ordeal.
And so that is--those are just some vignettes about that.
Mr. Fletcher. Thank you all. I think it is time that we
probably adjourn the hearing. Your testimony I think has been
very informative. We are going to continue these hearings and
hopefully hear from HCFA. I do think, whether it is the folks
that work for HCFA as well as providers, I think everyone has
the same intent, and that is to make sure we get good patient
care, good quality. But obviously from what we have learned
today, I think in the implementation of that there is a lot of
room for improvement.
So we look forward to holding these hearings and continue
to hold the hearings and be able to provide a lot of
information. Your testimony has been very beneficial. And we
thank you for coming today. And this meeting is adjourned.
Thank you.
[Whereupon, at 2:12 p.m., the Task Force was adjourned.]
Medicare's Regulatory Burden on Providers
(Part 2)
----------
WEDNESDAY, JUNE 14, 2000
House of Representatives,
Committee on the Budget,
Task Force on Health,
Washington, DC.
The Task Force met, pursuant to call, at 10:15 a.m. in room
210, Cannon House Office Building, Hon. Saxby Chambliss
(chairman of the Task Force) presiding.
Chairman Chambliss. All right, we will go ahead and get
started this morning. Let me welcome all of our guests here,
and I particularly want to say thank you to Dr. Berenson and
Mr. Charrow for being here to make a presentation this morning.
We are looking forward to hearing from you and looking forward
to dialoguing on what are very critical health care issues
facing this country.
As I said at the previous hearing that we had, these
hearings are not intended to be a witch hunt of any sort. We
are trying to get to the bottom of some issues that we are
hearing about from our constituents, that at the same time we
are hearing about from the other side, and I think Dr. Berenson
is going to point out some things not just that he thinks are
accomplishments of this administration with respect to
Medicare, but hopefully some ongoing problems that HCFA is
working on that still need to be addressed and still need to be
worked on.
I am concerned because at the first hearing, my colleague
and friend Mr. McDermott asked these folks to create a top 10
list of their regulatory burden concerns about Medicare. It
turned out to be 23, but they were boiled down to 13 by staff.
Dr. Berenson, that information was given to your staff
several weeks ago, on the 26th of May, and we asked that those
issues be addressed. I read your written testimony a couple of
times last night, and, frankly, they were not addressed. I am
not presuming that you are not going to address those 13
points, but I want to make sure that you understood that those
were presented in the spirit of bipartisanship, and that they
need to be addressed. We want to either resolve them one way or
other by correcting the law or the regulations.
It is important to us that these issues be addressed. I
know that you are going to do so one way or the other in your
testimony today or shortly thereafter.
I have a written statement that I will submit for the
record, and I want to move on because we have a number of
Members who have indicated that they are going to be here, and
we want to give everybody an opportunity to ask questions. I am
advised that we are not going to have another vote for another
hour and a half, possibly 2 hours, so we may be able to go
through this whole hearing before there are any other
interruptions from the floor.
One other bit of housekeeping, and that is I ask unanimous
consent that all Members be given 5 days to submit written
statements for the record after today's hearing, and hearing no
objection, so be it.
[The prepared statement of Saxby Chambliss follows:]
Prepared Statement of Hon. Saxby Chambliss, a Representative in
Congress From the State of Georgia
Today, the Health Task Force continues its efforts in investigating
the waste of resources associated with the burdens that Medicare's
complex regulatory system imposes on the health care community and the
patients they serve. Today's hearing will provide an opportunity for
those responsible in administering significant portions of the Federal
Medicare program to answer a number of comments and concerns raised at
this panel's initial hearing on this timely subject.
As described during the initial May 18 hearing on this matter,
these hearings are designed to provide a forum for Members of the Task
Force and the Budget Committee to become familiar with the difficulties
the health care community faces and to ensure that Federal programs
like Medicare do not penalize honest providers struggling to comply
with and meet the frustrating bureaucratic maze of Federal health care
regulations.
The two hearing structure was designed to first solicit provider
comments, which would then be summarized and presented to HCFA for
response at a second hearing. On May 18, the panel heard oral testimony
from individuals at ``ground zero'' in health care delivery. First, we
heard from Dr. Joe Sam Robinson who provided a practicing physician's
perspective on the burden of Medicare regulations in the daily practice
of medicine. Second, Kathleen Murray, the Chief Operating Officer at a
hospital in Chicago, told the panel of the high compliance costs
hospitals face and that her employees were buried under bureaucratic
paperwork. Ms. Murray also provided the panel with valuable information
on the impact of broad Federal regulations on hospitals, which must
comply with regulations promulgated from nearly 30 different Federal
agencies. Finally, Page Vaughn, a hospital administrator, told the Task
Force that regulations seem to come out of Washington without serious
concern for hospitals' ability to implement those regulations.
During the May 18 hearing, at the excellent suggestion of Mr.
McDermott, the witnesses were asked to create a ``Top Ten'' list of
suggestions for lessening the regulatory burden placed upon Medicare
providers. The witnesses took Mr. McDermott's request sincerely and
compiled a list of suggestions to the panel well in excess of ten
items. Before the conclusion of the initial hearing, the panel members
were in agreement that the list of provider suggestions should be
submitted to HCFA so its representatives could adequately respond to
the concerns at today's follow-up hearing.
In an effort to ensure HCFA had ample opportunity to respond to
provider concerns raised in the May 18 hearing, committee staff pared
the provider suggestions to those which were directed at HCFA and
germane to the issue of regulatory burden. This created a list of 14
manageable suggestions that were personally forwarded to HCFA following
the May 18 hearing.
It was my hope that providing HCFA with a small and manageable list
of provider suggestions in a timely fashion would provide them ample
opportunity to respond to the provider's concerns in detail at today's
hearing. I have had the opportunity to briefly read Dr. Berenson's
prepared testimony before the panel today, and I must say that I am
rather disappointed that his prepared remarks do not adequately address
the limited number of provider concerns forwarded to HCFA following the
May 18 hearing.
While Dr. Berenson's testimony regarding current initiatives at
HCFA to lessen the burden on the health care community is valuable
information to this panel, it is clear that a major disconnect still
exists between a provider community that feels an increasing burden and
the agency's initiatives that purport to be lessening such a burden.
Given the intensity with which the providers concerns were registered
with this panel last month, it was my hope that HCFA could use the
opportunity of this hearing to respond in like detail to the concerns
raised by the provider community. I hope Dr. Berenson's oral testimony
will shed greater light on HCFA's response to the provider concerns
personally forwarded to the agency by this panel's staff last month.
With that, I look forward to Dr. Berenson's testimony before the
Health Task Force today, as well as the testimony from Mr. Robert
Charrow, who served as Principal Deputy General Counsel at the
Department of Health and Human Services under President Reagan.
Enclosed is a copy of the list of provider suggestions forwarded to
HCFA following the Health Task Force's May 18 hearing.
Provider List of Suggestions to HCFA for Lessening Regulatory Burdens
1. Eliminate the requirement to submit an inpatient diagnosis
before diagnostic tests are done.
2. Eliminate the requirement that hospitals get patients to sign at
every single visit a statement that they don't have secondary insurance
coverage.
3. Eliminate the requirement that physicians provide secondary
payer information when they refer a patient to a hospital outpatient
department.
4. Give providers the software that has the program integrity edits
so they can determine in advance how to prevent claims from being filed
inappropriately.
5. Combine the Part A & B billing systems.
6. Want us to evaluate the impact of all regulations on: quality of
care; and on a total cost analysis for the impact on individuals,
communities, and compliance costs.
7. Target fraud, waste, and abuse instead of honest errors.
8. Decriminalize billing errors.
9. Establish an ethical oversight committee to assess HCFA micro-
policies and make sure they don't have any negative impact on patient
care and physician independents.
10. Expedite the process for changing provider numbers when a
business is sold or moves.
11. Pay promptly.
12. Simplify the cost report.
13. Review and rationalize the advance beneficiary notice policy.
Chairman Chambliss. Mr. McDermott.
Mr. McDermott. Thank you, Chairman Chambliss. I am glad
that we are having this second opportunity to have some
dialogue about these issues. I think they are very important
ones. And I, too, would like you to be as specific as you can
about the kinds of things that we actually heard here as
problems, and maybe you will add to your testimony in some way.
But I think given the enormous size of HCFA, to have
slashed the error rate from 14 to 8 percent I think is
admirable. I am not taking the position that HCFA has not done
a good job, and to quote, Nancy-Ann DeParle said that HCFA
contracts with 55 private health care insurers to process
nearly 1 billion Medicare fee-for-service claims per year with
346 private plans which provide managed care. For Medicare
alone the Agency pays more than $210 billion to some 700,000
physicians, 6,000 hospitals and all of the other providers in
the health care system. It really--HCFA is the largest insurer
in the country, providing coverage for 74 million people when
you add together Medicare and Medicaid and the children's
insurance plan. So the job is a daunting one, and the fact that
92 percent of the claims that are filed are filed correctly is
really a pretty good statement.
However, I think that in something as large as this, 1
percent is a lot of money. So we are looking for 2 percent or 3
percent, anything to drive that rate down. We are interested in
cutting out the waste and the fraud.
No one, I think, would sit on this dais and say that they
are in favor of continuing a system where it was possible to
get by with fraudulent claims or do other things. However, it
is the question of how you orchestrate or how you put together
the examination of that, of the claims, to get at the best
system, because you obviously have to be systematic. You can't
do it one claim at a time. With that many claims, it would be
an impossible job. So it has to be a screening system, and I
think that is what we are interested in hearing is how the
system works, given the feedback from the people that we had
before us last time, taking at least at face value that these
are the prominent issues that affect providers.
So with that, I think we welcome your testimony, and I
would ask unanimous consent to put my whole statement in the
record.
Chairman Chambliss. Without objection, so ordered.
[The prepared statement of Jim McDermott follows:]
Prepared Statement of Hon. Jim McDermott, a Representative in Congress
From the State of Washington
Thank you Chairman Chambliss for this hearing, and the opportunity
to hear more about how we can improve the Medicare system. I would also
like to thank Dr. Berenson and Mr. Charrow for agreeing to share their
thoughts on these issues.
When I asked the witnesses at our May 18 hearing to list their
concerns with Medicare's regulations, I am grateful that they took that
opportunity to compose the thoughtful list that they did. Using this
list as a starting point, we can take a real look at how the Health
Care Financing Administration (HCFA) can reduce the complexities and
errors that exist in the current system. This hearing gives HCFA a
chance to tell us what they are doing and to receive feedback from
providers.
Given the enormous size of the job that HCFA is tasked with, the
fact that they have slashed the payment error rate from 14 percent to
below 8 percent is admirable. At the last hearing, I quoted HCFA's
administrator, Nancy-Ann DeParle and I would like to quote her again by
saying HCFA, ``contracts with 55 private health insurers to process
nearly 1 billion Medicare fee-for-service claims each year, and with
346 private health plans that provide managed care. For Medicare alone,
the agency pays more than $210 billion in claims to some 700,000
physicians, 6,000 hospitals, and thousands of other providers and
suppliers each year. HCFA is the largest health insurer in the nation,
providing coverage for some 74 million Americans through Medicare,
Medicaid, and the State Children's Health Insurance Program, and paying
about $368 billion for health care services this year.'' The size of
Medicare is daunting, and the fact that 92 percent of claims that are
filed are filed correctly with an error rate of below 8 percent is
great.
However, we still need to see improvement. I hope that today's
witnesses will be able to provide us with logical and concise answers
to this list. Using these answers, we can craft real fixes to Medicare
that will, along with HCFA's efforts, reduce the burdens placed on
providers and get the error rates to an acceptable level: zero.
I am greatly looking forward to this hearing Mr. Chairman, and I
thank you for the time.
Chairman Chambliss. Mr. Lucas, do you have any comments?
Mr. Lucas. No, Mr. Chairman.
Chairman Chambliss. Mr. Gutknecht, do you have any
comments?
Mr. Gutknecht. Mr. Chairman, I would like to comment
briefly. I am delighted that you are having this hearing, and I
think this is an issue that deserves an enormous amount of
congressional oversight. When we meet with our nursing homes,
hospitals, providers of many kinds, this is an issue that gets
them excited.
I apologize, we also have an agriculture hearing, so I am
going to be in and out. I do appreciate the witnesses and the
fact that we are having this hearing. I hope that this will not
be the last.
Chairman Chambliss. At this time, Dr. Berenson, we will
turn it over to you.
STATEMENT OF ROBERT BERENSON, M.D., DIRECTOR, CENTER FOR HEALTH
PLANS AND PROVIDERS
Dr. Berenson. Thank you, Mr. Chairman. Let me say at the
beginning that maybe there was some confusion about the 13
leading concerns. My staff did provide me a number of those
questions. I read the testimony of everybody who participated,
but I did not understand that we were to provide specific
responses to each one of them. I can address many of them and
can provide you written responses subsequently, but there was a
misunderstanding about that specificity. And again, I will be
able to address a number of those issues that I have read and
been briefed about coming into today.
I have a firsthand experience with Medicare because I was,
in fact, a practicing physician for more than 20 years and also
served as medical director of a local Preferred Provider
Organization and in that capacity reviewed many claims and
dealt with concerns that physicians expressed about payment and
related issues.
We all share the goals of minimizing Medicare regulations
and maintaining and strengthening the program's efficiency and
integrity. I think we also appreciate the challenges these
sometimes conflicting goals can present. Such concerns have
been heightened by the BBA's substantial impact on providers
and our success in fighting fraud, waste and abuse.
We are taking a number of steps to review our policies for
ways that they might be streamlined or simplified. We are also
working to more sharply target our program integrity efforts.
We want to make sure that honest practitioners and other
providers have the information that they need to do the right
thing. Helping us in these efforts is our new Physicians
Regulatory Issues Team. Its job is to review, clarify, and
simplify rules and ensure that clinician concerns are heard and
addressed. This team is developing an impact analysis
initiative to ensure that we explicitly address how policies
that otherwise make sense affect practicing physicians to
identify operational burdens which might not have been
considered.
We are also establishing a sentinel practices system to
query and monitor a selection of physician offices across the
country and receive ongoing feedback on the real-world day-to-
day impact of Medicare rules. We have launched wide-ranging
education initiatives to help providers understand Medicare
policies and bill correctly and prepare them for new payment
systems mandated by the law.
We are establishing payment error rates for all contractors
so we can focus education and error prevention efforts much
more sharply.
We are requiring all claims processing contractors to
establish toll-free lines for providers to call with billing
questions.
We are testing new evaluation and management guidelines,
which I am going to be talking about in a little more detail.
When our Administrator Nancy-Ann DeParle arrived at the Agency,
and when I joined her a number of months later, one of the
immediate issues that we faced was physician dissatisfaction
with these guidelines or evaluation management services
relating to how to bill for office and hospital visits.
The administrator basically told us to start over. Our goal
has been to develop simpler guidelines that are clear and
streamline the documentation required. We will, in fact, next
week be holding a town hall meeting where we will be announcing
a new version of these guidelines and have committed to pilot-
testing them in a number of physician practices before we would
actually implement them. We are also revamping the advance
beneficiary notice that providers give to beneficiaries when
providing a service or item that Medicare may not cover. We
want a plain-language, user-friendly document explaining that a
given service or item may not be covered and that the
beneficiary may be responsible for payment so that the
beneficiary can make an informed consumer decision.
We have several other initiatives under way that are
addressed in my written testimony. Several of these are
designed to more sharply focus our program integrity efforts.
We realize that our efforts to reduce fraud, waste and abuse
have generated concerns among some clinicians and providers. We
know the majority of providers are honest and conscientious,
and we have no intention of punishing anyone for honest
mistakes or for misunderstanding what are, in fact, complex
rules and guidelines in many cases. If providers do make
billing errors, we want to find those errors before we make
payment, but there is a world of difference between honest
errors and the outright fraud we have been working to reduce.
We do not refer providers to law enforcement for minor or
occasional errors. Only the most serious matters are referred
to law enforcement.
I have spoken with hundreds of physicians about their
concerns and repeatedly have asked them to tell us if they know
of instances of improper pursuit of physicians for inadvertent
errors, and so far have not heard of that. Indeed, while there
are some 660,000 physicians receiving Medicare payments each
year, we review about 1 percent of physician claims, and in the
past 2 years physicians accounted for only 52 of some 500
criminal health care convictions at a time when the Justice
Department has received an 85 percent conviction rate on cases
it takes to court.
So our efforts really are not to criminalize what are
otherwise honest errors, and we are working hard to clarify the
rules and guidelines so that providers are not placed in
ambiguous situations.
I noted in the hearing press kit for the May 19th hearing
that you held you quoted Uwe Reinhardt, the economist from
Princeton in which he said that the statutes and rules
governing Medicare now run the risk of becoming themselves a
form of waste, fraud and abuse, and that clearly is a concern
to us. But he said also said in that Wall Street Journal
article that those complaining about our regulations, if they
were to be brutally honest, they would have to admit that the
complexity of statutes and regulations has been hatched over
the years by lawmakers and lobbyists. In the end, he said, a
compromise must be struck between rules so crude as to tolerate
widespread abuse and rules so finely honed as to become
impenetrable. We want to work with Congress and the health care
community to strike the balance.
The past few years have been particularly difficult for
providers due to the many BBA changes in our active program
integrity efforts, but we are turning a corner. We are moving
beyond BBA implementation. We are expanding efforts to help
honest practitioners and providers, and we are more sharply
targeting the kinds of fraud and abuse that we have had so much
success in fighting.
I thank you for holding this hearing and giving us another
opportunity to address these issues, and I would be happy to
respond to specific concerns that you may have.
Chairman Chambliss. Thank you very much, Dr. Berenson, and
we will note that you have a written statement for the record.
[The prepared statement of Robert Berenson follows:]
Prepared Statement of Robert Berenson, M.D., Director, Center for
Health Plans & Providers, Health Care Financing Administration
Chairman Chambliss, Congressman McDermott, distinguished Task Force
members, thank you for inviting us to discuss our progress in
streamlining Medicare policies and helping providers participate in the
Medicare program.
As a practicing physician for more than 20 years, and having
managed a Preferred Provider Organization, I have a firsthand
understanding of the types of concerns expressed by physicians and
other health care providers who participate in Medicare. The laws
governing Medicare are complex and extensive, and its administration is
complicated--in large part because medicine and our ever-evolving
health care delivery system are complex. And Medicare, according to the
General Accounting Office, is intrinsically at high risk of fraud,
waste, and abuse because of its size and scope.
We all share the goals of minimizing Medicare regulations and
maintaining and strengthening the program's efficiency and integrity. I
think we also all appreciate the challenges these sometimes conflicting
goals can present. Such concerns have been heightened by the Balanced
Budget Act's (BBA) substantial impact on providers, and by our
unprecedented success in fighting fraud, waste, and abuse, which has
cut the Medicare payment error rate nearly in half. We greatly
appreciate the opportunity this hearing provides to explore additional
actions we might take to help providers participating in the program.
We are already taking a number of steps to review our policies and
procedures for potential areas in which they might be streamlined or
simplified. Last year, for example, we worked with Congress to develop
the Balanced Budget Refinement Act (BBRA). We also took a number of
administrative steps to help providers adjust to changes mandated in
the BBA. And we are open to considering other adjustments that might be
appropriate.
We have several other initiatives underway to help providers and
better target our program integrity efforts.
We have launched a wide-ranging education initiative to
help providers understand Medicare policies and how to bill correctly,
and to prepare them for the new payment systems mandated by the law.
We have formed a Physicians Regulatory Issues Team to
review, clarify, and simplify rules, and ensure that clinician concerns
are heard as we develop policies and guidance.
We have worked with the HHS Inspector General to develop
compliance guidance for providers, including those issued just this
month for physicians, and inviting public comments on this guidance.
We are studying payment error rates at the contractor
level so we can focus education and error prevention efforts more
sharply.
We are requiring all claims processing contractors to
establish toll-free lines for providers to call with billing questions.
We will be testing simplified evaluation and management
guidelines designed to reduce the documentation required for physicians
to justify their claims.
This month we sent a letter to more than 800,000 providers
on how to address the most common documentation problems.
And we are conducting an increasing number of town
meetings and other endeavors to communicate directly with providers
about their concerns.
Background
The Health Care Financing Administration (HCFA) is the largest
health insurer in the nation, covering some 74 million Americans
through Medicare, Medicaid, and the State Children's Health Insurance
Program. It will pay about $368 billion for health care services this
year. For Medicare alone, we pay out more than $210 billion each year
for nearly one billion claims by some 700,000 physicians, 6,000
hospitals, and thousands of other providers and suppliers. The people
who work at HCFA care deeply about serving the 39 million senior
citizens and people with disabilities who rely on Medicare, and I am
proud of our record of accomplishments.
The innovations we have developed in quality improvement and
prospective payment systems that promote efficiency have been widely
adopted by other public and private sector insurers. We also have
important statutory responsibilities to ensure that quality and safety
standards are met, support medical education, and subsidize care for
those who are unable to pay.
The volume of Medicare laws and regulations covering all these
responsibilities, while often greatly exaggerated, is substantial. The
Social Security Act includes 900 pages of legislative language related
to HCFA programs and, for all these programs including Medicare, we
have issued 1,700 pages of regulations to implement this legislation.
Even with the manuals we provide for our contractors, the total number
of pages is no where near the figures alleged by some.
Congress is frequently very prescriptive in telling us how to
implement the legislative changes it makes to our programs. This was
particularly true with many of the 335 BBA provisions related to our
programs, including new prospective payment systems that require
substantial change for skilled nursing facilities, home health
agencies, and hospital outpatient departments.
The BBA represented the agreement of Congress and the
Administration to slow the growth in Medicare spending. Reducing
spending by such an unprecedented amount in a relatively short time was
an unequaled challenge. Virtually every hospital, physician, home
health agency, skilled nursing facility, durable medical equipment
supplier, and other health care provider in the country has been
affected, and almost all have seen an impact on their revenues.
Such significant change with such an ambitious implementation
schedule has created pressures and dissatisfaction. HCFA, of course,
was the face of the BBA for providers. While the past 2 years have not
been easy, I do believe we have done a good job, albeit not a perfect
job, in implementing the law and remaining true to the law's intent,
given the time frames, the competing interests of program stakeholders,
and the complexity of the changes.
The BBA and the Health Insurance Portability and Accountability Act
of 1996 both also included important new tools to help us prevent
improper payments. The vast majority of providers are honest and we
have no intention of punishing them for honest errors. However, we have
an indisputable obligation to try to pay fairly, prevent and identify
errors, recoup improper payments, and root out the small number of
providers who are not honest. This is a leading concern among
beneficiaries, who tell us that they feel that fraud, waste, and abuse
are rampant in the system. Still, moving in just a few short years from
relatively lax program integrity efforts to a zero tolerance policy has
been challenging for both us and providers.
But while difficult, the BBA and our successes in protecting
program integrity have both been essential for preserving and
strengthening the Medicare program. The Part A Hospital Insurance Trust
Fund, which was projected to become insolvent in 1999 when President
Clinton took office, is instead now projected to remain solvent until
2025.
Improving Guidance and Education
The need to continue with payment reforms, spending growth
controls, and program integrity initiatives underscores the importance
of our increased provider education efforts. We are therefore
redoubling our efforts to reach out to all providers to ensure that our
guidance on Medicare policies is clear, understandable, and consistent
among the private insurance companies that, by law, we must contract
with to process claims.
We have initiated a wide range of provider educational activities.
For example, we are:
Airing satellite broadcasts to hundreds of sites across
the country on topics of interest to providers such as Medicare
coverage and payment requirements; new Medicare benefits, women's
health and adult immunization initiatives, and more;
Surveying health care providers nationwide and analyzing
data collected to develop new education strategies for reaching out to
Medicare providers;
Developing computer-based training modules for providers
on topics such as proper claims submission, Medicare Secondary Payer
rules, and Medicare fraud and abuse efforts;
Writing articles on timely topics for fiscal intermediary
bulletins and other publications targeted toward physicians and other
providers;
Maintaining the www.hcfa.gov/medlearn web site to provide
up-to-date, easily accessible material on a wide variety of issues,
including interactive courses on the proper filing and documentation of
claims;
Communicating on a regular basis through conference calls
with national and state provider associations and issuing nationwide
mailings on issues of interest;
Sharing feedback with providers, both on an individual and
community level, about how to correct and prevent the types of errors
identified in medical review of claims so we can reduce the number of
improper claims among the vast majority of providers who make only
honest errors; and
Working to ensure that contractor toll-free service lines
are responsive to provider questions.
Among the most important of these efforts is development and
testing of simplified evaluation and management guidelines that are
designed to reduce the documentation required for physicians to justify
their claims. When our Administrator, Nancy-Ann DeParle, arrived at the
agency and learned of physician dissatisfaction with a new revision of
the guidelines, she ordered that physicians be allowed to use either
the new or old version, and instructed me to review the situation. As a
result, I and other HCFA physicians started over with three goals in
mind:
Simplify the guidelines;
Reduce the burden; and
Foster consistent and fair medical review.
We have developed simpler versions of the guidelines that we
believe provide clear, unambiguous guidance and streamline the
documentation required for clinically appropriate record keeping and
verification that services were medically necessary and rendered as
billed. We are going to rigorously test these new versions in the real
world of clinical practice. We will also test training mechanisms to
determine the best way to help physicians learn how to use the new
guidelines.
Throughout the process we will seek physician input on whether the
new version revisions being tested are, in fact, better for them in the
real world of day-to-day clinical practice. To begin the feedback
process, we are holding a public meeting next week in Baltimore to lay
out our proposed guidelines and discuss our testing plans with leaders
of physician organizations.
Another good example of our increased education efforts is our
current undertaking in preparation for implementation of the hospital
outpatient prospective payment system, which was mandated by the BBA.
This initiative, involving hospitals across the country, is
unprecedented in its scope and second in size only to our Year 2000
provider outreach efforts. As part of this effort, we are:
Holding nationwide train-the-trainer sessions for claims
processing contractors who, in turn, are providing training for local
hospitals and billing vendors in their areas;
Conducting additional training sessions for
representatives from national and state hospital associations, as well
as software vendors, in the coming months;
Posting training materials for providers on our
www.hcfa.gov website;
Sponsoring a national satellite conference specifically on
the hospital outpatient PPS on June 15;
Instructing all contractors to take immediate steps to
disseminate final program information as soon as we release it, and to
post these instructions on their web sites; and
Encouraging contractors to publish articles in their
provider bulletins and conduct outreach to get detailed information to
providers.
Responding to Provider Concerns
Parallel to our educational initiatives, we are working to improve
the service we provide to physicians and ensure that our regulations
help, rather than hinder, provision of high quality patient care. To do
so, we have doubled the number of physicians at HCFA and put them in
key positions. We have rejuvenated and sharpened the focus of our
Practicing Physicians Advisory Committee to ask their advice on how our
policies affect real-life clinical practice.
We also have established a new, internal, physician-led Physicians
Regulatory Issues Team. This team is developing new systems to create
rules and regulations that are simplified, clarified, and refined
specifically to reduce administrative workloads on providers and better
meet beneficiary needs. To do this, the Physicians Regulatory Issues
Team is:
Developing an ``impact analysis'' initiative to ensure
that we explicitly address the impact on practicing physicians before
and after issuing new policies or interpretations of existing policies,
and have already begun piloting these ideas with some current
regulations;
Developing a ``sentinel practices'' system to query and
monitor a selection of diverse types of physician offices across the
country in order to receive ongoing feedback on the real-world, day-to-
day impact of Medicare rules;
Developing a ``physician service workgroup'' in which
staff involved in physician-related efforts--from developing
regulations to outreach and education--will work together to ensure
clear, concise, and consistent communication;
Enhancing our communication with physicians at the State
and County level by having each of our 10 regional offices develop an
action plan that reflects the needs and character of local physician
communities;
Developing a set of ``frequently asked questions'' for
physicians, as well as a ``rules of the road'' brochure on the basics
of Medicare participation for physicians;
Hosting monthly conference calls with physician
organizations across the country to address real-time and emerging
issues, such as hospital coding, Peer Review Organization efforts,
Medicare payment error estimate, and new preventive health benefits;
and
Upgrading our website to provide clearer, more user-
friendly information for physicians.
Other Administrative Action
We also are taken a number of additional administrative actions to
moderate the impact of the Balanced Budget Act, reduce administrative
workloads, and assist providers in meeting the needs of the patients
they serve. These steps complement the legislative changes included in
the BBRA that was enacted into law last fall. For example:
We are revamping the advanced beneficiary notices that
providers give to beneficiaries when providing a service or item that
may not be covered by Medicare. The goal is to provide a plain-
language, user-friendly document explaining that a given service or
item may not be covered by Medicare and that the beneficiary may be
responsible for payment, so the beneficiary can make an informed
consumer decision. A new draft notice for physician and other Part B
services is now being reviewed by our Practicing Physicians Advisory
Committee, and will soon go into the Paperwork Reduction Act clearance
process, which includes opportunities for public comments. A new draft
advanced beneficiary notice for home health services is already in the
Paperwork Reduction Act clearance process.
We are delaying implementation of the hospital outpatient
prospective payment system until August 1. We are distressed about
having to postpone the benefits of this new system for beneficiaries,
but the 1 month delay will give both us and hospitals needed time to be
fully prepared for this substantial change. We also are asking
hospitals to not collect deductibles or coinsurance from Medicare
beneficiaries beginning August 1 until we notify them of the correct
amount. And we will provide all hospitals with a ``plain language''
flyer to help explain the change to beneficiaries.
We are postponing expansion of the BBA's ``transfer
policy'' for all hospitals for a period of 2 years, through 2002. As a
result, the transfer payment limits will apply only to the current 10
Diagnosis Related Group (DRG) categories, as prescribed by the BBA. We
are carefully considering whether further postponement of this policy
is warranted.
We are implementing new policies to make it easier for
rural hospitals, whose payments are now based on lower, rural area
average wages, to be reclassified and receive payments based on higher
average wages in nearby urban areas. As a consequence of these policy
changes, rural hospitals will receive higher reimbursement. Similarly,
we are helping rural hospitals adjust to the new outpatient prospective
payment system by using the same wage index for determining a
facility's outpatient payments rates that is used to calculate
inpatient rates.
We are helping home health agencies by extending the time
frame for repaying interim payment system overpayments from 1 year to
three, with the first year interest-free. We are postponing the
requirement for home health agencies to obtain surety bonds. And we
have eliminated the sequential billing requirement.
We are helping skilled nursing facilities by refining the
payment classification system in a budget neutral way to increase pay
for medically complex patients.
Ensuring Program Integrity
Although we recognize the need to reduce the administrative
workload on providers and simplify documentation requirements where we
are able, we also have a responsibility to be prudent stewards of the
trust funds and maintain the financial integrity of our programs. We
recognize this is a delicate, but critical, balance.
Today, our efforts to identify fraud, waste, and abuse in all of
our programs are more effective than ever before. From April through
September, 1998, we stopped about $5.3 billion from being paid to
providers for inappropriate claims. Our anti-fraud efforts returned
nearly $500 million to the Federal Government, a 65 percent increase
over the previous year. And we have reduced the Medicare error rate by
almost half since 1996, and maintained that progress in 1999. And total
Medicare integrity program savings in fiscal year 1999 totaled $9.9
billion. Yet Medicare pays 95 percent of ``clean'' claims submitted by
physicians without asking for any medical record to confirm the
accuracy of the code, the adequacy of the documentation, or the
appropriateness of the service.
We realize that our efforts to reduce fraud, waste, and abuse have
generated concern among some providers. We know the majority of
providers are honest and conscientious, and we have no intention of
punishing anyone for honest mistakes. If providers do make billing
errors, we want to find those errors, preferably before we make
payment. But there is a world of difference between honest errors and
the kind of outright fraud we have been so successful in fighting.
While some physicians have said they are afraid of being jailed for
minor errors, we do not refer providers to law enforcement for minor or
occasional errors. Only the most serious matters are referred for
prosecution. I have spoken with hundreds of physicians about these
concerns, and repeatedly asked them to tell us if they know of any
instances of improper pursuit of physicians for honest, inadvertent
errors.
In fact, while some 660,000 physicians receive Medicare payments
each year, we only review 1 percent of physician claims. And, in the
past 2 years, physicians accounted for only 52 of some 500 criminal
health care convictions, at a time when the Department of Justice has
achieved an 85 percent conviction rate on cases it takes to court.
Conclusion
We are committed to helping providers participate in Medicare and
to minimizing the amount of regulation, paperwork, and oversight as
much as our obligation to taxpayers and beneficiaries will allow. We
are taking many steps to be more responsive to provider concerns, and
are open to considering others that may be appropriate. The past few
years have been particularly difficult for providers due to the many
BBA changes and our robust program integrity efforts. But now, I
believe, we are turning a corner. We are moving beyond BBA
implementation. We are strengthening and expanding efforts to help
honest providers. And we are more sharply targeting the kinds of fraud,
waste, and abuse that we have had so much success in fighting. I thank
you again for holding this hearing and giving us yet another
opportunity to address these issues. And I am happy to answer your
questions.
Chairman Chambliss. First of all, let me say that one thing
that came out of our previous hearing, and one thing that I
have heard continually from physicians around the country, is
that there is a fact of intimidation that comes out of HCFA
toward the physician community as well as the medical supplier
community. I don't think that it is intentional on your part to
do that or your agency's part to do that, but you do need to
know it is there.
I think there ought to be some direction from the top to
folks working in your agency that you really ought to be a
service agency. You outlined a number of things that you are
doing to make the program more positive. I appreciate that. I
think they are things that needed to be done, and along with
that we ought to make sure that anybody who feels like they
have a concern about what they are doing, or how they are doing
it, or why they are getting varying determinations by HCFA that
their claims are not proper, can feel comfortable in picking up
the phone and calling HCFA to sit down and walk them through
the process.
The other thing that you mentioned, and we want to share
the blame if that is where the blame ought to be put, Medicare
is a very complicated program. Just the sheer amount of
dollars, as Mr. McDermott said, dictates that it is a broad-
ranging, tough animal to get your arms around. And part of that
may be Congress's fault, and if we have issued too many laws
that require you to issue thereby too many regulations as a
result of that, then we need to step back and take a look at
that. That is part of why we are going through this process.
I note in your written testimony a couple of things. First
of all, you refer to the fact that there is a certain volume of
Medicare laws and regulations that is substantial, but you
mention this often is greatly exaggerated, and you refer to
some specific numbers in there. But, you know, we heard from
the physicians and hospitals that testified earlier about the
sheer volume of regulations that come out from HCFA every year.
In fact, Dr. Robinson mentioned that he had his staff weigh the
amount of regulations that he got last year, and it was 35
pounds of documents that came to his office alone from HCFA.
Now, under the Paperwork Reduction Act, if 35 pounds is
going to every Medicare supplier in the system, then we are
obviously spending an awful lot of money just on paper, not
just on the regulations that are issued.
Secondly, the Mayo Foundation, of course, has indicated
that there is 132,000 pages of Medicare regulations and laws
regarding those regulations. If that is the fault of Congress,
we want to address that, but at the same time we fully expect
your agency to address that because that doesn't need to be the
case. The more regulations we have out there, obviously the
more difficult it is to comply with them, and the more
cumbersome and expensive on both ends, not just on the
physician's end.
You referred also in your written statement to the fact
that you have rejuvenated the Practicing Physicians Advisory
Committee and are seeking their advice on how your policies
affect real-life clinical practice, and I can't help but note
while again I think that commission was well-intended, I think
it was put together for the right reasons, and it is composed
of right types of people and hopefully the right personalities,
but your immediate past president of that group, that
committee, Dr. Marie Kuffner from the University of California
at Los Angeles wrote a very stinging letter to Secretary
Shalala on March 23, 2000, in which she really called the
administration to task on the policies that it was applying
with respect to the use of that committee and virtually saying
that that committee is just called on to rubber-stamp and be
involved in decisions to a very minimal extent.
Again, I would hope what you are saying in your written
statement may have resulted from that very stinging criticism,
which I don't know whether it went answered or not. I am
assuming that it didn't, and that being the case, I would hope
that some of the things that you are doing with respect to this
advisory committee is as a result of the criticisms that you
have received. While they were pretty strong, I hope that you
take them in the right way.
The one thing that again we have heard, or at least I have
heard, over and over as I go out into the field and talk to
my--particularly hospitals about the problems they incur with
Medicare, and one thing that we heard continually during the
hearing here with our two hospitals and Dr. Robinson, was the
fact that we have a paperwork nightmare with Medicare. Or they
have a paperwork nightmare with Medicare, not just on the fact
that on routine visits there are complicated follow-up
procedures that they have to do before they get paid, but
simple things such as folks coming into the hospital to get
recurring treatment for the same illness are required to fill
out this questionnaire every time they come into the hospital.
Now, in looking at your numbers, I believe you said you all
had a 1 billion claims that you responded to over--on an annual
basis, and you have some 6,000 hospitals that are participants
as Medicare suppliers, and I don't know what the number of
questionnaires that would generate or what it would translate
into, but certainly it is a huge volume of questionnaires alone
just as one individual document. If we are hearing those
complaints from our folks on a regular and recurring basis, I
know that you have got to be hearing those same complaints.
What I want to do is take just a minute to go through this
particular issue, and I want to make a suggestion, and
hopefully my colleagues will follow along with it because I
think it is one thing that we can do that will get some
attention and start the ball rolling to give Medicare providers
some relief. Our folks recommended that we encourage you do a
better job of meeting your public comment requirements,
independent OMB review and display of a control number on
information requests. And I emphasize display of control
number. Failure to display a control number triggers the public
protection section of the act, which proclaims that illegal
bootleg requests are unenforceable.
Now we asked the hospital industry to give us a copy of
what it tells them they have to comply with under penalty of
law with respect to the Medicare Secondary Payment
Questionnaire. They gave us, as I understand it, part 300 to
303.4 of the HCFA hospital manual regarding admission
procedures. These parts contain not only the questionnaire, but
the following instructions and admonitions as well, and I
quote, ``You are required to determine whether Medicare is a
primary or secondary payer for each inpatient admission of a
Medicare beneficiary and outpatient encounter with a Medicare
beneficiary. You must accomplish this by asking the beneficiary
about other insurance coverage. Section 301.2 lists the types
of questions that you must ask of Medicare beneficiaries for
every admission, outpatient encounter or start of care.'' .
The instructions establish as well a 10-year retention
requirement for hard copy and data related to all such
questionnaires. In large bold print you also have stated in
there, and again I quote, failure to obtain the information
listed in these sections is a violation of your provider
agreement with Medicare. Failure to file a proper claim can
result in the unnecessary denial or development of claims.
Now, frankly, I think this is pretty cumbersome and pretty
excessive and duplicative, even though some parts of that
questionnaire I know you have to ask, but there has got to be a
better way to do it from a recordkeeping standpoint than to
have all 6,000 of these hospitals keeping a questionnaire on
every hospital visit for every Medicare beneficiary for 10
years. I don't know of any agency, including the IRS, that
requires keeping records for 10 years like this. I am not sure
what the purpose of it could possibly be. I know you have a
copy of it. If you need a copy, we will give you a copy of what
the hospital folks have given us, and we would certainly like
your comment on that.
What I am going to propose to my colleagues here is that
the Paperwork Reduction Act has a whistleblower provision which
enables anybody to write the Director of OMB, who has overall
responsibility for the operation of the Paperwork Reduction
Act, and we are going to ask the Director of OMB for a written
determination whether federally sponsored information requests
are or are not bootlegs and do or do not comport with the law.
He is required to consult with agency heads, so I know he will
be talking with you, and respond within 60 days. Under the law,
the Director has authority to take remedial action if
necessary.
I hope all of my colleagues on this task force will join me
in sending that letter to the Director of OMB. As a taxpayer,
an individual, we are going to see if we can get something done
on that particular issue which we keep hearing complaints
about.
The last thing I want to comment on is I appreciate, as,
again, Mr. McDermott said, the work that you all have done in
what you contend to be decreasing waste, fraud and abuse by 50
percent, or I think it is waste and fraud you referred to by 50
percent. But, you know, that is a little bit misleading, too,
because I think what you have done, and you have done a good
job of this, and that is that you have educated our providers
all around the country all up and down the line about doing a
better job of completing the forms when they send them in to
you, and that is critical, and that is important, and that has
saved a lot of money, and it has made a lot of money for the
taxpayers, and it has made money, I am sure, for our providers.
But the problem is when you look at those numbers, they are
misleading in respect to those are clean claims that are filed
for the most part. You have educated those folks to file those
clean claims, but you are not really reaching out to the
fraudulent claims that you need to. That particular procedure
that you have used to educate folks does not reach out to those
claims where you have got just a fake claim submitted by a post
office box or somebody who simply has a post office box and
fills out a form and sends it in, and we send them a check.
We have to do a better job on issues like that, and there
are any number of other examples that we can give you. Those
are the types of things that are really wasteful and are
fraudulently taking money away from the American taxpayer and
from a darn good system that we have in Medicare.
We appreciate the work that you have done there, but I
don't want to walk away from here with everybody thinking that
we have solved the problem by the fact that you have--you have
done a good job in educating and saved money, but at the same
time there is still an awful lot of fraudulent situations out
there that have not been addressed.
Now, that is a lot that I have said, and you can address
what you feel you need to address from my comments.
Dr. Berenson. I have identified five topics. On the issue
of 35 pounds of regs and 135,000 pages, I spent the last few
days with my staff sort of trying to figure out where 35 pounds
of regs could be coming from. I was the practicing manager of a
physician practice for many years and received nothing like
that. We have--I will call Dr. Robinson now and try to
understand. We don't know really what that could be comprised
of, but I want to find out, and I will talk to him.
Specifically, the Mayo numbers, I think, need to be
analyzed a little more critically. Thirty-four thousand pages
were associated with Federal Register notices from 1982 to
1998. Federal Register notices contain some regulations. The
large amount of the information contained in them are preamble
language where we respond to questions and concerns from the
public, and we give the rationale for our policies. The
regulations themselves that are published in the Federal
Register ultimately are codified in our formal Medicare
regulations. Those pages in the Mayo analysis is 3,500. So I
think largely the 34,000 is not anything that a hospital has to
actively know, have at their fingertips, something they have to
know.
The 24,000 pages associated with Provider Reimbursement
Review Board decisions probably may have relevance to a
hospital, but clearly does not have relevance to physician
practices, even though the AMA uses the same number. Yet, even
for hospitals, they are not precedential. They review in
individual cases payment decisions, and again--and this
information gets summarized in newsletters and advisories.
So I think there is a problem. There are a lot of rules,
and it can be confusing. However, I do think that we have to
get beyond just quoting the numbers of pages because I think
there is something misleading in just identifying different
page counts.
Some of the bulletins and newsletters are just that,
educational materials that go out.
With regard to the Practicing Physicians Advisory
Committee, our modification in its functioning is partly in
response to the concerns that Dr. Kuffner and others had raised
in the last year, and what we realized and what is in her
letter to the Secretary are that in a number of areas HCFA
rejected policy recommendations. What was happening was that
that committee was engaging more in broad-based policy
discussion, on which we also get comments from the American
Medical Association; all of the medical specialty groups in
some cases agreed and in some cases disagreed. What we wanted
to do was direct PPAC much more into the area of operational
implementation of the program: How does a regulation actually
affect your practice of medicine, not PPAC's opinion about
whether we should or shouldn't be deferring to nurse
anesthetists to be able to practice independently. That is a
policy call. We are interested in hearing PPAC's opinion, but
we have many places to get that kind of input. What we want
PPAC to do, and I think it is responsive to Dr. Kuffner's
remarks, is work with us on understanding how our particular
policies and requirements affect practicing physicians, and
that is what we were referring to.
Chairman Chambliss. Dr. Berenson, I think what she said was
a darn good point. They were making policy recommendations to
you on this and basically saying you have to comply with State
law, and that was being disregarded, and Medicare was issuing
rules and regulations saying you were basically not going to
pay any attention to State law, and you were going to provide
payments to these folks irrespective of that, and I think that
is a critical point.
Dr. Berenson. Our position was to defer to State law on the
issue of nurse anesthetists. Basically it was that we had had a
requirement that nurse anesthetists had to be supervised by a
physician in our conditions of participation, and there are
varying State laws about independent practice for nurse
anesthetists. What we basically were saying was that we do not
need to overrule State law and hospitals' own guidelines in
these areas. So our position, in fact, was to defer to State
law, and Dr. Kuffner's advice was that we should ignore State
law and have a Federal requirement regardless. It is a
controversial and difficult issue.
My point here is the members of PPAC are selected because
they have understanding of how to practice medicine and what it
means to run an office and to be on the front lines with
patients. When we have a controversial issue about the quality
of care provided by anesthesiologists or nurse anesthetists,
there are many other sources of information that present
themselves to us, and PPAC is not particularly the expert
panel. It happens that Dr. Kuffner was an anesthesiologist, and
so she had a particular point of view on that issue and
presented it very forcefully.
We now have had two meetings subsequent to Dr. Kuffner's
chairmanship, and I think they have been very productive
meetings where we are working through operational issues in a
much more intensive way with that practicing advisory committee
so we get their input before decisions are made, not after the
fact. So that part of her criticism was justified, and we
accepted that, and I really do think that we have made some
important shifts in that committee.
On the issue of paperwork, I certainly share with
physicians the concern about having to comply with HCFA
requirements rather than taking care of patients and that
sometimes the requirements become a distraction. In fact, when
I was first announced for this job, many of my physician
colleagues immediately called me up and said, you have got to
do something about those evaluation and management guidelines
which HCFA, with the American Medical Association, had jointly
issued. The guidelines require physicians to document in the
medical record certain items to be able to justify levels of
payment.
There is a need for guidelines because the definitions
themselves that physicians and HCFA follow, the definitions in
the AMA's CPT code book, permit some ambiguity. For doing an
identical service, one physician may bill what is called a
level 2 service, and another physician might bill a level 4
service. None of them are defrauding the government. There is
enough ambiguity, such that conscientios physicians might
differ.
We think that there is a need for guidance in this area so
we pay people appropriately. The difference between coding a
level 2 and level 4 is 100 percent different payment. However,
the guidelines that were developed, the joint guidelines, were
much too intrusive and burdensome. In some ways, they actually
interfered with good medical care.
I was especially impressed by a good friend of mine who is
a trauma surgeon, who reported that when called to the
emergency room, she often couldn't find the information she
needed to take care of a patient who was in a car accident
because there was all of this documentation stuff in there, not
the basic information she was accustomed to finding. So we have
gone back to the drawing board and are very seriously doing
that.
We think that there need to be guidelines, but what we are
going to be announcing next week, I am quite confident, are
dramatically simpler--basic guidelines that will be more easily
understandable and should not lead to complying with somebody
else's notion of what the medical record should have. We don't
really want to interfere with a good medical record.
So I think that criticism was legitimate, and at the same
time I do think that there is a need--this is one of the
pressing issues right now that practicing physicians talk about
a lot. I think we understand the concerns about paperwork and
are working hard to respond.
On the Medicare secondary payer questionnaire, I don't know
all of the detail that you have asked, but let me just say a
couple of things. One is that OMB has reviewed the
questionnaire, and, in fact, we do have an OMB approval number.
There had been some confusion about whether we had actually
received OMB clearance for that document. The more basic point,
however, is that the MTAG, which is a committee of hospital
representatives and HCFA representatives, the Medicare
Technical Advisory Group, has been working now for many months
to simplify the requirements. We think they are right, that the
requirements go overboard, and we are about to have a set of
recommendations presented to me for simplifying those
requirements.
I think some of what you pointed out is absolutely right,
and we can do a better job. My point is that we have been
working with the industry in a forum that has been in existence
for many years for the purpose of talking about operational
issues, and we are close, I think, to having some options that
should make the situation easier, at the same time making sure
that Medicare is not paying inappropriately where there is a
primary payer so that Medicare is not supposed to pay. So that
is, again, trying to find the balance, but I am sure that we
can improve on the current requirements.
I guess the final point is about fraud and abuse and
whether we are targeting enough. I think in many ways we have,
in fact, directed the program and the program integrity efforts
to real criminal behavior and to eliminate gross abuse or overt
fraud, and we are not doing a half-baked job across the board.
I would simply point to the Congressional Budget Office
estimates or assessments as to why we are spending so much less
on Medicare than we had projected going into the Balanced
Budget Act or immediately after the Balanced Budget Act. Some
of the savings the CBO and the GAO ascribe to the decreased
spending in the BBA itself, but they also emphasize that HCFA
and the other Federal agencies' successful efforts in fraud and
abuse have been a major contributor to, the decrease in
spending and the extension of the trust fund solvency estimate,
the Part A trust fund, to 2025.
We actually do target. We do a small amount of random claim
review. The CFO audit, the chief financial officer audit, is to
determine an error rate, but in the field what the contractors
do is identify aberrant patterns to do either prepayment review
for a targeted group of providers, or postpayment review, and
then seek overpayments if they can determine that there was, in
fact, a pattern of improper billing.
So I think both activities are going on. I think we have
been reasonably successful. I think we need to keep working on
it and continue to do a good job in that area.
Chairman Chambliss. You didn't address the 10-year record
requirement. Why do we have that?
Dr. Berenson. That will be coming into the recommendations
to simplify the questionnaire. I don't have the specific answer
on that. Off the top I think it sounds like it is excessive.
Chairman Chambliss. Let me just say as you go through this,
and you are obviously addressing some of the concerns that
folks have, and I understand that you can't do it overnight,
not even in the 8 years that this administration has been
there, you can't address them all. We are going to have GAO
here, and we are, frankly, going to ask them some questions
about how you can do it better to get another opinion. But at
the same time we need to ask GAO is there anything Congress can
do to make this system work better. Are we imposing too much on
you?
I will just ask you this without fear of intimidation that
maybe our docs feel--Mr. McDermott and I will give you
clearance and hold you harmless--but if there is any criticism
of Congress that you think is justified, anything that we can
do from our end to sort of not just reduce paperwork, but just
make the system work better, we would certainly be willing to
look at it and address that.
Mr. McDermott.
Mr. McDermott. Thank you.
Let me follow up on what the Chairman has suggested. I
think I was the one that provoked the creation of this list. I
did it because having practiced, and I have listened to my
colleagues in various places, I figured that it would be an
opportunity for us to talk about the sort of day-to-day kinds
of things that people deal with. And I think that we in
Congress sometimes talk in bumper strips that turn into 500
pages of rules and regulations, and I think that sometimes we
don't see the connection. And I appreciate the Chairman's
willingness, and I think all of us are willing, if some of
these things can be changed by us, if it is things that we have
done, we need to know about that.
The first thing that struck me about your testimony was
that--the fact that you started this wide-ranging educational
initiative. Is it new, or has it been going on?
Dr. Berenson. It is relatively new. The regulatory impact
analysis on physicians is a new activity that began when
Administrator DeParle came to HCFA, and it has only been in the
very recent past that we have--now have a director of that
activity. She is Dr. Barbara Paul, who has been a practicing
internist from California, is now the full-time director of
that activity. That is a relatively new one.
Another relatively new activity is the new emphasis we are
giving in contracts with our contractors on customer service,
not only the beneficiaries where there had been an emphasis,
but provider customer service.
Mr. McDermott. That is the 800 number?
Dr. Berenson. That includes the 800 number.
Mr. McDermott. Was that not going on before?
Dr. Berenson. It was, and it was stopped, and now we are
putting it back out again. I do think that--to take the
invitation and just comment on Congress's role here is that the
BBA had so many requirements, I think our count was about 350
different pieces of initiatives that we had to accomplish, that
the basic running of the program such as education and
communication to providers about what the rules are--really
took a back seat during that period of time, and I think where
we have now finished most of the BBA implementation, there have
been a few new items in the BBRA.
And there is another point. Two days ago there was a
Heritage Foundation public symposium about HCFA which had a
number of speakers, and I just want to quote from Lynn
Etheridge, who is a health economist, who made the following
point. HCFA will spend over $360 billion in the year 2000,
while most of the 12 domestic Cabinet agencies have budgets
less than $50 billion, and yet in terms of employment, SSA has
60,000 employees, Agriculture has 98,000 employees, Interior
has 68,000 employees, and HCFA has 4,400 employees. So we have
a little over 4,000 employees to monitor $360 billion of
spending.
We can't do everything at once with that kind of a work
force, and I think--I saw in the previous testimony there was a
concern about correction errors, that we issue something and
make a mistake and have to go back and issue it again. In some
of our areas we are one or two people deep, thus affecting our
ability to avoid errors. I think that kind of allocation of
resources deserves attention. I think we could be doing a lot
more in the area of education and guidance to practitioners and
providers if we were better staffed.
Mr. McDermott. Is that 4,000 a fair statement if you
consider all of the employees of the contractors that are
processing your claims? You are obviously not counting them in
that figure.
Dr. Berenson. They are not, but most of those people are
processing claims. That would raise the number, but nowhere
near the kinds of numbers that we have seen elsewhere for the
kinds of workload and expectation.
But I think the more specific point is that the BBA
implementation is going well. The outpatient department
prospective payment system will happen soon; the home health
perspective payment on October 1; and I think we are
increasingly talking about doing a better job of educating and
communicating what we are doing.
Mr. McDermott. Can I ask a couple of specific questions and
hear your response to them? That physicians have to submit an
inpatient diagnosis for every diagnostic test that is done, and
the query was if the diagnosis is null and the test is not
needed, is this an unnecessary requirement?
Dr. Berenson. I can give a response to that.
We have a requirement that with every claim for services,
there should be an ICD-9 code submitted.
Mr. McDermott. Explain that.
Dr. Berenson. It is the categorization of diagnoses. It is
actually a classification system under the direction of the
World Health Organization, which basically has a compilation of
diagnoses, but it has a large section for signs and symptoms.
So if I am seeing a patient for whom I don't know the
diagnosis, for example fatigue and shortness of breath, and I
order a blood test, I can put fatigue and shortness of breath,
there are categories for that. That justifies the blood count--
CBC--or whatever I need, and I don't have to have the
diagnosis.
What we have said, and where I think there is some
confusion, some physicians in their medical notes use the term,
``rule out''--rule out heart attack, rule out myocardial
infarction. We are asking them to list ``chest pain.'' That is
the technical difference between what we are requiring and what
the doctor was complaining about. We permit blood tests or any
number of other tests. All we require is a reason for the test,
and it doesn't have to be a firm diagnosis if there is no
diagnosis known. What we want is the most certainty that the
physician has at that moment and there is a code for that level
of certainty.
Mr. McDermott. Why do patients have to sign a statement at
every single hospital visit that they don't have secondary
coverage? People coming in for chemotherapy come in three times
a week. Why do you have to do that every time?
Dr. Berenson. That is exactly where we are looking to see
if we can change that.
Mr. McDermott. What would be the process of looking at that
change so we can anticipate where the answer will come from?
Dr. Berenson. People's insurance status can change. A
retiree can have employer group coverage 1 week and not have it
the next week. Or there can be an accident in which the
liability insurer is primary and not Medicare.
What I described a little earlier was that we have had an
ongoing subcommittee of the MTAG, hospital representatives and
HCFA, and we now have a series of options about to be presented
at HCFA where we can simplify these requirements. That is the
goal, to simplify those requirements, perhaps--I don't know, I
can't prejudge what we are going to be saying, but you're
right, three times a week to have to go through the
questionnaire makes no sense, and we are looking for an
alternative to that.
Mr. McDermott. I think the rules in the State of Washington
were that you had to keep your records for 7 years. I find it
difficult to justify keeping hard copy for 10 years in the day
of commuters when you can put 150,000 pounds of data on a disk
the size of a 4-inch floppy. It is hard for me to understand
why there is still the requirement for hard copy. It sounds
like a throwback to maybe----
Dr. Berenson. Not everybody has their records on disk, but
I got the point from you and the Chairman. The 10 years, I
don't understand why it is there, and I will personally look
into it and try to get that resolved.
Mr. McDermott. One of the suggestions made was that HCFA
give providers the software that the program integrity edits so
they can prevent claims from being filed inappropriately in
advance. What is your response to that?
Dr. Berenson. Most of the edits are publicly known, and
there is, in fact, software available. There was one initiative
that took place where we purchased proprietary software from a
private firm which did not want us to release that information.
It is interesting. That activity came out of a Commerce
Committee oversight committee request that we, in fact, work
with that software; because it was proprietary, we were not
able to release it.
Our strong preference is to not have what are black box
edits. We are not proceeding anymore with that contract.
Mr. McDermott. Is that contract over then, the one that was
with the company?
Dr. Berenson. It is in the process of ending, I believe. I
don't know exactly, but I can clarify that for you.
[The information referred to follows:]
``Black Box'' Edits
The license for these edits expires September 30, 2000,
after which these edits will no longer be effective.
Mr. McDermott. It was a Commerce Committee?
Dr. Berenson. Commerce Committee oversight. Their concern
was that by providing the information, we would, in fact, be
arming the people who were defrauding the program. I personally
was trying to argue that this was not much about fraud, it
mostly was to do with the complexity of the payment system, and
we should be providing the edits because we are trying to
educate physicians. For many years, we have had the correct
coding initiative [CCI], where we have had a contract with
AdminaStar, one of our contractors, to develop edits that are
publicly known. We send them to a committee at the AMA. They
review it and give us advice, and we accept their advice in
most cases. When I was in practice every year, we got the new
edits. It is an ongoing process, and we have no real desire to
have this closed. We learn more and the physicians learn more
by having the process open.
There are some edits that, arguably, an unscrupulous
provider would take advantage of, but our basic decision has
been that those edits should be public where we can.
Mr. McDermott. How do you make that decision? It seems to
me that you have the difficulty of being an administrative
agency and a police agency at the same time so that you have
to, while you are administering all of these claims, also be in
the position of hunting for people who are taking advantage of
the system. How do you make the decision about what ways you
are screening to look for people who are filling their pockets
illegally? What is the process of the Agency?
Dr. Berenson. Well, it is interesting. We have a component
program integrity group, which is directly concerned about
program integrity and works with our contractors around those
issues.
Mr. McDermott. Does that go under the acronym PIG?
Dr. Berenson. They have tried to call it PI and not PIG.
That has been the subject of controversy internally, actually.
I am the head of the Center for Health Plans and Providers,
which is involved with payment issues, and then there is Jeff
Kang, who, I am sure you know, is the head of the coverage
group, the Office of the Clinical Standards and Quality. On
issues like this we will meet and try to reconcile the various
interests to come up with a judgment. Ultimately where we don't
work it out, it goes to the Administrator and the Deputy
Administrator. It is a balance--as I quoted Reinhardt, it is a
balance between having a system that is completely wide open to
take advantage of and another that is so complex and
impenetrable that it causes great problems. It is hard in a
general way to say how we strike that balance, but on any given
issue we work it through.
Mr. McDermott. Number 12 on the list is why does it take
HCFA to pay so long? Are you the actual payer, or is it the
contractors?
Dr. Berenson. The contractors are the payers, and I am
actually surprised by that question. Most physicians that I
have talked to give HCFA great credit and criticize private
insurers from whom they are not getting paid for 3 or 4 months.
We have specific requirements about what our payment time
period is. We are not supposed to pay within 14 days, but we
pay interest if it is beyond 28 days, and we have virtually no
complaints about missing those time frames.
Mr. McDermott. Does the interest come out of the hospital
trust fund or whatever, or does it come out of the contractors'
fees?
Dr. Berenson. It does not come out of the contractors'
fees, but meeting the payment timeframes is a major part of our
oversight of the contractors.
Mr. McDermott. How do you make a judgment about when a
contractor is doing a good job? I know in Washington State we
have had several changes, and I suspect that may be true around
the country.
Dr. Berenson. On that one I am going to basically say I
don't really directly have responsibility to work with the
contractors and would probably not be the best one to address
that issue, but I would be happy to provide a response for you.
[The information referred to follows:]
Contractor Oversight
In order to enhance our ongoing contractor oversight and
provide consistency in our review processes, we implemented a
new National Contractor Performance Evaluation Strategy in May
1999. This new effort is a nationwide, multi-tiered approach
and focuses our review on key, high risk contractors and
program benefits categories. Our evaluation strategy includes
ten core evaluation areas such as accounts receivable, audit
quality, standards for timely processing of claims and customer
service, as well as follow-up on performance improvement plans
that we require contractors to submit based on program
deficiencies identified during previous reviews.
National teams comprised of HCFA regional and central
office staff evaluate the fraud and abuse operations, as well
as other functions of a number of fiscal intermediaries and
carriers, including the five Regional Home Health
Intermediaries and the four Durable Medical Equipment Regional
Carriers. In conducting their reviews, the teams use a
standardized fraud and abuse review protocol, and team members
participate in reviews at multiple contractors, thus helping to
ensure the consistency of our evaluations across different
contractors.
We also have established specific, objective standards for
contractor benefit integrity performance that have been
incorporated into our Contractor Performance Evaluation review
protocol. These standards focus on:
Use of proactive and reactive techniques in
detecting and developing fraud cases;
Use of corrective actions, such as payment
suspensions, Civil Monetary Penalties, overpayment assessments,
pre-payment or post-payment claims reviews, edits, and claims
denials;
Proper development of fraud cases before referral
to law enforcement entities; and
Effectiveness of working relationships with
internal and external partners.
Mr. McDermott. In closing, I would like to echo what the
Chairman has said. We created Medicare. We created Medicaid. We
created CHIPs. We essentially created HCFA by doing that, and I
think it certainly--at least from most Members of Congress I
think there is a real desire to make it function more
effectively. I think, as I asked the physicians and the other
providers to submit a list, if there are things that you think
that we can reasonably do while we are maintaining quality of
care and also protecting the public purse, things that we can
do to simplify the process, we are open to considering those. I
think there is no one here who thinks that Medicare is going to
go away. We have a program that deals with too many people for
it to suddenly disappear. So the question is how to make it
work most effectively and painlessly and still protect the
public purse. We would look for suggestions from you. Thank
you.
Chairman Chambliss. Dr. Berenson, I did not remember
exactly what Dr. Kuffner had said with respect to HCFA not
adhering to State laws on that issue, and just for the record,
I am going to stick her letter in the record to make sure, and
everybody can read for themselves.
[The information referred to follows:]
University of California, Los Angeles,
Department of Anesthesiology, School of Medicine,
Los Angeles, CA, March 23, 2000.
Donna E. Shalala, Ph.D,
Secretary, Department of Health and Human Services, Washington, DC.
Dear Secretary Shalala: I'd like to thank you for the opportunity
to serve for the last eight years as a member, and for the past year as
chair, of your Practicing Physician Advisory Council (PPAC). As a
practicing physician and a charter member of the Council, I have been
driven to make PPAC as effective as possible. I have been guided by my
love for medicine and my sincere desire to make the Medicare and
Medicaid program more responsive to the concerns of the physician
community. It has often not been an easy road. I am disheartened and
frustrated that our collective efforts have not resulted in the
substantive improvements that the program so desperately needs.
Madame Secretary, I would respectfully urge you to re-examine the
commitment and direction your Administration can and should take to
improve the relationships between the Medicare program and the
practicing physician community. For provision of care to occur,
physicians must have faith in the system. But they do not. Physicians
are increasingly frustrated and upset with the direction that the
Medicare program is heading. Evidence of that came from a PPAC meeting
a year ago when the President of the America Academy of Family
Physicians told the council that 30 percent of their membership has
opted to refuse to treat new Medicare patients. The President of the
Colorado Medical Society recently was quoted in the Denver Post as
saying much the same thing, i.e. physicians are increasingly reluctant
to take new Medicare patents. In late January, Professor Uwe E.
Reinhardt wrote an article in the Wall Street Journal ``Medicare Can
Turn Anyone Into a Crook.'' My personal reaction to all of this is, why
isn't anyone in the Administration or the Congress listing?
I'm personally disappointed that after eight years of trying my
very best as a member of PPAC to raise the Department's consciousness
of the physician's plight of dealing with Medicare. I am departing
without any real sense of accomplishment. I think it's unfortunate that
PPAC members still receive only cursory background information a day or
two before PPAC meetings when they are expected to make substantive
decisions. There are two many instances when there has been a lack of
adequate follow through on PPAC recommendations. I'm disappointed that
PPAC on many occasions is assigned issues of only marginal importance
to physicians with little opportunity to affect the agenda.
I'm disheartened that issues of importance to physicians are
handled internally, that issues such as evaluation and management
guidelines and making Medicare rules less complex and numerous are
decided elsewhere without our involvement. I am saddened that fraud and
abuse detection is given higher priority than teaching physicians how
to improve their Medicare documentation. I'm very concerned that
Medicare and Medicaid payments don't keep up with the increasing cost
of medical practice, and yet physicians are expected to comply with
more and more regulations.
Also disturbing are three particular issues PPAC addressed at
length and provided unequivocal advice and direction on which the
Department/HCFA has now apparently opted to ignore. The first of these
was the very strong quality of care concern from PPAC that the
Department refrain from issuing regulations that would eliminate the
need for physician supervision of nurse anesthetists services. Even the
Congress agreed that your Administration should not proceed with this
proposed rule until further data was available. Soon to be released
data clearly indicates that PPAC and congressional concerns are well
founded and yet the Department is apparently prepared to allow nurse
anesthetists to work unsupervised. Why is the Department ignoring our
recommendations?
At our last two meetings PPAC voiced strong opposition to the
Department's proposed approach that would allow HCFA to pay for service
rendered by clinical nurse practitioners and advance practical nurses
without assuring that state laws requiring collaborative agreements, as
required by most medical practices acts, were in place. Now, despite
our concerns that the policy was fiscally unsound and state laws were
being ignored, final regulations have been published that dismiss
PPAC's concerns. Why was our advice ignored? What is the purpose of
having an advisory committee of practicing physicians if the Department
does not use them appropriately and ignore their advice?
Lastly, I am appalled by what appears to be the Department's
abdication of its responsibilities to physicians and their patients
with respect to the issues of private health plans, when Medicare is
the primary payer. Reimbursing physicians less than Congress deemed-an
amount necessary and reflective of the resources and cost needed to
furnish services to our seniors-seems blatantly unfair. It is well
known that health plan contracting in California is coercive-physicians
accept contracts on a take it or leave it basis and accept capitation
and other reimbursement rates which are so low that they do not cover
the cost of care. But they must accept these contracts to maintain
contnuity of care with their patients. Physicians have urged the
Department to enforce the congressionally mandated fee schedule which,
at least theoretically, should be actuarially sound, yet the Department
has claimed it can not remedy this situation insofar as its own
beneficiaries are concerned since it has not ``jurisdiction'' over
private health plans. I believe this is wrong. The Department must act
whenever the health and safety of our seniors are at stakes.
During the last year there have been some improvements in the PPAC
process following organized medicine's letter to you in 1999. For
several meetings we had a representative of your office attend portions
of the meeting. For some meetings, we had the Health Care Financing
Administration management participate in the summary recommendation
portions of our public meetings. I continue to be disappointed,
however, that instead of actively soliciting our input on critical
issues of the day, we are handed agendas that appear to be a worn
shopping list of items of secondary importance to physicians. I am also
concerned that the Department could not assure the Council at our last
meeting that our advice and recommendations are factored into the
regulation development and rulemaking process. Was not that the purpose
of the Council?
At times we have addressed issues that had joint responsibility
within the Department. We are told that HCFA staff only has limited
responsibility for a particular portion of the regulation or ruling and
that The Office of the Inspector General or some other HHS component
has the rest. We have had to schedule multiple meetings to resolve a
single issue, rather than looking for a workable solution and then
employing the talents of the Administration to resolve the issue. At
other times we are told that the problem with an issue is that it would
require a legislative fix and them the effort is dropped rather than
having the Administration pursue the needed legislative fix.
After eight years of serving on PPAC, I therefore have to question
whether there is the commitment or interest on the part of the public
sector to address those issues that Congress agreed with when it
created PPAC. The council was formed in large part to respond to the
hassle factor in dealing with Medicare. Eighteen months ago the
Administrator of HCFA formed an internal task force known as the
Physicians Regulatory Initiative Taskforce (PRIT) headed by Steven
Gleasom, DO, who reported to the Administrator. Part of that task
force's responsibility was to examine the reportedly 100,000 pages of
rules, regulations, instructions, program memorandums, etc, that
physicians and other health care entities need to comply with in order
to bill the Medicare program correctly. Regrettably, there has been no
known progress in reducing the amount of regulation and oversight and,
in fact, there has undoubtedly been an increase in such regulation. Had
the Department used PPAC more effectively, such an internal task force
would not have been necessary. Why was it necessary to form such a
group when PPAC already existed? What was the conclusion of PRIT? Why
haven't the results been made public? When might the physician
community begin to recognize a reduction in the number of rules,
regulations?
I appeal to you Madame Secretary, don't squander the willingness of
physician leaders to give of their time and experiences to advise the
Department and HCFA on the future direction of the Medicare and
Medicaid program. Each PPAC member sincerely and earnestly wants to
improve the relationship of the program with those who provide the care
to the nation's seniors, poor and disabled. That is why they sought to
be chosen by you and to advise the Department. Please don't let us
down!
Respectfully,
Marie G. Kuffner, M.D.,
Chair, Practicing Physician Advisory Council 1999-2000.
Chairman Chambliss. She said that at the last two meetings
of PPAC, that they ``voiced strong opposition to the
Department's proposed approach to allow HCFA to pay for
services rendered by clinical nurse practitioners and advance
practical nurses without ensuring that State laws requiring
collaborative agreements as required by most medical practice
acts were in place. Now despite our concerns that the policy
was fiscally unsound and State laws are being ignored, final
regulations have been published that dismiss PPAC's concerns.
Why was our advice ignored?'' .
You have stated your position, but I want that for the
record.
Mr. Herger.
Mr. Herger. Thank you, Mr. Chairman.
Thank you, Dr. Berenson for appearing before us.
Certainly one of the challenges that we have with such a
large system is that of waste, fraud and abuse; but I do have a
question that goes to the implementation of that. Lately as I
have been traveling around my northern California district, I
have been hearing from hospital administrators who are
concerned about what they perceived to be an overzealous effort
on the part of the Health Care Financing Administration to
prosecute fraud and abuse, and many of these health care
providers tell me that they are worried that legitimate billing
errors are often being prosecuted as fraudulent behavior.
Given this atmosphere of distrust and apprehension, I would
like to inquire about your agency's plan to implement the new
Outpatient Perspective Payment System, or PPS, and I know that
you did refer to it to a degree in your testimony, but as you
know, HCFA has had to delay the implementation of this system
because of the complexity of the transition involved. Could you
tell me, Doctor, what assurances you can give to health
providers in northern California and across the Nation that
they will not be prosecuted for honest billing errors that may
result from this incredibly complex transition, and what steps
you intend to take to ensure that the transition to a new
payment system is as smooth as possible, particularly for small
and rural hospitals?
Dr. Berenson. As your constituents say, it is a very
complex change. We are moving from a system of cost
reimbursement to one based on categories of procedures. In many
cases the hospitals will need to learn how to do new forms of
coding that they haven't had to do before, at least for
payment.
We had hoped to and planned to have the new system in place
on July 1, but in recent days realized in ongoing discussions
with hospital administrators and their trade associations that
many hospitals were ready and, indeed, some of our systems were
not ready. So the Administrator announced very recently that we
will be moving to an August 1 effective date for outpatient
PPS.
We regretted doing that because beneficiaries cost-sharing
in an aggregate sense will be limited once we implement this
system. Right now beneficiaries pay far more for outpatient
services than they should. Their obligation is not just limited
to 20 percent of approved payments.
In any case, as part of those discussions with the hospital
industry, the issue of errors made implementing outpatient PPS
has been raised. As you know, HCFA does not prosecute. We don't
have that authority. The inspector general of DHHS and the
Justice Department do that. We establish the rules, and we
sometimes make referrals. Nevertheless, we are facilitating
discussions with the Office of Inspector General, and they will
be, I believe, issuing a public statement to hospitals, giving
them some comfort about what their oversight will be during
this time period when the program is being implemented. I can't
speak on their behalf at this moment, but they understand the
concerns that the hospitals do have about making errors during
this transition, and, again, they are having conversations.
They will issue a public statement which I think will go a long
way to providing reassurance to the hospitals.
Mr. Herger. I have a number of rural hospitals, I have a
large rural northeastern California district, and I have heard
from a number about the complexity, and, again, maybe you are
not the one prosecuting, and I don't want to give the
impression that I--I don't know of any of our colleagues who
don't want you to be doing everything that you can to ensure
that we don't have waste, fraud and abuse, but now I am
referring to the innocent mistakes that are made.
As a matter of fact, I was talking with one physician who
said that he had different boxes that he would check on what
the procedure was. As you come up with newer procedures, the
procedure that he was doing was not there. It was somewhere
between this and that. Again, is he going to be prosecuted for
that?
So it is a very complex issue. It is not a black-and-white,
easy issue. My concern goes to those who are not misusing the
system, who are attempting to go by the rules, but because of
the complexity are at least perceived as not going by the
rules. I am not sure if you have exactly addressed that, but
this is a major concern that I have heard from a number of my
different hospitals.
Dr. Berenson. I think that is right. There have been a
couple of well-publicized settlements that have been entered
into between certain hospitals and enforcement agencies that I
think have had somewhat of a chilling effect. There were
Judiciary Committee hearings that I participated in 2 years
ago, when I first joined HCFA, in which the Justice Department
was basically asked to be more reasonable in the way in which
they inquired of hospitals about what they were doing. DOJ
themselves understood the concerns and took corrective actions
as to the manner in which they were interacting with hospitals.
I think we are finding the right balance. For example, in 2
years, only 52 criminal health care convictions of physicians
have been made. In addition, most of the payment edits really
are there for coding complexity reasons, and it has nothing to
do with believing that somebody is defrauding the program.
We use a coding system called CPT--common procedural
terminology--that the AMA works very hard to maintain. It has
over 8,000 different codes, and we believe that is what
physicians have grown up with, and that is what they have used,
and we have made a decision not to introduce a new coding
system at this time. Well, 8,000 different codes represents a
very complex system, and physicians legitimately may not know
exactly how to code.
So our goal is to have some edits in the system so we can
seamlessly convert what the physician coded into a proper
payment. I would also offer an opinion here that some of the
concern that physicians raise about enforcement and criminal
behavior is generated sometimes by consultants and others
holding conferences and scaring physicians about what HCFA is
going to do. When we have a random audit of a physician claim,
the worst that happens if we find that there was a miscode for
example, is that we don't pay $50, we pay $40. It doesn't
generate a referral. It doesn't generate an in-depth audit. It
is simply our system for ensuring that we are paying correctly.
We need to do a better job. There is no question about.
With the BBA getting behind us, I think we will need to assure
that physicians can hear directly from us and not through other
third parties who I think have an interest in promoting some
scare tactics about what we are doing.
The Administrator now writes an article every quarter in
the Journal of the American Medical Association. We have now
monthly phone calls that Dr. Paul participates on with medical
associations and specialty societies. We are working very hard
in this area.
Mr. Herger. Thank you, Dr. Berenson.
Thank you, Mr. Chairman.
Chairman Chambliss. Mr. Davis.
Mr. Davis. One of the things that everybody has said this
morning, including you, is the need to try to strike that
balance. My personal impression is that the system is
increasingly suffering both in level and service and cost from
the complexity, particularly given the cumulative nature.
A lot of what we have talked about here today boils down to
management of information. I am pleased to hear you implying
that HCFA is sort of coming up for air after having worked
through at least some of the implementation of the BBA, and you
clearly have emphasized a renewed priority on this physician
consulting process that you have been describing in various
ways.
My question to you is what perhaps you should be doing to
put an equal amount of emphasis on using a lot of the
developments in IT technology that are having positive effects
in the private sector in terms of level of service and cost,
and shouldn't we really be putting some fundamental emphasis on
how we can make that technology tackle a lot of these problems?
Dr. Berenson. I think that is exactly right. We have done a
few things in that area. Again, our initial focus in the last
year and a half was being Y2K-compliant, and that went well.
We now have a number of Web sites that physicians and
others can consult with a lot of detail around policies and
guidelines. We are in the process of having all of the local
medical review policies, which have been a problem for
physicians and hospitals to track. We are putting that on a Web
site so that is publicly available using the Internet.
In another way we are actively working to provide
information to beneficiaries as well. Medicare Compare is what
we call the activity to inform beneficiaries about their
choices among Medicare Plus Choice plans and the traditional
fee-for-service plan. We are now putting quality measures up on
that site as well so that beneficiaries have that kind of
information as well as patient satisfaction surveys of the
various health plans. So we are looking at the potential of
using the Internet and are starting in these ways, but you are
absolutely right.
Mr. Davis. To what extent do you think the provider
community that you have to work with is using these tools or is
prepared to use these tools if you work with them?
Dr. Berenson. Most institutional providers are fully ready.
The most recent survey data that I have seen from physician
offices suggest that not half of physicians actually are on-
line in their offices.
I think we are in the process of a revolution for
physicians to actually get real-time information to help them
make clinical decisions.
Chairman Chambliss. Dr. Berenson, did you say that half the
physician suppliers are on-line?
Dr. Berenson. The last survey I saw said that fewer than 50
percent were on-line in their offices, but that is increasing
fairly quickly now. I don't have the exact numbers with me, but
that was the number, I am pretty sure.
Mr. Davis. Are you willing to speculate as to how quickly
we are going to get up to a very high percentage of those
doctors being on-line?
Dr. Berenson. There is certainly a general belief that they
are going to be on-line. There are many new ventures that are
there to serve many purposes--I am not going to name any
particular ones because I will have shown some favoritism.
Basically, a website is envisioned to be a place where
physicians can get up-to-date clinical information, where they
can have the roster of physicians that are in the health plan
that they participate in, where they can see HCFA rules,
amongst other things, sort of a one-stop shopping, and where
they can actually submit their claims.
Right now the majority--virtually 100 percent of Part A
claims that come from hospitals are electronic. It is not that
high for Part B claims, but it is well more than half, and I
anticipate that we will be moving close to 100 percent of
electronic submissions of all claims in the very near future.
Mr. Davis. It would seem that there would be a significant
financial incentive to get on-line and result in more timely
processing.
Dr. Berenson. There is no question about that.
Mr. Davis. Let's suppose we are at that point where there
is a significant percentage. To what extent does that present
significant new opportunities to use the technology to better
manage the information? Your review of claims, for example.
Dr. Berenson. There is no question that electronic
transmission helps dramatically. We can build in the edits
electronically and still maintain the integrity of the trust
fund and do it all electronically. We can potentially move the
money much quicker that way. Again, I am not the expert in this
area, but HCFA, I think, is the leading payer in terms of
electronic submission and being able to put in program
safeguards into an electronic format. There will still be the
need for some claims to be kicked out for medical review. We
cannot automatically pay all of the time. But increasingly we
will have software capability, as the Chairman pointed out, of
emphasizing the problem providers, and not the large majority
of the good providers who should get paid promptly and
efficiently.
Mr. Davis. I want to emphasize the potential of elevating
this issue to a very high consideration, including what you can
do to more effectively engage the provider community to move
more quickly to reach a critical level of the information
infrastructure. It just seems to me that we are going to have
to find some fundamental way to----
Dr. Berenson. One thing that will help a lot, and this is
something that I saw in the testimony from the last hearing,
the concern about HIPAA implementation, the Health Insurance
Portability and Accountability Act. We are moving to
standardize the electronic formats. There is a start-up cost
associated with that, that is correct, but the long-term
efficiency of having all payers having the same rules, the same
standards, will in the long run lead to much more efficient
processing of information. Right now a hospital is faced with
100 or more insurance companies, all with different rules and
standards for electronic submission. HIPAA will standardize all
of that, and I think the start-up costs are well worth it. It
will lead to great savings. We have estimates of savings in the
long run that far outrun the actual implementation costs, and I
think that will be a major change for the better in moving
toward electronic submission. And we obviously have to deal
with privacy and those concerns, but I think it is a major
advance.
Mr. Davis. I think perhaps the issue is just timing, and it
seems to me that we ought to err on the side of moving this as
quickly as possible. Next year we will have a hearty debate on
medical privacy. We need to be concerned how that impedes the
ability to move up to this type of system.
Briefly, Mr. Chairman, I would like to turn to a more
limited subject. It is the surety bond issue with respect to
home health, which is in the 1997 BBA, and I worked on that in
a small way with others. In my home State that has worked well
with respect to Medicaid. Living somewhere near Dade and
Broward County, I am painfully aware of people gaming the
system. As you know, with relatively modest administrative
costs, we in Florida have saved a lot of money in terms of
ferreting out some bad actors in home health care.
I am frustrated how long it has taken HCFA to work through
the implementation. I think there was a regulation pulled back,
and then it was reissued. Can you tell me what is happening
with that?
Dr. Berenson. I know that was a view that the requirement
was excessive, so we did pull it back. I can't tell you the
status of it, but I can get back to you on that.
Mr. Davis. The intent was to do something relatively
similar to Florida, which was a $50,000 surety bond, which I
think was intended to have the effect of forcing some due
diligence on the part of the surety company as far as the
identity and track record of the provider. I think what HCFA
did instead was to set the level of the bond at a percentage of
the billings.
Dr. Berenson. It was one or the other, so it became a much
larger dollar commitment for those who had high volume. At the
time when many of the home health agencies were dropping out of
the system, I think about 2,500 altogether, there was a view to
pulling the surety bond requirement. I honestly at this moment
can't tell you what the current plans are, but we will get back
to you on that.
Mr. Davis. Thank you.
Thank you, Mr. Chairman.
Chairman Chambliss. Dr. Berenson, I am glad to hear you say
that you are moving toward getting 100 percent of our claims
filed on-line. I hope we learn something from our MTS
experience. That concept was certainly a good concept, and I
hope that we will incorporate those mistakes that we learned
from that into our next venture here, and perhaps we can still
combine Part A and Part B, which I think would be beneficial.
Dr. Fletcher.
Mr. Fletcher. Thank you, Mr. Chairman.
Dr. Berenson, thank you for coming. I know the Chairman
asked a question about some of the technology that you all use
in identifying or ferreting out those folks--maybe the real
abusers rather than focusing a broad spectrum on probably very
honest providers out there. You mentioned there are only 52
criminal convictions, and that there is about an 85 percent
rate of conviction on that. So there were probably a little
more that were at least taken to court. How many civil fines,
though? And you mention in here physicians and providers are
very concerned, there is a grave concern, and you mentioned
consultants may raise that concern more than necessary because
of their own interests.
How many civil fines have you all placed upon physicians
and providers? Do you have any idea? I hear a lot of concern
about that much more than the criminal aspect.
Dr. Berenson. I do not have a number for you. What I am
hearing mostly from providers is the concern about the
settlement process related to overpayments and whether that is
a fair process, and we are working to make sure that that is
the case. I am not aware of the number on civil fines, but we
will see if we have that information and can get that to you.
Mr. Fletcher. We would like to get that because there is a
concern that we hear often about $10,000 a mistake. There may
be a lot more fear out there than actuality, but it doesn't
take very many to raise concerns, and I think it is important
that we have the number of fines out there and the types of
problems that cause those fines.
[The information referred to follows:]
Civil Monetary Penalties
The HHS Inspector General imposes most civil monetary
penalties but does not break down collections between these and
other monetary impositions. Inspector General monetary
impositions totaled $324.1 million in fiscal 1999 through 534
civil actions and 303 criminal convictions. We have asked them
for a more precise breakdown and will forward it to you as soon
as we receive it
We have authority to impose civil fines on physicians, but
have not used this authority. We have imposed fines on nursing
homes totaling $19.2 million for both Medicare and Medicaid in
fiscal 1999 and $9.7 million so far in fiscal 2000. We also
have imposed fines on clinical laboratories totaling $227,105
in fiscal 1999 and $128,645 so far in fiscal 2000.
Mr. Fletcher. And let me ask you, when you compare the
private market with what you are doing at HCFA, when you look
at the technology of when claims come through, what kind of
computer systems do you have that look and say something is odd
going on with this provider that stands out among others that
would allow you to target what providers you actually inspect
and look at? What computer systems do you have to do that?
Dr. Berenson. Again, I don't directly work with the
contractors on that. I know there is an extensive profiling
done, and I am more familiar in the physician area. What we do
is randomly just review about 0.01 percent of claims, and that
is a general surveillance of what is going on. But, in fact, it
will be physicians who, for example, are only billing level 4s
and level 5s for all of their visits which come out of a
profile, which then will be subject to prepayment review or
postpayment review, and they are targeted specifically based on
that kind of profiling.
I know that there has been some kind of discussions from
scientists from Los Alamos and others to try to detect
aberrancies of claims, and I don't have that information, but
we can provide that.
[The information referred to follows:]
Computer Profiling
We have a number of projects underway that harness technology both
to pay claims correctly and to detect patterns of fraudulent or
aberrant billing.
correct coding edits
Medicare uses computer claims edits we have developed to ensure the
accuracy of claims payment. Claims are subject to a prepayment
electronic screen to verify:
beneficiary information, such as whether the patient is
enrolled in Medicare and if all copayments and deductibles have been
met;
provider eligibility and standing with the Medicare
program;
utilization history (for example, we pay only one claim in
a patient's lifetime for an appendectomy);
whether a beneficiary has other insurance the should pay
instead of Medicare.
Since 1994, we have had a contract with AdminaStar Federal to
develop edits to detect claims with codes for services that cannot or
should not be performed together or for services that should be grouped
together and paid as one item at a lower rate than if billed
separately. The system, known as the Correct Coding Initiative, was
first implemented in 1996. It includes more than 90,000 edits and saved
$290 million in fiscal year (FY)1998, $285 million in FY 1999, and $144
million for the first half of FY 2000.
We also purchase edits used in other private sector claims
processing systems. These edits are distributed to the contractors that
process Medicare claims and also screen for procedures that should not
be billed together.
statistical analysis contractor
Using our contracting authority under the Medicare Integrity
Program, we have awarded a contract to perform trend studies of
Medicare claims. This statistical analysis contractor will review
Medicare claims data in three states and perform an analysis of
utilization and payment to determine areas where we should focus
additional resources on detecting aberrant billing. If the contractor
identifies an aberrant pattern representing significant risk to the
Medicare Trust Fund, then we may allow the contractor to analyze data
from additional states.
The contractor also will test different software products to
measure their effectiveness and efficiency in detecting Medicare fraud,
waste, and abuse. The contractor will apply a rigorous and complete
testing protocol in order to verify the tool's alleged functionality
and performance in detecting fraud, waste, and abuse. Results of the
test will be reported to us for internal use only. Results will not be
published in order to protect vendor trade secrets and our sensitive
fraud detection methodologies.
mcneil study
In January 1999, we received the final report from a project that
had the dual objectives of cataloging the functionality of 10 widely
used electronic fraud, waste, and abuse detection products, and which
also gave us a clearer picture of what detection technologies our
current Medicare contractors employ. We found that the 10 systems
reviewed had considerable strengths, though their approaches to data
analysis varied considerably. In many cases, contractors had weaved
together multiple systems to take advantage of particular strengths in
each to produce an effect we dubbed the ``suite of systems approach.''
We also found that the effectiveness of these tools is dependent on the
personnel implementing the tools. Regardless of the strengths of the
electronic products, tools must be underpinned by solid personnel who
understand how to weave together suites of systems, and who understand
data analysis and how to let the data lead them to solutions.
mcneil ii market survey
We have also contracted with an information technology firm to
conduct a market survey to identify and catalog the functionality of
commercially available detection products. Working closely with both
Medicare and Medicaid Program Integrity staff, this contractor has
developed a market survey instrument to evaluate these tools, review
past performance, and customer satisfaction with these products.
technology conference on combating fraud and abuse
This June, we cosponsored with the Department Justice a conference
on using electronic tools to combat fraud and abuse. The conference
brought together both law enforcement and federal and state health care
officials to (a) identify new and emerging technologies that may be
applied to detecting health care fraud, waste, or abuse; (b) discuss
the benefits and drawbacks of technologies currently on the market, (c)
provide a networking forum for the various consumers of fraud, waste
and abuse technology. Nearly 300 persons attended the conference,
including representatives from HCFA's central and regional offices, the
HHS Inspector General, Medicaid State agencies, Medicaid fraud control
units, U.S. Attorney's offices, the General Accounting Office, and the
Senate Select Committee on Aging. Nearly 30 vendors displayed some of
the latest fraud detection tools available in the marketplace. We plan
to follow up on this conference by producing a report of proceedings
with recommendations for future steps, including the possibility of
regional or national technology user groups.
Mr. Fletcher. It would be interesting to get that. I was
talking with an individual that works--more of a vendor of
those types of systems, and from his experience found HCFA a
bit reluctant to invest in some of the latest software. That
may have been his perspective, and we would like to get your
perspective on that.
I read an article, and it has been a number of years ago,
that the Department of Justice was getting about $6 return for
every dollar that they invested in waste, fraud and abuse, and
it made me wonder somewhat, and I think physicians, because it
was in a physician piece of literature, that made physicians
and myself wonder is this really--the way it is being
implemented, does this allow HCFA to reduce their costs and
recoup $9.9 billion, or is it going at getting the bad players?
I think that is a concern that providers have. It is targeting
providers, or is there some other things going on here in
trying to reduce costs? And so I wonder if you can address that
briefly.
Dr. Berenson. I think you need to do both. Clearly bad
providers should not be in the system, and we should not be
spending public money for fraudulent behavior. At the same
time, I think there is a need also to pay correctly.
I don't know if you were here when I was talking about our
concerns about the documentation guidelines for evaluation
management services. For physicians with the same clinical
interaction with the patient, one physician may bill a level 2
and get $35 or thereabouts back, and another physician for the
same activity may bill a level 4 and get more than twice as
much. Neither of them are fraudulent. I am not worried about
that as a fraud problem.
What I am worried about is if, in fact, some doctors are
not getting paid appropriately and are getting paid too little,
they believe that Medicare is a bad payer and doesn't pay
enough. The way that the physician fee schedule works, if the
total spending on physician payments goes up a certain amount
and results in a reduced conversion factor the following year.
The physician who is billing a level 2 is getting ``under
paid,'' the physician at level 4 is pretty happy, I think we
have an obligation at least to clarify, without becoming as
burdensome as we were with those initial documentation
guidelines--clarify how they are supposed to bill. We spend
nearly $20 billion on evaluation management services. So taking
it out of the fraud context, I think it is appropriate for us
in a fee-for-service national payment system to try to pay
correctly so physicians are paid appropriately.
And what we need to do, and I have heard it many times
today, is take it out of the fear of prosecution or the fear of
enforcement, but provide some guidance so that conscientious,
well-meaning physicians and their staffs know how they are
supposed to code and take it out of this fear of retribution.
The discussion that we were having with Mr. McDermott
earlier was that some people viewed maintaining secrecy of our
software edits as a way of not arming those who were
perpetrating fraud on the program. I was arguing the purpose of
the edits is to deal with the complexity of this payment system
and to take it out of the fraud context and into paying
correctly.
The major point that I am trying to make here is that it is
not enough in a program of this size where we pay over $200
billion to simply go after the small percent who are committing
fraud. We need some understandable payment rules to pay
correctly. So some of our activities are in that area, and we
have to work hard that it not be misunderstood and that our
requirements not become a problem in and of themselves.
Mr. Fletcher. I agree with you from personal experience and
from managing several practices. At one time we found that the
burden of dealing with the complexity of HCFA was costly, and
we also found that generally we were probably undercoding
because of fear of retribution. I think a simplification of the
payment system and coding and clarification is certainly
warranted, and I appreciate that.
And I also--the communication you mentioned is very
important, but I think overall let me state in closing, I think
it is very important we would like to see what kind of
technology you have that ferrets out the bad players; secondly,
the number of civil penalties that have been levied on
providers and kind of a categorization of what they were for
and why and the amounts, and then certainly come back with what
your plans are for the simplification. You mentioned 8,000 CPT
codes, and we dealt with those. Much of the provider visits are
fairly simple and fairly few that we deal with most of the
time, except in the procedural area where it becomes quite
complex. And I think there are some very easy simplification
that could be done there and really clarify much of what goes
on with providers, at least for physicians.
Thank you very much for your testimony.
Chairman Chambliss. Dr. Berenson, just in closing, let me
say that we, first of all, appreciate very much your being here
and being forthright and straightforward with us and admitting
that there are some deficiencies out there that you are working
on. We have some witnesses that tell us what a great job that
they are doing, and everything is perfect at their agency.
This is a situation where we helped create that monster. We
as Members of Congress have helped create that--I won't refer
to it as a ``monster'' because it is a very valuable and needed
agency that obviously serves our taxpayers well, but we want to
work with you to help resolve these problems that we have
talked about and any that maybe we have not identified.
One thing you said strikes me or strikes at the heart of
something that I have been talking about since I have been
here, and I can't wait to go back in the next hearing where I
have Mr. Glickman before the Agriculture Committee and talk
about he has 90,000 employees and you have 4,000, and his
budget is significantly less than yours. And I have told him
all along that he has too darn many folks.
Dr. Berenson. Don't tell him where you got the numbers.
Chairman Chambliss. That is an excellent point. You don't
need as many per capita since you have got the contractors out
there doing a lot of leg work, as Mr. McDermott said, but your
folks are obviously somewhat understaffed, at least if you
compare it to other agencies with smaller budgets and more
people.
Also, even though you have addressed some of these specific
13 concerns that have been identified, I wish you would take--
we have got them listed in our book, and we will make sure
again that you have got them. I wish you would address each one
of those, even though it will be somewhat repetitive on some of
the issues. We want the answers to those. Those are concerns
that folks sat and talked to. We are going to talk to GAO and
other witnesses. These are some of the basic concerns that I
think everybody needs to give their opinion on and everybody
needs to give thought to as to how they should be addressed.
Dr. Berenson. I apologize for that misunderstanding, and we
will do that right away.
[The information referred to follows:]
Response From Dr. Berenson Addressing 13 Concerns Identified by
Providers
1. Eliminate the requirement to submit an inpatient diagnosis
before diagnostic tests are done.
Physicians and other providers are not required to submit a
diagnosis before tests are done. They should code what signs and
symptoms of the patient they know at the time of ordering the test.
When they are unsure what the diagnosis might be, they can code for
signs or symptoms, exposure to communicable disease, or other such
reasons.
2. Eliminate the requirement that hospitals get beneficiaries to
sign at every single visit a statement on secondary insurance coverage.
The law makes providers responsible for acquiring information
needed to bill any other insurer who may be responsible for a claim
before billing Medicare. We are very aware of providers concerns about
this issue, and are working with the American Hospital Association to
develop options that we think will comply with the law, minimize the
paperwork for hospitals and beneficiaries, and continue to help ensure
that Medicare does not pay claims that are the responsibility of other
insurers. We have had a number of conversations with a joint HCFA-
American Hospital Association Medicare Secondary Payer workgroup.
3. Eliminate the requirement that physicians provide secondary
payer information when they refer a patient to a hospital outpatient
department.
As mentioned above, the law makes providers responsible for
acquiring information needed to bill any other insurer who may be
responsible for a claim before billing Medicare. We are very aware of
providers concerns about this issue, and are working to develop options
that we think will comply with the law, minimize the paperwork for
hospitals and beneficiaries, and continue to help ensure that Medicare
does not pay claims that are the responsibility of other insurers.
4. Give providers the software for program integrity edits.
The majority of program integrity edits, those that were developed
by HCFA, are available to providers, and can be purchased from the
National Technical Information Services at the Department of Commerce.
This does not include edits associated with local medical review
policies that are established by individual claims processing
contractors. However, we recently established a website at:
www.lmrp.net where a comprehensive list of all local medical review
policies can be accessed online. We also use Commercial Off-the-Shelf
edits that are not available to the public because they have been
licensed from a private company and are proprietary. The license for
these edits expires September 30, 2000, after which these edits will no
longer be effective.
5. Combine the Part A & B billing systems.
Historically, the Social Security Act has always separated Medicare
into Part A and Part B. The law provides for separate organizations to
process claims for institutional (Part A) and noninstitutional (Part B)
providers. Basically, fiscal intermediaries process claims for
institutional providers (hospitals), and carriers process claims for
noninstitutional providers (physicians, suppliers). These providers
historically were paid on very different bases that necessitated the
development of different payment processes and procedures, including
different coding structures and claims forms. As some of the processes
and procedures for payment have changed, we are beginning to reexamine
systems to determine how best to respond. However, combining the Part A
and Part B systems would require a change in law, as well as extensive
changes in administrative structures.
6. Evaluate the costs of regulations.
We conduct extensive analyses of the costs and benefits of Medicare
regulations as required by law and Executive Orders. We perform routine
impact analyses for any regulation that is likely to result in:
An annual effect on the economy of $100 million or more;
A major increase in costs or prices for consumers,
individual industries, Federal, State or local government agencies, or
geographic regions; or
Significant adverse effects on competition, employment,
investment productivity, innovation, or on the ability of United
States-based enterprises to compete with foreign-based enterprises in
domestic and export markets.
We are required by Executive Order to assess all costs and benefits
of available regulatory alternatives and, when regulation is necessary,
to select regulatory approaches which maximize net benefits. This
includes examining potential economic, environmental, public health and
safety effects, distributive impacts, and equity. We also examine the
effect our rules will have on States.
Should a rule result in expenditures in any 1 year by State, local,
or tribal governments, in the aggregate, or by the private sector, of
$100 million, the Unfunded Mandates Reform Act of 1995 requires us to
prepare an assessment of anticipated costs and benefits.
The Regulatory Flexibility Act requires us to prepare a regulatory
flexibility analysis unless we certify that a final rule will not have
a significant economic impact on a substantial number of small
entities, which we consider to include all hospitals.
The Social Security Act requires us to prepare a regulatory impact
analysis for any final rule that may have a significant impact on the
operations of a substantial number of small rural hospitals.
And, before issuing a rule that requires submission of information
to us, the Paperwork Reduction Act requires us to provide 60-day notice
in the Federal Register and solicit public comment on:
The need for the information collection;
The accuracy of our estimate of the information collection
burden;
The quality, utility, and clarity of the information to be
collected; and,
Recommendations to minimize the burden on the affected
public.
We also have begun pilot testing a new ``impact analysis''
initiative designed to ensure that we explicitly address the impacts,
including any impacts on costs, for practicing physicians before and
after issuing new policies or interpretations of existing policies.
7. Target fraud, waste, and abuse instead of honest errors.
We are not looking to punish anyone for honest mistakes and we do
not make referrals to law enforcement agencies for occasional errors.
In fact, 95 percent of physician claims are paid without any medical
review. However, we have an obligation to taxpayers, beneficiaries, and
providers to pay correctly. In fact, under the physician fee schedule,
those providers who code correctly can be penalized through smaller
payment updates because of those who inappropriately bill for higher
codes than they should. Our program integrity efforts therefore must
focus both on targeting abusive and fraudulent billing practices, as
well as on provider education to help prevent honest errors. Most of
this education is through a variety of training mechanisms, such as
interactive courses available on our website, coding guidelines, and
targeted medical review. Our goal is to ensure that these efforts are
not intrusive or burdensome. We do need to perform some random review
of claims to establish the baseline of proper billing in the program
and determine where education efforts on correct billing should be
increased.
8. Decriminalize billing errors.
Honest errors have never been criminalized and we have no intention
of punishing honest errors. There is a world of difference between
honest mistakes and the kinds of fraud we have been so successful in
stopping. We know that most providers are honest and conscientious. We
do not view honest errors as evidence of criminal activity and we are
not looking to put anyone in jail for honest mistakes or to make
referrals to law enforcement agencies for occasional errors. We are
redoubling our efforts to educate the provider community so they
understand Medicare policies and bill correctly. In general, only after
repeated attempts of educating the provider have failed and the
analysis of billing and other data supports a suspicion of fraudulent
or abusive billing is a referral to law enforcement initiated.
We understand and are concerned that there is confusion among
providers regarding this process, and we are taking every opportunity
to clarify our position. For example, the HCFA Administrator recently
sent a letter to more than 800,000 providers on how to prevent the most
common documentation errors. We collaborated with the HHS Inspector
General on compliance guidance that focus on practical concerns of
smaller physician practices. We are requiring all claims processing
contractors to establish toll-free lines for providers to call with
billing questions. And we have formed a Physicians Regulatory Issues
Team to review, clarify, and simplify rules, and ensure that clinician
concerns are heard as we develop policies and guidance.
9. Establish a committee to assess impact of policies on patients
and physicians.
We have recently taken steps to increase our attention to these
concerns. We have rejuvenated and sharpened the focus of our Practicing
Physicians Advisory Committee to ask their advice on how our policies
affect real-life clinical practice. We also have established a new,
internal, physician-led Physicians Regulatory Issues Team. This team is
developing new systems to create rules and regulations that are
simplified, clarified, and refined specifically to reduce the
administrative workload on physicians and better meet beneficiary
needs. This team is developing an ``impact analysis'' initiative to
ensure that we explicitly address the impact on practicing physicians
before and after issuing new policies or interpretations of existing
policies, and have already begun testing these ideas with some current
regulations. The team also is developing a ``sentinel practices''
system to query and monitor a selection of diverse types of physician
offices across the country in order to receive ongoing feedback on the
real-world, day-to-day impact of Medicare rules.
10. Expedite the process for changing provider numbers.
We currently are implementing new standards for assigning provider
numbers. Under these revised procedures, we expect that most new
applications will be processed within 60 days or less. In general, when
a provider business is sold, and the new owner accepts assignment of
the assets and liabilities of the previous owner, the new owner can
continue to bill using the previous owner's provider number. If a
provider moves within a State, and there are no other changes to the
business, the provider number also remains the same. However, if a new
owner does not want to accept the assets and liabilities of the
previous owner, they are viewed as a new business and the new owner
must complete a new enrollment application to receive a new number.
11. Pay promptly.
Medicare is the fastest payer in the industry, paying electronic
claims on average in 16.5 days, which is much faster than private
insurers. A recent study of private health insurance payers in Ohio
found that 42 percent of undisputed claims missed the state's statutory
deadline of 24 days. Other data shows that private payers typically
reimburse paper claims only after 90 to 120 days. In fact, the law
stipulates that, if our contractors do not pay claims within 30 days,
we must pay interest on the claim. Therefore, we keep a close eye on
ensuring that claims are paid in a timely manner.
Current law mandates that we wait a minimum of 14 days to pay
claims that have been submitted electronically, and 26 days for claims
submitted on paper. This requirement affords us time to conduct
prepayment medical review, which is an essential part of our program
integrity efforts. It is far more cost-effective than the alternative
known as ``pay and chase,'' in which we must attempt to recoup funds
that have been improperly paid out.
12. Simplify the cost report.
We have convened an internal workgroup to review the current cost
report. It is examining the data necessary to monitor payments to
providers in a fully prospective environment, and any changes that may
be warranted in the cost reporting process.
13. Review and rationalize the advance beneficiary notice policy.
We are revamping the advanced beneficiary notices that providers
give to beneficiaries when providing a service or item that may not be
covered by Medicare. The goal is to provide a plain-language, user-
friendly document explaining that a given service or item may not be
covered by Medicare and that the beneficiary may be responsible for
payment, so the beneficiary can make an informed consumer decision. A
new draft notice for physician and other Part B services is now being
reviewed by our Practicing Physicians Advisory Committee, and will soon
go into the Paperwork Reduction Act clearance process, which includes
opportunities for public comments. A new draft advanced beneficiary
notice for home health services is already in the Paperwork Reduction
Act clearance process.
Chairman Chambliss. I made an announcement earlier that all
Members will be given 5 days to submit written statements. I
want to make sure that all Members also understand that they
have 5 days to submit additional written questions to both of
our witnesses, and we will get those questions answered.
I was trying to stall around enough to see if Mr. Gutknecht
was going to make it back.
Thank you, Dr. Berenson. Thank you for your testimony.
Mr. Charrow, thank you for patiently waiting. We look
forward to your testimony. I can't have you here without
commenting on the fact that I was particularly interested in
the personal experience that you alluded to in your written
statement. I have gone through a somewhat similar situation
from a personal standpoint, and it has been frustrating, but I
think we finally have gotten to the end of the road with mine,
and I was glad to see or glad to find somebody who is an expert
in this area. I know who to call next time.
We thank you for being here, and we will turn it over to
you.
STATEMENT OF ROBERT P. CHARROW, ESQ., CROWELL & MORING,
WASHINGTON, DC
Mr. Charrow. Mr. Chairman and Mr. Davis, I am honored to be
appearing before this committee to share with you some of my
experiences, perspectives and thoughts about the Medicare
system and how HCFA operates and perhaps, how HCFA should
operate in the future.
The interesting irony is or was that Dr. Berenson was a
client of our law firm until he went into government, and he
was an enjoyable client.
I would like to share with the committee information in a
few specific areas by asking and answering three fundamental
questions. First, has the Medicare system become too complex
and mired in arcane rules that can only be understood by
lawyers and accountants? Second, are the rules that govern the
system actually cost-justified, and has anyone bothered to test
them? Third, do the rules and red tape unnecessarily diminish
the amounts of funds available for medical care?
With the permission of the Chair, I would like to relate a
personal story that highlighted for me the complexity and
opaqueness of Medicare to providers and beneficiaries alike.
About a decade ago when my father was dying of prostate cancer,
the family, including my father, had to make some tough
decisions concerning what type of care he was to receive under
Medicare. The choice was between home health and hospice care.
My mother gathered the details from a home health agency and
hospice in Los Angeles. When she told me the level of care and
the various restrictions each claimed that Federal law
required, I knew something was amiss. I am a health care
lawyer, and for once I thought I would be able to benefit my
family. This turned out to be only partially true. Even I
needed help.
I quickly confirmed that what the providers had told my
mother was wrong. The coverage that the home health agency
offered to my father appeared to be inconsistent with existing
law. A quick check of the Federal rules and other program
documents confirmed my initial suspicion. Learning what my
father would be entitled to receive if he opted for hospice
care proved to be more challenging. The statutory law governing
hospice care had been significantly changed, and the
information given to my mother had been based on the old laws.
This was not surprising since the regulations implementing
those changes had never been issued by HCFA.
As a Washington health care lawyer, I was used to dealing
with the people at HCFA. After making a few phone calls, I
learned who at HCFA was setting policy for hospice care. I
called him and came away with lots of information about how
HCFA would be implementing the statutory changes. I called both
the home health agency and the hospice in Los Angeles, told
them who I was, and provided them with about 2 hours' worth of
free legal advice.
My father ultimately opted for hospice care. Had I not
suspected that what we had originally been told was wrong, had
I not known how to use the Code of Federal Regulations and the
various HCFA manuals, and had I not known whom to contact at
HCFA, we would have made the wrong treatment decision, and my
father would have been provided with fewer benefits than he was
legally entitled to receive.
That was my first experience as a quasiconsumer of Federal
health care services, and it was both sobering and frightening.
It drove home as nothing else could the basic fact that our
health care system is simply too complex and inelegant. If I as
a health care lawyer could not easily find the law, how can we
expect consumers or providers to understand the law?
We have heard this morning that Medicare is, in fact, a
very complex system. There seems to be some quibbling whether
we are talking about 80,000 pages of regulations or 100,000
pages or 130,000 pages; or whether we are talking about 35
pounds of documents in a physician's office, or whether we are
talking about 15 pounds. But the fact remains that everyone
agrees that Medicare is extremely complex.
I had need last month to print off the State operating
manual. This is the manual that is used by surveyors
(inspectors), when they go in to inspect a hospital. My
secretary printed off the document, and she said, ``What should
I do with it?'' And I said, ``File it,'' and she said, ``It is
4\1/2\ feet high.''
Chairman Chambliss. Did you weigh it?
Mr. Charrow. I couldn't pick it up.
We have heard mention of statutes, and the actual organic
legislation which is contained in Title 18 of the Social
Security Act is about 400 pages long; the rules that govern
Medicare only, these are the formally promulgated regulations
that appear in the Code of Federal Regulations, 1,300 pages. On
top of that you have Medicare issuances, program memoranda,
manuals of various types, inspector general alerts, advisory
opinions, local medical review policies, coverage decisions,
departmental appeal board rulings, PPRB decisions,
Administrator decisions and the like.
I think there can be little doubt that HCFA is too complex;
there are too many rules and regulations, and too much red
tape.
The second question that was more fundamental, is whether
the current level of regulation is necessary? Astonishingly, we
don't know. Before the government buys a $2 billion weapons
system, it tests the system for years and requires the
contractor to make necessary design and manufacturing changes.
Before HCFA implements a regulatory initiative that could cost
significantly more than a billion dollars and will affect
hundreds of thousands of providers and millions of
beneficiaries, does it do any testing? The answer is usually
no. In short, we are making changes to a $2 billion system
without first testing the impacts of those changes.
To illustrate this, and since there has been so much talk
this morning about fraud, waste and abuse, I would like to turn
my attention to the rules that govern fraud, waste and abuse.
Everyone will agree, and I think everyone I heard this morning
agreed, that fraud is evil. It is criminal and should be
punished decisively, and providers who engage in fraud should
be unceremoniously removed from the system.
Fraud is relatively easy to define. We not only know it
when we see it, but we can articulate why some conduct is
fraudulent and other conduct is not. For example, the hospital
chain that billed Medicare for treating patients that never
existed was committing fraud. That is a no-brainer. The
physician who bills Medicare for long office visits when, in
fact, he saw the patient for less than 3 minutes is also
committing fraud. There is no question about that.
The Federal laws governing fraud apply equally across the
board. They apply to defense contractors, to universities, to
hospitals, to physicians, to clinical laboratories and even
beneficiaries. Interestingly enough, though, we have been led
to believe that health care is rife with fraud. And, in fact,
we do receive information that there are large settlements
every year. The real question, though, in my mind is not how
much fraud there is, because we honestly don't know, but
rather--how do we differentiate between fraud on the one hand,
and waste and abuse on the other, and how do we define what
waste is and what abuse is? One person's waste is another
person's medical necessity.
Those are complicated decisions. So when the inspector
general comes before Congress and says, I have saved the system
$20 billion by reducing fraud, waste and abuse, I would like to
know how much of that is true fraud and how much of that is
waste and abuse, and of the waste and abuse, how much of that
really relates to medical decisionmaking which the inspector
general may not be competent to decide.
I would like to turn my attention for a moment to
kickbacks. Like fraud, kickbacks should be, and in fact are,
outlawed. The physician who accepts a 20 percent kickback in
exchange for ordering a specific battery of tests from a
specific clinical laboratory should be treated no differently
than the defense contractor that gets secret kickbacks from its
subcontractors. Kickbacks in Medicare are bad. They promote
overpayment, overutilization, and inappropriately interject
financial considerations into medical decisionmaking.
The antikickback law that governs Federal health care
programs is extremely different than the antikickback law that
governs defense contractors and everyone else. It is far
broader and procedurally distinct from those laws. In fact, it
is so broad that it outlaws conduct that in every other setting
would be perfectly legitimate. For example, under the
antikickback law of 1997, a physician commits a felony when he
or she sells his or her practice. A physician commits a felony
when he or she accepts a warranty on a piece of equipment that
he or she buys.
The law is extraordinarily broad. It was passed that way by
Congress with a reason, because when they enacted an
antikickback law in 1972--it didn't work. Congress broadened it
in 1977 to not only cover kickbacks, but any form of
remuneration that one may receive in exchange for a direct or
indirect referral of a patient.
As I indicated, the law was so broad that it covered
arguably legitimate conduct. In 1987, Congress addressed this
issue. Unfortunately Congress did not reword the statute as I
hoped it would. Instead Congress developed the concept of the
safe harbor and instructed the Secretary to issue safe harbors.
Now a safe harbor is a set of procedures which if you follow,
your arrangement becomes nonprosecutable even though it is
arguably illegal. In 1991, the Secretary issued the first 10
safe harbors, and today there are 15 safe harbors, the last
having been issued in November 1999.
The safe harbor system works this way. I am a physician,
and I want to rent office space from another physician. This
raises concern, and it can give rise to serious antikickback
concerns. To qualify for the safe harbor, I would have to have
a written contract. The written contract would have to be for
longer than a year and at fair market value. The rental safe
harbor is a fairly simple one to meet. The investment safe
harbor is a fairly complex one to meet, and they vary in
between. The point about all of them is that they are extremely
rigid. They actually set out the contours in great detail of
the types of conduct you must put in your contract in order to
qualify for safe harbor protection.
And as Congress realized in the 1990's, the inspector
general was issuing safe harbors at a very, very slow rate, and
that those safe harbors that did exist were extremely rigid.
Congress, as part of the Health Insurance Portability and
Accountability Act of 1996, instructed the inspector general to
issue advisory opinions, which would act like a mini safe
harbor directed to a specific person with respect to a specific
transaction, sort of a one-shot safe harbor. The problem with
that is that it is giving the inspector general extraordinary
power in determining what sorts of arrangements ought to be
permitted and what sorts of arrangements ought not. And I
question the wisdom of a public policy which transfers
significant congressional responsibility and the responsibility
of political appointees in the executive branch, to career
attorneys to make decisions about what is good medicine and bad
medicine, and what makes economic sense, and what does not make
economic sense when the attorneys have little training in
economics and no training in medicine.
These are some of the things that drive up the cost of the
regulation under which HCFA operates, because physicians and
everyone else are extraordinarily afraid to act without seeking
an advisory opinion. And who do you go to to get an advisory
opinion? Your friendly Washington lawyer, me. I put the
advisory opinion requests together. I will submit them to HCFA
for you. It is a marvelous business for Washington lawyers, but
the money has to come from somewhere, and it comes out of money
that ordinarily would be used to treat patients.
In short, there are lots of hidden costs underlying
Medicare. There are very high transaction costs, yet we do not
know the magnitude of those costs. And remember, regulation is
not free. Complexity is not free. It all costs, and the
question is--has HCFA under this administration, or indeed
under the administration when I was present, done an adequate
job of quantifying the regulatory burden, and I submit it has
not. It has not done a good job of this with respect to its
formal regulations, which are relatively few, or its informal
regulations, in the form of guidelines and issuances, for which
it doesn't make any attempt to do a regulatory impact analysis.
Given the time, I am going to truncate my formal statement.
In my printed statement there is a typographical error. the
``1995'' after ``HIPAA'' should be ``1996.'' Aside from that, I
would like to respond to questions from the members of the
committee.
Chairman Chambliss. Thank you for that. You certainly
raised a number of good questions.
[The prepared statement of Robert P. Charrow follows:]
Prepared Statement of Robert P. Charrow, Esq., Crowell & Moring
Mr. Chairman and members of the Task Force, I am deeply honored at
being asked to share some of my experiences, perspectives, and thoughts
with the Committee. Health care--the way it is provided, the way it is
regulated, and the way it is funded--is of critical importance to most
Americans. As our population ages, concerns about the quality,
availability, and affordability of health care will only grow. These
concerns with attendant political and societal pressures will focus
primarily on Medicare--a system designed in 1965 and largely modeled
after the way medicine was practiced in that era.\1\ The practice of
medicine, though, has changed dramatically--both organizationally and
scientifically--and is remarkably different now than it was then.
Medicare, though, has remained fundamentally unaltered. The dissonance
between the way medicine is practiced and the way Medicare operates has
given rise to regulatory burdens and inefficiencies that frustrate
all--hospital administrators, family physicians, and Medicare
beneficiaries alike.
---------------------------------------------------------------------------
\1\ The Medicare and Medicaid programs were enacted in 1965 as
Titles XVIII and XIX of the Social Security Act, respectively, and
began operation on July 1, 1966. See Title I, Social Security Act
Amendments of 1965, Pub. L. No. 89-97, 79 Stat. 286.
---------------------------------------------------------------------------
I would like to share with the Committee my concerns in a few
specific areas by asking and answering three basic questions. First,
has the Medicare system simply become too complex and too mired in
arcane rules that can only be understood by lawyers and accountants?
Second, are the rules that govern the system truly cost justified and
has anyone bothered to test them? Third, do the rules and red tape
unnecessarily diminish the amount of funds available for medical care?
1. Is the Medicare Program Mired in Too Much Regulation?
With the permission of the Chair, I would like to relate a personal
story that highlighted for me the complexity and opaqueness of Medicare
to providers and beneficiaries alike.
About a decade ago, when my father was dying of prostate cancer,
the family, including my father, had to make some tough decisions
concerning what type of care he was to receive under Medicare. The
choice was between home health and hospice care. My mother gathered the
details from a home health agency and a hospice in Los Angeles, where
my parents lived. When she told me the level of care and the various
restrictions each claimed that Federal law required, I knew that
something was amiss. I am a health care lawyer and for once, I thought
I would be able use my esoteric specialty to benefit my family. This
turned out to be only partially true. I needed help.
I quickly confirmed that what the providers had told my mother was
wrong. The coverage that the home health agency offered to my father
appeared to be inconsistent with existing law. A quick check of the
Federal rules and other program documents confirmed my initial
suspicion. Learning what my father would be entitled to receive if he
opted for hospice care proved to be more challenging. The statutory law
governing hospice care had been significantly changed and the
information given to my mother had been based on the old laws. This was
not surprising, since the regulations implementing those changes had
never been issued by the Health Care Financing Administration.
As a Washington health care lawyer, I was used to dealing with the
people at HCFA. After making a few phone calls, I learned who at HCFA
was setting policy for hospice care. I called him, spent about 45
minutes on the phone with him, and came away with lots of information
about how HCFA would be implementing the statutory changes. I called
both the home health agency and the hospice in Los Angeles, told them
who I was, and provided them with about 2 hours worth of free legal
advice. My father ultimately opted for hospice care. Had I not
suspected that what we had originally been told was wrong, had I not
known how to use the Code of Federal Regulations and various HCFA
manuals, and had I not known whom to contact at HCFA, we would have
made the wrong treatment decision and my father would have been
provided with fewer benefits than he was legally entitled to receive.
That was my first experience as a quasi-consumer of Federal health
care services, and it was both sobering and frightening. It drove home,
as nothing else could, the basic fact that our health care system is
simply too complex and inelegant. If I, as a health care lawyer, could
not easily find the law, how can we expect consumers or even providers
to understand the law?
The Medicare statute is more than 400 pages long and is not a model
of clarity. In theory, HCFA is supposed to issue regulations to give
life to the statute. The regulatory process, though, takes years, and
usually what you end up with is a rule that is comprehensible and
accessible only to lawyers. Medicare's regulations take up about 1,300
pages in the Code of Federal Regulations. But that's only the
beginning. On top of the statute and regulations--all of which are
accessible to the public, but essentially unreadable--are Medicare
issuances, publications, program memoranda, manuals, Inspector General
Alerts, advisory opinions, local medical review policies, coverage
decisions, Departmental Appeals Board rulings, and so on. All told, the
400-page statute has given birth to more than 100,000 pages of
secondary Medicare laws, guidelines, issuances, and the like. All of
these affect the level of services and how they are delivered. Yet,
little of this information is readily available or easily
understandable. The Medicare system is simply collapsing under its own
regulatory weight.
2. Is the Current Level of Medicare Regulation Cost Justified?
There can be little doubt that Medicare is mired in regulation and
that the regulation impedes both providers and beneficiaries. The
second question, though, is more fundamental--is the current level of
regulation necessary? Astonishingly, we do not know. Before the
government buys a new $2 billion weapons system, it tests the system
for years and requires the contractor to make necessary design and
manufacturing changes. Before HCFA implements a regulatory initiative
that could cost significantly more than $1 billion and will affect
hundreds of thousands of providers and millions of beneficiaries, does
it do any ``testing?'' The answer is usually ``no.'' In short, we are
making changes to a $200 billion system without first testing the
impact of those changes.
To illustrate this, let's look at the rules that govern fraud,
waste, and abuse. Everyone would agree that fraud is evil, is criminal,
and should be punished decisively. Moreover, fraud is relatively easy
to define. We not only know it when we see it, but we can articulate
why some conduct is fraudulent and other conduct is not. For example,
the hospital chain that billed Medicare for treating patients that were
never hospitalized was committing fraud. Or the physician who bills
Medicare for a long office visit, when in fact he saw the patient for
less than 3 minutes is also committing fraud. The Federal laws
governing fraud apply equally across the board from defense contractors
to universities to hospitals, physicians, clinical laboratories and
even beneficiaries. Interestingly enough, although we have been led to
believe that healthcare is rife with fraud, in fact the numbers
indicate to the contrary. The Inspector General, for instance, reports
having recovered less than $500 million on account of all types of
improper conduct; when compared to the about $400 billion spent on
Medicare and Medicaid, the actual percentage of measurable fraud is
relatively small--medicine is about 99 and 44 one hundredths percent
pure; so far, so good.
Like fraud, most of us consider that kickbacks should also be
outlawed. The physician who accepts a 20 percent kickback in exchange
for ordering a specific battery of tests from a specific clinical lab
should be treated no differently than the defense contractor that gets
secret kickbacks from its subcontractors. Kickbacks in Medicare are
bad--they promote overpayment and over-utilization and inappropriately
interject financial considerations into medical decisionmaking. The
antikickback law that governs Federal healthcare programs, though, is
far broader and procedurally distinct from the one that applies to the
other sectors of the government. In fact, these laws are so expansive
that they prohibit conduct that is perfectly legitimate in other
settings.
Under the antikickback statute as written, for example, it is
illegal for a physician to sell his practice if the sale includes
``goodwill.'' No arrangement--whether it is a complex merger,
acquisition, joint venture, or a simple purchase of hospital or medical
office equipment--can be seriously considered without evaluating its
antikickback implications. Moreover, the healthcare antikickback laws
vest extraordinary discretion in the Office of Inspector General to
modify, to interpret and to apply these already broad laws. The law
effectively has transferred significant healthcare policy
decisionmaking from the Congress and the political appointees to career
OIG attorneys with no formal training in medicine and little in
developing or testing cogent policy.
How did all of this happen? Congress first enacted an antikickback
law for Medicare in 1972;\2\ that law, however, was somewhat ambiguous.
To eliminate that ambiguity, Congress in 1977 amended the law and
broadened its coverage.\3\
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\2\ See section 242(b), Social Security Amendments of 1972, Pub. L.
92-602, 86 Stat. 1419-1420
\3\ See Medicare-Medicaid Antifraud and Abuse Amendments of 1977,
Pub. L. No. 95-142, Sec. 4(a), 91 Stat. 1175, 1179-1181 (1977). In lieu
of the phrase ``kickback or bribe,'' as used in the 1972 law, the
amended version banned ``any remuneration (including any kickback,
bribe or rebate) directly or indirectly, overtly or covertly, in cash
or in kind'' to induce a referral. 42 U.S.C. Sec. 1396h(b)(1)(1977).
The antikickback law has been recodified as section 1128B(b), Social
Security Act, 42 U.S.C. Sec. 1320a-7b(b).
---------------------------------------------------------------------------
The new law went beyond prohibiting kickbacks and other forms of
fraud, and sought to use the threat of prosecution as way of regulating
``abuse'' and ``waste,'' terms that have no real legal meaning. Not
unexpectedly, the new law proved to be too broad, effectively outlawing
all sorts of legitimate business arrangements: a physician could not
sell his practice, a physician couldn't sublease space in his office to
another physician if that sublessee referred patients to the owner and
so on. To cure this problem, Congress in 1987, enacted legislation that
authorized the Secretary of Health and Human Services with the approval
of the Attorney General to develop so-called safe harbors.\4\ The
theory was that if a person who conformed his or her arrangement to the
conditions of the safe harbor, then that person would not be prosecuted
even though the arrangement technically violated the antikickback law.
In 1991, the Secretary issued the first ten safe harbors. Today there
are fifteen safe harbors, the last two having been issued in November
1999.\5\ There are safe harbors for renting office space, for receiving
a discount on the purchase of equipment, for obtaining a warranty and
for a variety of other normally straightforward business arrangements.
---------------------------------------------------------------------------
\4\ See section 14, Medicare and Medicaid Patient and Program
Protection Act of 1987, Pub. L. 100-93.
\5\ See 42 CFR Sec. 1001.952; see 56 Fed. Reg. 35,799 (July 29,
1991); 57 Fed. Reg. 52,723 (Nov. 5, 1992); 59 Fed. Reg. 37,202 (July
21, 1994); 61 Fed. Reg. 2,122, 2,125 (Jan. 25, 1996); 63 Fed. Reg.
46,676 (Sept. 2, 1998); 64 Fed. Reg. 63,503 (Nov. 19, 1999); and 64
Fed. Reg. 63,517 (Nov. 19, 1999).
---------------------------------------------------------------------------
The safe harbor system though had its problems. The Inspector
General was reluctant to issue safe harbors and when she did they
tended to be extraordinary rigid. Moreover, it took years to issue a
new safe harbor. Thus, as part of the Health Insurance Portability and
Accountability Act of 1996, Congress required the IG to issue advisory
opinions--these advisory opinions are essentially single transaction,
one time safe harbors. In deciding whether to approve a proposed
transaction, the OIG must consider, among other things, whether the
proposed arrangement will cause overutilization or adversely affect
patient care. Should these types of policy decisions, requiring
expertise in medical economics and medicine itself be made by lawyers
in the Inspector General's Office? I think not. Those whose training is
law enforcement tend to see ``waste'' and ``abuse'' everywhere. Indeed,
the IG has expressly noted that the advisory opinion process ``permits
this Office to protect specific arrangements that 'contain limitations,
requirements, or controls that give adequate assurance that Federal
health care programs cannot be abused.''' Advisory Opinion 98-14
(quoting from 62 Fed. Reg. 7350, 7351 (Feb. 19,1997).
Moreover, is it wise to effectively require people to seek
governmental approval before entering into a normal business
arrangement? The perils associated with violating the antikickback law
are so great that even those who are providing free goods or services
to health charities have sought advisory opinions first. Clearly, this
is good for lawyers, since we draft the advisory opinion requests. But
is it good for medicine and health care and does it make sense?
The most interesting aspect of the antikickback saga is that a
broad antikickback law may not make any sense today. Medicare payment
has changed since 1977 so that overutilization is far less of a problem
than it was then. For example, in 1977, hospitals were reimbursed for
their costs--the more they spent, the greater their reimbursement. If
they paid kickbacks to suppliers, those kickbacks were passed through
to the government. In such a setting a broad antikickback law made
commercial sense. In 1983, however, Congress changed the way in which
hospitals were paid so that they were no longer reimbursed for their
expenses, but instead were paid a fixed fee for treating a given
illness. If they paid kickbacks, the hospital, not the government,
would eat the cost. Correspondingly, the introduction and quick spread
of fee schedules and capitated payment arrangements in the late 1980's
and early 1990's also shifted the cost of kickback from the government
to private party. In short, there is now a serious question as to
whether this complex antikickback mechanism is even cost justified.
Surprisingly, though, no one at HHS has indicated any interest in
studying the problem or attempting to resolve it. The antikickback laws
provide the government with a way to micromanage medical care and there
does not seem to be any desire to give up that authority.
3. Can Over Regulation Affect the Quality of Care?
The antikickback law is symptomatic of a system that is overly
complex and overly regulated. Neither complexity nor regulation is
free--the more regulation, the less that can be spent on health care.
The real question is how much regulation is optimum, and for that we
must be willing to conduct experiments or develop models to see how
best to curtail regulation. There is certainly evidence, albeit
anecdotal, to suggest that over-regulation adversely affects the
quality of care by shifting resources from the medical treatment to
paper pushing and compliance activities.
You might ask, how can this be? After all, HCFA constantly reminds
us that Medicare's transaction costs are 80 percent less than those of
private insurers. HCFA has achieved low government transaction costs by
shifting those costs from the government to the private sector. For
example, private insurers take on the responsibility for conducting
compliance programs and auditing functions. Not so with Medicare; HHS
expects providers to undertake those functions.
Many now believe that when you add in all the compliance activities
and added administrative burdens associated with Medicare, its overall
transaction costs far exceed those of the private insurers.
Given that providers--whether hospitals or physicians--are paid
fixed fees, those extra transaction costs must come from somewhere and,
in many cases, they are coming out of the treatment side of the office,
rather than the administrative side. Given a choice, do we want our
hospitals to hire more coding clerks and compliance officers, or more
nurses and physicians?
Conclusion
I am not advocating that we abandon regulation nor am I suggesting
that regulation is unnecessary. Rather, I am advocating for the notion
that regulation is not free. We should at least determine empirically
which regulations make sense, and should be retained and which are
counterproductive and ought to be abandoned.
Chairman Chambliss. Now I am going to ask you for the
solutions. Starting with your last point there, I think we all
agree that the volume of rules and regulations out there are
just too burdensome and overbearing.
Number one, is HCFA just issuing rules and regulations to
cover their backsides, or is Congress passing laws or issuing
mandates over to HCFA that are causing this flood of rules and
regulations to come out, and what do we do about it? What is
Congress's role in this? Should we look at maybe repealing some
laws or passing some laws that will reduce those rules and
regulations, or should we stay on HCFA's case just to make sure
that they review and eliminate a number of rules and
regulations that are obsolete or just impractical?
Mr. Charrow. That is a good question. I think it is a
little of each. Congress issues as part of its statutory
changes directions to HCFA to issue rules, and HCFA goes out
and issues those rules.
I also think, on the other hand, that HCFA sometimes goes
overboard. Remember, the guidelines, the informal rules, those
which comprise the vast bulk of the paperwork, those are not
mandated by Congress. None of that is required by Congress. The
only thing that Congress requires is the formal notice and
comment rulemaking, and that takes up a relatively small
volume. But even there HCFA has on occasion gone overboard.
For example, HCFA recently issued a regulation revising its
conditions of participation. These are the conditions that
hospitals and providers must meet in order to participate in
the program and receive funding. It was a thick rule. One of
the provisions in the rule that caught the attention of the
medical community, hospitals and doctors alike, was what was
called ``the 1-hour rule'' which came out of nowhere. It was
not required by Congress or suggested by Congress. It wasn't
even in the proposed rule. It only appeared in the final rule,
and none of the commenters even suggested that rule.
The 1-hour rule applies, for example, when a patient is in
the psychiatric ward of a general hospital and somebody has to
put their arms around the patient to restrain him. The 1-hour
rule requires that that patient must be examined by a physician
within 1 hour. Take a rural psychiatric hospital, it doesn't
have physicians living in the hospital 24 hours a day. The
closest staff physician lives 45 minutes to 1 hour away, not
uncommon. That physician cannot get to the hospital in 1 hour.
The physician has to live on the premises. That drives up
costs, not required by Congress. That is sort of the genre of
regulation that I have been seeing in the past few years, and
it has caused me concern.
Chairman Chambliss. Your comments on waste and abuse, waste
and abuse first is fraud, and we talked with Dr. Berenson about
that. I am sure that you are familiar with the numbers where we
got the fee-for-service payment--improper fee-for-service
payments have been decreased from 23.2 billion in 1996 to 13.5
billion in 1999. I think Dr. Berenson understood my point there
that what we are talking about is an education of physicians.
We are not talking about fraud. How do we reach out or how do
we tell HCFA to reach out to more fraud cases? What, in your
opinion, is the answer to that?
Mr. Charrow. The one thing that we have to do if we want to
look at true fraud, is to have Congress differentiate clearly
between what is real fraud and what is waste and abuse.
We have really three levels of--three schemes in place to
deal with fraud, waste and abuse. Dr. Berenson addressed one of
those, the criminal prosecution. Dr. Fletcher mentioned the
civil penalties as what causes the physicians to be concerned,
and it is the civil penalties that drive the fear of God into
hospitals and into physicians because the civil penalties are
extraordinarily onerous.
There was a case when I was at HHS, a doctor in Nevada was
charged by the inspector general with having billed Medicaid
for I think it was--Medicaid for 800 urinalyses that had never
been performed, at about $3 a urinalysis, about $2,400 worth of
tests over a multiyear period. The inspector general then
applied the civil monetary penalty law as it existed at the
time, which was $2,000 for each false claim, so that is $2,000
times 800 which is about $1.6 million. So they went after this
physician for $1.6 million. After a trial, the Department
concluded that the submission of the claims were not false
claims, but rather were billing errors on the part of his
billing clerk, but he had to fight this battle with us for, I
think, 5 years.
When you talk about $2,400 worth of submissions versus a
$1.6 million potential penalty, that does strike the fear of
God into most businessmen. It certainly would strike the fear
of God into me. That is the concern, not the 52 criminal
prosecutions.
Chairman Chambliss. You talked about kickbacks, and you
talked about the fact that in 1977 we broadened the scope of
that particular provision. Do you think that we ought to go
back and relook at that now, and let's bring it back in,
particularly in light of what has happened and our experience
over the last 23 years?
Mr. Charrow. First of all, if you have a different
antikickback law for health care providers than you do for
defense contractors, you have to ask yourself why. Perhaps in
1977 it was justified. Remember, in 1977 the way Medicare paid
hospitals and physicians was very different than the way that
they are paid today. In 1977, hospitals were paid on a
reimbursement system, which means every dollar that they
incurred in costs was passed on to Medicare. So if they paid a
kickback, who paid for it ultimately? The trust fund.
Hospitals aren't paid that way anymore. They are paid on
the DRG prospective payment system, a flat fee for treating a
specific illness. If they pay a kickback, it is the hospital
that pays it, not the trust fund. So you have a lot of private
folks who have a real economic interest in not paying
kickbacks, which wasn't the case in 1977.
Chairman Chambliss. As you know, in 1999 we created the
MedPAC, Medicare Payment Advisory Commission, to conduct a
study and look at our rules and regulation process and come
back with some recommendations. Are we headed down the right
road there? From what you've seen thus far, are we doing the
right things with respect to that advisory commission?
Mr. Charrow. I think you are, and I also think that the
Congress and the administration have to work together to figure
out how to really bring Medicare into the 21st century. This
paper tiger is sort of hobbling across the millennium line, and
it is weighted down with 135,000 pages of regulation, and it is
going to have to service many more people as our population
grows older.
Medicare requires far more in the way of paperwork than
private insurers. Why is that? Private insurers are spending
their own money. They have stockholders. So you have to wonder
why does Medicare require so much more than the private
insurer. Some of it is Congress, and some of it is just the
momentum of a bureaucracy.
Chairman Chambliss. Mr. Davis.
Mr. Davis. To follow up on your last comment, which I think
is an interesting one, is there currently institutionalized any
effective process, in your judgment, to engage in this balance
with respect to the cost of compliance versus the projected
benefits of regulation?
Mr. Charrow. Yes and no. There are, of course, two schemes
for doing the cost-benefit analysis that you refer to. One is
the Regulatory Flexibility Act, which was amended by this
Congress to make it, I think, a far more potent weapon in 1995.
That piece of legislation requires that before an agency issues
what is called a major rule--which is usually a rule with an
impact of 100 million or more dollars on the economy--that it
engage in a fairly detailed cost-benefit analysis. And if the
agency doesn't believe that it is going to have a major impact
on the economy or on small businesses, the Secretary of the
department that issues the rule is required to do a
certification. Sometimes it works. Sometimes you get very good
cost-benefit analyses done, and sometimes you get none and no
certification. But it only applies to major rules.
OMB in theory is supposed to review on its own initiative
all rules and do a cost-benefit analysis for all rules, but
that is an internal proceeding, and the public never sees what
goes on. In some administrations that is taken more seriously
than other administrations. So it is mixed results.
Mr. Davis. So no process specific to HCFA?
Mr. Charrow. No.
Mr. Davis. Do you think there should be?
Mr. Charrow. Yes.
Mr. Davis. Can you detail that a little bit?
Mr. Charrow. I would love to see cost-benefit analysis done
with respect to the types of forms that providers are burdened
with. I think Dr. Berenson was extremely candid when he said,
yes, 10 years is too long. And, yes, maybe we should revisit
having physicians or hospitals fill out these forms every
visit. That may not make sense. But the real question is how
did that come into being; why is it there, and why didn't
somebody catch it?
Mr. Davis. You think if we had such a process at HCFA, we
would be able to make some projections about the cost of
compliance and engaging in this balance?
Mr. Charrow. Yes. And there is nothing that prevents HCFA
from going out and doing that with respect to some of its
regulatory initiatives that are up and running.
Chairman Chambliss. With respect to the incredible
proliferation of software and other technology in the IT
industry that is being used in health care, does that
dramatically alter this debate, in your judgment, in terms of
the extent of the problem or the availability of solutions?
Mr. Charrow. It certainly should help reduce what we call
the real transaction costs, and I think HCFA is moving in the
right direction. They still have significant problems with
their computer systems. I think you are all aware of that.
Hospitals, for example, have to query the HCFA computer systems
to find out whether a patient has used up their eligibility,
and frequently that computer system is down, and because they
have no way of getting the information, they have to admit the
patient, and only later do they find out that the patient has
used up his eligibility.
Mr. Davis. Do you have an opinion as to the extent to which
the provider community is seeing the advantages of being on-
line and what we can do to entice that?
Mr. Charrow. I would like to see more providers on-line. I
think the hospitals are on-line. They tend to interact
electronically with their intermediaries, the contractors,
quite efficiently, and I think the PPS system has really
reduced transaction costs. I know Mr. McDermott was a key
player in the recent piece of legislation that extended that to
psychiatric hospital, which reduced their costs dramatically.
I think we have to bring the docs into the game, and I
think a lot of what is happening with respect to the private
companies, MEDM which is run by the AMA and a group of
specialty societies, and Koop, M.D., are going to have that
effect.
Mr. Davis. My final question is do you have any
recommendations for us in Congress as to what we can do to
assist or influence HCFA putting more emphasis on this kind of
promise? And I am not referring to bringing more providers on-
line, just the whole notion that technology can dramatically
improve our ability to tackle this problem?
Mr. Charrow. I think HCFA realizes that. Having been in the
bureaucracy for 4 years, it is like golf. It looks real simple
until you try to do it. As a law prof, I thought it would be
easy to go into an agency and snap my finger and have things
done. I snapped my finger, and nothing got done. I had to learn
how the system operated. It is a big bureaucracy. It is 4,000
people plus 50,000 contractors, and it is the entire
Department. So it is tough. And in Congress, of course, it is
tough to figure out ultimately what impact your legislation is
going to have. Legislating is a tough job.
Mr. Davis. Well, it just seems to me what is unique about
this situation is the technology is improving the level of
service and reducing costs in the private sector in ways that
seemed unfathomable a few years ago. How do we get involved
sooner rather than later?
Mr. Charrow. As someone who comes from a law firm that has
difficulty keeping their computers up and running--we have two
summer associates here who suffered through a day of down
computers yesterday--I am not sure.
Mr. Davis. Thank you.
Mr. Charrow. Thank you.
Chairman Chambliss. Mr. McDermott. The gentleman has
yielded to Dr. Fletcher.
Mr. Fletcher. Well, thank you for the testimony. I read
through it and heard part of your questioning. I have some
concerns. I said if I went back to practice, I probably would
consider eliminating much of the insurance and the other things
and lower the costs on patients and reducing the administrative
staff, because the complexity of billing, of dealing with
insurance companies, and HCFA particularly, has gotten so
burdensome that I believe--and I don't know if we have
numbers--that a substantial cost of the system--when I look at
the number of administrative people involved in hospitals
versus the number that actually touch the patient, I wonder how
much regulations costs versus how much it saves.
United Health Care looked at--they were spending a great
deal of money on reviewing procedures to see if they were
medically necessary and found that they spent three or four
times as much doing that as the procedures would cost. I would
welcome any reduction in bureaucracy, red tape, a
simplification.
I agree that it does look like golf, it looks simpler than
it really is. I think sometimes it certainly--and I would like
to hear--and I am not sure that the answer is getting every
physician computerized and on-line. If we don't change the
billings, it is just going to require more advanced technology.
I remember when we practiced, I went a number of years without
computerization because it was much more efficient, but we
eventually went there.
If you could help me with maybe some of what you see in the
regulation and the implementing, and I asked the last gentleman
for the number of civil penalties that are levied and how they
reflect the complexity of the regulations, and I wonder if you
can address that a bit.
Mr. Charrow. As I alluded but actually did not state
expressly a few moments ago, the civil money penalty law
operates at two levels. It operates under the aegis of the
Department of Justice where they can go into court and under
the False Claims Act sue a doctor or other provider for treble
damages plus $10,000 per false claim. To be guilty under the
Civil False Claims Act, you do not have to have committed
fraud. If you made a bad mistake, you could be civilly
prosecuted. That is one option the Department of Justice has.
The other option, available also on the civil side, is what
is called the civil money penalty law. It is done entirely
administratively at the Department of Health and Human
Services. Prosecution is by the Inspector General'S Office.
Trial is before an administrator law judge. Same penalties. It
is easier for the Department to do it that way, and it is that
civil money penalty law that creates the fear of God in most
providers.
Mr. Fletcher. I appreciate that because in the last
testimony it was more a fear of criminal penalties, and we hear
that, criminal penalties, but from my experience it has been
more the civil penalties because folks have a greater fear
because there is no necessity for them to show a particular
intent.
Do you have any idea how often that is used against
providers when it may have been due to the complexity of the
regulation?
Mr. Charrow. My guess is that like any agency, the agency
does in its own head a cost-benefit analysis before it seeks to
go after somebody. One of the factors that always factors into
the equation is how much can we recover. The greater the
potential recovery, the more likely you are to see an action
independent of the level of intent. Now, as the amount of the
potential recovery decreases, the level of intent the
prosecutor is going to require before they go after that person
increases. There is a lot of money at stake, and it is going to
be done administratively civilly. Invariably they are going to
settle. You are not going to take it to trial. So they will
settle for 25 cents on the dollar, but it is 25 cents not on
the Medicare dollar, it is on the treble dollar plus the
$10,000 per false claim.
Mr. Fletcher. Do you have any idea the degree--because I
think we are getting down to where the fear--the source of fear
is.
Mr. Charrow. I don't have the most recent numbers. The
Office of the Inspector General would have that. They would be
able to tell you the number of cases that they referred to the
Department of Justice for the False Claims Act. They would be
able to tell you the number of civil money penalty cases that
they have initiated against providers and doctors.
There is a list on the Web of practitioners and other
providers who have been excluded from the program, usually
through some form of CMP process, and the list goes on and on
and on.
Mr. Fletcher. That is the reason when they talked about 50
some having been convicted criminally, I think that is really a
very small part of what is going on in waste, fraud and abuse
that concerns providers. I want to make sure that we do stop
the waste, fraud and abuse and that we eliminate the bad
players out there. And you brought up in your testimony that it
is very important to make a system that is simple, easy,
understandable, very clear, and that it is not just the
monetary return that the administration may get out of a
particular case, but rather it has to involve the intent. And
that I think there is a much greater use that is needed of the
carrot rather than the stick approach when we come to honest
providers. I fear we are losing many of them, and there is a
lot of talk out there of not participating with Medicare in the
future, and that is going to have a tremendous impact on the
health care of our seniors in this country.
So I would hope as we work on this committee and other
committees to do oversight hearing that we can work with HCFA
and yourself and folks to see if we can't get regulations that
are more simple; that we are not operating under a system of
fear, but rather cooperation and collaboration.
Mr. Charrow. I think the most interesting statistic that I
can relate to you is that the most common type of request I had
after HIPAA was enacted in 1996 was requests by physicians for
opt-out forms. This would be the form they would submit to the
secretary to opt out of Medicare.
Chairman Chambliss. Dr. McDermott.
Mr. McDermott. I appreciate your coming today, and I
particularly appreciate the story you tell in your testimony.
Yesterday standing on the steps of the Capitol, as we left last
night a Member told me almost an identical story of dealing
with her own mother's problems that day and what it took for a
Member of Congress to find out from a home health agency what,
in fact, her mother was actually entitled to, and I think the
system undeniably is complicated.
What is interesting to me is that sometimes we think that
this is a political problem of one party or another, but I
think your coming and testifying really is saying no matter
what your intention is, no matter how you want to change it, it
is difficult to do it without an enormous period of figuring
out what Murphy's law is really going to produce, because we
pass these laws thinking X is going to happen, and Y happens.
How did that happen? Well, it is the bureaucrats.
Well, it is not quite as simple as that, and I think what
you have contributed, and I hope that you will feel, as we said
to the last witness, that anything you think that you can
suggest to us in terms of things that we really could do,
having had your experience, that those are things that we can
make changes to lift the burden off the bureaucrats, because
the bureaucrats are always caught in the position of covering
themselves. The Congress directed us to do this, and therefore
we have to do all this to make sure that we do what they ask us
to do. I was thinking as I----
Mr. Charrow. I do have one suggestion. It probably doesn't
affect this committee, but the thing I noticed the most when I
was at HHS was that 2 a.m. to 3 a.m. to 4 a.m., I would get
calls from the Ways and Means Committee when they were marking
up major pieces of Medicare legislation--one of us would always
be present--the legislation was being written in the middle of
the night by, as someone who is a bit older can say, kids, who
were exhausted, and I always scratched my head and thought, oh,
my God, I wonder what it is going to look like when it is
signed by the President.
Mr. McDermott. My wife does complex environmental
litigation, and she asks me how did this get in the Superfund
law.
I only close by telling a short story about Elliott
Richardson. They asked him what thing had he not been able to
accomplish, and he said, well, if I had my way, I would call
all of the members of HHS to the D.C. stadium, and I would go
out on the floor of the stadium with a bullhorn and say, my
name is Elliott Richardson, I am your boss, you work for me.
And, of course, the problem when you come into it trying to
change stuff is it has gotten--it has evolved in ways that
anybody coming in from the outside, it looks very easy.
I think your golf analogy is quite correct. I don't know
how we will change Ways and Means writing bills in the middle
of the night. It doesn't make any difference whether it is
Democrats or Republicans in charge of the committee, they are
both doing the same thing. We will work at it.
Thank you very much.
Mr. Charrow. Thank you for having me.
Chairman Chambliss. I agree, that seems to be the nature of
the beast around here.
Mr. Charrow, your personal example, do you think that your
hospice folks and your skilled care facility, whatever the
other one was there, didn't know the answer to your question,
didn't know what benefits your father was entitled to because
they were not aware of all of the rules and regulations,
because they were too burdensome? What was the problem?
Mr. Charrow. They were surprised. They had been operating
off the old play book when there was a new play book. I felt
sorry for them in a way. They were good people trying to do a
good job in a very complex environment. These people are not
lawyers. They don't have in-house counsel. They are small
businesses by and large, nonprofits.
Mr. McDermott. Do you mean they were not sent a copy of the
new rules and regs?
Mr. Charrow. They didn't exist. They were in development in
the hospice situation. The home health was a bit more complex.
I never figured out what they had received and had not
received, but what they cobbled together from what they had
received was not correct.
Chairman Chambliss. That is interesting, and that ought to
be something that we can address and we can fix, and I agree
with your comment. I was willing to spot Dr. Berenson about
60,000 pages, but that still left us 70,000 pages. Undoubtedly
from that answer there are a lot of pages that are obsolete
rules and regulations, and we need to throw them away. How we
are going to do that, I don't know. Our MedPAC has their work
cut out for them.
Mr. Charrow. Give them a page limit. Courts do it all of
the time.
Chairman Chambliss. There you go.
Mr. Charrow, thank you for being here and for your very
thoughtful insights. We thank you for coming, and if there are
any additional written questions, we will sure get them to you
right away.
This hearing is adjourned.
[Whereupon, at 12:42 p.m., the Task Force was adjourned.]
Blowing Smoke on the Invisible Man: Measuring Fraud, Payment Errors in
Medicare and Medicaid
----------
WEDNESDAY, JULY 12, 2000
House of Representatives,
Committee on the Budget,
Task Force on Health,
Washington, DC.
The Task Force met, pursuant to call, at 10 a.m. in room
210, Cannon House Office Building, Hon. Saxby Chambliss
(chairman of the Task Force) presiding.
Chairman Chambliss. We will call the hearing to order. And,
Ms. Jarmon, Mr. Hamel, we will let you all take seats as we
begin to make a few opening comments here.
This is another of our hearings in our process of reviewing
waste, fraud and abuse in Medicare/Medicaid programs, and we
are excited today to look at another aspect. We have talked
about Medicare exclusively just about in each of the hearings
that we have had thus far. We are going to continue to talk
about Medicare to a certain extent today, but also look at
Medicaid and what the Federal responsibility with respect to
waste, fraud and abuse in Medicaid is and just as importantly
what it should be.
So we have folks from the GAO as well as folks from HCFA
back with us today, and also a gentleman who has had more
practical experience at the State level to bring us some
information about what is going on out there.
And he had--we have a chart over here that Dr. Sparrow, who
was hired by HCFA to do some work--and I think Ms. Thompson
referred to the work that he did with respect to coordinating
some of the ideas at the State level and bringing all that
together. And we have adopted one of the quotes from Dr.
Sparrow here as somewhat of an underlying theme. And we have
had a blowup of that quote made available here this morning.
It is--when we talk about waste, fraud and abuse with
respect to Medicare and Medicaid, it is kind of like looking at
the invisible man. I like his quote: ``It is like in the
Hollywood movies, trying to blow smoke on the invisible man.
For a moment you see what is there, but only for a moment.''
that literally is true because it is so hard to get your arms
around the sheer volume of this program, and trying to pick out
the real instances of waste, fraud and abuse is extremely
difficult. You think you got it at one moment, then you turn
around and it is gone.
Let's put those other two charts up, too.
I just want to emphasize the real significance of what we
are dealing with here. We have got an appropriation bill that
is going to be coming to the floor here sometime, I guess, this
week or next week, the foreign operations bill. In that bill we
spend somewhere around $15 billion a year. If you look at the
Medicare outlays, and we don't know what the waste, fraud and
abuse number is, if it is 1 percent, it is 2.1 billion, but it
goes all the way up to, if it is 15 percent, 32.55 billion. We
could pass two foreign ops bills if it were 15 percent, and we
could bring it within some sort of reasonable control. So that
is the significance of Medicare waste, fraud and abuse.
Medicaid is not too far from that. We have total outlays
last year of Medicaid of $203 billion. And again, if 1 percent
of the Medicaid allocation is where the waste, fraud and abuse
lies, then we are looking at 2.03 billion all the way to 30.45
if it turns out to be 15 percent of the program. So we are
talking about real dollars, we are talking about significant
money, and we are talking about dollars that ought to be used
for the beneficiaries of those two programs and obviously not
going out the back door.
I want to thank our witnesses in advance for being here. As
I have said in each one of these hearings, we are not here to
point fingers. It is not a partisan issue that we are dealing
with. I think every administration has had the same problems
with respect to trying to put their finger on waste, fraud and
abuse. We just think we can do a better job with it. And we
want to make sure that we understand from our end where the
problems are, and if we need to participate from a legislative
perspective and in helping solve that problem, we need to know
that, and we need to get on board with you to try to help get
to the bottom of this issue that we know is out there.
By the same token we want to make sure that our Federal
agencies are doing everything they ought to be doing and in the
most efficient manner possible to try to get to the bottom of
the issue of waste, fraud and abuse.
So, again, we thank you for being here. We look forward to
your testimony.
[The prepared statement of Saxby Chambliss follows:]
Prepared Statement of Hon. Saxby Chambliss, a Representative in
Congress From the State of Georgia
Today, the Health Task Force continues to focus on waste, fraud,
abuse and mismanagement in the Federal health care system by
investigating fraud measurement techniques in the Medicare and Medicaid
programs.
As the title of the hearing--``Blowing Smoke on the Invisible
Man''--implies, the key to determining the level of fraud and abuse in
America's two largest public health care delivery programs is
identifying criminals and fraudulent techniques designed to elude
detection.
Or as health care fraud expert Malcolm Sparrow said: ``There's a
trap of circularity--you look for what you've seen before. Meanwhile
other kinds of fraud are developing within the system that remain
invisible because you're not familiar with them and you have no
detection apparatus for that. * * * It's like in Hollywood movies,
trying to blow smoke on the invisible man. For a moment you see what's
there--but only for a moment.''
To most properly allocate valuable resources to combat improper
payments under Medicare and Medicaid, we need the best information
available on areas of waste, fraud and abuse--identifying the invisible
man in effect. The purpose of today's hearing, relative to Medicare, is
to find out whether the current methodologies used by the Department of
Health and Human Services to measure improper payments provide the most
accurate reflection of actual improper payments made under Medicare.
For example, the Department of Health and Human Services' Inspector
General has estimated for Fiscal Year 1999 that ``improper'' Medicare
fee-for-service payments totaled $13.5 billion, which is a dramatic
decrease from the $23.2 billion in improper payments estimated in
Fiscal Year 1996.
While the Department and the Clinton administration have publicly
attributed the sharp decrease in improper payments to their efforts to
combat waste, fraud and abuse, there is increasing dispute over the
nature of such a claim as we learn that true Medicare fraud often goes
unmeasured.
Even though the General Accounting Office has kept Medicare on its
``high risk'' list, meaning the program is exceptionally vulnerable to
fraud and abuse, questions persist whether the Department has
measurement techniques in place to accurately gauge the level of fraud
and abuse within the program.
To help ascertain the extent of the government's Medicare fraud
measurement techniques, the House Budget Committee called upon the GAO
because numerous academics, government watchdog organizations, and
concerned citizens have noted that audits, such as the type used by the
HHS to arrive at the $13.5 billion figure in FY1999, do not detect
fraud because they are not designed to. Instead of concentrating on
fraud, the Task Force has heard from previous witnesses that the
measurements are aimed at billing correctness, utilization review and
policy coverage. Additionally, many of the so-called errors identified
as ``improper'' may not result from abuse but from honest differences
of opinion regarding how medicine ought to be practiced, what is
``medically necessary.''
More troubling is that recent accounts show that Medicare has
attracted its own class of organized criminals, persons who specialize
in defrauding health care and health insurance systems. I believe one
of our witnesses, a special investigative agent with GAO, will be able
to provide first-hand testimony regarding the sham medical entities,
fictitious physician groups, and ``post office box'' clinics that
organized criminals have created to defraud Medicare. Everyone would
certainly agree that such fraudulent activities need to be included in
a calculation of improper Medicare payments.
I anticipate the GAO witnesses will discuss the results of its
study into fraud measurement techniques and will discuss how the
existing methodology employed by HHS was not intended to detect
fraudulent schemes such as kickbacks, services not actually provided,
and those developed by organized criminals.
With that, I look forward to hearing GAO's critique of the current
improper payment measurement methodology, and to learning GAO's
recommendations on how government can best adopt a comprehensive
methodology to measure fraudulent activities and allow for the best
allocation of resources to combat waste, fraud and abuse.
Finally, the second panel will testify on payment error measurement
rates relative to Medicaid. Currently there is no comprehensive Federal
system in place to measure Medicaid improper payments. The witnesses on
the second panel are here today to discuss both the pros and the cons
of whether such a system would be feasible or effective in measuring
Medicaid waste, fraud and abuse.
Chairman Chambliss. And at this time, I would recognize the
gentleman from Washington, the ranking member of the Task
Force, Dr. McDermott. Jim.
Mr. McDermott. Thank you, Mr. Chairman. I think the figures
and the quote that the Chairman has put up on the board are
sort of interesting. The man who wrote that quote also wrote a
book called License to Steal. He works at the Kennedy School of
Government. He is a very respected gentleman.
I think the issue here and I think the conundrum--and for
those of you who aren't from the Northwest, that means puzzle--
that we face here is that HCFA hires contractors to administer
the program, and they pay the bills sent in by the providers.
And the dilemma that faces this committee and faces all of us
in the government, in the Congress, is the question of on whom
do we put the responsibility for finding fraud, waste and
abuse?
Now, I assume that North Dakota Blue Cross/Blue Shield,
which administers the program in the State of Washington, when
they are dealing with their own claims are very vigorous in
preventing fraud, waste and abuse. I wouldn't think that as a
for-profit company they would be lax, otherwise their
stockholders would eat their lunch, and their president would
be gone. So, when they are doing that for themselves, the
question then is are they doing the same for the government
under the contracts that the HCFA writes with them?
Now I know we have had more than one contract in the State
of Washington. We have had about three of them that I can
remember in the last 10 years. And the question then, is the
best place to go after fraud, waste and abuse by saying to
HCFA, go and redo all the claims that North Dakota Blue Cross/
Blue Shield did; or go out to all the hospitals in the State of
Washington and all over the Northwest?
Actually North Dakota has three or four States for whom
they examine claims or for whom they process claims, and the
question is, should they go out there, should HCFA go out and
examine all those claims? Well, we already had a hearing where
we heard from providers who said there is too much of that
coming out there looking at our records. So we are caught in a
real conundrum, and that is if you are going to look for fraud,
waste and abuse, how much pressure can you put on the
providers, and who should do it, and where is the law of
diminishing return? I mean, if HCFA wants to hire 100,000
people to go out and examine every hospital and every doctor's
office, that is going to cost something. And if you are going
to do that, on top of what is already being done apparently or
presumably by the contractors who are hired, isn't that a
duplication of effort?
It is those kinds of issues that I think this committee is
struggling with. No one thinks that any human system is
perfect. Especially in the United States where we have the free
enterprise system and we value entrepreneurship, we are going
to have some entrepreneurs who are going to skate too close to
the line in trying to maximize their profits. No question. It
happens everywhere. Whether you are talking about the defense
industry or the health industry it doesn't really make any
difference. Wherever there is money involved, some people are
going to try to push the rules as far as they can.
As we had in the Defense Department recently, we had a wire
manufacturer who was making the controls for airplanes who is
saying that the wire is of a certain strength, and it turns out
it is not of a certain strength, and you have every military
aircraft had to be examined for whether or not they had that
kind of steel in their controls. Now, that kind of thing goes
on in the military industry. It certainly goes on in health
care. But the question we have is who should we put the
responsibility on to press, and how hard should they press?
So I am eager, Mr. Chairman, to hear what the GAO has to
say on this whole issue. Thank you.
Chairman Chambliss. Thank you.
Mr. Lucas, you care to make any statement?
Mr. Lucas. Mr. Chairman, this last 4th of July district
work period I had three health care roundtables in three
different hospitals in my district. The one common thread
through all these meetings were the comments from the hospital
administrators--two of them I have known personally for a long
time and I think they are people of integrity. They complained
that when honest mistakes were made in filing Medicare claims,
the ultimatums that were issued were either fines or ``we are
going to sue you.'' I heard this clear across my district. So I
am wondering if we aren't being overzealous in the pursuit of
people who are making honest mistakes.
Chairman Chambliss. There is no question but that is a real
problem, and some of that will be addressed today I know.
Before we begin, let me just ask unanimous consent that all
Members be given 5 days to submit written statements for the
record.
Our first panel this morning comes from the General
Accounting Office, Gloria L. Jarmon and William D. Hamel. Ms.
Jarmon, Mr. Hamel, welcome to this Task Force hearing. We
appreciate you being here today. We look forward to your
testimony.
Ms. Jarmon.
STATEMENT OF GLORIA JARMON, DIRECTOR, HEALTH, EDUCATION, AND
HUMAN SERVICES ACCOUNTING AND FINANCIAL MANAGEMENT ISSUES,
ACCOUNTING AND INFORMATION MANAGEMENT DIVISION, U.S. GENERAL
ACCOUNTING OFFICE; ACCOMPANIED BY WILLIAM D. HAMEL, SPECIAL
AGENT, OFFICE OF SPECIAL INVESTIGATIONS, GENERAL ACCOUNTING
OFFICE
Ms. Jarmon. Thank you.
Mr. Chairman and members of the Task Force, we are pleased
to be here today to discuss our review of HCFA's efforts to
improve the measurement of improper payments in the Medicare
program. With me today is Bill Hamel from our Office of Special
Investigations.
You asked us to provide suggested improvements to assist
HCFA in its efforts to further estimate Medicare improper
payments, including potential fraud and abuse. I will summarize
our statement and ask that the full statement be made part of
the record.
While we believe HCFA's efforts to measure Medicare fee-
for-service improper payments can be further enhanced with the
use of additional fraud detection techniques, we support the
efforts they have taken thus far. Considering the challenges
associated with identifying and measuring improper payments,
the projects discussed in our statement represent important
steps toward advancing the usefulness of HCFA's improper
payment measurement efforts.
I will first briefly discuss the current methodology used
by HCFA to estimate Medicare fee-for-service improper payments.
Next I will mention HCFA's three planned projects to further
measure improper payments. Then I will summarize our results.
The current methodology, which estimated fiscal year 1999
Medicare fee-for-service improper payments at $13.5 billion,
was a significant step toward quantifying such payments. It was
not designed to identify or measure the full extent of levels
of fraud and abuse in the Medicare program. The methodology
generally assumes that medical records received for review
represent actual services provided. While this estimate has
been useful for financial statement information and as a
performance measure for the program, given the size and
complexity of the Medicare program, its usefulness as a tool
for targeting specific corrective actions is limited.
To enhance its understanding of improper payments and help
it develop targeted corrective actions, HCFA has recently begun
three projects. These projects are shown in my statement in the
charts on pages 16 and 20. I will briefly summarize the
projects. The first one is the Comprehensive Error Rate Testing
project, referred to as the CERT, C-E-R-T, project. It is
similar to the current methodology; however, it is designed to
produce a paid claims error rate at each contractor by provider
type and service category levels. It is undergoing a phased
implementation with a scheduled completion date of October
2001.
The second project on the charts is called the Payment
Error Prevention Program, or the PEPP, P-E-P-P, project. This
is also similar to the CERT project and the current
methodology, but it is designed to develop payment error rates
for each State and for each peer review organization area of
responsibility. HCFA officials stated that this project is the
furthest along in implementation, with the first quarterly
reports expected in September of 2000.
The third project is the Model Fraud Rate project, or MFRP,
and this is an effort to develop a potential fraud rate for a
specific locality and specific benefit type. It has been tried
in southern California. However, HCFA officials told us that
they intend to eventually expand the scope of this project to
provide a national potential fraud rate. However, the Medicare
contractor assisting HCFA in developing this project is
dropping out of the Medicare program in September of 2000 and
has ceased work on the project.
Given the billions of dollars that are at risk, it is
imperative that HCFA continue its efforts to develop timely and
comprehensive payment error rate estimates that can be used to
develop effective program integrity strategies for reducing
errors and combating fraud and abuse. HCFA's projects could
collectively address some of the limitations of the current
methodology if properly executed. For example, expanding the
scope of the Model Fraud Rate project to include studying
provider visits and a more extensive assessment of the cause of
improper payments and other techniques could help HCFA pinpoint
additional high-risk areas and develop more effective
corrective actions.
The chart to my right, which is also on page 7 of my
statement, shows the six most common types of potential fraud
and abuse cases from HCFA's fraud investigation database. It
shows the relative frequency of these cases based on
information gathered by HCFA from 1993 to April 2000. You can
see that, based on information in their database, 37 percent of
the errors relate to services not rendered, going down to,
according to their database, about 7 percent relating to
kickbacks and accepting/soliciting bribes. HCFA officials told
us that while more complex types of fraud or abuse, such as
fraudulent cost reporting and kickback arrangements, which on
this chart show 7 percent each, may be less frequent than other
types, such cases often involve significantly greater losses,
especially fraudulent cost reporting.
The next chart that we have to my right, is a version of
the chart on page 9 of our statement, which shows five of the
most promising techniques identified by health care fraud
experts and investigators. The chart we have here is a summary
of some of the key questions that investigators try to answer
by employing those techniques. Many of these techniques are
currently performed by Medicare contractor fraud units to
detect potential fraud and abuse. I will talk briefly about
each of them.
First, the medical record review. It primarily tells you
whether there is reasonable documentation for the services that
were provided.
Secondly, data analysis. This often highlights unusual
relationships between the data.
Third, beneficiary contact. This addresses whether services
were actually received by the beneficiary.
Provider contact is important because it is done to ensure
that the provider actually exists and has documentation on site
that supports the billed amount.
And the fifth technique on that chart and on page 9 is
third-party contact, which addresses whether entities, such as
state licensing boards and a wide list of other third-party
entities, can validate key information related to the claim,
such as whether the doctor is licensed.
It is important to note, however, that no matter how
sophisticated the techniques, not all fraud and abuse will be
identified. Using a variety of techniques holds more promise
for estimating the extent of potentially fraudulent and abusive
activity and also provides a deterrent value to such illegal
activity. The implementation of more extensive detection
techniques is bound to be challenging and expensive. So using
rigorous study methods and consulting with the people affected,
such as beneficiary and provider advocacy groups, are essential
steps to ensure success as well as considering the tangible and
intangible benefits of using particular techniques.
Mr. Chairman, this concludes our statement. We would be
happy to answer any questions that you or other members of the
Task Force may have.
Chairman Chambliss. Thank you very much, Ms. Jarmon.
[The prepared statement of Gloria Jarmon follows:]
Prepared Statment of Gloria L. Jarmon, Director, Health, Education, and
Human Services Accounting and Financial Management Issues, Accounting
and Information Management Division, U.S. Government Accounting Office
Mr. Chairman and members of the Task Force, I am pleased to be here
today to discuss our review of the Health Care Financing
Administration's (HCFA) efforts to improve the measurement of improper
payments in the Medicare fee-for-service program. Identifying the
extent of improper payments and their causes, including those
attributable to potential fraud and abuse, are the first steps toward
implementing the most cost-effective ways to reduce losses. In my
statement today, I would like to share with you the results of our
review which is being conducted at the request of the Chairman of the
House Committee on the Budget.
HCFA, an operating division within the Department of Health and
Human Services (HHS), has designated ensuring the integrity of the
Medicare program a top priority. It recognizes that inappropriate
payments are a drain on the program's financial resources--resources
intended to provide essential health care services to millions of
elderly and disabled Americans. In conjunction with its audit of HCFA's
annual financial statements since 1996, the HHS Office of the Inspector
General (OIG) has conducted a nationwide study to estimate Medicare
fee-for-service improper payments.\1\ The statistically projectable
results cited in the OIG's study have provided valuable insights
regarding the extent of Medicare vulnerabilities. Results from the most
recent study indicate that, of the $164 billion in fiscal year 1999
Medicare fee-for-service claim payments, a projected $13.5 billion were
paid improperly for various reasons ranging from inadvertent errors to
outright fraud and abuse. The magnitude of these estimated losses has
led to considerable concern regarding HCFA's efforts to protect
Medicare dollars as well as the need to obtain a better understanding
of the nature and extent of the problems.
---------------------------------------------------------------------------
\1\ The Chief Financial Officers Act of 1990, as expanded by the
Government Management Reform Act of 1994 (GMRA), requires 24 major
departments and agencies, including HHS, to prepare and have audited
agencywide financial statements. Major ``components'' of these 24
agencies, such as HCFA, may also be required to have audited financial
statements.
---------------------------------------------------------------------------
The OIG's study was a major undertaking and, as we recently
reported,\2\ the development and implementation of the methodology
(referred to as ``current methodology '') it used as the basis for its
estimates represents a significant step toward quantifying Medicare
improper payments. It is important to note however, that this
methodology was not intended to and would not detect all potentially
fraudulent schemes perpetrated against the Medicare program. Rather, it
was designed to provide users of HCFA's financial statements with an
initial estimate of Medicare fee-for-service claims that may have been
paid in error and has served as a performance measure for the program.
However, given the size and complexity of the Medicare program, the
usefulness of this estimate as a tool for targeting specific corrective
actions is limited.
---------------------------------------------------------------------------
\2\ Efforts to Measure Medicare Fraud (GAO/AIMD-00-69R, February 4,
2000).
---------------------------------------------------------------------------
To demonstrate a commitment to improving payment safeguards, in
January 2000, HCFA reaffirmed its goal of reducing the Medicare fee-
for-service payment errors to 5 percent or less by the year 2002, about
a 3 percent or $5 billion reduction from fiscal year 1999 levels.
However, without additional information on the extent of improper
payments\3\ attributable to potential fraud and abuse, HCFA's ability
to fully measure the success of its efforts remains limited.
Accomplishing this goal will depend, in part, on HCFA's ability to
further develop improper payment measures to enable it to more
effectively target specific corrective actions. In response to this
need, HCFA has begun three projects intended to enhance its
understanding of improper payments and help it develop targeted
corrective actions.
---------------------------------------------------------------------------
\3\ Improper payments are defined as payments made for unauthorized
purposes or excessive amounts. Improper payments can be caused by fraud
and abuse, which involve a deliberate disregard for the truth or
falsity of information or an intentional deception or misrepresentation
that an individual knows or should know to be false or does not believe
to be true and makes, knowing the deception could result in some
unauthorized benefit to himself or some other person. Using
information, such as the factors contributing to improper payments, to
address fraudulent or abusive payments only as such payments are
specifically identified and adjudicated unnecessarily limits and delays
developing effective corrective actions. Accordingly, we believe that
using these data as soon as practical to analyze and develop
appropriate initiatives, represents effective management efforts to
increase accountability over Federal assets.
---------------------------------------------------------------------------
Given the importance of Medicare to millions of beneficiaries and
concerns about the financial health of the program, you asked us to
provide suggested improvements to assist HCFA in its efforts to further
estimate Medicare improper payments, including potential fraud and
abuse. In summary, we concluded that:
Because it was not intended to include procedures designed
specifically to identify all types of potential fraudulent and abusive
activity, the current methodology does not provide an estimate of the
full extent of improper Medicare fee-for-service payments;
HCFA has initiated three projects designed to further its
measurement efforts which offer some promise for determining the extent
of improper payments attributable to potential fraud and abuse; and
Based on careful evaluation of their effectiveness,
performing additional potential fraud identification techniques as part
of its efforts to measure improper payments could assist HCFA in
arriving at a more comprehensive measurement and, ultimately, develop
cost-effective internal controls to combat improper payments; however,
no set of techniques, no matter how extensive, can be expected to
measure all potential fraud and abuse.
We are making recommendations designed to assist HCFA in its
efforts to further enhance its ability to measure the extent of losses
emanating from Medicare fee-for-service payments. Although we believe
HCFA's efforts to measure Medicare fee-for-service improper payments
can be further enhanced with the use of additional fraud detection
techniques, we support the efforts they have taken thus far.
Considering the challenges associated with identifying and measuring
improper payments, the projects discussed in our statement represent
important steps toward advancing the usefulness of its improper payment
measurement efforts.
To fulfill our objectives, we analyzed the current methodology and
HCFA's three planned projects related to improper payment measurement;
related documents discussing the methodologies, designs, planned steps,
and time frames for implementation of these initiatives; and relevant
HHS OIG and GAO reports. We also interviewed HCFA officials and
recognized experts in health care and fraud detection in academia,
Federal and state government, and the private sector on the various
types of improper payments and the techniques used to identify and
measure them. We performed our work from November 1999 through June
2000 in accordance with generally accepted government auditing
standards. See appendix 1 for a more detailed discussion of our
objectives, scope, and methodology.
In my statement today, I will summarize our conclusions and
recommendations regarding:
The three HCFA projects that have been designed or
initiated to measure Medicare fee-for-service improper payments;
How such projects will potentially enhance HCFA's ability
to comprehensively measure improper payments, including those
attributable to potentially fraudulent and abusive provider practices
based on the extent to which effective techniques used to detect common
types of potential fraud and abuse are included in their design; and
Actions HCFA should take to further enhance its efforts to
measure the extent of improper Medicare fee-for-service payments and
help HCFA better develop targeted corrective actions.
But, first I would like to begin with some relevant background
about HCFA, the Medicare program, and the vulnerabilities of the
Medicare program to fraud and abuse.
Medicare Is Vulnerable to Fraudulent and Abusive Activity
In 1990, we designated Medicare as a high-risk program,\4\ and it
continues to be one today. Many of Medicare's vulnerabilities are
inherent due to its size and administrative structure, which make the
largest health care program in the nation a perpetually attractive
target for exploitation. Wrongdoers continue to find ways to dodge
program safeguards. The dynamic nature of fraud and abuse requires
constant vigilance and the development of increasingly sophisticated
measures to detect fraudulent schemes and protect the program.
---------------------------------------------------------------------------
\4\ High Risk Series: An Update (GAO/HR-99-1, January 1999).
---------------------------------------------------------------------------
With total benefit payments of $201 billion in fiscal year 1999,
Medicare enrollment has doubled since 1967 to nearly 40 million
beneficiaries today. Beneficiaries can elect to receive Medicare
benefits through the program's fee-for-service or managed care options.
With benefit payments of $164 billion in fiscal year 1999 and about 85
percent of participating beneficiaries, the fee-for-service option
represents the most significant part of the program. The managed care
option accounts for the remaining $37 billion and 15 percent of
participating beneficiaries. The program is comprised of two
components. Hospital Insurance or Medicare Part A covers hospital,
skilled nursing facility, home health, and hospice care. Supplementary
Medical Insurance, also known as Part B, covers physician, outpatient
hospital, home health, laboratory tests, durable medical equipment
(DME), designated therapy services, and some other services not covered
by Part A.
HCFA's administration of the Medicare fee-for-service program is
decentralized. Each year, about 1 million providers enrolled in the
program submit about 900 million claims to about 56 Medicare
contractors for payment. The bulk of the claims are submitted
electronically and never touch human hands during the entire computer
processing and payment cycle.
Ensuring the integrity of the Medicare fee-for-service program is a
significant challenge for HCFA and its Medicare claims processing
contractors and Peer Review Organizations (PROs). They are HCFA's front
line defense against inappropriate payments including fraud and abuse
and should ensure that the right amount is paid to a legitimate
provider for covered and necessary services provided to eligible
beneficiaries. Except for inpatient hospital claims, which are reviewed
by the PROs, Medicare contractors perform both automated and manual
prepayment and postpayment medical reviews of Medicare claims. Various
types of pre- and postpayment reviews are available to contractors to
assess whether claims are for covered services that are medically
necessary and reasonable. These include automated reviews of submitted
claims based on computerized edits within contractors' claims
processing systems, routine manual reviews of claims submitted, and
more complex manual reviews of submitted claims based on medical
records obtained from providers.
Reliance on postpayment utilization and medical record reviews to
detect potential fraud and abuse has created opportunities for
unscrupulous providers and suppliers to defraud the program with little
fear of prompt detection. For example, a few providers--subjects of
past health care fraud investigations in which they have pled guilty to
or have been indicted for criminal charges--had set up storefront
operations and fraudulently obtain millions of dollars from Medicare
before their billing schemes were detected through postpayment reviews.
HCFA is moving toward more extensive use of prepayment reviews, but
contractors' efforts to prevent and detect improper payments are
challenged due to the sheer volume of claims they are required to
process and the need to pay providers timely. The program's
vulnerabilities have been compounded by the emergence of some organized
groups of criminals who specialize in defrauding and abusing Medicare,
which has led to an array of fraudulent schemes that are diverse and
vary in complexity. For example, based on our recent review of seven
investigations of fraud or alleged fraud, we reported that the criminal
groups involved had created as many as 160 sham medical entities--such
as medical clinics, physician groups, diagnostic laboratories, and
durable medical equipment companies--or used the names of legitimate
providers to bill for services not provided.\5\
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\5\ Criminal Groups in Health Care Fraud (GAO/OSI-00-1R, October 5,
1999).
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Medicare contractors and PROs are identifying thousands of improper
payments each year due to mistakes, errors, and outright fraud and
abuse. They refer the most flagrant cases of potential fraud and abuse
to the OIG and Department of Justice (DOJ) so they can investigate
further, and if appropriate, pursue criminal and civil sanctions. HCFA
tracks the cases referred by Medicare contractors and PROs to the OIG
and DOJ in its Fraud Investigation Database (FID).\6\ Figure 1 shows
the six most common types of potential fraud and abuse cases in the FID
and the relative frequency of these cases. Definitions of these common
types of fraud and abuse and examples are provided in appendix 2 to
this testimony.
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\6\ The Fraud Investigation Database is a comprehensive nationwide
system devoted to Medicare fraud and abuse data accumulation. The
system was created in 1995, but contains data on potential fraud and
abuse referrals going back to 1993.
We were unable to assess the level of actual or potential program
losses for the different types of potential fraud or abuse due to the
limited financial data in the FID. However, HCFA officials told us that
while more complex types of fraud or abuse, such as fraudulent cost
reporting and kickback arrangements may be less frequent than other
types, such cases often involve significantly greater losses.
Efforts to Measure Potential Fraud and Abuse Rely on Effective Use of
Diverse Techniques
Given the broad nature of health care fraud and abuse, efforts to
measure its potential extent should incorporate carefully selected
detection techniques into the overall measurement methodology. With
billions of dollars at stake, health care fraud and abuse detection has
become an emerging field of study among academics, private insurers,
and HCFA officials charged with managing health care programs. A
variety of methods and techniques are being utilized or suggested to
improve efforts to uncover suspected health care fraud and abuse. Such
variety is needed because one technique alone may not uncover all types
of improper payments.
Although the vast majority of health care providers and suppliers
are honest, unscrupulous persons and companies can be found in every
health care profession and industry. Further, fraudulent schemes
targeting health care patients and providers have occurred in every
part of the country and involve a wide variety of medical services and
products. Individual physicians, laboratories, hospitals, nursing
homes, home health care agencies, and medical equipment suppliers have
been found to perpetrate fraud and abuse.
Fraud and abuse detection is not an exact science. No matter how
sophisticated the techniques or the fraud and abuse audit protocols,
not all fraud and abuse can be expected to be identified. However,
using a variety of techniques holds more promise for estimating the
extent of potentially fraudulent and abusive activity and also provides
a deterrent to such illegal activity. Health care fraud experts and
investigators have identified techniques that can be used to detect
fraudulent and abusive activity. According to OIG officials, these
techniques are performed by Medicare contractor fraud units\7\ to
detect potential fraud and abuse. Table 1 summarizes the most promising
techniques they identified along with some of their limitations.
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\7\ Medicare contractor fraud units are located at each HCFA
contractor and are responsible for preventing, detecting, and deterring
Medicare fraud and abuse.
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table 1.--techniques for detecting potential fraud and abuse
Medical record review: Doctors and nurses review medical records to
assess whether the services billed were allowable, reasonable,
medically necessary, adequately documented, and coded correctly in
accordance with Medicare reimbursement rules and regulations.
Limitations: Medical reviews may not uncover services that have not
been rendered or billing for more expensive procedures when the medical
records have been falsified to support the claim.
Beneficiary contact: Verify that the services billed were actually
received through contacting the beneficiary either in person or over
the phone, or by mailing a questionnaire.
Limitations: Beneficiary may be difficult to locate and not be
fully aware of, or understand the nature of, all services provided.
Contact may not reveal collusion between the beneficiary and provider
to fraudulently bill for unneeded services or services not received. In
some instances, medical necessity and quality of care may be difficult
to judge.
Provider contact: Visit provider to confirm that a business
actually exists, that the activity observed supports the number of
claims being submitted by the provider, and that medical records and
other documentation support the services billed.
Limitations: Provider contact may not reveal collusion between the
provider and beneficiary to fraudulently bill for unneeded services or
services not rendered. In some instances, medical necessity and quality
of care may be difficult to judge.
Data analysis: Examine provider and beneficiary billing histories
to identify unusual or suspicious claims. Provider focused data
analysis attempts to identify unusual billing, utilization, and
referral patterns relative to a provider's peer group. Beneficiary
focused data analysis looks for unusual treatment patterns such as
visiting several different providers for the same ailment or claims for
duplicate or similar services.
Limitations: Data analysis may only identify the most flagrant
cases of potential fraud and abuse because it relies on detecting
unusual patterns relative to the norm. Application of additional
techniques may be necessary to assess the appropriateness of unusual
patterns identified.
Third party contact/confirmation: Validate information relied on to
pay claims with third parties to assist in identifying potential fraud
and abuse. For example, verify that a provider is qualified to render
medical services to Medicare beneficiaries through contacting state
licensing boards or other professional organizations. Also, other
entities, such as employers, private insurers, other governmental
agencies (e.g., Internal Revenue Service, Social Security
Administration, state Medicaid agencies) and law enforcement
authorities represent valuable sources in determining the validity of
claim payments when the reliability of data from primary sources (e.g.,
claims data, beneficiaries, and providers) is questionable.
Limitations: Does not address utilization patterns, whether
services were rendered, the need for services, or quality of services.
Consequently, health care experts and investigators also told us
that effective detection of potential fraud and abuse necessarily
involves the application of several of these techniques and
considerable analysis, especially for the more sophisticated types of
billing schemes and kickback arrangements. In addition, data on fraud
referrals contained in the FID indicate that information necessary for
identifying potential Medicare fraud and abuse comes from a variety of
sources, as shown in figure 2. In particular, these data and the fraud
experts we spoke with suggest that Medicare beneficiaries represent a
valuable source for detecting certain types of potential fraud and
abuse, especially services not rendered. HCFA officials told us that
beneficiary complaints stem largely from the beneficiaries' review of
their explanation of Medicare benefit (EOMB) statements received after
health services and supplies are provided. These findings suggest that
potential fraud and abuse can only be comprehensively measured by
effectively applying a variety of investigation techniques using a
variety of sources.
Planned HCFA Projects Will Provide Some Improvements
The inherent vulnerabilities of the Medicare fee-for-service
program have fueled debate over how extensively the measurement of
potential fraud and abuse should be pursued to provide information that
policymakers and HCFA managers need to effectively target program
integrity efforts. Implementing the current methodology to estimate
improper payments is a major undertaking and represents an attempt to
give HCFA a national estimate of payment accuracy in the Medicare
program. The current methodology focuses on estimating Medicare
payments that do not comply with payment policies as spelled out in
Medicare laws and regulations, but does not specifically attempt to
identify potential fraud and abuse. In addition to the current
methodology, HCFA has three projects in various stages of development
that could somewhat enhance the capability to uncover potential fraud
and abuse and help HCFA better target program safeguard efforts over
the next few years.
current methodology not designed to measure the full extent of
potential fraud and abuse
The primary purpose of the current methodology is to provide an
estimate of improper payments that HCFA can use for financial statement
reporting purposes, and it has served as a performance measure. The OIG
is responsible for overseeing the annual audit of HCFA's financial
statements, as required by the Chief Financial Officers Act of 1990 as
expanded by the Government Management Reform Act of 1994. The current
methodology has identified improper payments ranging from inadvertent
mistakes to outright fraud and abuse. However, specifically identifying
potentially fraudulent and abusive activity and quantifying the portion
of the error rate attributable to such activity has been beyond the
scope of the current methodology.
The focus of the current methodology is on procedures that verify
that the claim payments made by Medicare contractors were in accordance
with Medicare laws and regulations. The primary procedures used are
medical record reviews and third party verifications. Medical
professionals working for Medicare contractors and PROs review medical
records submitted by providers and assess whether the medical services
paid for were allowable, medically necessary, accurately coded, and
sufficiently documented. OIG staff perform various procedures including
third party verifications to ensure that health care providers are in
``good standing'' with state licensing and regulatory authorities and
are properly enrolled in the Medicare program. They also verify with
the Social Security Administration (SSA) that the beneficiaries
receiving the services were eligible for them.
The OIG reported that the medical reviews conducted in the current
methodology have been the most productive technique for identifying
improper payments--detecting the overwhelming majority of the improper
payments identified.\8\ According to OIG officials, medical reviews
have led to some major prosecutions. In addition, some of the health
care fraud experts we talked with stated that such medical reviews are
most effective in detecting unintentional errors. However, they also
told us that medical reviews are less effective in identifying
potentially fraudulent and abusive activity because clever providers
can easily falsify supporting information in the medical records to
avoid detection.
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\8\ Improper Fiscal Year 1999 Medicare Fee-For-Service Payments,
Department of Health and Human Services, Office of Inspector General,
February 2000, A-17-99-01999.
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With respect to identifying potentially fraudulent or abusive
activities, OIG officials indicated that medical reviews performed
during the current methodology have resulted in referrals to its
Investigations Office. However, they acknowledge that the current
methodology generally assumes that all medical records received for
review are valid and thus represent actual services provided. In
addition, they agree that additional improper payments may have been
detected had additional verification procedures been performed, such as
first, confirming with the beneficiary whether the services or supplies
billed were received and needed and second, confirming the nature of
services or supplies provided through on-site visits and direct contact
with current or former provider employees. Recognizing the potential
for abuse based on past investigations--such as falsified certificates
of medical necessity or where beneficiaries are not ``homebound'', a
requirement for receiving home health benefits--the OIG has included
face-to-face contact with beneficiaries and providers when reviewing
sampled claims associated with home health agency services. Further,
during the course of our review, OIG officials stated that they will
conduct beneficiary interviews when reviewing DME claims selected in
its fiscal year 2000 study. However, according to OIG officials, they
have not extended this or certain other techniques to the other
numerous types of claims included in its annual review because they
consider them costly and time-consuming.
Accordingly, the OIG recognizes that the current methodology does
not estimate the full extent of Medicare fee-for-service improper
payments, especially those resulting from potentially fraudulent and
abusive activity for which documentation, at least on the surface,
appears to be valid and complete. In fact, the OIG testified \9\ that
its estimate of improper payments did not take into consideration
numerous kinds of outright fraud such as phony records or kickback
schemes. To identify potential fraud, the OIG also relies on tips
received from informants and other investigative techniques.
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\9\ July 17, 1997, testimony of the HHS Inspector General in a
hearing before the House Committee on Ways and Means, Subcommittee on
Health, entitled Audit of HCFA Financial Statements.
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A secondary benefit that has been derived from the current
methodology is that it has prompted HCFA into developing additional
strategies, as we discuss later, for reducing the types of improper
payments identified. However, HCFA is limited in developing specific
corrective actions to prevent such payments because the current
methodology only produces an overall national estimate of improper
payments. Having the ability to pinpoint problem areas by geographic
areas below a national level (referred to as subnational), Medicare
contractors, provider types, and services would make improper payment
measures a more useful management tool.
hcfa projects enhance error rate precision and some potential fraud and
abuse detection capabilities
HCFA has two projects that center on providing it with the
capability of producing improper payment rates on a subnational and
provider type basis--the Comprehensive Error Rate Testing (CERT)
project and the surveillance portion of the Payment Error Prevention
Program (PEPP). These projects are designed to improve the precision of
future improper payment estimates and provide additional information to
help develop corrective actions. However, since the methodologies
associated with the CERT and PEPP projects incorporate techniques for
identifying improper payments that are similar to those used in the
current methodology, the extent to which these two projects will
enhance HCFA's potential fraud and abuse measurement efforts is
limited.
HCFA has a third project in the concept phase that will test the
viability of using a variety of investigative techniques to develop a
potential fraud rate for a specific geographic area or for a specific
benefit type. This project, called the Model Fraud Rate Project (MFRP),
provides HCFA the opportunity to pilot test more extensive detection
techniques that, if effective, could be incorporated into the other
measurement methodologies to improve the measurement and, ultimately,
prevention of potential fraudulent and abusive activity. Table 2
compares the scope and potential fraud and abuse detection capabilities
of the current methodology to the HCFA projects.
The CERT project focuses on reviewing a random sample of all Part A
and B claims processed by Medicare contractors each year except
inpatient Prospective Payment System (PPS) hospital claims. It involves
the review of a significantly larger random sample of claims and thus,
according to HCFA officials, allowing HCFA to project subnational
improper payment rates for each Medicare contractor and provider type.
It is the largest of the projects and is undergoing a phased
implementation with a scheduled completion date of October 2001. In
addition to developing subnational error rates, HCFA officials stated
that the CERT project will also be used to develop performance measures
that will assist HCFA in monitoring contractor operations and provider
compliance. For example, CERT is designed to produce a claim processing
error rate for each contractor that will reflect the percentage of
claims paid incorrectly and denied incorrectly, and a provider
compliance rate that indicates the percentage of claims submitted
correctly.
The PEPP project is similar to the CERT project and is designed to
develop payment error rates for the Part A inpatient PPS hospital
claims not covered by CERT. PEPP is designed to produce subnational
error rates for each state and for each PRO area of responsibility.
Claim reviews under PEPP are designed to be continuous in nature with
results reported quarterly. HCFA officials stated that the project is
the furthest along in implementation, with the first quarterly reports
expected in September 2000. The contractors and PROs implementing the
project are expected to identify the nature and extent of payment
errors for these inpatient claims and implement appropriate
interventions aimed at reducing them.
After their full implementation, HCFA intends to develop a national
improper payment rate by combining the results of the CERT and PEPP
projects. This rate will be compared to the rate produced by the
current methodology to identify, and research reasons for, any
significant variances among results. While the national estimate will
continue to provide valuable information concerning the extent of
improper payments, HCFA officials state that the availability of
reliable estimates at the subnational levels contemplated by these
efforts will greatly enhance the usefulness of these estimates as
management tools.
While enhancing the precision of improper payment estimates will
offer a richer basis for analyzing causes and designing corrective
actions, conceptually, the MFRP holds the most promise for improving
the measurement of potential fraud and abuse. However, the Medicare
contractor assisting HCFA in developing this project is dropping out of
the Medicare program in September 2000 and has ceased work on the
project. Efforts to date have focused on developing a potential fraud
rate for a specific locality and specific benefit type; however, HCFA
intends to eventually expand the scope of the project to provide a
national potential fraud rate. As currently conceived, the project
involves studying the pros and cons of using various investigative
techniques, such as beneficiary contact, to estimate the occurrence of
potential fraud. HCFA officials informed us that before the contractor
ceased work on this project, it conducted a small pilot test using
beneficiary contact as a potential fraud detection technique that
identified some of the challenges HCFA will face in implementing this
technique. The results of the test are discussed later.
HCFA is seeking another contractor to take over implementation of
the project. The contractor eventually selected will be expected to
produce a report that identifies the specific potential fraud and abuse
identification techniques used, the effectiveness of the techniques in
identifying potential fraud and abuse, and recommendations for
implementing the techniques nationally. The contractor will also be
expected to develop a ``how to manual'' that Medicare contractors and
other HCFA program safeguard contractors (PSC) can use to implement
promising techniques. HCFA officials stated that promising techniques
identified through MFRP could also be exported to the CERT and PEPP
projects and the current methodology to enhance national and
subnational estimates of potential fraud and abuse over time.
expanding the scope of the hcfa projects could enhance measurement of
potential fraud and abuse
Collectively, HCFA's projects do not comprehensively attempt to
measure potential fraud and abuse or evaluate the specific
vulnerabilities in the claims processing process that may be allowing
fraud and abuse to be perpetrated. Table 3 shows the limited use of
selected identification elements among the current methodology and the
HCFA projects. The MFRP project's scope, for example, does not include
studying the viability of making provider and supplier contact or using
third party confirmations to detect potential fraud and abuse.
Contacting beneficiaries and checking providers are valuable
investigative techniques used to develop potential fraud and abuse
cases. For example, California officials recently visited all Medicaid
\10\ Durable Medical Equipment (DME) suppliers as part of a statewide
Medicaid provider enrollment effort and found that 40 percent of the
dollars paid to the suppliers was potentially fraudulent. The on-site
visits not only helped to identify the fraudulent activity, but also to
obtain sufficient evidence to support criminal prosecutions for fraud.
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\10\ The Medicaid program represents the primary source of health
care for medically vulnerable Americans, including poor families, the
disabled, and persons with developmental disabilities requiring long-
term care. Medicaid is administered in partnership with the states
pursuant to Title XIX of the Social Security Act with combined state
and Federal medical assistance outlays in fiscal year 1999 totaling
$180.8 billion.
a The CERT and PEPP projects also provide for estimates
of improper payments at the subnational and provider type levels.
b The scope of the MFRP is still conceptual. Efforts to
date have focused on developing a potential fraud rate for specific
benefit types and specific localities and to eventually expand efforts
to provide a national rate.
c Errors can be classified in many ways; table 3 shows
two types of categories. For example, cause classifications may include
inadvertent billing errors or possible fraud and abuse errors. Type
categories may include documentation errors or lack of medical
necessity errors.
d Methodology includes face-to-face contact with
beneficiaries and providers for home health agency claims only.
e Other than requests for medical records.
f Third part contact/confirmation, for example, may
include contact with State licensing boards or other professional
organizations to verify provider standing. This example represents only
one of the numerous methods of utilizing third party confirmation to
identify improper payments.
g See table 1 for a discussion of data analysis
techniques for detecting potential fraud and abuse.
h OIG officials recently told us that each year at the
end of their review, after all data has been entered in their national
database, they profile each provider type in the claims sample.
Including an assessment of the likely causes of specific payment
errors could help HCFA better develop effective strategies to mitigate
them. The current methodology classifies errors by type, such as lack
of documentation or medically unnecessary services, which is used to
show the relative magnitude of the problems. Knowing the relative
magnitude of a problem offers perspective on what issues need to be
addressed. For example, based on its review of errors identified in the
current methodology, HCFA recently issued a letter to physicians
emphasizing the need to pay close attention when assigning Current
Procedural Terminology (CPT) codes\11\ and billing Medicare for two
closely related, yet differing, types of evaluation and management
services.
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\11\ CPT consists of a list of 5-digit codes for most of the
services performed by physicians as well as instructions for using them
for billing purposes.
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Further analysis of identified improper payments that provide
additional insights into possible root causes for their occurrence is
essential for developing effective corrective actions. For example, if
errors are resulting from intentionally abusive activity, specific
circumstances or reasons that permit the abuse to be perpetrated can be
analyzed to develop and implement additional prepayment edits to detect
and prevent their occurrence. In this regard, GAO has long advocated
enhancing automated claims auditing systems to more effectively detect
inappropriate payments due to inadvertent mistakes or deliberate abuse
of Medicare billing systems.\12\ Also, developing or strengthening
specific enforcement sanctions offer an additional tool to deter
providers or suppliers from submitting inappropriate claims.
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\12\ Medicare Billing: Commercial System Could Save Hundreds of
Millions Annually (GAO/AIMD-98-91, April 15, 1998) and Medicare Claims:
Commercial Technology Could Save Billions Lost to Billing Abuse (GAO/
AIMD-95-135, May 5, 1995).
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Likewise, numerous individuals and entities are involved throughout
the entire Medicare claims payment process, including providers,
suppliers, employees (caregivers, clerical, and management), Medicare
claims processing contractors, HCFA, beneficiaries (and their
relatives), and others. Interestingly, in its review of Illinois
Medicaid payments,\13\ the Illinois Department of Public Aid (IDPA)
determined that over 45 percent of the errors it identified were
inadvertent or caused by the IDPA itself during the process of
approving services or adjudicating claims, and that 55 percent appeared
to be caused by questionable billing practices. IDPA officials told us
that having a clear understanding of the root causes for these errors
has been instrumental in developing effective corrective actions.
Similarly, attributing the causes of Medicare fee-for-service improper
payments to those responsible for them could provide HCFA with useful
information for developing specific corrective actions.
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\13\ Payment Accuracy Review of the Illinois Medical Assistance
Program, Illinois Department of Public Aid, August 1998.
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Certain third party validation techniques are included and have
been successfully implemented in the current methodology. For example,
OIG staff confirm a provider's eligibility to bill the Medicare program
by contacting state licensing boards to ensure that the doctors billing
Medicare have active licenses. They also verify that beneficiaries are
eligible to receive medical services under the Medicare program with
the SSA. However, as currently conceived, none of the HCFA projects
include third party contact as a potential fraud detection technique.
implementing more aggressive fraud detection techniques will require
careful study and additional resources
The experiences of recent efforts to apply more aggressive fraud
detection techniques coupled with our discussions with patient and
provider advocacy groups indicate that finding successful protocols for
implementing some detection techniques may require careful study. Our
review of three studies that have attempted to use beneficiary contact
as a measurement device--the MFRP and two Medicaid studies in Texas and
Illinois--indicate that, while useful, it is a challenging technique to
implement.
The initial contractor for the MFRP conducted a small
pilot test using beneficiary contact to verify Medicare billed services
and found that making contact was more difficult than anticipated.
Telephone contact was the most cost-effective approach for contacting
beneficiaries, but the contractor could only reach 46 percent of them
due to difficulty in obtaining valid phone numbers and difficulty in
actually talking to the beneficiary or his or her representative once a
valid number was located. Using more costly and time-consuming
approaches, such as mailing written surveys and conducting face-to-face
interviews only increased the success rate to 64 percent. To maximize
the effectiveness of these alternative approaches, the contractor noted
that it was important to obtain valid addresses and ensure that the
written survey instrument was concise, easy to understand, and complete
for beneficiaries to take the time to respond.
The state of Texas experienced similar difficulties
contacting Medicaid recipients in a recent statewide fraud study.\14\
Telephone numbers for more than half of the 700 recipients that the
state attempted to contact were not available or were incorrect. The
state attempted to make face-to-face contact if telephone contact was
not possible, and by the study's end, over 85 percent of the recipients
were contacted. The state concluded that contacting a recipient by
telephone is the only cost-effective way to verify that services had
been delivered. It also found that delays in making contact could
impact the results since recipients' ability to accurately recall
events appeared to diminish over time.
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\14\ Final Staff Draft Report on Health Care Claims Study and
Comments from Affected State Agencies, Texas Comptroller of Public
Accounts, December 1998.
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For the Illinois Medicaid study, the IDPA found other
problems in using beneficiary contact as a detection technique in the
payment accuracy study of its program.\15\ Department investigators met
with almost 600 recipients or their representatives to verify that
selected medical services had been received. The investigators found
that while recipient interviews were an overall useful step in the
study's methodology, they did not always produce the desired results.
For example, investigators found cases where caretaker relatives could
not verify the receipt of services. They also found other cases where
recipients were unaware of the services received, such as lab tests, or
could not reliably verify the receipt of services because they were
mentally challenged.
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\15\ See footnote 13.
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Illinois officials involved with implementing the Medicaid study
told us that direct provider contact is also challenging. For example,
an important consideration is whether or not to make unannounced
visits. According to the Illinois officials, unannounced visits can be
disruptive to medical practices and inappropriately harm the
reputations of honest providers by giving patients and staff the
impression that suspicious activities are taking place. Announced
visits, on the other hand, can give the provider time to falsify
medical records, especially if they know which medical records are
going to be reviewed. The Illinois officials resolved this dilemma by
announcing visits 2 days in advance and requesting records for 50
recipients so it would be difficult for the provider to falsify all the
records on such short notice.
Data on fraud referrals included in HCFA's FID indicates that
health care providers and beneficiaries represent important sources for
identifying improper payments, particularly for certain types of
potential fraud and abuse. Moreover, the application of more extensive
fraud detection techniques into efforts to measure improper payments
will require their cooperation. Our discussions with patient and health
care provider advocacy groups indicated they may oppose the application
of more extensive detection techniques due to concerns with violating
doctor-patient confidentiality, protecting the privacy of sensitive
medical information, and added administrative burdens. For example,
officials from the Administration on Aging, an HHS operating division,
told us that they discourage elders from responding to telephone
requests for medical and other sensitive information. Similarly, the
American Medical Association and American Hospital Association
emphasize the adverse impact that meeting what they consider to be
complex regulations and responding to regulatory inquiries has on
health care providers' ability to focus on meeting patient needs. They
also voiced concerns with the added cost that would have to be absorbed
by providers to comply with even more requests for medical information
in an era of declining Medicare reimbursements. Further, some of the
health care experts we talked with cautioned that there are practical
limits to the amount of potentially fraudulent and abusive activity
that can be measured. These experts emphasize that no set of
techniques, no matter how extensive, can be expected to identify and
measure all potential fraud and abuse.
In addition to beneficiary and provider contact, the health and
fraud experts we spoke with told us that validating the information
that Medicare contractors are relying on to pay claims, including
provider and supplier assertions concerning the appropriateness of
those claims, with third parties could also help to identify potential
fraudulent or abusive activity. The current methodology incorporates
such procedures to confirm providers' current standing with state
licensing authorities and beneficiaries' eligibility status with SSA.
Other sources--such as beneficiary employers, beneficiary relatives or
personal caregivers, State Medicaid agencies, and employees of
providers and suppliers--could also offer useful information for
assessing the appropriateness of claims. However, determining the
appropriate nature and extent of third party verification procedures to
incorporate into efforts to measure improper payments should be
considered carefully. Excluding third party verification efforts, and
therefore placing greater reliance on the accuracy of data developed
internally or provided independently, should be based on risks
determined through analysis of reliable indicators.
The Comptroller General's Standards for Internal Control in the
Federal Government stresses the importance of performing comprehensive
risk assessments and implementing control activities, including efforts
to monitor the effectiveness of corrective actions to help managers
consistently achieve their goals. While the annual cost of the current
methodology and the HCFA projects involve several million dollars,
these efforts represent a needed investment toward avoiding significant
future losses through better understanding the nature and extent of
improper payments--including potential fraud and abuse. As shown in
table 2, the current methodology costs $4.7 million, not counting the
cost of medical review staff time at contractors. PEPP is estimated to
cost $7.5 million annually, and CERT costs are expected to be over $4
million annually once fully implemented. While these may seem to be
expensive efforts, when considered in relation to the size and
vulnerability of the Medicare program and the known improper payments
that are occurring, they represent prudent, needed outlays to help
ensure program integrity.
In our recent report on improper payments across the Federal
Government,\16\ we discussed the importance of ascertaining the full
extent of improper payments and understanding their causes to establish
more effective preventive measures and to help curb improper use of
Federal resources. However, as we recently testified,\17\ HCFA's
ability to protect against fraud and abuse depends on adequate
administrative funding. Therefore, in developing effective strategies
for measuring improper payments, consideration of the most effective
techniques to apply in the most efficient manner is essential to
maximize the value of administrative resources. While HCFA faces
significant challenges for ensuring the integrity of the Medicare fee-
for-service program, importantly, HCFA can use the results of these
efforts to more effectively assess corrective actions, target high-risk
areas, and better meet its role as steward of Medicare dollars.
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\16\ Financial Management: Increased Attention Needed to Prevent
Billions in Improper Payments (GAO/AIMD-00-10, October 29, 1999).
\17\ Medicare: HCFA Faces Challenges to Control Improper Payments
(GAO/T-HEHS-00-74, March 9, 2000).
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mfrp holds some promise for advancing potential fraud and abuse
management
HCFA plans to expand its efforts to measure Medicare improper
payments by assessing the usefulness of performing additional fraud
detection techniques with the MFRP. Meanwhile, since the current
methodology and the CERT and PEPP projects do not incorporate the use
of some techniques considered effective in identifying potential fraud
and abuse, HCFA's ability to fully measure the success of its efforts
to reduce fraud and abuse remains limited.
Health care fraud experts told us that the ability of these
projects to measure potential fraud and abuse are somewhat dependent on
the nature, extent, and level of fraud sophistication that may be
involved. For example, the introduction of beneficiary contact, in
conjunction with other techniques, should improve the ability to
determine whether services were actually rendered. However, if the
beneficiary is a willing participant in the potential fraud and abuse
scheme, these additional techniques may not lead to an accurate
determination.
Conclusions
The size and administrative complexity of the Medicare fee-for-
service program make it vulnerable to inadvertent error and
exploitation by unscrupulous providers and suppliers. Given the
billions of dollars that are at risk, it is imperative that HCFA
continue its efforts to develop timely and comprehensive payment error
rate estimates that can be used to develop effective program integrity
strategies for reducing errors and combating fraud and abuse. The
current methodology represented a significant first step in obtaining
such information, but the lack of key fraud and abuse detection
techniques limit its effective use as a management tool to estimate
potential fraud and abuse and ultimately achieve important program
integrity goals. HCFA's projects could collectively address some of the
limitations of the current methodology if properly executed, but do not
appear to go far enough. Expanding the scope of the Model Fraud Rate
Project to include studying provider visits and a more extensive
assessment of the cause of improper payments and other promising
techniques could help HCFA pinpoint additional high-risk areas and
develop more effective corrective actions. The implementation of more
extensive detection techniques is bound to be challenging and
expensive, so using rigorous study methods and consulting with the
people affected, such as beneficiary and provider advocacy groups, are
essential steps to ensure success, as well as considering the tangible
and intangible benefits of using particular techniques. Given the
delays and potential challenges associated with implementing the Model
Fraud Rate Project, substantial improvements in the measurement of
improper payments, especially those stemming from potential fraudulent
and abusive activity, will probably not be realized for a few years.
Recommendations
To improve the usefulness of measuring Medicare fee-for-service
improper payments, including those attributable to potential fraud and
abuse, we recommend that the HCFA Administrator take the following
actions:
Experiment with incorporating additional techniques for
detecting potential fraud and abuse into methodologies used to identify
and measure improper payments and then evaluate their effectiveness. In
determining the nature and extent of additional specific procedures to
perform, the overall measurement approach should first, recognize the
types of fraud and abuse perpetrated against the Medicare program,
second, consider the relative risks of potential fraud or abuse that
stem from the various types of claims, third, identify the advantages
and limitations of common fraud detection techniques and use an
effective combination of these techniques to detect improper payments,
and fourth, consider, in consultation with advocacy groups, concerns of
those potentially affected by their use, including beneficiaries and
health care providers.
Include in the methodologies' design, sufficient scope and
evaluation to more effectively identify underlying causes of improper
payments, including potential fraud and abuse, to develop appropriate
corrective actions.
Mr. Chairman this concludes my statement. I would be happy to
answer any questions you or other Members of the Task Force may have.
Appendix I--Objectives, Scope, and Methodology
Our objective was to identify additional improvements to the
Medicare improper payments measurement projects that were recently
designed by HCFA to further estimate improper payments including
potential fraud and abuse.
Through interviews with HCFA Program Integrity Group officials and
reviews of HCFA documentation including program integrity plans,
project descriptions, statements of work, and requests for proposals,
we identified HCFA projects that could improve the measurement of
Medicare fee-for-service improper payments.
Through interviews with health care fraud and investigation
experts, we gained an understanding of the vulnerabilities in the
Medicare fee-for-service program that create opportunities for improper
payments, especially those stemming from fraudulent and abusive
activity, and the most promising detection techniques to identify these
payments. Specifically, we talked with officials from the Department of
Health and Human Service's Office of the Inspector General (OIG) and
Office of Investigations (OI), Department of Justice (DOJ), Federal
Bureau of Investigation (FBI), HCFA's program integrity group, HCFA's
Atlanta Regional Office unit specializing in fraud detection efforts, a
Medicare claims processing contractor, Association of Certified Fraud
Examiners, three private health insurance organizations, National
Health Care Anti-Fraud Association (NHCAA), Health Insurance
Association of America (HIAA), three states in connection with their
Medicaid program, and two academicians with notable fraud investigation
experience. We also reviewed various documents including HCFA and OIG
Fraud Alerts, prior GAO, OIG, and other studies on health care fraud
and abuse, particularly those related to the Medicare fee-for-service
program.
We analyzed HCFA's Fraud Investigation Database (FID) to identify
the most common types of potential fraud referred to the OI and DOJ for
further investigation and possible criminal and civil sanctions. We
also analyzed the FID to determine the most frequent sources for
identifying potential fraud. The FID was created in 1995, but has data
on fraud referral going back to 1993. We did not attempt to validate
the database.
To assess the potential effectiveness of the techniques planned for
the HCFA projects for identifying improper payments attributable to
potential fraud and abuse, we first performed a comparative analysis of
common types and sources of referrals of fraud and abuse occurring in
the Medicare program, the types of techniques identified by
investigative experts as most effective for identifying them, and the
extent to which identified techniques are incorporated in the
respective methodologies and second, discussed the results of our
analysis with officials in HCFA's Program Integrity Group and OIG.
To gain an understanding of how the implementation of additional
procedures to identify and measure improper payments attributable to
potential fraud and abuse could affect providers, suppliers, and
recipients of health care services and supplies, we interviewed
officials from patient and health care provider advocacy groups,
including the American Medical Association, American Hospital
Association, HHS Administration on Aging (AOA), American Association of
Retired Persons (AARP), and the Health Care Compliance Association
(HCCA).
We performed our work from November 1999 through June 2000 in
accordance with generally accepted government auditing standards.
Appendix II--Definitions and Examples of Common Types of Potential
Fraud and Abuse Referrals
services not rendered
As the category indicates, cases involving billing for services not
rendered occur when health care providers bill Medicare for services
they never provided. Potential fraud and abuse is usually detected by
statements received from the provider's patients or their custodians
and the lack of supporting documents in the medical records.
For example, a provider routinely submitted claims to Medicare and
CHAMPUS\1\ for cancer care operations for services not rendered or not
ordered; upcoded procedures, as defined below, to gain improper high
reimbursement; and double billed Medicare for certain procedures. As a
result of the fraudulent submissions, the provider allegedly obtained
millions of dollars to which they were not entitled.
---------------------------------------------------------------------------
\1\ CHAMPUS, or the Civilian Health and Medical Program of the
Uniformed Services, is a fee-for-service health insurance program that
pays for a substantial part of the health care that civilian hospitals,
physicians, and others provide to nonactive duty Department of Defense
beneficiaries.
---------------------------------------------------------------------------
medically unnecessary services and supplies and overutilization
Cases involving medically unnecessary services, supplies, or
overutilization occur when providers or suppliers bill Medicare for
items and services that are not reasonable and necessary for the
diagnosis and treatment of illness or injury or to improve the
functioning of a body part. They include incidents or practices of
provider, physicians, or suppliers of services that are inconsistent
with accepted sound medical practices, directly or indirectly resulting
in unnecessary costs to Medicare, improper payments, or payments for
services that fail to meet professionally recognized standards of care
or are medically unnecessary.
For example, a provider ordered magnetic resonance imaging tests
(MRIs) and neurological tests which investigators questioned whether
the tests were medically necessary, and whether the neurological tests
were actually performed. Most of the tests were performed on patients
who responded to the provider's advertisements in the yellow pages.
After a 5 to 10 minute consultation, the provider would diagnose almost
every patient with the same disorder--radiculopathy, a disease
involving compression of, or injury to the roots of spinal nerves.
misrepresentation of services and products/falsifying certificates of
medical necessity (cmns)/other documents
Medicare publishes coverage rules on what goods and services the
program will pay for and under what circumstances it will pay or not
pay for certain goods and services. Providers sometimes bill Medicare,
showing a billing code for a covered item or service when, in fact, a
noncovered item or service was provided. Further, providers sometimes
intentionally falsify statements or other required documentation when
asked to support payments for claimed services or supplies. In
particular, investigators have determined that falsification of CMNs--
documents evidencing appropriately authorized health care
professionals' assertions regarding the beneficiaries' needs for
certain types of care or supplies, such as home health and hospice
services or certain durable medical equipment--occur, providing
unscrupulous providers and suppliers additional opportunities to abuse
Medicare.
For example, a provider billed for an orthotic knee brace, when in
fact the provider was providing Medicare beneficiaries with nonelastic
compression garments and leggings. Although knee orthotics are
reimbursed by Medicare and Medi-Cal\2\ for a total of over $650 per
brace, the nonelastic compression garment is not reimbursed by
Medicare. The total billings totaled approximately $332,055.
---------------------------------------------------------------------------
\2\ The Medicaid program for the State of California is known as
the Medi-Cal program.
---------------------------------------------------------------------------
upcoding
One type of incorrect coding is called ``upcoding.'' Upcoding cases
result from health care providers changing codes on claim forms
submitted to Medicare, causing reimbursements to be paid at higher
rates than are warranted by the service actually provided. Upcoding can
also result from providers billing for services actually provided by
nonphysicians, which would be paid at a lower reimbursement rate.
For example, a provider allegedly submitted false claims for
services provided by physicians in training and inflated (upcoded)
claims in connection with patient admissions services. The provider
paid the U.S. Government $825,000 primarily to settle allegations
resulting from an audit performed by the HHS OIG. The audit was
triggered by a lawsuit filed by private citizens as authorized by the
False Claims Act (31 U.S.C. sections 3729-3733).
fraudulent cost reporting
Falsifying any portion of the annual report submitted by all
institutional providers participating in the Medicare program. The
report is submitted on prescribed forms, depending on the type of
provider (e.g., hospital, skilled nursing facility, etc.). The cost
information and statistical data reported must be current, accurate and
in sufficient detail to support an accurate determination of payments
made for the services rendered.
For example, a provider billed Medicare for hundreds of thousands
of dollars for personal expenses disguised as legitimate healthcare
expenses. The personal expenses billed included an addition to a
private home, vacations, and beauty pageant gowns. The provider was
fined over $500,000 for the fraudulent billings.
kickbacks and accepting/soliciting bribes, gratuities or rebates
Section 1128B of the Social Security Act, 42 U.S.C. Sec. 1320a-
7b(b), makes it a felony to solicit, receive, offer, or pay a kickback,
bribe, or rebate in connection with the provision of goods, facilities,
or services under a Federal health care program, including Medicare.
For example, a provider agreed to plead guilty to conspiracy, mail
fraud, and violating the anti-kickback provision and to pay $10.8
million in criminal fines in connection with its scheme to defraud
Medicare. The pleas relate to kickbacks and false Medicare billings
made in connection with the provider's receipt of fees from another
company for the provider's management of certain home health agencies.
Chairman Chambliss. How much direct contact did your office
have with providers out there? Did you all actually go out and
visit with any of the providers with respect to the procedure
that is now used to examine waste, fraud and abuse?
Ms. Jarmon. We talked to some organizations that cover
providers. I think we did talk to some providers.
Chairman Chambliss. I am just curious what the reaction was
to the--from the Medical Association of Illinois or Georgia or
whoever you talked to. What reaction do you get from those
folks with respect to your investigation into this?
Ms. Jarmon. Their reaction was there is no way that you
would ever get a handle on all the fraud because the schemes
are continually changing, so that it would probably be
impossible to ever come up with a fraud rate. They were
concerned about more contact with the providers and how it
would affect their operations.
They do understand that there is a fraud problem, and they
were sympathetic to the fact that something needs to be done to
address it, but they feel like most providers are honest, which
is what we believe also, and that there needs to be targeted
efforts to address where the problems are rather than make it
an invasive procedure to all providers or many providers.
Chairman Chambliss. Do you find within the Medicare review
process is there any correlation between State licensing boards
and the investigators from HCFA with respect to just
determining the simple--something simple, like requiring
notification from State licensing boards of all persons who are
licensed in that State as well as all persons who are, for
disciplinary reasons, becoming unlicensed, die or whatever; is
there any correlation there, is that information being shared
back and forth between State licensing boards and Medicare--I
mean and HCFA, excuse me.
Ms. Jarmon. The Medicare fraud units within the different
contractors within HCFA, and I believe there are about 56
Medicare contractors throughout the country, do get information
from the State licensing boards, but I am not sure of how and
how often the information is shared. But they do receive
information. They do perform third-party verification of
information with the State licensing boards.
Chairman Chambliss. Right. I think a little bit later on we
are going to hear a statement with respect to the way in which
most waste, fraud and abuse is uncovered is through review of
medical records, which presents some problems in and of itself
with respect to privacy issues. But would you agree with that,
that based on y'all's research, that reviewing independent
medical records of Medicare beneficiaries is, in fact, the best
way to try to discover these problems?
Ms. Jarmon. I will answer that briefly, then I will let Mr.
Hamel answer it, because he has been more involved hands on in
looking at some of this information. We found that all five of
the techniques that we have here are important. Medical record
review is one of the five techniques. Many of the experts we
talked to who are fraud investigators have said it is important
to combine the techniques. Any one technique in and of itself
would not be effective. It is important if you are doing a
medical record review to also do data analysis and combine some
techniques if the emphasis is to try to determine potential
fraud.
Mr. Hamel, anything you want to add?
Mr. Hamel. No, I think that is a fair assessment.
Chairman Chambliss. You didn't make reference either in
your written statement or in your oral statement to where you
think the scale of waste, fraud and abuse in Medicare is. Is
there any way to get any kind of accurate number on pure waste,
fraud and abuse; not errors, but waste, fraud and abuse?
Ms. Jarmon. I don't think it is possible to know exactly
how much waste, fraud and abuse is in the Medicare program. We
do know, like I mentioned in the statement, that the estimate
that the IG comes up with, doesn't include efforts to identify
all the fraud and abuse. So we know that total improper
payments, including the actual fraud and abuse is probably
something more than the $13.5 billion that was estimated for
fiscal year 1999. How much more we don't know.
Chairman Chambliss. Well, and their numbers actually refer
more to errors made by suppliers rather than by what we refer
to as true waste, fraud and abuse though; isn't that correct?
Ms. Jarmon. Right. They don't know how much of it is just
errors or how much of it might be fraud. Right.
Chairman Chambliss. As a layman, I have a little bit of a
difficult time understanding the way some of these schemes
evolve. For example, I keep reading and hearing about the fact
that waste, fraud and abuse organizers, I guess, is a way I
would categorize them, create false files, and they just have a
mailbox out there, and they send claim forms in to HCFA, and
they wind up getting paid. And I don't understand how that
happens from a practical standpoint. Can you all talk a little
bit about that and somewhat educate me and maybe some other
Members here that don't understand exactly how that can happen?
Ms. Jarmon. I will let Bill talk about that. He has some
hands-on experience with seeing some of it.
Mr. Hamel. We also issued a report in October 1999 having
to do with organized criminal groups that were engaging in
health care fraud. What we found was that, generically
speaking, individuals with criminal histories for non-health-
care-related violations, such as securities fraud, weapons,
drugs and narcotics, assembled themselves and organized
themselves into groups for the specific purpose of defrauding
the Medicare program and other health care insurers.
Some of the things that they would do would be to establish
a drop box, for example. They would rent a mailbox and call it
an office suite, and they would obtain Medicare beneficiary
numbers, by either stealing them or paying people to steal
them, or they would purchase them. They would rummage through
garbage and use all kinds of various illicit means to get
numbers without the consent of the beneficiary and then just
submit claims for bogus services. The checks from Medicare
would be sent to the mailbox, or in some cases electronically
transmitted to a bank account, and after they had concluded
enough billings, they would just close up shop and move
elsewhere.
Chairman Chambliss. So are they using falsified supplier
numbers also? I am assuming that a physician, for example, has
a number out there that Medicare has on file or HCFA has on
file, and he has got to give that number when he submits his
claim.
Mr. Hamel. In the cases that we examined--actually some of
them had legitimate numbers, and some of them had numbers that
were no good.
Chairman Chambliss. I guess that is what I can't
understand. In this life of high tech that we now live in or
this era of high tech, why we can't detect that as part of an
electronic filing? If there is a false number there, why we
can't correlate that to a claim that comes in? Is there any
answer to that?
Mr. Hamel. My understanding is that there are controls; as
a result of some of these scams being identified, controls are
being put in place to prevent bogus numbers or inactive numbers
from becoming activated, and that HCFA has implemented controls
to go by addresses and try and do physical verification to
determine whether it is a legitimate organization or provider.
Chairman Chambliss. Well, in y'all's examination, both from
HCFA's perspective as well as the provider's perspective, do we
have the appropriate software, hardware or whatever we need out
there to try to develop this further, improve this further? Are
we lacking in that respect? Or is it people not doing their
job? Or what is causing the dropping through the cracks on
that?
Mr. Hamel. I would say that from my experience, there is
always evolving computer software technology, but some of the
data analysis that I worked with at Medicare contractors was
sophisticated enough to be able to identify unusual utilization
patterns, referral patterns, spike analysis. For example, if
there was an uncommon ailment, and there was no known epidemic,
and suddenly a provider was treating that particular condition,
they had audits in place to be able to identify those.
Chairman Chambliss. I guess what I can't understand is that
if Dr. Joe Smith in Atlanta, Georgia, is supplier number Smith
2000, and he puts that on his requisition form, he gets a check
to Dr. Joe Smith in Atlanta, Georgia. If somebody falsifies a
name of Dr. James Smith with the number Smith 2001, why we
can't pick that up as opposed to sending a check to him or
depositing a check in his account? I have a very difficult time
understanding that, and maybe some of our other witnesses who
are dealing with it on the other side can help straighten that
out a little later on.
Ms. Jarmon. Some of those fraud schemes----
Chairman Chambliss. Go ahead.
Ms. Jarmon [continuing]. Are being picked up. The problem
seems to be that the fraud is evolving. Sometimes, as HCFA
builds in controls to address certain types of fraud, another
type evolves. So it seems like it is a change in environment as
fraud schemes change.
Chairman Chambliss. So this is that moving target, that
invisible man that Dr. Sparrow is talking about here.
Ms. Jarmon. Yes.
Chairman Chambliss. OK. Jim.
Mr. McDermott. Thank you, Mr. Chairman.
From your testimony and from reading it, it doesn't seem
like you found any fault with what HCFA was doing, you just
said they ought to do more. Is that a fair assessment?
Ms. Jarmon. We said they need to continue experimenting
with different techniques, and that they need to do more
analysis to determine the causes of the improper payments. But
we are encouraging them to continue what they are doing as far
as experimenting with different techniques.
Mr. McDermott. So the $10 billion they saved and 42 percent
reduction in payment errors is not--you are not saying that
there is anything wrong with that, they just haven't done
enough; they should do 100 percent, huh? Or close to it.
Ms. Jarmon. We aren't saying they should do 100 percent. We
are saying they should continue to evaluate the different
approaches. We aren't saying anything about the 42 percent
decrease.
Mr. McDermott. Besides doing more of what they are doing,
does GAO have any other fraud detection models that they are
saying they should be using?
Ms. Jarmon. We don't have any fraud detection models we are
saying they should be using.
Mr. Hamel. I can say that the five techniques that are on
the chart that Ms. Jarmon spoke to before are all useful tools
and powerful tools in the detection of potential and actual
fraud. What we are saying is that you can't use them in
isolation of one another. That greatly diminishes their
usefulness and their reliability from a measurement
perspective, and that when you use them in combination of one
another, and, having done health care fraud investigations,
always using at least two or three of these techniques at one
time, it greatly increases the reliability of identifying
potential fraud.
Mr. McDermott. In looking at those, I know you don't want
to take them individually, but I just want to take one of them,
which is the one that says provider contact. My understanding
is that the budget that was just put out by the House of
Representatives cut that section of the budget by 6 percent.
Now, if I understand what you are saying, you actually need to
have more people going out, in part to answer Mr. Chambliss's
question about does a place actually exist, is there actually a
business at 411 Elm Street or not. And that is what I
understand that whole question of provider contact to be about.
Is there something I am missing when we are cutting the
budget to the section that, in fact, is the one that you say
ought to be done here?
Ms. Jarmon. We are saying that there needs to be some
assessment of the risk. In areas where they determine there is
a riskier population or there have been a lot of problems, they
should evaluate the need to perform additional testing. For
example, investigations in California have shown many problems
in the area of durable medical equipment supplies. They did
some work, and in 40 percent of the items, there were problems
as far as, the providers weren't there, or there were
significant errors. So utilizing this information, in
determining improper payments on Medicare fee-for-service, the
IG is planning to actually visit the DME suppliers and
beneficiaries when they do the medical equipment part of their
sample.
So we are saying that they need to determine where the
risks are for a higher probability of errors. They need to do
more contacting the beneficiaries and providers. We aren't
saying it should be done overall, because we agree it would be
costly if it was done on an overall basis.
Mr. McDermott. So you would be in agreement with the cut of
the budget of that section of the appropriation?
Ms. Jarmon. No, we aren't saying that.
Mr. McDermott. You don't think that they are doing too
many, you are just saying they ought to emphasize more in
certain areas.
Ms. Jarmon. And determine where the risk is. Right.
Mr. McDermott. The other question I have that sort of
puzzles me is this business about how you do it without casting
a wider net, or do you believe that they ought to be doing
unannounced audits?
Ms. Jarmon. In some cases where there is a lot of risk, an
unannounced audit may be necessary. Rather than casting a wider
net, I know some of their approaches that they are looking at
are larger samples. The IG's methodology that they were doing
on behalf of HCFA, which is called the current methodology in
our statement, that sample included reviewing 5,000 to 8,000
claims. Some of the approaches they are looking at are going to
be much larger samplings. So I guess there is a broader net.
But what we are suggesting is to go deeper into the areas where
there is potential risks rather than having it broader.
Mr. McDermott. When I was in the State, in the State
legislature, we had a program called WISPRO, an MRO
organization that looked at claims. We always announced to a
hospital, we are coming in on the 12th of August, and they had
a month in advance to get themselves--we didn't tell them what
cases we were going do look at, but we told them a month in
advance we were coming.
Now, it seems to me that one way that you get around that
is to say we are not going to announce to anybody we are
coming. We will just show up in the record room and start
pulling charts that we think look bad. Is there--do you have
any problem with that as an approach?
Ms. Jarmon. I will talk briefly about this because I know
some of this will be discussed further in the next panel. One
of the studies we did look at was the Illinois study, and I
know Mr. Miller is here, so you can talk further with him about
that.
I know there were some problems with contacting providers
such as, if you just show up unannounced. There would be
concerns as far as whether the government is questioning a
particular provider--who might be an honest provider. Then if
you give a lot of notice, if it is not an honest provider, you
give them time to falsify the documentation.
I think what Illinois eventually did was they gave the
providers, the doctors, 2 days' notice. They would say, we are
going to come in 2 days and look at 50 documents. In most cases
2 days may not be enough time for someone to falsify records if
they aren't honest. I think that is what they decided to do
instead of the unannounced visits. Like I said, he could talk
further about that.
Did you want to add anything?
Mr. Hamel. I was just going to say Ms. Jarmon said and in
our statement we are suggesting to consider the risks to the
program in using these techniques, and what is most appropriate
when you consider what those risks are. If you are in a high-
risk area where there has been a lot of fraud, perhaps durable
medical equipment, then you would consider using an unannounced
site visit to see if the business is really a viable entity. In
other situations you would assess the risk and make a
determination of what is appropriate.
Mr. McDermott. And HCFA is not now doing that?
Ms. Jarmon. They may be doing some of it, and Ms. Thompson
can talk further about that, we don't think they have done a
broad enough risk analysis.
Mr. McDermott. I am sorry, I have to leave and go vote. We
have got about 2 minutes. So thank you.
Chairman Chambliss. I have asked Mr. Ryan to go vote and
come back and resume the hearing. So we will try to keep going.
As soon as he gets back, we will resume.
[Recess.]
Chairman Chambliss. Mr. Ryan.
Mr. Ryan. Good morning. Thank you for coming. Appreciate
all your work on this issue.
I just want to ask you a couple of quick questions. I think
it was a little while ago when Secretary Shalala said that,
quote, we have witnessed an enormous improvement with an
estimated rate of improper payments in the Medicare fee-for-
service drop from 14 percent in fiscal year 1996 to less than 8
percent in fiscal year 1999. Is it the case, Ms. Jarmon, that
the largest portion of this decline has come from the area of
documentation, and is it possible really to know whether the
decline in this area reflects a real drop in improper payments
or simply just better paperwork?
Ms. Jarmon. Right. A large part of that error rate does
relate to the lack of documentation. And since the model used
to come up with that error rate doesn't identify or doesn't
attempt to measure fraud, you really don't know whether there
really has been a decrease or how much the decrease has been.
Mr. Ryan. So it is more kind of a clerical error measure
rather than a real fraudulent measurement.
Ms. Jarmon. It is not a fraud measurement, right.
Mr. Ryan. So without really knowing the true level of fraud
and abuse in Medicare, it is tough to determine whether an
enormous improvement has been made, isn't it?
Ms. Jarmon. Yes, it is difficult to determine what the
improvement has been when there hasn't been a fraud rate.
Mr. Ryan. I assume you have reviewed the three HCFA
projects that are under way right now. Do you believe in your
opinion and from your analysis whether any of the three HCFA
projects currently under way employ all of the techniques that
the GAO would recommend to get the best total measurement
possible for improper payments in fee-for-service?
Ms. Jarmon. Two of the projects that we talked about, CERT
and PEPP, are very similar to the methodology that is used in
the current methodology. And the one that comes closest to
including all of the techniques that we think need to be looked
into or included is the Model Fraud Rate project. But that one
is also limited as far as provider contact and verification
with third parties. So, right now, none of those three projects
include all of the techniques that we talk about in our
statement.
Mr. Ryan. So you think we could do a better job in actually
getting at real fraud, and that these projects may be more
going down the road toward kind of a clerical error instead of
actual fraud.
Ms. Jarmon. We think more can be done using the techniques.
HCFA already uses some of them to identify fraud. More could be
done to use the techniques to try to measure potential fraud.
Mr. Ryan. I come from Wisconsin, and in Wisconsin there is
kind of an old saying when looking at the fraud and abuse in
the United States that we are being penalized for being good.
We are being penalized for being efficient; that in many ways
in going after fraud, we kind of went after the whole country
with the same approach, kind of with a meat axe rather than
going after fraud with a scalpel or a laser focusing on where
fraud actually occurs. Home health agencies is one of those
examples that leaps to mind.
How dependent is a measurement of and how dependent is the
enforcement of fraud reduction dependent on State insurance
regulatory regimes? Louisiana clearly had a lot more real fraud
in home health than did Wisconsin, but in Wisconsin home health
agencies, which I think are pretty efficient, well-run, honest
organizations, are clearly on the losing end of these efforts.
And do you think that there is, A, a better way to go after
this more, and in a way of not going after all of the actors in
the system, but actually finding a way to go after the actual
fraud that is occurring without unnecessarily and needlessly
hurting the good actors in the system; and, B, how dependent is
this on State insurance regimes and State enforcement?
Ms. Jarmon. Yes. I think what we refer to as a risk-based
approach would try to focus on the areas where there is more
risk, including parts of the country where for some reason,
there is more risk. We are suggesting that the HCFA look at a
risk-based approach to determine where additional techniques
should be used.
Like you mention with home health agencies and with durable
medical equipment, in certain parts of the country it has been
shown there is more risk in those areas. So we think there
should be a use of all of the five techniques in those areas,
but to do it globally throughout the country in all the States
would be very costly. I don't think that is the best use of
resources. But a risk-based approach and which involves
determining high-risk areas and using possibly all the
techniques is probably a good use of resources because we are
talking about a very large program.
Mr. Ryan. That way we can leave the good actors in the
system to go on with their business, and we can actually focus
our effort where fraud actually does exist. Thank you.
Mr. McDermott. Would the gentleman yield for a question?
Would you define, either one of you, who you mean by more risk?
I mean, we want HCFA to focus on the areas of more risk. What
criteria would you use for that investigation? What does ``more
risk'' mean?
Ms. Jarmon. I can use an example of a study in California
where they really looked at all of the suppliers there of
durable medical equipment, and based on their work, they
concluded that there was about 40 percent errors in that
population.
I think the Medicare contractors are doing some work and
using all of these techniques to identify some cases of fraud.
They aren't using them to measure fraud. I think some of the
work that they are already doing are showing where there is a
risk in the population. So, I think using some of the
information that is available from some of the work that they
have done in identifying fraud, can be used to determine where
the risk is and where they found more errors, or where they
found fraud.
Mr. McDermott. But they discovered that by looking at every
durable medical equipment provider in California?
Ms. Jarmon. In California, yes.
Mr. McDermott. How would you know if Wisconsin or
Washington or Georgia--what ways to go about that? I mean, from
learning whatever you learned from the California study, how
would you know who to go for?
Ms. Jarmon. The people who did the work in California
talked to the fraud units in other States, and a best practices
or lessons learned approach can be used. They can talk about
what they did and what they found. They can use their prior
experience regarding where there have been problems in the
past. So communication among the different parties or the
different entities that are involved in trying to manage this
program can be effective.
Mr. Ryan. I yield.
Chairman Chambliss. You talked about the methodology,
current methodology, plus the new systems that HCFA is using
now, the--I will refer to the acronyms as CERT and PEPP. The
way I understand what you have said about those programs is
that those programs are designed more to catch errors as
opposed to being focused on true waste, fraud and abuse. Am I
wrong in that perception, or is there some more direct focus in
those methodologies on waste, fraud and abuse?
Ms. Jarmon. You are right. The CERT and the PEPP are
focused on payment claim errors rather than focusing on fraud.
Chairman Chambliss. What bothers me about that is I am
still not sure that I get any feeling that there is a real
concentrated effort being made to strike at the heart of what
we are talking about, and that being not penalizing honest
suppliers who just simply make mistakes, but going after
whatever that amount of waste, fraud and abuse is that exists
out there. Am I wrong in that perception, or are we not really
focusing in on that from a HCFA perspective?
Ms. Jarmon. The third project that we mentioned that HCFA
is looking into is the Model Fraud Rate project. It is a
project where they are trying to focus on fraud. That project
is very much in the infancy stage, but it is our understanding
that it is their plan to try to focus on fraud through that
project.
Chairman Chambliss. OK. Mr. Hamel, you referred to that
report in October of '99, which did point out several specific
instances of schemes that were in place that were being carried
out by certain organizations. Since that date, since that
report of October of '99, have you come across any additional
schemes that are being carried out today?
Mr. Hamel. We are working on one investigation, but because
it is under way, I am not comfortable discussing the details of
it in an open forum.
Chairman Chambliss. Sure. OK.
We have been talking primarily about Medicare, but let me
ask a question about Medicaid. Does the GAO or the IG Office
get involved in any audits of Medicaid?
Ms. Jarmon. We can't speak for the IG. We have done limited
work related to Medicaid.
Chairman Chambliss. OK.
Ms. Jarmon. We did visit Illinois and Texas and looked at
what they were doing to try to estimate Medicaid error rate,
but our work has been limited in that area.
Chairman Chambliss. OK. Anything additional, Jim?
Mr. McDermott. I wanted--your statistical basis for your
cases reviewed, if you could put that chart back up again,
where you found them. I forget, you told us page 20, was that--
--
Ms. Jarmon. The first chart is from page 7. That
information came from HCFA's fraud investigation database,
which is the database where they track the cases that have been
referred.
Mr. McDermott. Now, when you look at that, what I ask
myself is where would I put my resources, what areas do you
think there are problems that are not being assessed because of
lack of resources being put into them?
Mr. Hamel. I would say that while that chart demonstrates
the types of schemes for referrals, it doesn't address the
volume of dollars for those schemes. For example, fraudulent
cost reporting may only represent 7 percent of the referrals,
but these cases represent a significantly disproportionately
larger number of dollars. For example, it was in the newspaper
that the Columbia HCA case involved three-quarters of a billion
dollars. So I think one has to consider how much the impact is
on the program financially with respect to those schemes, not
just what the schemes are.
Mr. McDermott. Explain to us, it would be interesting for
the committee, I think, to understand how they caught HCA.
Mr. Hamel. That was the result of a qui tam lawsuit, which
is a lawsuit that is filed by a citizen under the False Claims
Act. A whistleblower in which----
Mr. McDermott. Somebody working inside the organization
blew the whistle?
Mr. Hamel. Yes.
Mr. McDermott. So they were going to get some benefit from
whatever the settlement was, they get some portion of that $750
million?
Mr. Hamel. That is correct.
Mr. McDermott. How much did they get?
Mr. Hamel. They only announced a partial settlement. It has
not been completely settled, so I don't know what--they are
called relators--what the relator's share will be. But
generally, it is somewhere between 10 and 25 percent.
Mr. McDermott. It is not described in the law?
Mr. Hamel. The percentage--I think this is a sliding scale
and is described in the statute. I think the maximum, I
believe, is 25 percent.
Mr. McDermott. So in that case, they shouldn't be given
credit at all for finding that, should they?
Mr. Hamel. We are not suggesting that HCFA is taking credit
for that.
Mr. McDermott. So that is just where the reports are, but
they don't get credit for it as a result of their fraud, waste
and abuse issue, or their fraud, waste and abuse program.
Mr. Hamel. The chart only demonstrates statistically where
the sources or the types of fraud referrals come from.
Mr. McDermott. Did you analyze what they were doing inside
in terms of what it had actually produced?
Mr. Hamel. I am not sure I quite understand, ``it''
referring to the database?
Mr. McDermott. HCFA. Did you look at the database and
decide what HCFA had found in there, or what was found from the
kind of thing--I guess one of those 7 percent, or half of 1
percent or whatever was HCA, but it is up there as though they
had discovered this.
Ms. Jarmon. It is not clear as far as who identifies the
information in their fraud database. It just shows that these
are cases that are potential fraud, and in some cases, are
being referred to the IG to further investigate. In some cases,
they are referred to the Department of Justice. So the database
just shows information that has come to their attention,
through their own reviews, as being referred. I don't think it
had detail as far as the ultimate resolution of those cases.
This was just to give a picture as to where some of the
potential fraud exists that they are aware of.
Mr. McDermott. Presumably, in all the big operations where
there is fraud, I mean, we talk about these organizations, sort
of anonymous or kind of unnamed organizations, it would seem
there would be somebody inside who would know what is going on.
It would seem to be that protecting whistleblowers would be a
really important thing to do to make qui tam suits more likely;
would it?
Mr. Hamel. They are not uncommon.
Mr. McDermott. You mean, that is a way to get the big ones,
right?
Mr. Hamel. Well, I am saying that qui tam lawsuits are not
uncommon. There are many of them filed.
Mr. McDermott. Most of them are won by the person who
brings the case?
Mr. Hamel. The government intervenes on their behalf if
they determine that there is a reason to intervene. And then
when there is a resulting action, if the government recovers
money, then they stand to receive a share of that. So there is
an incentive in qui tams for someone to blow the whistle.
Mr. McDermott. Is there protection for people who bring
these suits?
Mr. Hamel. I can't answer to the specifics about that.
Mr. McDermott. Because one of the problems you have, it
seems to me, in fraud, the people who perpetrate fraud
generally are not stupid. They generally are pretty shrewd at
having figured out the system and having figured out that there
is a loophole here, and there is a hole I can drive a Mack
truck through and fill it with money. Those organizations you
are talking about are doing that because there is money there.
And they back their truck up to it with fraud written on the
side and drive away with it. And it strikes me that that is
very hard to get on a systematic basis, that you could ever set
up a unit that is going to find fraud itself. You might take
these referrals from other people to get them. But just
throwing a wide net over all the providers out in the United
States is not going to get very much fraud.
Mr. Hamel. Some of the criminal groups that we referred to,
some of the ways that the conduct is identified is through, for
example, data analysis where you know there is unusual
utilization for certain kinds of billing procedure codes, where
suddenly there is a dramatic increase. Those are the kinds of
things that help identify red flags for problems for which
other kinds of techniques can be used to determine whether or
not it is just a billing error or where there is something more
to it, such as fraud.
Mr. McDermott. Wouldn't those be in the screens that the
intermediary has? If suddenly you get a big blip of, I don't
know, whatever, whatever kind of--abdominal surgery, suddenly
you have a 50 percent increase in a given area for abdominal
surgery, shouldn't that show in the database or the records of
the HCFA intermediary that is looking at those cases and paying
those claims?
Mr. Hamel. For the Medicare contractors I have worked with,
it does. They have computer edits in place to identify some of
those situations. But, I couldn't speak to how they design
them.
Mr. McDermott. You didn't look at those, you didn't look at
what was being done by the intermediaries; you only looked at
what was being done by HCFA; is that correct?
Ms. Jarmon. We looked at some intermediaries also. You are
right. Some of that information is there that is being used by
them in their database to identify fraud. The techniques that
we had on the other chart, include data analysis which you are
talking about. The qui tam instances, would relate to the third
party contacts. While they are being used to identify fraud,
they aren't being used to try to measure it.
Mr. McDermott. When you looked at their records, are they
using the same screens and the same techniques that they use on
their private business?
Ms. Jarmon. I am not sure about whether they are using the
same screens, because I know the Medicare program is so
different from the private health programs. I am not sure if
they are.
Mr. McDermott. They are paying claims they have got--the
insurance company, Blue Cross Blue Shield pays claim. They take
in premiums and pay claims. On this one, they don't take in the
premiums, they just pay claims. Why wouldn't they have the same
mechanism in place to detect whether they were paying a
fraudulent claim or not? Is it because their own money isn't
involved? Is that what you are saying?
Ms. Jarmon. I am not saying that. I am not sure why it is
not the same mechanism, because they do use the same fraud
techniques on the private side and on the public side. But why
the results are different, I am not sure.
Mr. McDermott. OK. Maybe we will find out later.
Thank you, Mr. Chairman.
Chairman Chambliss. I think you have seized on a good point
there, that we keep looking to HCFA and seem to stop there. And
obviously, I think we need to think in terms of maybe looking
beyond HCFA. I want to make sure that I have fixed in my mind,
before we let you go about this issue of when we hear that
there has been an enormous improvement in the area of
determining waste fraud and abuse in the Medicare program, that
we really can't say that as a fact, because we don't know what
the waste fraud and abuse number is. So whether we are
improving it or whether it is getting worse, we really can't
say; is that a fair statement?
Ms. Jarmon. That is true.
Chairman Chambliss. Yeah, the other thing I wanted to make
sure, I had a clarification on, and we had in the record, we
talked a little bit earlier about some privacy issues and
whether we ought to have unannounced audits, announced audits
or whatever. In your testimony, you talked about some advocacy
groups that oppose more extensive measurement techniques on the
ground of confidentiality, privacy problems, as well as
administrative problems. Is there anything that HCFA or any
other government organization can do a better job of to try to
make sure that we can do a better job of doing our audits
without allowing the supplier the opportunity to falsify
records, but at the same time, satisfy these advocacy groups?
Ms. Jarmon. I think it is going to be important that HCFA
has the advocacy groups at the table with them and is
consulting with them on ways to address the problem.
Chairman Chambliss. And do you find that the case now? Is
AMA or the Medical Association of Georgia or the Medical
Association of Washington, are they involved in the process
now?
Ms. Jarmon. I think there has been much more communication
between those groups and HCFA.
Chairman Chambliss. OK. All right. Thank you all very much.
We appreciate your testimony. We will ask our second panel of
Penny Thompson, who is director of program integrity group of
Office of Financial Management from HCFA and Mr. Robb Miller,
inspector general, Department of Public Aid from the State of
Illinois.
STATEMENTS OF PENNY THOMPSON, DIRECTOR, PROGRAM INTEGRITY GROUP
OF OFFICE OF FINANCIAL MANAGEMENT, HEALTH CARE FINANCING
ADMINISTRATION; AND ROBB MILLER, INSPECTOR GENERAL, DEPARTMENT
OF PUBLIC AID, STATE OF ILLINOIS
Chairman Chambliss. Again, we appreciate you two folks
waiting patiently and being here, and we look forward to your
testimony. And Ms. Thompson we will start with you.
STATEMENT OF PENNY THOMPSON
Ms. Thompson. Chairman Chambliss, Representative McDermott,
Task Force members, thank you for the opportunity to discuss
our efforts to promote and protect program integrity in
Medicare and Medicaid. I would also like to thank our General
Accounting Office and HHS/IG colleagues for their ongoing
assistance in these efforts.
Since the Clinton administration took office, we have made
paying right and fighting fraud waste and abuse one of our top
priorities. We have implemented an agencywide comprehensive
plan for program integrity, and we are committed to learning
and refining our efforts to make further improvements. Some
relate to some of the issues that you discussed with the first
panel about the way that we enroll providers, about the way
that we use technology, about how we contract and oversee
intermediaries and carriers that work for Medicare, activities
involving our enhanced and increased collaboration with law
enforcement and with providers, physicians and suppliers.
Efforts to measure payment errors are an integral part of
our overall efforts. While no measurement tool is perfect,
findings from the national Medicare error rate estimate
conducted each year since 1996 by the HHS inspector general
have played an essential role in directing us to areas that
most need attention and help guide our corrective actions. We
are now increasing efforts to measure errors in both Medicare
and Medicaid.
In Medicare, we are developing error rates for each of the
contractors who process claims better to target and focus our
corrective actions and our resources.
In Medicaid, we are working with States as they begin to
conduct error rate measurement, and we are working to determine
whether a common methodology that would allow for valid State-
to-State comparisons and national estimate is feasible. We have
several other efforts underway to assist States in promoting
Medicaid program integrity. We hired a nationally recognized
expert in health care fraud issues, Dr. Malcomb Sparrow of
Harvard University's Kennedy School of Government, to conduct a
series of seminars across the country where State program
integrity personnel came together to discuss their successes,
their challenges, and their concerns.
And just last month, we held a special conference on how
information technology can help fight fraud waste and abuse and
prevent improper payments. Better data systems are key to
improving efforts to fight Medicaid and Medicare fraud waste
and abuse. But many States have inadequate technological
infrastructures and a basic inability to interrogate their
databases efficiently to ferret out improper claims.
In all these efforts, it is essential to stress that
measurement of payment errors is a developing science, and we
are learning as we proceed. Error rates are essential for
accurately determining the extent of improper payments and
assessing any improvement and preventing them. But it is
important to understand and acknowledge as there has been
discussion of this morning that acknowledged payment errors,
most of which are honest mistakes, is not the same of
measurement of fraud. That would be far more challenging, given
the covert nature and legal definition of fraud. And States
such as Illinois, that have about begun to measure payment
errors, agree that measuring fraud is a much greater challenge.
There is also a critical need to overcome the common
tendency to shoot the messenger, which can complicate and
hinder efforts to measure and address payment errors. We are
encouraged that a number of States have agreed to work with us
on these issues and participated in discussions on this topic
at our recent information technology conference. We look
forward to continuing to work with our GAO and IG colleagues,
other experts in Congress, to meet these detection measurement
and administrative challenges. We welcome your assistance.
Specific answers to the questions that you asked us to address
at this hearing are attached to my written testimony. And I am
happy to answer additional questions. Thank you.
Chairman Chambliss. Thank you.
[The prepared statement of Penny Thompson follows:]
Prepared Statement of Penny Thompson, Program Integrity Director,
Health Care Financing Administration
Chairman Chambliss, Representative McDermott, distinguished Task
Force members, thank you for the opportunity to discuss our efforts to
promote and protect program integrity in Medicare and Medicaid. I would
also like to thank our General Accounting Office (GAO) and HHS
Inspector General (IG) colleagues for their ongoing assistance in these
efforts.
Since the Clinton Administration took office, we have made paying
right and fighting fraud, waste, and abuse one of our top priorities.
We began with the Operation Restore Trust initiative to coordinate
efforts among Medicare, Medicaid, and law enforcement agencies on known
problem areas. Lessons learned in that highly successful project are
now standard operating procedure throughout our agency. The result is
record success in assuring proper payments to honest providers and
penalties for problem providers. To build on this success, we have
implemented an agency-wide Comprehensive Plan for Program Integrity
with clear objectives, such as increasing the effectiveness of medical
review, targeting known problem areas, and increasing efforts to help
providers comply with program rules.
Efforts to measure payment errors are an integral part of our
program integrity agenda. While no measurement tool is perfect,
findings from the national Medicare error rate estimate conducted each
year since 1996 have played an essential role in directing us to areas
that most need attention and guiding our corrective actions. We are now
increasing efforts to measure errors in both Medicare and Medicaid. In
Medicare, we are developing error rates for each of the contractors who
process claims.
In Medicaid, we are working with States as they begin to conduct
error rate measurements, and to determine whether a common methodology
that would allow for valid State-to-State comparisons and national
estimates is feasible. We have several other efforts underway to assist
States in promoting Medicaid program integrity. We have conducted
seminars around the country to explore the challenges States face in
these efforts. And just last month we held a special conference on how
information technology can help fight fraud, waste, and abuse.
In all these efforts it is essential to stress that measurement of
payment errors is a developing science, and we are learning as we
proceed. It is also important to understand that measurement of payment
errors, most of which are honest mistakes, is not measurement of fraud,
which would be far more challenging given the covert nature and legal
definition of fraud. There also is a critical need to overcome the
common tendency to ``shoot the messenger,'' which can complicate and
hinder efforts to measure and address payment errors.
Promoting Medicaid Program Integrity
We fight fraud, waste, and abuse in Medicaid in partnership with
States, beneficiaries, providers, contractors, and Federal agencies. We
provide funding and technical assistance and oversee States in their
efforts to ensure that taxpayer dollars are spent appropriately.
Special Federal matching funds are available for State Medicaid fraud
control units. These fraud control units are usually located in the
State Attorney General's office and generally perform both
investigatory and prosecutorial functions. Forty-seven States have
established such units to investigate allegations. In States without
fraud control units, the Medicaid agency is responsible for
investigating allegations and referring cases to the appropriate
authorities.
Some States are making good progress in making sure that their
Medicaid programs protect taxpayer dollars. However, we all agree that
more needs to be done, and we are committed to repeating and building
upon this success across the country. To that end, we have established
a Medicaid Fraud and Abuse Control Technical Advisory Group, in which
State and Federal technical staff work together to advance program
integrity issues.
To further these efforts, we hired a nationally recognized expert
in health care fraud issues, Dr. Malcolm Sparrow of Harvard
University's Kennedy School of Government, to conduct a series of
seminars across the country where State program integrity personnel
came together to discuss their successes, challenges, and concerns.
High-level representatives from 49 States and numerous Federal agencies
and Departments participated, and Dr. Sparrow produced a report on what
we learned at the seminars. On May 2 of this year we held a Medicaid
Fraud and Abuse Commitment Conference to focus on Dr. Sparrow's
findings. Three essential themes emerged from the seminars:
There are unique issues within managed care.
There are substantial information technology issues.
There is a need for building commitment at the State
level.
Managed Care
More than half of Medicaid beneficiaries across the country are now
in some form of managed care, and managed care presents unique program
integrity challenges. Many States are still learning how to address
these challenges, and some are fighting the misconception that managed
care somehow does away with program integrity issues. And there is a
well-recognized need to improve the quality of managed care contracts
to promote and protect program integrity.
To help States address these issues, we have sponsored a series of
workshops, dating back to 1997, to bring State managed care staff
together with utilization and review directors and fraud control unit
directors. These workshops focused on how fraud manifests differently
within the managed care setting and how programs to address it should
be structured. They also featured ``negotiating sessions'' among State
delegations and resulted in written agreements on how to work more
cooperatively and effectively together.
We also have worked with State Medicaid agencies and fraud control
units to develop Guidelines for Addressing Fraud and Abuse in Medicaid
Managed Care. The guidelines focus on:
Key components of an effective managed care fraud control
program;
Data needed to detect and prosecute managed care fraud;
How to report managed care fraud;
Suggested language for managed care contracts and waivers;
and
The roles of HCFA, State Medicaid agencies and fraud
control units, managed care organizations, and the IG.
We hope to have these guidelines to the States later this year.
We also have developed a draft model Medicaid Managed Care
Compliance Plan for States that is similar to our compliance plan for
Medicare+Choice plans. Compliance programs help establish and promote
awareness of applicable program regulations and to define a standard of
organizational values regarding regulatory compliance. Effective
compliance programs include:
Standards and Procedures: The organization must establish relevant
compliance standards and procedures to be followed by its employees and
other agents that are reasonably capable of reducing the prospect of
criminal conduct.
High Level Oversight and Delegation of Authority: Specific high-
level personnel must be assigned overall responsibility to oversee
compliance with such standards and procedures.
Employee Training: The organization must communicate effectively
its standards and procedures to all employees and agents, for example
by requiring participation in training programs or by disseminating
publications that explain what is required.
Monitoring and Auditing: The organization must take reasonable
steps to achieve compliance with its standards, for example by
utilizing monitoring and auditing systems and by having a system for
reporting criminal conduct without fear of retribution.
Enforcement and Disciplinary Mechanisms: The standards must be
consistently enforced through appropriate disciplinary mechanisms,
including discipline for the failure to detect an offense.
Corrective Actions and Prevention: After an offense has been
detected, the organization must take all reasonable steps to respond
appropriately and prevent similar offenses.
We are considering whether to mandate, in final Medicaid managed
care regulations, that plans participating in Medicaid have compliance
programs in place.
Information Technology
Better data systems are key to improving efforts to fight Medicaid
fraud, waste, and abuse. But many States have inadequate technological
infrastructures and a basic inability to interrogate databases
efficiently to ferret out improper claims. A number of States indicate
that they need better, more targeted data, to pinpoint areas most
likely to foster problems, as well as guidance and technical assistance
on acquiring new data systems and other fraud and abuse detection
tools.
To address this, we collaborated last month with the Department of
Justice to conduct a conference on the role of information technology
in promoting Medicaid program integrity. The conference had nearly 300
attendees from all across the country, and served as a highly
interactive information exchange on electronic tools, techniques, and
approaches for combating health care fraud and abuse. Robust
discussions focused on the need for wider understanding of the
technological tools available, funding to procure such tools, sources
of data and how to access them, legal means for sharing data, and
privacy issues. Nearly 30 vendors displayed some of the latest fraud
detection tools available in the marketplace. We plan to follow up on
this conference by producing a report of the proceedings with
recommendations for future steps, including the possibility of forming
regional or national technology user groups.
In addition, our Technical Advisory Group is addressing data
issues. It is preparing an educational packet that identifies various
reporting requirements and suggestions for how States can implement
them. It also will disseminate information to all States on Medicare-
Medicaid data sharing rules.
We also recently developed a national fraud and abuse electronic
bulletin board, co-sponsored by the American Public Human Services
Association, to allow States to exchange and share information on fraud
and abuse related issues. And we are modifying our National Fraud
Investigation Database to include Medicaid cases, which will further
help in tracking down and stopping unscrupulous providers across the
country.
Commitment
States have primary responsibility for protecting Medicaid program
integrity. While some States are having success, the seminars made
clear that, in many States, the nature and magnitude of the Medicaid
fraud problem is still not properly understood. In some States it may
not even be treated as a serious or central issue in program
administration.
We are taking several steps to help States meet this challenge and
understand their obligation to ensure that taxpayer dollars are spent
properly. For example, we have developed and posted on our www.hcfa.gov
website a comprehensive listing of State statutes that target Medicaid
fraud. This allows States to access and share innovative and effective
program integrity legislation. The website also includes detailed
contact information for State program integrity personnel and
individual State legislation web sites.
We also have worked closely with the IG to clarify how States can
ensure that payments are not made to providers who have been
``excluded'' from Medicare and Medicaid because of program integrity or
other problems. Guidance for States now clearly addresses the specifics
of what must be reported to whom, when, and where, as well as how to
enforce exclusions, and the consequences for States that fail to
comply. We are also working to help States enhance their processes for
identifying excluded providers.
Measuring Payment Errors
Still, each State needs to be held accountable for protecting
taxpayer dollars and meeting concrete goals and objectives for
improvement in the fight against fraud, waste, and abuse. Error rates
are essential for accurately determining the extent of improper
payments and assessing any improvement in preventing them.
Four years ago, we worked with the IG to break new ground in
developing a systematic, statistically valid estimate to assess the
accuracy of payments. We did not want to merely examine whether claims
processing systems were working correctly--avoiding duplicate payments,
payments to ineligible providers or beneficiaries, or incorrectly
calculated payment amounts. We wanted to examine in a statistically
valid way whether payment was made for a service that met all
requirements for documenting the service, coding it correctly, and
representing medically necessary care. To do this, obtaining medical
records is key. Other kinds of verification, such as contact with the
Social Security Administration to verify beneficiary enrollment, and
visits with beneficiaries designated as ``homebound,'' also are
important.
This systematic, statistically valid estimate was a great leap
forward. Estimates of Medicare payment errors, done by the IG each year
since 1996, have greatly aided us in improving our management of the
program. They have provided us with a meaningful benchmark from which
we have tracked our success--showing a decrease in improper payments of
almost half since 1996. We also found interesting results that
confirmed the validity of this approach. Indeed, the vast majority of
errors we detect using this approach are found only through examination
of medical records. Few errors are related to our claims processing
systems, or detectable based on the data on the face of the claim. Few
are related to third party verification or beneficiary contact.
In fact, medical records are by far the most important source of
information on whether payment is made properly. While this methodology
is not perfect or the only one we could have devised, it has been a
valuable tool to evaluate and measure the effectiveness of our internal
controls.
However, every methodology has its limitations. One limitation is
that the national estimate is too broad to allow discrete judgments
about where the largest problems reside, or what targeted interventions
would have the most impact. As a result, after several years of
experience with the national error rate program, we developed two new
projects for Medicare--the Payment Error Prevention Program (PEPP) and
the Comprehensive Error Rate Testing program (CERT). We designed PEPP
and CERT to develop more targeted error rate estimates in States (for
inpatient hospital discharges) and at claims processing contractors
(for all other services). They are largely consistent with the way we
calculate errors in the overall national error rate, but contain some
important adjustments.
For example, rather than measuring only net errors (overpayments
minus underpayments), we want to measure absolute errors (overpayments
plus underpayments). In implementing CERT, we will use just one
national contractor to review medical records, to ensure consistency
and facilitate our oversight. These additional efforts will provide us
additional useful information for making interventions to address
payment problems, and represent step-by-step building on our collective
efforts over time.
Measuring Fraud
It is essential to stress that these measurements are of payment
errors, most of which are honest mistakes by well-intentioned
providers. These are not measurements of fraud. Certain kinds of
fraud--such as falsification of medical records--probably would not be
detected through current methodology. And other kinds of fraud--on cost
reports, for example--are not detectable in a claims-based sampling
environment.
Fraud measurement is, in fact, uncharted territory. Our progress in
pioneering payment accuracy projects might not even be directly
relevant to helping us navigate this new territory. Some experts
suggest that a statistically valid estimate of fraud might not be
possible at all, given the covert nature and level of evidence
necessary to meet the legal definition of fraud. And methods to
establish fraud might be considerably different than those used to
detect other payment errors.
For example, given the importance of establishing patterns, it
might be more reliable to sample providers rather than individual
claims. And, to minimize the concern about manufactured records, it
might be necessary to conduct unannounced visits to providers, or
provide very little notice. More direct contact with beneficiaries to
verify the provision of the services billed also may be warranted.
All of these approaches, while potentially useful, are themselves
unproven as reliable, valid measures in establishing the probability of
fraud. The State of Illinois did establish direct contact with
beneficiaries to verify claims as part of its 1998 payment accuracy
project. But in reporting on this effort, the investigators stressed
that ``this study was designed to measure payment accuracy. It was
never intended to measure a fraud rate. Indeed, we are not sure that is
even possible.'' They go on to say that establishing a fraud rate
``would have required, at a minimum, conducting a criminal
investigation on each service in the sample. Even then, we would not
have been certain that every potentially fraudulent claim would be
detected * * *''
We have found beneficiary contact in known Medicare problem areas,
such as durable medical equipment or home health, to be quite useful.
However, few investigations based on the hundreds of thousands of
beneficiary calls we receive regarding suspected fraud result in any
payment adjustments because discussion with the beneficiary and/or
provider sufficiently explain the situation. Since these contacts with
beneficiaries are initiated by them, we could expect ``cold calls''
outside of known problem areas to yield fewer instances of potential
fraud.
Provider-based sampling has certain advantages methodologically,
but creates great tension in the provider community, especially when
combined with unannounced visits or interviews with employees. The
benefits of such an approach, as weighed against the actual and
unintended costs, have not yet been thoroughly researched, and care
must be taken in assessing how such efforts would be viewed by
providers. Already sensitive to random review of claims, in which we
ask for additional documentation to support the claim, providers are
very likely to object strenuously to greater invasions.
Also, since most providers are honest, the number of providers to
be randomly sampled and the depth of investigation necessary to
establish a statistically valid fraud rate would entail substantial
costs. Profiling, i.e., the use of analytical tools to detect patterns
which might be indicative of fraud, might provide an alternative to
random sampling. And it is a valuable tool that we already use to
detect fraud in both Medicare and Medicaid. However, it is not clear
that it could provide a statistically valid measurement of fraud.
Error Measurement in Medicaid
All of this experience has provided a backdrop to informing our
approach to dealing with States on Medicaid payment accuracy projects.
We are very supportive of States' efforts in this arena, and believe
that measurement programs are an essential part of proper fiscal
management of Medicaid. Some States have already attempted such
measurement. The Illinois Department of Public Aid, in 1998, conducted
what it believes was the first comprehensive payment accuracy review of
any State Medicaid program. The Kansas Medicaid agency conducted a
similar review in 1999. And, pursuant to State law, the Texas
Comptroller, in 1998, conducted the first of what will be biennial
Medicaid payment accuracy reviews. In addition, Alabama, North
Carolina, Missouri, and Ohio State audit agencies have performed
limited reviews in one or several recent years to measure the accuracy
of Medicaid payments.
To advance these efforts, we sent a national review team to conduct
a targeted evaluation of anti-fraud efforts in eight States (Illinois,
Wyoming, Oklahoma, Virginia, Vermont, Georgia, Nebraska and Nevada)
selected to represent a cross-section of State Medicaid programs. These
reviews were completed last month and will help provide an accurate
assessment of where States are, what barriers may hinder their
progress, and what most needs to be done to ensure substantial,
measurable improvement.
However, it is clear from that start that the nature and structure
of the Medicaid program presents different challenges and opportunities
for both Federal and State partners in such measurements. Each State
Medicaid program has unique eligibility and coverage rules, and other
variables.
That makes development of a statistically valid, common methodology
that could be used by all States particularly challenging. Such a
common methodology would have substantial advantages in allowing State-
to-State comparisons and a national payment accuracy rate to be
constructed. Determining whether a common methodology is feasible is a
high priority for us, and we have made it one of our Government
Performance and Results Act goals.
To help us in this effort, we are requesting $3.5 million from the
Health Care Fraud and Abuse Control Program for FY 2001 to:
Provide incentive grants to several States to conduct
payment accuracy studies and assess the feasibility of establishing a
standard methodology;
Contract with an outside audit/consulting firm to assess
State and Medicare program payment accuracy study experience to date,
work with the pilot States, and develop appropriate measurement
methodologies; and
Hire expert analysts to staff this initiative.
If development of a common methodology does not prove to be
feasible, we want to help States develop measurement tools that they
can tailor to their own programs to help reduce inaccurate payments,
recover overpayments, and target reviews on the specific providers or
services that are most problematic.
At the least, guiding principles, definitions, and reporting
protocols should be developed so that stakeholders can easily
understand, interpret, and draw proper conclusions about each State's
approach. We expect that our Technical Advisory Group can help develop
these important tools.
We also would like to see groups of States bind together to assess
certain benefit areas. For example, it would be very useful for several
States with differing payment rules, provider enrollment processes, and
administrative review procedures to examine payment errors in a given
benefit area, such as transportation or home health. The results would
not only be useful for each individual State, but also to the system as
a whole. Regression analysis and other techniques could be used to
isolate variables that are most, or least, related to payment accuracy.
We also believe it is very important that States understand that
they will be rewarded and respected for undertaking these long overdue
efforts to measure and prevent payment errors. Unfortunately, as we
have found in Medicare, such efforts are sometimes greeted with scorn
and retribution despite the large amounts of taxpayer dollars in need
of protection. We are encouraged that a number of States have agreed to
work with us on these issues and participated in discussions on this
topic at our recent information technology conference.
Conclusion
We have been working diligently to improve our payment error
measurement systems and to help States fight Medicaid fraud, waste, and
abuse. We are providing States with information, tools, and training to
build effective program integrity infrastructures. And we are building
a basis for holding States accountable for measurable improvement.
We look forward to continuing to work with our GAO and IG
colleagues, other experts, and Congress to meet these detection,
measurement, and administrative challenges. We welcome your assistance.
Specific answers to the questions you asked us to address at this
hearing are attached, and I am happy to answer any additional
questions.
1. What is HCFA's role in guiding/developing error rate and/or
fraud rate measurement methodologies? Is there a need for a common
methodology for error rate measurement? Or do variations in the
Medicaid programs across the States argue against a common approach?
We have a central role to play, particularly in determining whether
a common methodology can be developed and used by all States. Such a
common methodology would allow State-to-State comparisons to be made
and a national payment accuracy rate to be constructed. We are now
exploring whether and how such a common methodology might be developed.
Our preliminary discussions with State officials experienced in this
area suggest that developing a common methodology will be difficult
because each Medicaid program is unique, in terms of eligibility,
service coverage, reimbursement methodologies, managed care
penetration, and other variables.
Determining whether a common methodology is feasible is a high
priority for us, and we have made it one of our Government Performance
and Results Act goals. To help us in this effort, we are requesting
$3.5 million from the Health Care Fraud and Abuse Control Program for
FY 2001 to:
Provide incentive grants to several States to conduct
payment accuracy studies and assess the feasibility of establishing a
standard methodology;
Contract with an outside audit/consulting firm to assess
State and Medicare program payment accuracy study experience to date,
work with the pilot States, and develop appropriate measurement
methodologies; and
Hire expert analysts to staff this initiative.
If development of a common methodology does not prove to be
feasible, we will continue to have a key role in providing guidance and
sharing best practices that States find to be successful in developing
measurement tools that they can tailor to their own programs to help
reduce inaccurate payments, recover overpayments, and target reviews on
the specific providers or services that are most problematic.
2. Do States have statutory authority to use Medicaid funds to
measure error rates?
Yes. The Social Security Act authorizes Federal matching of State
expenditures the Secretary finds necessary for the proper and efficient
administration of the State's Medicaid Plan. State costs incurred in
performing Medicaid payment accuracy studies qualify for Federal
matching.
3. Which States are measuring error rates?
The Illinois Department of Public Aid in 1998 conducted what it
believes was the first comprehensive payment accuracy review of any
State Medicaid program. The Kansas Medicaid agency conducted a similar
review in 1999. And, pursuant to State law, the Texas Comptroller in
1998 conducted the first of what will be biennial Medicaid payment
accuracy reviews. In addition, Alabama, North Carolina, Missouri and
Ohio State audit agencies have performed limited reviews in one or
several recent years to measure the accuracy of Medicaid payments.
4. What are the findings of recent error rate measurements in
Texas, Illinois, Kansas, and other States?
The payment accuracy rates were:
95 percent in Illinois;
77 to 92 percent in Kansas (depending upon whether a claim
for which the provider might have complete documentation but failed to
mail it in was counted as an error);
89.5 percent in Texas; and
97 to 98 percent in North Carolina.
We do not have rates for Alabama, Missouri or Ohio. It is important
to stress that the review methodologies differed from State to State.
Illinois reviewed 599 individual medical services billed and approved
for payment, while Texas examined all paid claims related to 1200
patient days. Some States visited provider offices to obtain
documentation, while others merely asked the provider to mail in the
requested documentation. Several States interviewed the sample
beneficiaries, others did not.
5. What is the status of the HCFA working group which is reviewing
the issue of Medicaid error rates? What are the goals and time frames
of the working group?
We have established a Payment Accuracy Measurement Workgroup that
includes HCFA Medicaid and Program Integrity Group staff, members of
the Medicaid Fraud & Abuse Technical Advisory Group from Illinois,
Alabama, Louisiana and North Carolina, and the American Public Human
Services Association. We also expect to work closely with the HHS
Office of Inspector General.
The working group's goal for FY 2001 and 2002 is to evaluate the
payment accuracy methodologies used by States to date, provide
incentive funding to several States for additional pilots, and assess
the feasibility of developing a common measurement methodology suitable
for use by all States. What we and our State partners learn over the
next 2 years will suggest options for FY 2003 and beyond.
6. Do the States believe that error rate measurement is a good use
of federal/state funds? Within a State, who should have the
responsibility to conduct error rate measures?
Some States are interested in exploring error rate measurement and
have already attempted to conduct measurement studies. Other States may
see more value in focusing on suspect providers or services than on
conducting comprehensive payment accuracy studies. Who within a State
should have responsibility for conducting error rate measurement is a
question we want to explore as we work to determine whether a common
methodology is feasible for all States.
7. How expensive is it to conduct error rate measurement? If it is
to be done, how frequently should it be done? What are the
implementation difficulties?
The cost would vary dramatically depending upon the scale and depth
of the review performed, for example, the size of the sample, whether
the State visits providers to obtain claim documentation or simply ask
providers to mail it in, whether beneficiaries are interviewed face-to-
face and, most significantly, whether full medical record reviews are
conducted by medical professionals.
The optimal frequency for error rate measurement is a question we
want to explore as we study this issue. For Medicare, measurement of
the error rate on an annual basis has proven to be useful in assessing
progress and the need for the further corrective actions. But there is,
at this time, insufficient evidence to conclude that annual measurement
would be optimal in Medicaid.
8. Is there a reliable estimate of the level of Medicaid fraud? If
so, how much fraud is there in this program?
No. And it is important to stress the substantial difference
between measurement of payment errors, which the HHS Inspector General
and some States have been doing, and measurement of fraud, which is
probably far more challenging given the nature and legal definition of
fraud.
9. What is the Federal match rate for error rate measurement
efforts in the states?
The Federal match rate for most State Medicaid administrative costs
is 50 percent. For skilled professional medical personnel, such as
those used to review medical records in error rate measurement efforts,
75 percent matching is available.
10. If a common methodology is justified, what can the Congress or
this Task Force do to promote this effort? Has GAO or the IG issued any
reports, letters, or testimony on error rate measurement? If so, what
recommendations were made, if any?
If a common methodology proves to be a technically viable option,
implementing it in every State will likely require a statutory mandate.
We are not aware of any GAO or IG reports that evaluate or compare
State Medicaid payment accuracy studies conducted to date, or that
attempt to devise a Medicaid payment accuracy measurement methodology.
However, the IG has for several years has recommended that we construct
a national Medicaid payment accuracy rate.
Chairman Chambliss. Mr. Miller.
STATEMENT OF ROBB MILLER
Mr. Miller. Good morning, Mr. Chairman, and Representative
McDermott and distinguished members of the Task Force. Thank
you for the opportunity to be here today. As one of the
messengers, I am always worried about being shot at, but I
think I am fairly safe here this morning.
Chairman Chambliss. We are bad shots up here anyway, Mr.
Miller, don't worry about it.
Mr. Miller. We were the first Medicaid program to buy
Kevlar. I think it is important to get a little background on
how we came to do payment accuracy measurement in Illinois, so
that you can kind of understand the context in which we work.
The State of Illinois Medicaid program has a long history, in
my opinion, at least during the 9 years I have been there I
know it does, of being a proactive, preventive organization, as
well as being reactive to problems that occur. We have a long-
standing commitment to empirical research. For example, for
more than 5 years, we have had a full-time fraud research
bureau in my office. We have published 21 reports on various
aspects of program integrity since 1994. Many of these are on
our Web site. I only share that with you so that you understand
we are a State that is very interested in getting down to
finding out what the real facts are, and not every State
necessarily has that ability or has the resources to do that.
I think it is also important to understand that we have an
excellent working relationship with our Medicaid policy and
program staff, even though I am the inspector general, and that
can be kind of an adversarial role. Often we work very well
together--not often, but we always work very well together. I
also think it is important to understand that I have benefited
a lot, and the State of Illinois has benefited a lot, from
HCFA's leadership in fraud and abuse control; I have been a
member of their technical advisory group. I am chairing that
group's subgroup on measurement and have been working with HCFA
closely on this.
I think that we are all making a lot of progress here. And
I also think it would be appropriate to make sure we recognize,
as you did, Dr. Sparrow's work. His work has been seminal in
this area and it is a body of work that I have come to respect.
I'd like to briefly describe what I, at least, think are
the goals of payment accuracy measurement. And first, you will
notice I haven't used the word ``error'' yet. We measure
payment accuracy in Illinois. I think that accentuating the
positive is the first step toward getting other States and
everyone involved in this toward acceptance. There will be
plenty of people that will emphasize the errors and the
negatives of this. We measured accuracy in Illinois. It
established a baseline for us to know where we started. It will
allow us to judge future program integrity initiatives and
their success. In Illinois, our baseline is 95.28 percent
accuracy in the payments we reviewed. It helps us identify
specific problem areas. Even though we didn't stratify by
provider type, it became quickly clear to us that nonemergency
transportation in Illinois was a troubled area. 31 percent of
the money we spent on nonemergency transportation was being
misspent, and that has helped us then allocate resources.
Payment accuracy measurement allows you to rationally allocate
resources in an intelligent, thoughtful way.
For example, we are now ready to award a contract to a
private firm that will more closely monitor nonemergency
transportation, will handle the prior approvals for all these
services, and also institute additional integrity checks, both
pre- and post service. We went out and looked at the top 64
paid providers in Illinois. We did that in about 6 weeks. And
six of them, or 10 percent, are now on their way out of the
Medicaid program.
We have implemented a program where we are now monitoring
newly enrolled providers more closely. We are getting out there
within 60 days of their enrollment. We are trying to educate
them, but we are also watching to make sure they are not on the
wrong track. If they are, we'll be happy to explain the error
of their ways. But there is a cost of payment accuracy
measurement. To do it right, in my opinion, and my opinion
only, it is very expensive. It is labor intensive. We spent
14,000 staff hours conducting the study that is on our Web
site, payment accuracy review. And a large part of that came
from client interviews, or what GAO refers to as bene, or
beneficiary interviews. We went out and we found all but 14 of
the recipients in our study, and we interviewed them
personally. Those interviews were of great service to us as an
old investigator, because I am an ex cop, I would not do a
study like this without having a face-to-face contact with the
person who supposedly received the service. We went out and
physically collected the medical records. That was time-
consuming, but it was also worthwhile. And you heard GAO
describe a little bit about how we did it. And basically, and
direct and indirect costs we think estimated costs to the State
of Illinois and the Medicaid program about $1.7 million to
conduct this study, but the benefits are going to be reaped
many fold from that as we clean up various areas.
I wanted to take this opportunity to say from one State's
perspective and one man's perspective what I think we need in
terms of payment accuracy measurement. We need your
encouragement. We need--not every State sees the value in
measurement. Many of my counterparts around the country, and I
have gotten to know a number of them, question expending the
resources on measure payment accuracy and trying to establish a
base line, and targeting problem areas when they are confident,
and may be so, that they already know what those problems are,
and they can expend their resources more directly. We need
financial incentives. I am sure that is not shocking that
somebody comes here and says we need more money. But most of
our efforts are matched at just the base rate instead of a
higher FFP matching rate. I think if Congress and if HCFA are
serious about payment accuracy measurement, we need to be
encouraged through a higher matching rate. And most
importantly, we need flexibility. One size does not fit all.
You have probably heard this before, but there are 56 Medicaid
programs, you know, and there is an old saying if you have seen
one Medicaid program you have seen one Medicaid program. There
are no two that are exactly alike. Every one is different
enough that to say one methodology will work will, I think, be
a prescription for problems.
For example, earlier you mentioned providers that are more
at risk. Some States might want to do targeted reviews, whether
it is home health or transportation or some other problem area,
and get at those providers that are more at risk of being
fraudulent rather than measure their entire population, the
vast majority of whom are honest providers.
I am also very leery, frankly, of the establishment of a
national fraud rate. I don't know that it is possible. It would
take, in my opinion, a criminal investigation of every service
in the service sample that we studied in our project to
determine intent. We determine accuracy, but we did not
determine intent. I am not sure that that is possible. I am not
sure that that does anything but titillate frankly, and sound
like a good sound byte or a headline. Payment accuracy,
determining what payment accuracy is, serves the goals that we
are trying to get to, which are improving program integrity and
improving payment accuracy. And I think, as Ms. Thompson
alluded to, State-by-State comparisons create some fear and
apprehension amongst us, frankly because somebody will be below
average and those of us that are below average find probably
that to be an unpleasant experience.
Finally, annual reviews. I don't think doing this every
year is possible or practicable. We should, at the worst, so to
speak, not do a payment accuracy measurement more than every 2
years. Because frankly, you need the timing between those
periods to implement the changes that your study promulgated.
It will be 2 years in August since we published this report,
and we are still working on issues that were identified through
that. I certainly hope that no one ever looks at quality
control like goals and penalties where States are punished
financially for not reaching their goals. Please don't mandate
a common methodology. You know, encourage us to do it, but use
incentives to do it. And I certainly appreciate the opportunity
to having been here today. It has been an honor, Mr. Chairman,
Mr. McDermott, Mr. Lucas. If there are any questions I would be
happy to answer them.
Chairman Chambliss. Thank you, Mr. Miller.
[The prepared statement of Robb Miller follows:]
Prepared Statement of Robb Miller, Inspector General, Illinois
Department of Public Aid
Good morning. My name is Robb Miller and I am the inspector general
for the Illinois Department of Public Aid. I have been responsible for
Medicaid program integrity in Illinois since 1991. I am pleased to be
able to testify today on the value of Medicaid payment accuracy
measurement. In Illinois, we have seen the benefits of measurement and
believe that those benefits outweigh the cost and effort it takes to
conduct such a study. Nonetheless, I have misgivings over the potential
that measurement might be mandated upon the states. I think it is
critical that each state be allowed to find its own way through this
new world of measurement.
I believe Illinois was the first state to independently measure the
accuracy of its Medicaid program and publish the results. While our
Payment Accuracy Review (PAR) was not a perfect effort, we conducted it
in a professional manner and elicited the two primary outcomes we
sought. Those were to establish a baseline against which we can measure
the success of future program integrity initiatives and to identify
specific problem areas upon which we would focus our attention.
Our interest in measurement is reflected in our long-standing
commitment to empirical research. For more than 5 years, we had a full-
time fraud research staff within the Office of Inspector General. Since
1994, we have published 21 reports on various aspects of program
integrity. We combine preventive and reactive strategies in combating
Medicaid fraud and abuse in Illinois. In the Office of Inspector
General, we have more than 300 staff, the vast majority of whom are
dedicated full-time to Medicaid program integrity.
We also had prior measurement experience. In 1994, we examined a
statistically valid sample of hospital inpatient stays to identify the
frequency of up coding. The results indicated that down coding occurred
to almost the same extent as up coding and was statistically a near
wash.
I would be remiss if I did not mention the valuable insights and
guidance I have received through Illinois' participation in HCFA's
Medicaid Fraud and Abuse Control Technical Advisory Group (TAG). Over
the last 3 years, the TAG has brought together program integrity
directors from around the country to identify common challenges and
develop effective solutions. I am proud to be the chair of its National
Measurement working group. We are working closely with HCFA to share
the states' perspective on the value and challenges of payment accuracy
measurement.
It is also important to note that our Payment Accuracy Review was
the joint effort of the department's Medicaid staff and the Office of
Inspector General. It simply would not have been possible to
successfully complete if we were not already in a longstanding and
effective partnership to combat fraud and abuse. We work closely
together on a daily basis. We jointly created the Medicaid Fraud and
Abuse Executive Workgroup which has met monthly for more than 3 years
to identify and eliminate challenges to the integrity of the Medicaid
program. Finally, any success PAR achieved is also directly
attributable to the commitment demonstrated by the former agency and
Medicaid directors. That commitment continues today through the current
agency and Medicaid directors' support of program integrity efforts.
In brief, the Payment Accuracy Review studied 599 randomly selected
paid services from January 1998. Our four part review consisted of a
client interview, medical record examination, contextual review of all
other services during the 7 days before and after the sample service
and a multi-stage expert review. Payments in error were categorized as
``agency,'' ``inadvertent'' and ``questionable.''
Questionable errors represented 54.7 percent of the overpayments
followed by agency (23.4 percent) and inadvertent (21.9 percent). Up
coding caused 45.6 percent of dollars overpaid. Nonexistent or
incomplete documentation represented 33.2 percent of the overpayments.
The universe included fee for service and inpatient hospital and
hospice stays. Planning for the study began in late 1997 and the report
was published in August 1998. (The entire report can be obtained from
our web site at www.state.il.us/agency/oig.) Illinois' payment accuracy
rate was 95.28 percent and represented estimated annualized errors of
$113 million on a base universe of approximately $2.4 billion.
Even though we did not stratify our sample by provider type, PAR
readily confirmed our worst fears in one specific area. Nearly one-
third of all payments to nonemergency transportation providers were in
error. As the result of PAR and other analysis efforts, the Illinois
Department of Public Aid has been able to take a number of steps that
will improve the overall integrity of this provider type.
For example, we are preparing to award a contract for nonemergency
transportation prior approvals and integrity checks. Late last year, we
conducted an examination of the top 64 providers which resulted in our
seeking to terminate six of them. We are currently piloting a project
to physically visit and inspect all transportation providers within 60
days of enrollment to more closely monitor them. We are also working on
an RFP to obtain additional automated code review software and planning
a random claims selection project.
The Payment Accuracy Review also validated our ongoing program
integrity efforts. For example, 29 providers were identified through
PAR as having submitted questionable claims for payment. Of those 29,
28 were already under some form of scrutiny by our department.
The insights we gained from PAR are also being incorporated into
other initiatives that will continue to build on this knowledge base.
We are now planning what we expect will be our ongoing payment accuracy
measurement system for the future. Through the examination of
approximately 1,800 randomly selected claims each year, we expect to
continue to assess our payment accuracy, identify additional problem
areas and make even better management decisions on the allocation of
scarce program integrity resources.
I believe that most states could expect to achieve these same
outcomes by conducting similar studies of their programs. Establishing
a baseline is important. If you don't know where you started your
journey, you won't know when you reach your destination. Developing
empirical evidence about specific risks allows you to rationally
allocate your resources. It also strengthens your resolve to address
those risks head on.
Specific Questions
To offer more specific information to the members of the Committee,
I have listed below ten questions posed to me and my responses to them.
Please understand these represent my opinions only. I hope you find
this information useful.
1. What is HCFA's role in guiding/developing error rate and/or
fraud rate measurement methodologies? HCFA should have the lead role in
educating states on the benefits of measurement and encouraging them,
through incentives, to measure payment accuracy. I consider HCFA to be
our partner in program integrity and improving payment accuracy.
Partners should work together toward mutually agreed upon goals.
Is there a need for a common methodology for error rate
measurement? Or do variations in the Medicaid programs across the
states argue against a common approach? Not only is there not a need
for a common methodology, my experience tells me that mandating one
would be a terrible idea. As the question acknowledges, if you have
seen one Medicaid program, you have seen just that--one Medicaid
program. Each of the 56 states and territories have different payment
rules, hearing procedures, enrollment practices, etc. Even within
states, payment systems vary dramatically among fee for service,
managed care and long term care.
Through my TAG participation, I know many of my Medicaid
counterparts around the country. It is fair to say that a number of
them have reservations about the value of measurement. Some of them
would argue that they already have sufficient experience and knowledge
to effectively allocate their resources without expending the time and
money on measurement. They would posit that those resources are better
expended attacking problems directly. I also do not think I would be
overstating the case by adding that a common measurement methodology
would be of great concern to all of us.
Each state needs to decide how to measure its payment accuracy.
Every state should be free to determine for itself whether to study its
entire Medicaid program or only components thereof. Some programs might
want to zero in on specific programs within Medicaid, such as pharmacy,
home health or durable medical goods. A uniform methodology would
likely preclude targeted reviews.
Illinois' experience in measurement is just that--Illinois'
experience. Each Medicaid program is unique. This was demonstrated in
the different approaches that Kansas, Texas and Illinois employed to
achieve the same goals.
A common methodology could even hinder states' efforts to address
problems unique to each of their situations. For example, Illinois'
payment accuracy review did not include any managed care payments. In
the bigger fiscal picture, managed care does not represent a
significant issue in the Illinois Medicaid program. But it certainly
does in Arizona and Tennessee. How could one methodology address all of
our needs?
A common methodology might seem desirable on the Federal level. It
would allow, on its face, for state by state comparisons and the
establishment of a national Medicaid payment accuracy rate. But neither
of those goals support the real value of payment accuracy measurement.
Frankly, comparing the states to each other would likely lead to even
greater apprehension about the value of measurement.
I question the value of establishing a national Medicaid payment
accuracy rate. If one accepts the premise that there are no two
identical Medicaid programs, then each needs to be able to establish
its own baseline and identify the problems unique to each of them. A
national rate would likely be used to pummel states that fall below
that rate. This would be a further disincentive to most of us. While I
support the need to measure payment accuracy, there are many different
ways to skin this cat. The liabilities of a uniform methodology far
outweigh any benefits.
2. Do states have the statutory authority to use Medicaid funds to
measure error rates?
Yes.
3. Which States are measuring error rates? The only states that I
am aware of which have conducted comprehensive measurements are
Illinois, Texas and Kansas.
4. What are the findings of recent error rate measurements in
Texas, Illinois, Kansas, and other States? Illinois' payment accuracy
rate was 95.28 percent for the universe it examined (fee for service
and inpatient hospital and hospice services).
5. What is the status of the HCFA working group which is reviewing
the issue of Medicaid error rates? I cannot speak for HCFA on this but
I can advise you that the TAG is working closely with HCFA on this
issue. We have shared our concerns about mandatory measurement
requirements.
What are the goals and time frames of the working group? Defer to
HCFA.
6. Do the states believe that error rate measurement is a good use
of federal/state funds? I can only speak for Illinois but it has been a
very positive experience for us. Besides establishing a baseline
measurement, PAR provided us with the evidence we needed to address
serious problems in nonemergency transportation. Arguably, we could
have taken some or all of these steps without the analysis of payment
accuracy. PAR, however, eliminated nay sayers and strengthened our
resolve to tackle this issue directly.
There is one potential area of measurement, though, that would
definitely not be a good use of Federal and state funds. States should
never be required to collect the overpayments discovered through
payment accuracy measurement. In the vast majority of cases, the
overpayment is insignificant. In addition, the due process required to
adjudicate the collection in most states would so bog down the
measurement process as to make it virtually unworkable.
Within a state, who should have the responsibility to conduct error
rate measures? There is no question in my mind that the Medicaid agency
should be responsible for this. Making measurement part of the Single
Audit Act would serve as a disincentive to the states. The long term
goal of measurement is program integrity and payment accuracy
improvements. The best way to achieve that is for each Medicaid program
to buy into the value of measurement. Reaching that consensus will not
be likely if the Medicaid agency is not responsible for measuring
itself. Mandating the state auditor to conduct these studies will
inherently cause tension that can be avoided by encouraging states to
explore the benefits of measurement. It would also be more difficult to
accomplish because of the strict time frames under the Single Audit
Act. Sufficient safeguards to prevent over-reporting payment accuracy
rates can be designed into the measurement projects.
7. How expensive is it to conduct error rate measurement? Measuring
payment accuracy is an expensive and laborious process. In Illinois, we
devoted nearly 11,000 staff hours to conducting this study ($335,000 in
salary and benefits). We estimated that we likely lost an additional
$1,300,000 in collections from audits that were not conducted during
that time period. Replicating our study alone would consume more than
half of what I understand HCFA is seeking in next year's budget to
encourage other states to conduct measurements.
The bulk of the staff hours resulted from conducting 585 client
interviews and visits to almost every provider to personally collect
the medical records. We spent $14,000 in travel costs alone on these
tasks. This effort is necessary, though, for several reasons.
Client interviews are key, in my opinion, because they place a
human face on what would otherwise be a document review. It would be
presumptuous to declare a service was not delivered without asking the
recipient if he or she did, in fact, receive the service. In future
reviews, we will use client interviews more selectively but they will
continue to be an important part of the process. For example, there may
be limited utility to interviewing a client for whom the service was a
consult or arcane lab test. Nonetheless, a number of client interviews
provided us with assurance that the payment was erroneous. They were
also very helpful in making the final determination as to whether the
error was ``inadvertent'' on the part of the provider or if it was
``questionable.''
The physical collection of medical records ensured that we did not
have any payments declared in error because the provider simply
neglected or refused to provide the documentation. We accomplished this
by first asking the provider, on short notice, to have the records of
50 patients (we were only seeking the records of one patient) available
to us within the next 72 hours. An auditor or nurse reviewed the record
in question at the provider's site and copied the relevant documents.
Our theory was that asking for one record would have led to
falsification of the documentation. By asking for 50 records on short
notice, we were pretty sure that the provider would have neither the
time nor the energy to forge so many documents.
Our commitment of staff, time and other resources was significant.
However, I do not regret making that commitment. It was necessary to
carry out the project in the most professional manner we could.
If it is to be done, how frequently should it be done? I do not
believe it needs to be conducted more often than every 2 years. If
conducted thoroughly and on an annual basis, the current measurement
project would barely be finished before the next one would have to
start. When would you have time to analyze your results and plan your
next program integrity initiatives to address the problems that
measurement identified?
What are the implementation difficulties? Training and staff
resources are always a challenge. Drawing a statistically valid sample
soon after the period you are studying is closed can also be difficult.
If you are committed to client interviews, the trick is to use a period
of time for which you are fairly confident that all claims have been
adjudicated. At the same time, that period has to be pretty recent so
that client memories have not significantly faded.
8. Is there a reliable estimate of the level of Medicaid fraud? If
so, how much fraud is there in this program? I am not aware of any
reliable fraud estimates. Moreover, I am unconvinced of the value of
trying to establish one even if you could. The reason is simple. To
establish fraud, you have to establish intent. At a minimum, that would
require interviewing every provider in the sample and probably many
others. It would essentially call for a full criminal investigation of
each service in the sample. The additional resources necessary to
establish intent would be better directed toward other areas. To
establish a fraud rate just to have one does not serve the interests of
program integrity. Measuring payment accuracy, on the other hand,
achieves the goals we are seeking without going to the extremes
necessary to establish intent.
Finally, in Illinois, we measured payment accuracy, not payment
errors. Accentuating the positive is a first step toward de-
stigmatizing the entire process.
9. What is the Federal match rate for error rate measurement
efforts in the states? I believe it is eligible for the standard match
rate for each state. Specialized medical staff reviews are eligible for
75 percent match, however.
10. If a common methodology is justified, what can the Congress or
this Task Force do to promote this effort? I want to reiterate that I
believe a common methodology is the wrong approach to this challenge.
Congress and this Task Force can and I hope will play a leading role in
encouraging payment accuracy measurement. Measurement is a strange, new
world to many of us. The appropriate way to encourage states to explore
this world is through incentives, not penalties. Two approaches
immediately come to mind. First, Congress should appropriate additional
funds to HCFA for grants to states to begin their own pilot measurement
projects. Second, measurement activities should be matched at an
increased rate of at least 75 percent to encourage us to continue this
commitment. Use the carrot, not the stick.
Has GAO or the IG issued any reports, letters, or testimony on
error rate measurement? If so, what recommendations were made, if any?
Defer to GAO or the IG.
Other Issues I also want to briefly touch on two final issues that
merit consideration in measurement. Neither medical necessity nor
client eligibility should be considered when making a determination on
payment accuracy. Judging the medical necessity of a service calls for
extensive medical consultant review and, in Illinois at least,
extensive due process. This is an area better left for quality of care
peer review processes. Secondly, the client eligibility determinations
are often made by other state agencies. The measurement process would
be better served if eligibility is not considered a factor in
measurement.
Conclusion
Thank you for the opportunity to share my thoughts on this
important topic. I look forward to our successful partnership to combat
fraud and abuse in the Medicaid program.
Chairman Chambliss. We do appreciate you both being here.
Ms. Thompson made the statement that it has been a top priority
of this administration to look after the taxpayer dollar and
try to improve the situation regarding waste fraud and abuse. I
hope you found that to be the case when this administration
came in. And I don't say that in a political way, because
obviously, that ought to be a top priority of every
administration. And I am assuming that was probably the case.
You also said in your written testimony that when it comes to
looking at taxpayer dollars, that this is a top priority and
that you had certain goals and objectives with respect to
weight fraud and abuse. And I just like to know what those
goals and objectives are, how you have been going about
reaching those goals and objectives, and how far have you
gotten?
Ms. Thompson. Well, we have a number of different and
interlocking goals. We, of course, have goals under the
Government and Performance Results Act, which we have
published, about our desire to get our error rate down to 5
percent by the year 2002.
Chairman Chambliss. Well, let me interrupt you just a
minute. I appreciate what you are saying with respect to error
rate. But we have talked both with Dr. Berenson when he was
here a couple of weeks ago, we talked again today about error
rate versus waste fraud and abuse. And I'd like for you to
concentrate on true waste fraud and abuse.
Ms. Thompson. If I can speak to that too, because I was
interested to hear that conversation earlier. I often talk to
people about this and say, tell me what your definition is when
you think of waste, fraud, and abuse. Is that all improper
payments or is that improper payments classified by the source
of the error? In other words, if we make an improper payment to
someone for whatever reason, clearly that is wasteful. That is
not a payment that we should have made, and it is not a payment
that was intended to be made, and it was not a payment that
supports the goals and objectives of the program.
It may also be abuse, depending, again, on what the rules
are and what people intended to do. It may also be fraud. When
we look at improper payments, we are looking at a cross section
of fraud, waste, and abuse. What we haven't done, and it's a
fair criticism, is that in looking at our assessment of
improper payments, we have not attempted to classify them. We
have not attempted to say, in this case, this improper payment
occurred because someone was honest in trying to do the right
thing and was simply confused. In this case, this improper
payment occurred because someone was being an aggressive
entrepreneur, was trying to push the envelope and they pushed
it a little too hard. In this case, an improper payment
occurred because someone knew they weren't entitled to a
payment but submitted a claim. It was only as a result of
asking for a medical record, going deeper beyond the claim,
that we identified the improper payment itself.
Chairman Chambliss. Well, unfortunately, it looks like we
are going to cut short due to votes. I want to very quickly and
give an opportunity for Dr. McDermott and Dr. Fletcher to ask
questions, because this may be it. But with respect to
Medicaid, I have a little bit of a problem in the fact that we
send this money out to the States without any oversight, and I
think it is a good idea to block grant that money, let the
States control it.
I agree with what Mr. Miller says, that you are not going
to find a cookie-cutter approach to looking at waste fraud and
abuse with 47 different programs out there. But I think there
must be some commonality that can be achieved in all of those
programs. And I think, also, that there has got to be some
oversight on the part of GAO, IG, HCFA, whoever it needs to be,
I mean, the States have got to report back to us on some kind
of basis as to how they are spending this money. Now, I don't
see that being done from anything that I have read, or anything
we have talked about. And I will just make that in the form of
a comment. And what I'd really like to do is to have both of
you submit written comments back to the committee with respect
to how you think we can improve the oversight in the Medicaid
program. How we can have the States be more accountable to the
taxpayer for the dollars that we are sending out. If I could
just ask you to do that in writing rather than trying to do it
today and taking this time. So with that, I will defer to Mr.
McDermott.
Mr. McDermott. Thank you, Mr. Chairman. I also have a kind
of a general question. Ms. Thompson, you were responsible for
both Medicare and Medicaid?
Ms. Thompson. For coordinating program integrity activities
in both those programs, right.
Mr. McDermott. In the Medicaid area, it sounds like you
have given it to the States and said since you guys got half
the money in the bag here, you look after it; is that correct?
Ms. Thompson. There is absolutely no doubt that the States
are primarily accountable for the Medicaid program in a variety
of different matters.
Mr. McDermott. I asked the question of the previous panel
of whether or not the intermediates on the Medicare side had
the same standards for their private businesses as they did for
what they were doing in Medicare. Do you know the answer to
that?
Ms. Thompson. It is a very interesting question and one
that we have looked at in a variety of different settings. And
it cuts both ways. We do have specific program requirements
under Medicare that we want contractors to apply. But of
course, one of the reasons that we contract with private
insurers when the program was first started, 35 years ago--
today is actually a celebration of the 35th anniversary of both
Medicare and Medicaid--was the idea that private insurers knew
how to do this. They already had the capacity, they already had
the infrastructure, they already had the experience. Why did
the Federal Government need to recreate a claims processing or
health insurance capacity at the Federal level when there were
private insurers more than capable of doing that? I think over
time, what we have come to realize is that, we can't simply
walk away from our responsibility and say it is theirs.
But we do need to hold them accountable for their
decisions. We need to make sure that the resources we give them
to do the job are adequate, which has been an issue that they
have raised with us. We need to make sure that our instructions
to them are clear, which is another issue that they have raised
to us, and that we make tools available to them. But clearly,
it is not HCFA employees or Federal employees who are there
actually touching those claims and processing them through. So
without a good partnership with our contractors, and without a
robust oversight on our part, we are not going to be
successful.
Mr. McDermott. One of the things that has happened in the
State of Washington, I know because I was in the State
legislature for a long time, we have changed intermediaries
several times. What is the process by which you come in and
suddenly saying to these people, hey look, you folks aren't
doing the job, you are out and these folks are in.
Ms. Thompson. As you can imagine that is a rarely invoked
provision. It is very traumatic, actually, for providers and
suppliers and physicians that are doing business with an
insurer. Obviously, the stakes are very high for that insurer.
And so the program has sought to try to work out problems, to
try to develop corrective action plans for identified
deficiencies.
For the most part, contractors that have left the program
have done so voluntarily. And in many of those transitions that
you are discussing, that is a result of the contractor deciding
that the Medicare business was no longer worthwhile for them or
was not a line of business they wished to pursue.
Mr. McDermott. So you put so much pressure on them to
perform that they decide we would rather do something else.
Ms. Thompson. That sometimes has happened.
Mr. McDermott. Sometimes. Maybe just one other thing, and I
guess maybe the two of you can do this in writing for the
committee. And that is, I'd like to know what other experts
besides Illinois are on the books and who is doing it, and who
is doing it in a different way, because I concur with Mr.
Miller's suggestion that one plan may not work everywhere, but
if laboratories of democracy are State legislatures and they
have half the money on the line, they have come up with
different ways, in different places, some may be sharable. So
if you have any ideas about that, I think it would be helpful
to us in part, because maybe you know some right here off the
top of your head that are also as good as Illinois. I don't
know how Illinois got here. I think it is a good State, but
having been born there----
Mr. Miller. I like to think so.
Ms. Thompson. There have been a couple of other States--off
the top of my head, Texas and Kansas--the methodologies have
not been entirely similar. They have come up with some
different results, and had some different kinds of experiences
in terms of the reaction in their communities to those findings
and so forth. Part of the group that we have established in
HCFA is with the States, some of the States that have had those
experiences in trying to develop some information about how
people approach things differently. Talking to beneficiaries,
was that useful? How was that done? Was it costly? Did that
actually add information that was not readily apparent through
other mechanisms such as getting information directly from the
provider? Did you go and see the provider on site? Did you
review medical records? Who was in the universe? Were all
claims possible to be selected from the universe or were there
certain kinds of claims that were excluded specifically?
So some of those dimensions which I think are very useful
to start with are, what are the differences in what people have
done, and obviously also bringing in the experience that
Medicare has had doing 4 years worth of this kind of
measurement and what we consider to be the benefits and the
disadvantages of the way that we have approached it. So we
would be happy to provide further information on that. And
certainly, as the group continues its deliberations and issues
any products, we would be happy to share those with the
committee also.
Mr. Miller. One, I guess, demonstration of our commitment
to research is in our report, we put exactly how we did this.
So it could be replicatable, and also so we wouldn't forget the
next time we would have it right there, documented. We even
have the formulas.
Mr. McDermott. You don't think you'll be there forever?
Mr. Miller. I am the messenger, remember. But I think it's
important that we learn from each other and we share these
results with each other. I think that's why it is important
that Texas and Kansas reports are out there, HHS OIG's work is
out there for us to all learn from.
Mr. McDermott. I think you will make that available to the
committee. I have one question of you as a good cop. You go
into some doctors office you ask for his sheet, his appointment
sheet, and you look at that. How do you tell whether he saw 30
minutes with Mrs. Johnson or he only saw her for 5 and billed
for 30?
Mr. Miller. Well, that is very difficult, obviously. The
more, the smarter the crook is, the better their documentation.
Sometimes perfect documentation is your best clue that you
should look at this more closely. But that is why a multi-part
review was so important to us. We interviewed clients. We
looked at the medical record. We did a contextual analysis. We
looked at all of the services 7 days on either side of the
claim. Then we brought in our own internal experts and had a
multi-layer review; that is the chart the GAO had up here, we
did almost all those things to every one of those claims, so
that we could be confident that we were making the best
decision possible. And also that, for example, the client
interview was very helpful to us in categorizing whether this
service or the error was inadvertent by an honest provider, or
whether it was questionable. That was the term we used for----
Mr. McDermott. On the cost benefit analysis, you said you
spent a million 4, what did you get back, or what do you
estimate as having been saved as a result of this process?
Mr. Miller. Actually, we spent out of pocket less than
400,000, but we lost about a million 3 in audit revenue that we
would have collected from audits we didn't do during that
period. I don't have a good number for you representative on
what we expect to save. But we are working toward that because
like I say, we have tightened transportation up dramatically
already, and we think to bring a much tighter, and that alone,
probably more than offset the cost of the study, plus
everything else we have learned from it.
Mr. McDermott. Thank you, Mr. Chairman.
Chairman Chambliss. Very quickly, Dr. Fletcher.
Mr. Fletcher. Let me go quickly because we do have to run
to vote. We have a chart up here that those $203 billion
expenditure Medicaid in the range of fraud, 1 percent to 15
showing the amount that it cost; 2 billion to over $3 billion.
Let me ask kind of a combined question. Are we putting enough
resources waste and fraud abuse, first of all? And what
additional incentives could the Federal Government provide to
States to conduct a periodic rate study? Let me leave that, if
you can answer that very quickly, we would appreciate it.
Ms. Thompson. The first question, again, enough resources.
I am one of those people that tends to believe that you make
resource choices depending on what you think is important. If
you think something is important enough, you have the
resources, and you will make the choices to implement those
resources. For Medicaid programs, they have to come up with
half the money basically to perform an error rate study. The
Federal Government chips in the other half. And the kind, of
course, that Mr. Miller is talking about are not, you know----
Mr. Fletcher. Are we putting enough in, do you feel like or
not?
Ms. Thompson. Throughout the States I don't think our
investments are there in the way that they should be, no. In
terms of incentives for States, I keep asking the question, and
I asked the question of the States at a session a few weeks ago
in which I said why isn't the incentive to save your own money
enough incentive?
Mr. Fletcher. I have one other question I would like to
submit it. I will submit that to you.
Chairman Chambliss. What I will conclude with is, and I
have a number of questions also, and am sure other panel
members do that we will submit to you in writing. I apologize
for having to cut this short. Thank you all for being here.
Your testimony has been very enlightening. And we will submit
written questions to you that we would like to get answered as
soon as possible. Thank you very much.
[The prepared statement of the Office of Inspector General,
HHS, follows:]
Prepared Statement of the Office of Inspector General, Department of
Health and Human Services
Pursuant to our discussions with Budget Committee staff, the Office
of Inspector General (OIG) of the Department of Health and Human
Services offers the following thoughts on identifying improper payments
and fraud in the Medicare program. This statement focuses on the
development and purpose of the annual Medicare fee-for-service error
rate and describes the numerous methods we use to detect fraud and some
of the results we have achieved in our continuing fight against fraud,
waste, and abuse.
First, we would like to express our belief that the vast majority
of health care providers are honest in their dealings with Medicare.
When we talk about fraud, we are not talking about providers who make
innocent billing errors, but rather those who intentionally set out to
defraud the Medicare program or abuse Medicare beneficiaries. The
importance of our ongoing work is not only to protect the taxpayers and
ensure quality healthcare for Medicare beneficiaries but also to make
the Medicare environment one in which honest providers can operate on a
level playing field and do not find themselves in unfair competition
with criminals.
At the same time, we are concerned about all errors, even those
that are totally innocent. The complexity of the Medicare program
places an obligation on health care providers, beneficiaries, fiscal
intermediaries, carriers, and the Health Care Financing Administration
(HCFA) to take reasonable care to comply with its rules. Thus, our
audits and studies are also intended to identify vulnerabilities to
administrative errors and to the related dollar losses, which can be
quite significant.
background
The HCFA is the single largest purchaser of health care in the
world. With expenditures of approximately $316 billion, assets of $212
billion, and liabilities of $39 billion, HCFA is also the largest
component of the Department. In 1999, Medicare and Medicaid outlays
represented 33.7 cents of every dollar of health care spent in the
United States. In view of Medicare's 39.5 million beneficiaries, 870
million claims processed and paid annually, complex reimbursement
rules, and decentralized operations, the program is inherently at high
risk for payment errors and fraudulent schemes.
Like other insurers, Medicare makes payments based on a standard
claim form. Providers typically bill Medicare using standard procedure
codes without submitting detailed supporting medical records. However,
regulations specifically require providers to retain supporting
documentation and to make it available upon request.
The OIG is statutorily charged with protecting the integrity of our
Department's programs, as well as promoting their economy, efficiency,
and effectiveness. The OIG meets this mandate through a comprehensive
program of audits, program evaluations, and investigations designed to
improve the management of the Department; to detect and prevent waste,
fraud, and abuse; and to ensure that beneficiaries receive high-
quality, necessary services at appropriate payment levels. As part of
this effort, we conduct annual audits of the Department's and HCFA's
financial statements, as required by the Chief Financial Officers Act,
as amended by the Government Management Reform Act of 1994.
annual estimate of improper payments
One objective of a financial statement audit is to determine
whether there are material instances of noncompliance with laws and
regulations. To that end, for the Fiscal Year (FY) 1996 financial
statement audit period, we developed the first methodology to measure
noncompliance in the Medicare fee-for-service program, which included
reviewing supporting medical records. This work resulted in the first-
ever, statistically valid, national rate of improper Medicare payments.
At HCFA's request, we have continued these reviews because of the high
risk of Medicare payment errors and the huge dollar impact on the
financial statements.
This past year, we completed our fourth annual review, covering FY
1999, of the extent of fee-for-service payments that did not comply
with laws and regulations. Our primary objective each year has been to
determine whether Medicare benefit payments were made in accordance
with Title XVIII of the Social Security Act (Medicare) and implementing
regulations. Specifically, we examine whether services were (1)
furnished by certified Medicare providers to eligible beneficiaries;
(2) reimbursed by HCFA's Medicare contractors in accordance with
Medicare laws and regulations; and (3) medically necessary, accurately
coded, and sufficiently supported in the beneficiaries' medical
records. Our objective is not to determine the extent of fraud in the
Medicare program.
Methodology
To accomplish our objective, we begin with a statistically valid
sample. For FY 1999, our multistage, stratified sample design resulted
in a sample of 600 beneficiaries with 5,223 claims valued at $5.4
million. For each selected beneficiary, we review all claims processed
for payment. We first contact each provider in our sample by letter
requesting copies of all medical records supporting services billed. In
the event that we do not receive a response, we make numerous follow-up
contacts by letter, telephone calls, and/or onsite visits. Then medical
review staff from the Medicare contractors (fiscal intermediaries and
carriers) and peer review organizations assess the medical records to
determine whether the services billed were reasonable, adequately
supported, medically necessary, and coded in accordance with Medicare
reimbursement rules and regulations.
Concurrent with the medical reviews, we make additional detailed
claim reviews to determine whether (1) the contractor paid, recorded,
and reported the claim correctly; (2) the beneficiary and the provider
met all Medicare eligibility requirements; (3) the contractor did not
make duplicate payments or payments for which another primary insurer
should have been responsible under Medicare secondary payer
requirements; and (4) all services were subjected to applicable
deductible and co-insurance amounts and were priced in accordance with
payment regulations.
Results in Brief
These audit procedures have enabled us to determine the extent of
sampled claims that did not comply with Medicare laws and regulations.
By projecting the sample results, we have estimated an annual national
error rate. In FY 1999, for instance, net payment errors totaled an
estimated $13.5 billion, or about 7.97 percent of total Medicare fee-
for-service benefit payments. As in past years, the payment errors
could range from inadvertent mistakes to abuse or outright fraud, such
as phony records or kickbacks. We cannot quantify what portion of the
error rate is attributable to fraud.
Our historical analysis of payment errors from FY 1996 through FY
1999 identified four major error categories: unsupported services,
medically unnecessary services, incorrect coding, and noncovered
services and miscellaneous errors. Where appropriate, we also
identified specific trends by the types of health care providers whose
claims were erroneous. For example, this past year's estimated $5.5
billion in unsupported services was largely attributable to home health
agencies ($1.7 billion), durable medical equipment (DME) suppliers
($1.6 billion), and physicians ($1.1 billion).
When the sampled claims were submitted for payment to Medicare
contractors, they contained no visible errors. It should be noted that
the contractors' claim processing controls were generally adequate for
(1) ensuring beneficiary and provider Medicare eligibility, (2) pricing
claims based on information submitted, and (3) ensuring that the
services as billed were allowable under Medicare rules and regulations.
However, their controls were not effective in detecting the types of
errors we found. Instead, reviews of patient records by medical
professionals detected 92 percent of the improper payments.
Summing up, our error rate methodology enables us to quantify, with
statistical certainty, the extent of improper payments and to clearly
see the pervasiveness of these improper payments across the various
types of Medicare services. The methodology also identifies the types
of errors and the types of providers accountable for these errors. More
importantly, it provides a performance measure for HCFA's use in
reducing improper payments. We have seen significant progress in this
area; the FY 1999 $13.5 billion estimate represents a 42 percent
reduction since the FY 1996 estimate of $23.2 billion.
Using the Error Rate Process as an Internal Control
The HCFA subsequently incorporated the error rate process as part
of its internal control structure. It intends to further expand the
scope of this technique through two processes: Comprehensive Error Rate
Testing (CERT) and the surveillance portion of the Payment Error
Prevention Program (PEPP). The PEPP is designed to produce an error
rate on inpatient hospital services, and CERT, while similar to the
current methodology, provides more detail on error causes at specific
Medicare contractors.
The current error rate process has been endorsed by the General
Accounting Office (GAO) for several years and is consistent with its
report, ``Increased Attention Needed to Prevent Billions in Improper
Payments'' (GAO/AIMD-00-10), calling for agencies to establish
processes to determine compliance with laws and regulations. The GAO
states that ``cost-effective internal controls should be designed to
provide reasonable assurance regarding prevention of or prompt
detection of unauthorized acquisition, use, or disposition of an
agency's assets.'' We concur with GAO and believe that HCFA's current
and proposed error rate processes will do exactly that.
Expanding the Error Rate Methodology to Measure Fraud
With respect to incorporating into the error rate methodology the
additional techniques being discussed at this hearing, we believe that
beneficiary interviews and provider profiling are appropriate tools in
certain circumstances. While medical reviews clearly were the primary
identifier of improper payments in all 4 years' error rate samples, we
also conducted beneficiary and/or caregiver interviews concerning
services billed by high-risk providers. For example, we contacted
beneficiaries who had received home health services to determine
whether they were, in fact, homebound--a requirement for Medicare
reimbursement of these services. In FY 1996, when problems in meeting
this requirement were more prevalent, beneficiary and caregiver visits
were quite valuable in establishing whether beneficiaries were
homebound. However, when errors shifted in the following years to
problems with beneficiaries' plans of care, these types of contacts had
limited value in determining improper payments.
This observation is shared by Medicare contractor fraud control
units, which find that beneficiary interviews generally are not a
valuable resource for detecting fraud. According to fraud control
officials, beneficiaries (like any other patients) do not always
remember what services were rendered, do not understand the usual/
customary charges associated with surgeries, or do not recognize the
scope of certain therapy services. Recalling specific details of time
spent or services performed by the physician during an office visit 6
or 8 months ago would be a major challenge for anybody, with often
questionable results. We therefore believe that beneficiary contacts
should be used on a case-by-case basis for selected high-risk Medicare
services. For instance, because of the high risk of abusive billing
practices by DME providers, we are expanding our ongoing FY 2000 error
rate methodology to include contacts with beneficiaries who received
DME services.
On the other hand, the fraud control units we contacted found
provider profiling an excellent technique for identifying fraud. This
technique highlights irregular billing patterns and other anomalies so
that a provider's claims can be targeted for more detailed review of
medical records. We, too, apply this technique, not as part of our
error rate methodology but in in-depth reviews of individual providers.
These reviews often follow our multi-State reviews used to develop a
``national'' error rate for specific provider types or services.
Through individual provider audits, we can identify patterns of
misconduct or multiple questionable actions that may be referred for
investigation. It is interesting to note that a review at one provider
often takes as many, if not more, resources than a multi-State error
rate review.
We do not devote investigative resources to cases unless we have a
proper predication, such as a particularly egregious situation or a
strongly suspected pattern of abuse based on a sample. For example, in
the current error rate process, if we find a claim for services that
were not performed, we cannot conclude that there is a pattern of abuse
or fraud. If we were to expand the audit scope as suggested by GAO, we
would have to review a significant number of additional provider claims
to establish such a pattern. In addition, substantial evidence must be
developed before an investigation can be initiated. For instance, to
obtain a search warrant, both the U.S. Attorney and the Federal
magistrate must be convinced that there is probable cause, based on the
evidence, that a crime has occurred. Thus, determining fraud is
extremely time-consuming, often taking several years and thousands of
staff-hours to prove intentional deception or misrepresentation on the
part of just one provider. Additionally, expanding the current error
rate methodology in an attempt to determine actual or potential fraud
would go substantially beyond what is expected in a normal internal
control process, and it is unclear whether cost-effective corrective
actions could be developed to preclude the types of schemes discussed
below.
fraud detection
As we have stated, the error rate methodology does not detect
fraud, such as kickbacks, deliberate forgery of bills or supporting
documents, or violations of the Stark law regarding the financial
relationship between an entity and a physician or an immediate family
member. To fulfill this function of our legislative mandate, we look to
sources and techniques outside the error rate process. And we know from
our investigations and from complaints we receive that waste, fraud,
and abuse are still pervasive in the health care sector. We are
therefore continuing to watch all areas of Medicare through our audits,
inspections, and investigations, as well as to encourage and receive
support from industry and beneficiary groups in our efforts.
Before we describe these efforts, it may be useful to define what
we mean by ``fraud.'' The Government's primary enforcement tool, the
civil False Claims Act, covers only offenses that are committed with
actual knowledge of the falsity of the claim, reckless disregard of the
truth or falsity of the claim, or deliberate ignorance of the truth or
falsity of the claim. The other major civil remedy available to the
Government, the Civil Monetary Penalties Law, has the same standard of
proof. Neither statute covers mistakes, errors, misunderstanding of the
rules, or negligence, and we are very mindful of the difference between
innocent errors (``erroneous claims '') and reckless or intentional
conduct (``fraudulent claims '').
To actually determine fraud, we typically obtain information
through a combination of investigative techniques tailored to each
case. These tools include subpoenas of medical and billing records, use
of search warrants, investigative interviews of provider employees,
surveillance, and undercover operations. For example, establishing that
a claim is tainted by an illegal kickback often requires an analysis of
contracts in the context of safe harbors as well as a review of the
provider's Medicare and private billings over time. Once this
information is gathered, it is presented to a U.S. Attorney whose
office will evaluate the information and, with input from the OIG, make
a final decision on whether the conduct constitutes criminal or civil
fraud. If the evidence demonstrates an intentional violation of the
law, the U.S. Attorney may opt to present the case to a Federal grand
jury for potential criminal action. If no criminal intent can be shown,
but there is evidence of provider knowledge that false claims were
submitted, a civil False Claims Act case may be authorized.
Now let us describe the sources and techniques that we use to
detect and combat fraud, along with some related accomplishments.
Allegations of Wrongdoing
The OIG receives allegations of wrongdoing from a number of
sources, including beneficiaries, ex-employees of providers,
competitors, contractors, and Qui Tam complaints. Each of these
allegations is taken seriously and is evaluated as quickly and
thoroughly as possible. Because Qui Tams are based on insider
information, they have proved most useful in terms of identifying
large-dollar vulnerabilities. In fact, since Calendar Year 1996, we
have received 1,074 Qui Tam allegations, of which over 300 are under
active investigation.
For example, one case that began with a Qui Tam complaint centered
on misconduct engaged in by National Medical Care, a nationwide
dialysis company, and various of its subsidiaries before a 1996 merger
with Fresenius Medical Care Holdings, Inc., the Nation's largest
provider of kidney dialysis products and services. The Government
recently reached a record-breaking Medicare fraud settlement with
Fresenius. As a result of a joint investigation by OIG and multiple law
enforcement agencies, the company agreed to a global resolution under
which three subsidiaries pled guilty, and it agreed to pay $486 million
to resolve the criminal and civil aspects of the case. As part of the
civil settlement agreement on credit balances, the company paid
directly to HCFA $11 million for overpayments that were previously
reported to the fiscal intermediaries but never recouped. The alleged
criminal misconduct involved illegal kickback activity, submission of
false claims for dialysis-related nutrition therapy services, improper
billing for laboratory services, and false reporting of credit
balances. As part of the settlement, the company also entered into the
most comprehensive corporate integrity agreement ever imposed by OIG.
Medicare Contractor Fraud Control Units
Medicare contractor fraud control units, which are a required part
of the Medicare claim processing contractors' operations, are used in
the effort to prevent, detect, and deter Medicare fraud and abuse. They
employ a number of techniques, including sampling claims to determine
propriety of payments, contacting beneficiaries to verify delivery of
services, reviewing DME certificates of medical necessity, analyzing
high-cost procedures and items, and analyzing local billing trends
against national and regional trends for the top 30 national
procedures. Unusual trends are targeted for focused medical review.
Potential fraud is also identified by researching complaints and
referrals received from beneficiaries, providers, and industry insiders
and through various data analysis techniques. One proactive technique
profiles providers using special software designed to highlight
irregular billing patterns and other anomalies to target a provider's
claims for more detailed review.
If fraud is indicated, the fraud control units refer cases to the
OIG and other law enforcement authorities for consideration of civil or
criminal prosecution and application of administrative sanctions. Over
a third of the more than 1,600 referrals in FYs 1998 and 1999 were
developed using proactive techniques.
Audits and Evaluations
Many of our leads on potential fraud are developed through audits
and evaluations of various aspects of the Medicare program, most often
on a provider-by-provider basis. Some significant examples are
summarized below:
Home Health Care. Looking behind the explosive growth in Medicare
expenditures for home health care since 1990, OIG, using claim data
from 1995 through part of 1996, found that 40 percent of the payments
were improper. We also determined that many home health agencies shared
characteristics that could undermine the Department's ability to
recover overpayments or levy sanctions. Our recommendations to
strengthen the Medicare certification process and to otherwise protect
the trust fund were adopted in the Balanced Budget Act of 1997.
Conducted at the Department's request, our follow-up work, which
examined 1998 claim data, noted that the payment error rate had fallen
to 19 percent.
Additional reviews at individual home health agencies have led to
420 investigations of potential fraud since October 1997, and 130 of
these investigations are ongoing. A particularly egregious case of
misappropriated Medicare funds and potential abuse of Medicare patients
was noted at St. John's Home Health Agency, the highest paid home
health agency in South Florida. We found that St. John's billed
Medicare for nonrendered or upcoded home health services, that nurses
and home health aides permitted subcontracting groups to use their
names and/or create fraudulent documents to support nonrendered
services, and that some nursing visits were provided by unlicensed
persons. Further, subcontractors paid kickbacks to St. John's employees
in order to do business with them. In December 1999, 26 people were
indicted for racketeering, conspiring to racketeer, conspiring to
launder money, and conspiring to submit false claims to the Medicare
program. Subsequent to plea or trial, there were 24 guilty verdicts (1
individual became a fugitive and 1 was acquitted); all 24 of those
found guilty are in the process of being excluded from Federal health
care programs.
Durable Medical Equipment. After sampling 36 new durable medical
equipment applicants in the Miami, Florida, area, HCFA reported in 1996
that 32 were not bona fide businesses. Among other problems, some bogus
applicants did not have a physical address or an inventory of DME.
According to HCFA, those companies should not have been issued a
supplier number because they were not operational entities. To
determine the prevalence of this problem, we sampled suppliers and
applicants in 12 large metropolitan areas in New York, Florida, Texas,
Illinois, and California at HCFA's request. Our inspection found that 1
of every 14 suppliers and 1 of every 9 new applicants did not have a
required physical address. When we checked questionable addresses, we
usually found that the business had closed or had a questionable
presence at the address. Some addresses were merely mail drop locations
or were nonexistent or could not be located. These types of problems
with physical addresses often indicate potentially illegitimate
business arrangements.
A classic example is a case we uncovered in New York. The OIG was
drawn into investigating this scheme after numerous Medicare
beneficiaries complained to their carriers that they had not received
the services for which Medicare was billed. We interviewed the
beneficiaries and verified that claims had been submitted for services
that were not actually rendered. These companies billed Medicare for
millions in fraudulent claims. In one instance, three of the companies
billing for ear implants received checks from Medicare totaling
approximately $1 million in less than a month. The bank where the money
was being deposited became suspicious and called the carrier which, in
turn, stopped payment on the checks. The carrier had placed a system
alert on these companies if they submitted claims for MRI services, so
the fictitious companies began submitting claims for ear implants and
were paid.
Partial Hospitalization and Community Mental Health Centers. In
collaboration with HCFA, we examined the growth of Medicare
expenditures to community mental health centers for partial
hospitalization services (highly intensive outpatient psychiatric
services). We found that Medicare was paying for services to
beneficiaries who had no history of mental illness and for therapy
sessions that consisted of only recreational and diversionary
activities, such as watching television, dancing, and playing games.
Our review in five States, which accounted for 77 percent of partial
hospitalization payments to mental health centers nationally during
1996, disclosed that over 90 percent of the services, or $229 million
in Medicare payments, were unallowable or highly questionable. From
that review, we were able to identify potentially abusive centers for
in-depth audits and, based on our results, referred all of these
centers for investigation of potential fraud. Currently, investigations
are underway at 18 centers identified from this work and from other
sources.
Hospital Outpatient Psychiatric Services. The OIG conducted a 10-
State review of outpatient psychiatric services which accounted for 77
percent of the value of partial hospitalization and other outpatient
psychiatric claims at acute care hospitals nationally. We estimated
that almost 60 percent of the $382 million in 1997 outpatient
psychiatric claims made by hospitals did not meet Medicare
reimbursement requirements. These unallowable services were not
reasonable and necessary for the patient's condition, not authorized
and/or supervised by a physician, not adequately documented or not
documented at all, or rendered by unlicensed personnel. Our reviews at
individual hospitals found similar problems, as well as alteration of
medical records after we selected the records for review. To determine
whether fraud was a factor in these cases, additional work is being
performed. Overall, we have 69 ongoing investigations.
Undercover Operations
We occasionally conduct undercover operations to identify potential
fraud. Past undercover operations have targeted podiatrists,
opthalmologists, chiropractors, medical doctors, DME companies, billing
companies, and laboratories for various Medicare billing fraud schemes,
such as billing for medically unnecessary services, billing for
services not provided, soliciting and receiving kickbacks, upcoding
services, unbundling services, and misusing provider Medicare billing
numbers. Many of these undercover operations are conducted jointly with
other Federal agencies, including the Federal Bureau of Investigations
(FBI), the Internal Revenue Service (IRS), and the Drug Enforcement
Agency, since violations often fall within their jurisdictions as well.
For example, an ongoing multiagency undercover project targeted
certain DME providers. The DME companies offered cash kickbacks to
undercover operatives (Federal agents) in exchange for patient
referrals. In addition, some companies billed Medicare and/or Medicaid
for medically unnecessary services, services not provided, and/or
upcoded services. The operation also identified physicians involved in
the scheme. To date, this project has resulted in 20 convictions with
nearly $1 million in restitutions, fines, and savings. Additional cases
are currently being adjudicated, and more convictions are expected.
In conclusion, we would like to commend HCFA for incorporating an
improper payment methodology into its internal control structure for
Medicare, and we note that it was one of the first health care programs
to develop such a technique. Modifications to the methodology being
made by HCFA would further enhance its ability to identify areas in
need of corrective action. With respect to other techniques being
discussed today to expand the error rate process, we believe they are
currently being used to the extent appropriate. For example, we have
used beneficiary contacts in high-risk areas for the past 4 years. Such
techniques as provider profiling have long been used as a means for
targeting providers for fraud investigations and, as we have noted,
have led to a significant number of investigative referrals. To
incorporate additional fraud development techniques into the error rate
methodology, in our opinion, would be cost prohibitive and extremely
time-consuming and would divert substantial resources from the
Department's highly successful fraud-fighting efforts. We believe that
all the techniques discussed have their appropriate uses in a
comprehensive, flexible anti-fraud system. We, HCFA, the Department of
Justice, the FBI, and other enforcement entities will continue to apply
these techniques in the most cost-effective manner that ensures the
best outcomes for Medicare and other Federal health care programs.
[The responses to followup questions from Robb Miller
follow:]
Responses to Followup Questions Submitted to Robb Miller, Inspector
General, Illinois Department of Public Aid
Question: What factors lead Illinois to conduct an error rate
study?
The Illinois Department of Public Aid's Office of Inspector General
has had a long-standing interest in empirical research to identify the
causes of and solutions to Medicaid fraud and abuse. We had internal
discussions years ago about the viability of measuring payment
accuracy.
However, there were several events tied to our decision to conduct
the Payment Accuracy Review (PAR). The first was becoming involved with
HCFA's Medicaid Fraud and Abuse Technical Advisory Group (TAG). The TAG
has provided a valuable forum of program integrity administrators from
around the country who were grappling with the same issues.
The second was the challenge laid down in Sparrow's License to
Steal. He clearly articulated the value and worth of establishing the
payment accuracy baseline.
Finally, both the agency head and Medicaid director at that time
believed it was also important to establish the baseline. Their support
for the project and their willingness to deal with whatever the
outcomes might have been were critical to embarking on this course.
We recognized that this study would be challenging. We were equally
convinced that it would be invaluable for problem identification and
the development of solutions. We felt that measurement was necessary to
determine our effectiveness over time. As a consequence, we saw it as
our responsibility to the taxpayers.
Question: What were the key implementation difficulties that
Illinois experienced when measuring Medicaid error rates?
There are almost too many challenges to enumerate. Their volume and
complexity serve to highlight why payment accuracy measurement has not
been universally embraced. Effective payment accuracy is very
difficult, time-consuming and expensive. Below please find a partial
list of the challenges we encountered:
Six-month project period--once consensus was reached on conducting
the project, we wanted to get it done in as timely a manner as
possible.
Medicaid Management Information System (MMIS)--at that time, our
data warehouse was not in existence. MMIS was not designed to support
analytical needs as much as operational ones, and it was not designed
for rapid response projects like this.
Sampling methodologies--We held many hours of discussion before we
settled on a service (as opposed to a claim or a patient day) as the
unit of measurement and developed our particular stratified sample
design.
Identifying which provider areas would be reviewed--while long term
care and capitated payment services are also important, we focused on
fee for service and inpatient payments.
Coordinating activities of multiple disciplines across
organizational lines--no one entity within the department had all the
expertise necessary.
Identification, extraction, and use of MMIS (internal) data--we had
to rapidly develop, test and use a series of programs to select the
stratified sample, develop field reports and develop the contextual
data analysis reports, all in a legacy mainframe system. We also had to
rapidly develope a complementary PC system that used these and other
data to perform the statistical analysis and reporting.
Drawing the sample soon after service--this was done to ensure
fresher client recollections during the interview but it also meant
that there may have been services that had not been submitted for
payment yet which might have affected the contextual analysis.
Data analysis--there were multiple levels of review; producing
error rates required weighting because the sample was stratified and
records in each strata had different probabilities of selection.
Medical record collection--on site visits were critical to
preventing errors based simply on records not submitted.
Client interviews--they were particularly valuable in confirming
that service was not provided but challenging to identify the vast
majority clients.
Staff commitment--14,000 hours of staff time.
Lost audit revenue--because staff were redirected from other
activities, including provider audits, we projected that the Department
lost $1.3 million in audit revenues.
Question: You expressed concern about States being required by the
Federal Government to use a common Medicaid error rate methodology.
But, surely, there must be a common basic approach that could be
modified to accommodate an individual State's needs. Don't you agree?
As you know, I am on the record as opposing a ``one size fits all''
approach to payment accuracy. There are major differences in:
A. The ways states determine client eligibility;
B. The types of providers allowed to be enrolled, and
C. The administration of the Medicaid program.
These differences would make a common methodology difficult if not
impossible.
I would hope Congress and HCFA would focus on the outcome, not the
process. If they are interested in payment accuracy and program
integrity improvements, states need the flexibility to address the
areas with which they are most concerned. A state's progress toward
this goal should be measured only against itself, not some artificial
national average.
Having said all that, my opinions are based only on my experiences
and beliefs. I need to be just as willing to test them as we were to
measure payment accuracy in the first place. I would suggest that more
study and experimentation be conducted to determine whether a common
methodology is feasible and if so, what that methodology is. HCFA and
states could collaborate on efforts to deploy and evaluate different
measurement approaches. A workgroup of state and Federal officials and
members of the research community could then examine these experiences
and advise HCFA and Congress on the question how best to proceed.
As part of these efforts, HCFA and states might first attempt to
identify a universe of services and populations present in all Medicaid
programs, and then determine the significance of that common universe
to each state program. It would be unfortunate for states to feel
compelled to focus their program integrity efforts on areas that
constitute a minority of their expenditures or on areas where a
minority of the problems are to be found. While allowing states the
ability to initiate targeted measurement reviews would help, states
would still have a strong incentive to focus their program integrity
operations on only those services included within the common universe.
HCFA and states might also carefully examine the value of
alternative strategies for conducting contextual record reviews, third-
party verification, and client interviews. Such an examination might
help identify best practices that could become part of a national
methodology.
Question: In your testimony you urge the use of ``the carrot, not
the stick.'' Medicaid payments to those not eligible for Medicaid and
failure of a State to collect from third party insurers would seem to
(be) areas were both repayment and a penalty might be appropriate.
Would you comment please?
Both of these are challenging areas for state Medicaid agency
operations. However, I am not clear on their connection to the overall
topic of payment accuracy measurement. Nonetheless, I agree that states
need to be diligent in: a) preventing ineligible providers from
enrolling or receiving payments, and b) collecting as much as possible
from private insurers who provide additional coverage to Medicaid
patients. At the same time, I am sure you also understand that every
state has different laws that limit its abilities in both of these
areas.
I believe that we are already required to return the FFP for
payments to providers which should not have been made for whatever
reason, including that they were excluded at the time of the service. I
am not sure what value there would be to an additional sanction against
the state.
Third party liability collections are more of an art than a
science. The only way we should be required to return the FFP is if we
know of the insurance in the first place. If we know that, we will have
already made every reasonable effort to collect and, consequently,
return the FFP. Again, I do not see any value in additional penalties
for states.
[Whereupon, at 11:50 a.m., the Task Force was adjourned.]
HCFA and Health: The Impact of Medicare Regulation on Health Care
Delivery
----------
WEDNESDAY, AUGUST 9, 2000
House of Representatives,
Committee on the Budget,
Task Force on Health,
Washington, DC.
The Task Force met, pursuant to call, at 10 a.m. in the
Blakely Auditorium, Keeneland Health Education Center, St.
Joseph Hospital, Lexington, KY.
Members present: Representatives Chambliss and Fletcher.
Chairman Chambliss. If we can have your attention, we will
get started here this morning.
I first of all want to thank the folks here in Lexington
and St. Joseph Hospital for hosting us this morning. This is
our fourth hearing that the Waste, Fraud and Abuse Task Force
has held. The other three have been in Washington, and this one
is our first field hearing. We have another hearing scheduled
in Macon, GA, on Monday of next week.
Our purpose in these hearings is not to throw darts or
throw rocks at anybody, but simply to look at a system that is
obviously a very needed system, and I have reference, of
course, to the Medicare system in this country. We know it is a
system that our senior citizens, in some instances, are totally
dependent upon for their health care needs, which is why it is
so valuable. But over the years, we also know and understand
that the system has certain waste, fraud and abuse instances
that have taken place, in part probably because of some things
that Congress has done that we want to try to correct, but also
in part because there are simply some things going on out there
in the health care delivery system that ought not to be going
on.
Also, there are any number of complex regulations that
everybody in the health system that benefits from Medicare has
to deal with that have caused this system to be expensive on
the part of suppliers. And we are trying to seek to get to the
bottom of some of these issues. We know we are not going to
turn this program around and make it simpler and easier for our
suppliers to deal with in the short term, but if we can start
down that road of making some corrections in the system so that
the end result is that the terrific quality health care that we
provide in this country to our senior citizens is continued and
the complexities are somewhat eliminated, then the patients are
the ones that ultimately benefit, and at the same time, the
taxpayer gets a better bang for the buck in health care
delivery system.
We have held our other three hearings, as I say, in
Washington, and I just cannot say enough about the good support
and guidance and counsel that I have had as Chairman of this
Task Force from my Vice Chairman, Congressman Ernie Fletcher
from here in Lexington. Ernie and I have had any number of
issues that we have worked on in his 2 years in Congress,
dealing with issues from agriculture to health care. And he has
been a good friend and certainly a good adviser to me, and a
person who has a real concern about all issues that we deal
with, but particularly with his background in health care, the
issue of health care is certainly vitally important to him.
And Ernie, I am very pleased that we were able to come here
this morning to Lexington, your home town, and to hear from
witnesses that you have been gracious enough to have provided
to us to talk about some of these issues. And thank you for
being a host to us this morning. And I will recognize you for
any comments you have.
Mr. Fletcher. Well, thank you, Chairman Chambliss. And I
would like to thank you.
Mr. Chambliss represents Georgia's 8th District and works
on the Budget Committee there as Vice Chair there, on the full
Committee. And we have established these task force, oversight
task force, as he has mentioned, and our charge is to look at
HCFA, the Health Care Finance Administration, which administers
Medicare, and to look at the regulations they have promulgated,
the way they administer the program, and how it affects health
care delivery and the waste, fraud and abuse approach that they
have taken toward providers.
And as I have traveled throughout this district, and we
have had several hearings in Washington, and even from my own
personal experience, I have found that Medicare, first off, is
one of the most successful health care programs we have had.
But in recent years, the administration, by HCFA, has caused a
great deal of problems with reimbursal changes, with
administrative changes, with growing red tape, with the
complication of billing, with difficulties involved in making
sure that reimbursement is there on time, with some of their
waste, fraud and abuse, it does not seem to really promote, I
believe, in the best way, the delivery of health care in the
system that we have now.
So we are having these hearings, and I thank each of you
for coming, and all of you that are willing to share your
experiences with us this morning. This information will be very
helpful to us as we go about to look at changes that are needed
in the future. I think even the very fact that we are having
hearings certainly brings information to HCFA itself, and the
need for changes that they might see and do even before
regulations or before new laws are passed.
So I see many of you out here I have worked with in the
health care industry, and I want to thank St. Joe, their staff,
for allowing us to use their facility in hosting this hearing
this morning.
Mr. Chairman, I have some other comments, if I could ask
unanimous consent to enter those into the record? And I will
yield the rest of my time.
Chairman Chambliss. Right. Well, I ask unanimous consent
that all members and witnesses--and I say witnesses also--be
given 5 days to submit written statements for the record. And
without objection, that is so ordered.
[The prepared statement of Ernie Fletcher follows:]
Prepared Statement of Hon. Ernie Fletcher, a Representative in Congress
From the State of Kentucky
Thank you, Chairman Chambliss. I know I speak for everyone present
when I say that we are all very happy and honored to have you visit us
here in Kentucky's Sixth District.
I would like to thank as well the administration and staff of St.
Joseph Hospital for opening their doors to the Budget Committee Task
Force on Health for this hearing on the Health Care Financing
Administration today. This is a special event for me personally,
because I spent many years affiliated with St. Joseph as a physician
here in Lexington--they are memories I carry with me to this day.
It has been an honor and a privilege to serve with you and the
other Members of Congress who make up the Budget Committee. I believe
that ensuring access to quality health care is one of the most vital
issues facing the future of America, and the chance to have a hand in
shaping the Federal budget to provide the funds necessary for this
purpose is one that I appreciate and consider to be very important.
The Health Care Financing Administration, or HCFA, is at once one
of the most critical Federal agencies--it administers many of the
Federal programs that guarantee health care for millions of Americans-
and one of the most tangled, convoluted, paper-choked, frustrating, and
difficult to navigate Federal bureaucracies. It is precisely because
HCFA's mission is so important that its glaring failures are so
serious.
As a physician, I experienced firsthand some of the problems about
which our witnesses today will testify. As a Congressman, I am
contacted on a weekly basis by providers who are confounded by HCFA's
rules, regulations, policies, and errors. These problems run the gamut
from paperwork errors that need to be rectified to major policy
decisions by HCFA that could have adverse impacts on the quality of
care that patients will receive.
As you can see from these charts, there are more than 100,000 pages
of laws, regulations, rules, interpretations, and court decisions
governing the procedures necessary to process a claim presented to
HCFA. Some of these laws and regulations are, in fact contradictory.
For example, the American Medical Association has reported to this
Committee the experiences some of its members have had in treating
patients covered by Medicare who arrive in the emergency room. EMTALA,
the Emergency Medical Treatment and Labor Act, requires that physicians
must treat patients received in the emergency room without inquiring
about their ability to pay. But if that patient is covered by Medicare,
and requires services that Medicare may not cover, HCFA requires that
the physician inform the patient of this possibility, and ask the
patient to sign an Advance Beneficiary Notice stating that the patient
is aware that he or she may be liable for the cost of these services.
Mr. Chairman, it is likely that this scenario is playing itself out
right now just a short distance away in this hospital.
Due to the complexity and sheer volume of these kinds of rules, it
has become increasingly difficult for providers to accurately bill for
their services, exposing them to charges of fraud for honest errors. My
staff and I have spent hours helping hospitals and other providers in
my district who are on the verge of bankruptcy because of billing
disputes with Medicare. Yet despite these kinds of common errors,
several years ago HCFA eliminated its toll-free service lines that
allowed providers to ask questions about billing and coding.
To address these concerns, I introduced with my colleague, Ms.
Berkley of Nevada, H.R. 3300, the Doctors' Bill of Rights. This
legislation would require HCFA to reinstate these hotlines; allow
providers to request a telephone or in-person conversation with a
carrier without being suspected of fraud; allow providers to repay
inadvertent Medicare overpayments within 3 months without penalty,
interest, or fear of audit; and require HCFA and its carriers to devote
more resources to outreach and education initiatives designed to reduce
billing error rates.
Our purpose here today is to let Congress hear first-hand from
providers who are on the front-lines, delivering health care to our
seniors. I can read statistics from studies, and tell you what I have
heard from my medical colleagues, Mr. Chairman, but that is no
substitute for the real world experience of these witnesses before us
today.
I am proud and honored to have before us a panel of witnesses from
across the provider spectrum, including physicians, those providing
home health care, and hospital administrators. They can give us the
perspective and information we need in Congress to correctly identify
the problems with current system, and begin to solve them.
With that thought in mind, Mr. Chairman, I am looking forward to
hearing from these witnesses who have graciously agreed to share some
of their valuable time and experience with us, and I look forward to
taking their lessons back with us to Capitol Hill when Congress
reconvenes in September. I yield back the balance of my time.
Chairman Chambliss. We do not have any particular order
that we are going to ask witnesses to testify in this morning,
but our procedure will be to hear from the witnesses, and then
we will have questions from the panel, and then we will take
questions from the audience when we conclude the testimony of
the witnesses.
I understand Dr. Carloss has another engagement a little
later on this morning and is going to have to leave us early,
so we are going to ask if Dr. Carloss will start off. And we
understand that, when you have to leave, that you will be
excused, you are not mad at us and upset with us if you get up
and walk out, but you have another meeting. So Dr. Carloss, we
will start with you, and thank you for being here this morning.
STATEMENT OF HARRY W. CARLOSS, JR., M.D., FACP, PRESIDENT,
KENTUCKY MEDICAL ASSOCIATION
Dr. Carloss. Thank you, Congressman Chambliss. Would you
prefer me to testify from here or there?
Chairman Chambliss. Let me ask the staff. What was our
intention, guys?
Voice. I think from the table.
Chairman Chambliss. From the table? Great, sure, we can see
you.
Dr. Carloss. I thank you all for inviting me here today as
President of the Kentucky Medical Association. I appreciate the
opportunity to address this forum and to supply information
about how regulations from HCFA are affecting the patients and
the physicians of the Commonwealth of Kentucky.
I would like to say at the outset that Medicare is an
essential program to our population, and determining
regulations to cover a diverse population in a multiplicity of
situations is a difficult task fraught with unforeseen
consequences and difficulties. We as physicians recognize
dealing with complex tasks, but we are used to dealing with
them in a concise and efficient manner.
This is Harrison's Textbook of Internal Medicine. If your
doctor knows everything in this textbook, he is an outstanding
physician. Harrison's Textbook of Internal Medicine is 2088
pages. The Congressional Budget Office reports that Medicare
regulations today number in excess in of 117,000 pages. When
Congress thought that the IRS was burdensome and regulatory,
and needed reform, its regulations had 17,000 pages.
A number of these regulations are subject to revision and
interpretation by local carriers on a frequent basis. These
carriers are allowed to put their own spin and their own
interpretation on rules, thus it is possible for a Medicare
patient from one area of the United States to have an item
covered, and move to another area of the United States and have
an item not covered.
Treatment coverage and patient reimbursement should be
uniform throughout the nation. Congress should establish a task
force with representatives of all agencies with Medicare
oversight and physician representation. They should be charged
with compelling all medical directives to be listed in one
source, establishing one single set of rules and guidelines for
the entire program.
The government should further demonstrate its commitment to
easing regulatory environment of micromanagement by assuring
that these regulations are actually streamlined. Improving how
the regulations and updates are communicated with physicians,
improving education for physicians and their staff in regard to
these regulations, and actually letting physicians take care of
patients as they have been trained to do.
Too often in this country today, patients receive the care
that their physician thinks Medicare wants them to have rather
than what their physician thinks is the best care. This is the
case because of fear of violating some obscure rule which could
result in a compromise of the physician's ability to practice
medicine or result in non-payment for the service. Recently in
Kentucky, Administar, our Medicare carrier, has advised us that
they will no longer print and distribute the monthly update
bulletins, as a cost-saving measure. So now they are going to
change the rules and their interpretations on a monthly basis,
and they are going to hold us responsible for their contents,
and they are not even going to tell us what their contents are.
We at the Kentucky Medical Association are all for removing
all fraudulent medical practitioners. But with IRS or Gestapo-
like authority, overzealous enforcement agencies throughout the
nation are looking for rule violations when the rules are so
complicated and so numerous that no one could possibly be
responsible for their content. And now in Kentucky, they are
not even going to tell us what the rules are.
If that is not bad enough, in Kentucky, if a case goes to
review, it takes forever to get paid. On July 19th of this
year, my office manager called Administar about some problem
claims. She was informed by the Administar supervisor that they
were opening mail from April 7th. July 19th, opening April 7th
mail.
My accounts receivable over 90 days--and when I say my
accounts receivable, I am referring to my medical practice; I
am in a two-man oncology practice in western Kentucky--is
$89,143.86. The bulk of this cost represents treatments for
drugs for which I am forced to pay monthly. The Medicare
bureaucracy has no complete list of covered and non-covered
services. HCFA actually encourages its more than 60 carries to
make their own coverage determinations on a case-by-case basis.
This makes billing akin to Russian roulette, where you never
know if you will be paid or if you will be subject to fraud and
abuse investigation. This Medicare bureaucracy is forcing small
group and independent practitioners to increase the time they
spend on Medicare compliance, thus decreasing the time they
spend on patient care.
I know you have had testimony in the hearings in Washington
from other medical experts who are more familiar with these
things than I am. But I want to tell you how these bureaucratic
hassles that we are subject to are affecting my practice and my
patients, with some specific examples. This is resulting in
substandard care for Medicare patients. In the early 1980's, I
attended a conference at the Andy Anderson Tumor Hospital in
Houston, Texas. A physician there presented his work on chronic
myelogenous leukemia. He reported that a certain drug,
Interferon, had reverted the chromosome abnormality, the
Philadelphia chromosome, back to normal in patients treated
with the drug, Interferon. This essentially meant that a
population of these patients were cured with treatment with
Interferon.
I went home from the meeting and started treating some of
my patients with Interferon, as other physicians did throughout
the country, and with great success in some patients. Last
year, articles appeared in peer review journals, and the FDA
recognized this as an indication for the drug. My patients and
many other patients throughout the nation had already
benefitted for years for treatment of this drug. The early
1980's to 1999. Currently, under the reimbursement rules in
this State, these patients could not have been treated, not
until they received FDA approval or until three peer review
journals were published.
Oncology is a rapidly changing field. Innovations must be
rapidly applied for maximum success against fighting this dread
disease.
My second example involves another oncology drug, Neumega.
This drug is given to prevent--prevent a specific complication
of chemotherapy. In Kentucky, every billing day for Neumega
must be accompanied by a copy of the patient's record. If you
give it 4 days in a row, you send in four copies of the
patient's record. This is a drug that prevents a complication.
So I have to pay staff to copy records, send in claims, then
because it is automatically going go into review because it has
records with it, I have to wait 90 days for payment, 90 days to
even be reviewed for review for payment. Please tell me how
this micromanagement benefits anyone?
The government subsidizes the education of physicians, why
not let them practice. Who is more qualified to determine who
should get Neumega? Me? Other physicians? Or insurance clerks?
Please tell me how can prevention be seen in the current
medical record?
I do not use this drug on Medicare patients. It is an
expensive drug. I cannot afford to. I have never received one
penny of payment from Medicare for the drug Neumega. I stopped
using it for that reason. So Medicare patients are subject to
the complications that this drug prevents, whereas other
patients are not. That is not right.
Further regarding oncology drugs, HCFA has said that, on
October 1, we will be reimbursed at 17 percent less than the
average wholesale price. Of that 83 percent, the patient is, of
course, responsible for a 20 percent copayment. The first 6
months of this year in my office, we administered $1,902,716.54
of drugs. In 6 months. And during that time, we wrote off to
bad debt $528,882.36. Many of our patients are poor. They
cannot afford the 20 percent copayment. This 20 percent might
amount to hundreds of dollars on a single treatment day.
Many uninsured patients cannot afford treatment for these
drugs at all. You tell me. It does not take a lot to figure
out. If I am reimbursed at 17 percent less than average
wholesale price, pay a 6-percent Kentucky sales tax on these
drugs, lose a 20 percent copayment for bad debt, lose the
interest costs while I am waiting for Medicare review for 90
days, pay shipping, breakage, spillage and spoilage and provide
care for the uninsured, how long can I stay in business?
On October 1, if this rule goes forth, Medicare patients
may not be able to receive drugs in my office. It is just an
economic decision. They will not be able to get this treatment,
I cannot afford to give it to them. In a system where the
government has paid $900 for a hammer, I do not understand why
I am not allowed to make a profit on drugs so that I can
distribute them among my indigent patients.
In closing, I would like you to consider how far HCFA has
twisted the intent of Congress as stated in Section 1801 of the
Act that created Medicare. This Act specifically forbids, and I
quote, ``any Federal officer or employee to exercise any
supervision or control over the practice of medicine, or the
manner in which medical services are provided, or over the
selection, tenure or compensation of any officer of employee of
any institution, agency or person providing health care
services.'' We have certainly come a long way.
Thank you.
[The prepared statement of Harry W. Carloss follows:]
Prepared Statement of Harry W. Carloss, Jr., M.D., FACP, President,
Kentucky Medical Association
Gentleman and ladies of Congress, as President of the Kentucky
Medical Association, I appreciate the opportunity to address this forum
and supply information about how relations with HCFA are affecting
physicians and patient in the state of Kentucky.
I would like to say at the outset that Medicare is an essential
program for our population. Determining regulations to cover a diverse
population in a multiplicity of situations is a complex task fraught
with unforeseen consequences and difficulties. We as physicians
recognize the complexity of this task but we are used to dealing with
complex medical problems in a concise efficient manner.
This is Harrison's textbook of Internal Medicine. It encompasses
all of the organ systems of the human body. It is 2088 pages. Medicare
regulations cover reimbursement for these diseases. Unfortunately, I
could not bring a copy here today as it has been reported by the
congressional budget office to be in excess of 100,000 pages. A number
of these regulations, such as those issued by Medicare carriers, are
updated frequently. When you thought IRS regulations needed reforming,
they numbered approximately 17,000 pages.
To further confuse the issue, the country is divided into regions
and finally carriers with each geographic region putting their own
interpretation or spin on the rules. It is possible for a patient from
one state to have an item covered only to have it rejected when they
move to a different region. Treatment coverage and patient
reimbursement should be uniform throughout the United States. Congress
should establish a task force with representatives from all agencies
with Medicare jurisdiction, as well as physician representation. They
should charge it with compiling all Medicare directives into one
source, thus establishing one simplified set of rules and guidelines
for the entire program.
The government should further demonstrate its commitment to ease
the regulatory environment of micro management by; 1) assuring that
streamlining of Medicare regulations occurs, 2) improving how
regulations and updates are communicated, 3) improving education for
physicians and their staff, and 4) letting physicians take care of
their patients as they have been trained to do.
Far too often patients receive the care a physician thinks Medicare
wants them to have rather than what the physician thinks is best care.
This is the case because of fear of violating some rule, which could
result in a compromise of their ability to practice medicine.
Recently in Kentucky, Administar has advised us that they will no
longer print and distribute the monthly bulletin as a cost saving
measure. So now they change the rules and their interpretation and do
not tell us. We at the KMA are all for removing fraudulent
practitioners but with IRS or Gestapo-like authority, overzealous
enforcement agencies are looking for rule violations when the rules are
so complicated and numerous that no one could possibly be responsible
for their contents. And now in Kentucky, they are not even going to
send us updates but still hold us responsible for their contents. If
that is not bad enough, if a case goes to review, it takes forever to
get it paid.
On July 19, my office manager called regarding a problem with
claims. An Administar supervisor told her that they were working on
mail from April 7. My accounts receivable over 90 days for Medicare is
$89,143.86. The bulk of this cost represents cancer treatment drugs for
which I have to pay monthly. Medicare bureaucracy has no complete
master list of covered and noncovered services. HCFA actually
encourages its more than 60 carriers to make their own additional
coverage determinations on a case by case basis. This makes billing
akin to Russian roulette where you never know if you will be paid or be
subject to fraud and abuse investigations.
The Medicare bureaucracy is forcing solo and small group practices
to increase time spent on Medicare compliance and reduce time spent on
patient care. I would like to briefly give you some examples of how
these bureaucratic hassles result in substandard care for Medicare
patients.
No. 1. In the early 1980's, I went to a conference where a
physician from MD Anderson hospital in Texas presented work on CML. He
reported that a drug, Interferon, had reverted the chromosome change
commonly seen with CML back to normal. At that time, I started treating
some CML patients with that drug. Just last year articles appeared in a
peer review journal, and FDA recognized this as an indication for the
drug. My patients had benefited from this treatment already for a
number of years. Currently under the reimbursement rules for this
state, these patients could not have been treated until last year.
Oncology is a rapidly changing field; innovations must be rapidly
available for patient use if we are to combat this dreaded disease.
No. 2. Neumega is a drug that prevents a complication of
chemotherapy. In Kentucky, every billing for Neumega must be
accompanied by the medical record and be subject to review. Therefore,
I have to pay staff to copy records, send in claims, wait 90 days for
the review and then maybe get paid. Please tell me how this
micromanagement benefits anyone. The government subsidizes the
education of physicians. Why not let them practice? Who is more
qualified to determine if the patient needed the drug, the doctor or an
insurance clerk-especially a drug that prevents a complication? How can
you see prevention on a current record? I do not use this drug on
Medicare patients.
Regarding oncology drugs, recently HCFA has said that beginning
October 1, we will be reimbursed at 17 percent less than AWP (average
wholesale price). Of that 83 percent the patient is responsible for a
20 percent co-payment. The first 6 months of this year my office
administered $ 1,902,716.54 of drugs. We wrote off $528,882.36. Many of
our patients are poor and cannot afford co-payments which might amount
to hundreds of dollars for a single treatment. Many uninsured patients
cannot afford to pay for these drugs.
It does not take much to figure out if I am reimbursed at 17
percent less than AWP, pay a 6 percent Kentucky sales tax, lose the 20
percent co-payment for bad debt, lose interest cost while waiting for
payment, pay shipping, breakage, spillage and spoilage, and provide
care for the uninsured I won't be in business very long--thus October 1
if this goes forth. Medicare patients may not be able to get treatments
at my office. In a system that allows the government to pay $900 for a
hammer, I don't understand why I am not allowed to make a profit on
drugs.
In closing I would like you to consider how far HCFA has twisted
the intent of congress as stated in section 1801 of the act that
created Medicare--the act which forbids ``any Federal officer or
employee to exercise any supervision or control over the practice of
medicine or the manner in which medical services are provided, or over
the selection, tenure, or compensation of any officer or employee of
any institution, agency, or person providing health services.''
Chairman Chambliss. Dr. Carloss, thank you very much, and
we are going to even go a little bit out of order and ask you a
few questions, knowing that you are going to have to leave,
instead of asking questions to everybody at the end. I am a
little bit disturbed by what you said, and it is a follow-on to
what I have heard other physicians say. One in particular that
we had testify in Washington a couple of months ago, about the
attitude of HCFA when they come into your office, or the
attitude that you hear from them over the telephone as being
one of intimidation versus one of wanting to reach a helping
hand out to you to try to help you through this maze that you
have to tread through. And I want to make sure that I am
hearing that from you. Is it your feeling that, in general,
physicians feel some intimidation from HCFA, both from a
personal visit standpoint as well as in dealing with them
through the volumes of the other regulations that are existing
out there?
Dr. Carloss. That is difficult for me to answer because I
very rarely am intimidated. [Laughter.]
But I will tell you, there is one thing that I am afraid
of. And I am afraid of snakes. And the reason I am afraid of
snakes is because I cannot see them always. And I know that
they can attack me from unforeseen places. And that is somewhat
of the fear that I have in dealing with the Federal Government.
Not in Kentucky, but in other states in the union, physicians
offices have been entered by armed agents when patients are
present. You know, I just cannot imagine such a thing happening
in my country, but apparently it has and has been reported
widely.
This has not been reported to me as President of the
Kentucky Medical Association. But I feel that physicians are
intimidated by the unknown, because they do not know what the
rules are, they cannot find out what the rules are. Let me give
you an example. You know, I am giving some drugs that cost
$9,000 a week. I would like to know if I am going to be paid
for them or not because I am giving them in my office. And if I
am not getting paid for them, I am paying for them.
Oncologists have a very high overhead. And running, as you
say, millions of dollars worth of drugs through the office. So
we have a directory, and we can look under in the directory,
the directory is pretty far behind as far as oncology
treatments go. So we will call the Administar people and we
will say, we have a patient and they have this disease and we
would like to give them this treatment. Will you cover that?
And they say, well, we should cover that, but of course, what
we tell you on the phone is not an absolute guarantee that we
will cover it. And you just go ahead and give it to them and
send it in, and we will send it to review.
So I am giving this drug once every 2 weeks and it is going
to review, and a review lasts 90 days before they even start to
look at it, by their own admission, lasts 90 days. So then they
come up after they finally review and they say, well, we do not
believe it is indicated because you do not have three peer
review journals and it has not been approved by the FDA for
this, so we are not going to pay for it.
So now--and I can actually show you charts of patients who
have gotten drugs under unusual circumstances, that had failed
other treatments, had gotten drugs, had responded to the drugs
and are in complete remission, and Medicare is telling me that
they are not going to pay me for the drug.
Now you know, the reason that I am going to have trouble
practicing medicine under this kind of regime is because I
cannot walk in that room and say, Mrs. Jones, Medicare told me
today they are no longer going to pay for your drug, so I
cannot give it to you, and you are going to die. I cannot do
that. So we are giving these drugs currently in my practice at
a loss for--until we get reviewed. And then if we are turned
down, and then if we are working on a patient, then we are
still giving them and my partner and I are paying for them out
of our pocket, or trying to get the drug company to give them
to us free, which they are reluctant to do because they think
that, if a person has some sort of coverage, the coverage ought
to pay for them.
So that is the kind of intimidation that I feel. It is not
that I am--I am not really worried that the Gestapo is going to
come kick down my door tomorrow, although they have in other
states. But I am worried about things that I do not know and do
not understand, and I am worried about providing quality care
for my patients.
Chairman Chambliss. Some of what we have heard with respect
to intimidation, I want to ask this to all other panelists
also, is just the fact that there are so many civil penalties
on the books out there that you can do everything you think is
right in filing a claim, and yet if you should happen to use
the wrong code, which I understand is sometimes easy to do,
that you subject yourself to civil penalties. So the rest of
you may be thinking about that.
Is what you are telling me with respect to a difference of
interpretation by HCFA in Kentucky versus the way they may
interpret medical necessity or whatever determines coverage in,
say, Indiana, is that basically just from a--trying to
determine what the definition of medical necessity is or does
coverage depend on something else in different jurisdictions?
Dr. Carloss. Coverage depends upon the ruling of the
covering carrier in the jurisdiction. Kentucky and Indiana may
not be the best example because they are the same carrier,
Administar covers Kentucky and Indiana. But I can tell you that
I have patients that winter in Florida that have gotten the
treatment in Florida that have come back to Kentucky and have
not been able to get the same treatment until I had gone
through the entire appeals process. So there is a great
variation from state to state and from carrier to carrier.
As to what you said about the coding, you know, the coding
is fantasy land. I think that you have already heard testimony
from the American College of Physicians that, when a patient
sees--is seen by a physician in his office and the coding
process takes place, that over 6,000 determinations go into
determining the correct code. In my office, if it is hard, we
code it a little higher than we do if it is not hard.
Now HCFA actually has a ruling, and I have tried to find a
copy of this but I could not go through the 100,000 pages. But
they have a ruling that, if a doctor has more training and a
patient comes and it is an easy answer, so if you, as a
Congressman, you have heard lots of testimony and you were able
to solve a difficult problem quickly because you had all the
background information and training, that would not actually be
worth as much to HCFA as if you were off the street and had to
make the decision, and it took you longer and you made a less
good decision. That is probably not the right way to say it,
but doctor of less experience would actually get paid more for
making the same diagnosis than a subspecialist would get paid,
under the coding system.
But you know, I can tell you the honest truth, I do not
code the things in my office to any great extent. I have the
nurses help me with the coding in the office. My job is to see
patients. I hate other things, and I am a very obstinate
person. If things are easy, we put down a low code. If things
are hard, we put down a high code.
Now I got in trouble once for that because a lot of things
seemed easy to me that year and I put down a lot of the low
codes, and I actually received a letter that I was going to be
fined because that I had submitted too many low codes.
[Laughter.]
Chairman Chambliss. You were not charging the government
enough?
Dr. Carloss. Exactly, that is right, I was not charging
them enough. And actually there was a fine stated, and I was
helped by some of my representatives in Washington so that I
did not actually have to pay the fine.
Chairman Chambliss. And that is exactly the form of
intimidation that I had referenced to that we have heard about.
Let me just mention very quickly, and then I want to turn
it over to Dr. Fletcher, but we have been involved with trying
to provide some assistance to one of the problems that you
spent a good deal of time on there, and that is this issue of
you being compensated for the drugs administered to your
patients, and I know you are familiar with the fact that the
administration has now come out and they are going to change
the rule in the middle of the stream and say that we cannot use
the red book anymore, and that they have gone to any number of
discount drug catalogs, apparently, and come up with the fact
that we are reimbursing you at too high a rate when, in fact,
we are reimbursing you at what the red book rate is. And it may
be a little bit higher, but we are shortchanging you on the
other end.
And everybody knows the way that game has been played, and
it has been sanctioned by Medicare, and now all of a sudden
they are coming back and saying, we are going to cut you back
to another 17 percent, I believe, on the reimbursement rate for
those drugs.
We have sent a letter to Secretary Shalala, and it is a
bipartisan effort to try to at least set back that October 1
date that we can have an opportunity to discuss this further,
and make sure that, if we are going to reduce the reimbursement
rate on the drugs that, at the very least, we allow additional
compensation to you on the other end. Because what you say is,
I know, exactly right. You can only go so far in administering
drugs to Medicare patients that you are not going to be
reimbursed for.
So I hope we are going to get a satisfactory answer out of
that, and I am sure Dr. Fletcher will stay in touch with you
with regard to the way we proceed on that, and the reaction we
get from Secretary Shalala.
Dr. Carloss. Thank you.
Chairman Chambliss. Dr. Fletcher.
Mr. Fletcher. Thank you, Chairman Chambliss. And Dr.
Carloss, we appreciate your distinguished service as President
of the KMA as well as years of service to patients in western
Kentucky, cancer patients. And so it is an honor to really have
you. And I appreciate very informative testimony.
Some of the things you brought up I think stress the
importance, you mentioned patients' difficulty, particularly
uninsured or low-income patients, seniors on fixed income, that
are not able to afford those co-pays. And I think it certainly
stresses the importance of prescription drug coverage and a
more comprehensive drug coverage for our Medicare patients. And
we have worked very hard for that in the Budget Committee.
Let me say, even this year, we have passed budget--in our
budget 200--well, actually, we passed more than that, it ended
up being about $250 million for women with breast and cervical
cancer that have no insurance or are under-insured, so that we
can insure every woman actually across the country is able to
get the treatment when they are diagnosed with those diseases.
So I share your concern.
And somewhat, you know, as you listen to this, you kind of
wonder, boy, this sounds so ridiculous sometimes as to how they
administer things. Is it really that bad? And yet, my personal
experience confirms what you have said, as well as the
testimony we have heard previously.
Let me ask you just one thing, how much staff would you
say, or increased staff costs have you seen over the years of
your practice, just to try to comply with the coding, the
regulations and making sure that you keep those folks from
barging into your office when you are trying to care for
patients over something that may be a minor mistake or a coding
mistake, as you mentioned?
Dr. Carloss. In our office, I have one full-time senior
employee who does nothing but deal with those types of issues.
And the majority of my practice is Medicare-related. You know,
Medicare does not just apply to the elderly. Frequently, if you
get a disease that I take care of, you get Medicare disability.
And so my practice is skewed more to Medicare than other
people. You know, I am practically an employee of the
government, I think about 76 percent of my practice is Medicare
or Medicaid. But I have not been able to get on the Federal
employees' health benefits. [Laughter.]
Chairman Chambliss. It ain't that good. [Laughter.]
Dr. Carloss. You just be glad you live in Georgia,
Congressman.
Mr. Fletcher. Dr. Carloss, let me ask you, if the change in
regulation is decrease--17 percent decrease in reimbursal for
outpatient pharmaceuticals, let me say the President in his
budget, both years, particularly last year, was going to
decrease reimbursals even more on oncology outpatient
treatment, which is what you are talking about. We fortunately
killed that because that would have had a tremendous impact. He
was going to cut I think Medicare and those reimbursals, it was
like $18 billion.
But if it gets to the point where you cannot economically
give treatment in your office that costs substantially less
than giving it in a hospital, what are you going to do, and are
you going to have to hospitalize these patients to give
treatment in order to try to secure payment so that they can
get the treatment, life-saving treatment many times, that they
need?
Dr. Carloss. That is exactly what I will do, is that I will
admit the patients to the hospital, as long as I am allowed to
do that.
Now as you are well aware, the Medicaid program in the
State of Kentucky does not reimburse for drugs as high as--
Medicaid does not reimburse as high as Medicare does for the
drug. It is a small number of people, but recently in this
State, they decided that doctors had to pay a 6-percent sales
tax in addition to the price of the drug.
Now when you add that 6 percent sales tax in, that makes a
list of about 20 drugs that it actually costs me money to
provide the drug. I actually lose money on the drug. Now we are
kind of slow in my office, we are just now catching on to this,
and we are admitting all those people to the hospital.
Mr. Fletcher. So that probably costs multiple times what it
would if you gave it as an outpatient, where you could--you do
not have the cost of the facility, the hospital day or whatever
it requires there.
Dr. Carloss. It costs somebody. It eventually costs the
taxpayer, one way or another. But I have been told that one way
HCFA is looking at this is if they forced all of these people
into the hospital, they would come under a DRG, and they would
actually save money by forcing people into the hospital and
inconveniencing all the Medicare patients. Now I do not know if
that is official policy, but when I met with you in Washington,
I also ran into a HCFA person that night who mentioned that
that might be a goal.
So it might cost the government less in one hand, but I--it
is going to hard for me to say this without insulting anybody,
but the government is a one-step process. I have been an
advisor to HCFA regarding peer review. I have worked on HCFA
committees. And you know, when I see patients, I have to think
five or six steps down the road, and I know that you all in
Congress have to think many steps down the road. But when it
appears to me that, in my experience with the government, they
can only think one step ahead. If we do this, this will happen.
What they do not consider that, for every action, that there is
a whole series of reactions that go on.
Mr. Fletcher. Well, I appreciate it. And I was surprised to
find out this year that this State charges 6 percent on cancer
treatment.
Dr. Carloss. Yeah, I was surprised by that, too.
Mr. Fletcher. And I do not know if they do that in Georgia,
but I certainly think we need to call on the Governor of this
State and the State Legislature to take a look at this and
rescind that. That seems to me the opposite message of what you
are sending, I think. We have a new cancer prevention center at
the University of Kentucky, we are putting a lot of emphasis,
we have the third highest rate of cancer. And now we are taxing
cancer. And I think we need to look very seriously about it in
this State, about rescinding that tax.
Dr. Carloss, if there was one thing--and I know that is
hard to do--but one thing we could do or take back with us from
your testimony today that would be the most urgent thing to
change, what would it be, in your opinion?
Dr. Carloss. The population in this United States cannot
exist without Medicare. We owe our senior citizens, of which I
am rapidly becoming one, the best treatment that there is
available, under a simplified system. And that may cost some
money. But we need to make sure that medical benefits are
distributed equally to the population of the United States.
People that life in Florida are no more American than people
that live in Kentucky. They have provided no more service to
their country, and their families and their communities, and
they do not deserve any more special care than people in
Kentucky.
If you are going to have a Federal program, you are going
to have to have one set of rules that apply to everybody in the
entire country, and they have to be administered fairly.
Mr. Fletcher. We appreciate your testimony, and I yield
back, Mr. Chairman.
Chairman Chambliss. Thank you very much, Dr. Carloss.
We have no particular order to go in, but I think we will
start, Mr. Fraraccio with you, and just proceed down the line.
Dr. Reynolds, we will come to you next and go right on down.
STATEMENT OF ROBERT D. FRARACCIO, CHIEF EXECUTIVE OFFICER,
CLARK REGIONAL MEDICAL CENTER
Mr. Fraraccio. Thank you, Congressman. Is this microphone
working OK?
Good morning. My name is Bob Fraraccio, and I am the CEO at
Clark Regional Medical Center. I have held this position since
June 1993. Clark Regional is a freestanding, not-for-profit
community hospital located in Winchester just 15 miles east of
Lexington. The hospital opened in 1917 and is licensed for 100
beds.
I appreciate the opportunity to speak this morning to the
Task Force on Health about the Federal regulatory burden on
hospitals, and I would like to focus my remarks on three areas.
First, the sheer volume of regulations; second, the lack of
sufficient planning prior to their implementation; and finally,
the inconsistency with which these regulations are
administered.
Without a doubt, the health care industry is the most
regulated industry in the country. In addition to Medicare,
hospitals are subject to regulations from numerous other
agencies including Medicaid, OSHA, EPA, CDC, Center for Disease
Controls, and the IRS, just to name a few. Dr. Carloss just
mentioned that Medicare had regulations that totaled 117,000
pages. The information I received says that that number is in
excess of 132,000 pages. And these rules are extremely complex
and costly for hospitals. One example would be how HCFA has
delegated to its fiscal intermediary the method for determining
the medical necessity for outpatient testing, and as you know,
most hospitals see about 60 percent of their revenue from
outpatient sources. So it affects a high volume.
The vehicle to make this determination for necessity is a
publication called the Local Medical Review Policy or LMRP. The
LMRP may used for surgical procedures, laboratory tests,
radiology tests and respiratory tests. In short, almost all
outpatient diagnostic testing requires LMRP. In order to be
reimbursed, hospitals are required to collect ICD-9 codes,
diagnosis codes for the requested services. The vast number of
physicians do not routinely provide specific ICD-9 codes when
ordering tests for the simple reason that the test itself is
usually needed to make the diagnosis.
Nonetheless, Clark Regional and other hospitals have been
forced to implement the LMRP process which results in long
delays for patients requiring simple tests, while we spend
inordinate amount of time and money tracking down physicians
for the appropriate codes.
In some cases, the hospital is not paid at all since
Medicare rejects the general ICD-9 codes. If the information
cannot be obtained in a timely manner, an advance beneficiary
notice, or an ABN, is issued to the patient stating that, if
Medicare does not pay for the service, the patient becomes
responsible for payment. The patient then has the option of
refusing treatment or risk additional out-of-pocket expense.
In addition to costly delays, the LMRP creates a major
public relations problem. You can imagine that patients can be
extremely upset with these types of situations, and they take
their frustrations out on the hospital and the physicians, but
certainly not the fiscal intermediary nor HCFA itself.
The next area I would like to address is the lack of
planning when implementing new regulations. Through the
Balanced Budget Act of 1997, Congress sought to simplify
outpatient reimbursement by requiring HCFA to implement a
prospective payment system. Hospitals support Congress's effort
for an outpatient prospective payment system that is simple,
predictable and fair. Unfortunately, between the enactment of
the law and the drafting of the regulatory language, the new
system is anything but simple, predictable and fair.
The ambulatory payment classification system, which took
effect on August 1 of this year is more complex than the
inpatient prospective payment system implemented in the early
1980's, known as DRGs. It is most likely the significant--the
most significant comprehensive and complex program ever
implemented by HCFA, yet the final regulations for APCs were
issued in mid-April of this year, leaving the hospitals a mere
three or three and a half months to prepare for such massive
changes.
Despite repeated requests on the part of the American
Hospital Association for HCFA to delay implementation of the
regulations until providers had a better opportunity to prepare
for the changes, HCFA insisted on implementing this new
program, even though HCFA's training manuals and materials were
inaccurate, misleading and lacked detail information that
hospitals needed to properly comply with its directives.
If past experience is any indication, we can expect that
HCFA will follow with correction notice after correction
notice, thus complicating and hindering hospitals' ability to
implement changes in a timely and appropriate fashion, while at
the same time increasing their risk of losing reimbursement for
outpatient procedures.
And the last area I would like to talk about briefly is the
inconsistency of regulatory interpretation. Throughout the
years, HCFA, through its fiscal intermediary, has consistently
interpreted many of its regulations in an inconsistent manner.
A critical example for Clark Regional deals with the
disproportionate share payments. In recognition of the
additional costs incurred by hospitals treating a
disproportionately high share of indigent patients, Federal law
requires that the Medicare program make additional payments to
such disproportionate share hospitals. Hospitals with 100 beds
or more, and at least 15 percent Medicaid utilization qualified
for these additional payments. Clark Regional is licensed for
100 beds and had been receiving disproportionate share payments
for several years.
In June 1997, Medicare's intermediary, Administar, notified
Clark Regional that it would no longer receive disproportionate
share funding due to a different interpretation of the Medicare
regulations. Subsequently, the intermediary reversed its
position stating that we would, indeed, continue to receive
those funds, and shortly thereafter reversed itself a second
time, denying payments of those funds.
In addition, Administar chose to reopen closed reports,
closed cost reports retroactively to 1992 and take back
payments that had already been made to Clark Regional Medical
Center. This amount totaled to $2.5 million, a staggering
amount for a hospital the size of Clark Regional. HCFA's
rationale was that Clark Regional failed to meet the 100-bed
threshold due to the fact that when a patient is considered an
observation patient, as opposed to an inpatient, the hospital's
bed count dropped below 100. HCFA's argument claims that using
an existing bed to temporarily observe a patient, changes the
size of the hospital.
Presumably, according to HCFA, the hospital size changes
yet again when that same patient in that same bed becomes an
inpatient. In making its argument, HCFA is actually
contradicting its own guidelines. Those guidelines make clear
that observation beds are not to be excluded from the hospital
bed count. The hospital appealed this matter to the Provider
Reimbursement Review Board, or the PRRB. This Board is
appointed by HCFA and is composed of experts in the field of
reimbursement. It is empowered to conduct hearings and rule in
a manner that, ``affords great weight to the interpretive
rules, general statements of policy and rules of agency,
organization, procedure or practice established by HCFA.''
On September 2nd, 1999, the PRRB released a decision fully
favorable to Clark Regional Medical Center. The Board held that
the beds at issue met all the program requirements to be
included in the bed size calculation to determine
disproportionate share eligibility. On November 8,
approximately 2 months later, 1999, the HCFA Administrator
unilaterally reversed the decision of the PRRB. The
Administrator's decision did not even attempt to address the
aspects of HCFA's own guidelines, stating that changes in day-
to-day use in beds did not change the bed counts, and that the
bed counts should only change when the size of the facility
changes.
Subsequently, Clark Regional filed a lawsuit contesting the
Administrator's decision in the United States District Court
for the Eastern Kentucky District. In addition to having to pay
HCFA--repay HCFA the $2.5 million, the hospital has incurred
significant legal expense for the PRRB appeal, and continues to
incur significant legal expense preparing for the trial which
is expected to take place later this fall. All the while, HCFA
has held our money which could have been used to make
improvements in patient care services.
In Kentucky, Clark Regional and Pattie A. Clay in Richmond
are the only two hospitals that have been impacted by this
disproportionate share ruling. Throughout the country, we have
been able to find approximately 12 other hospitals in the same
situation, contesting a total of approximately $30 million.
While the dollars involved for each individual hospital are
significant, it is a relatively small amount of money for HCFA
in the overall scheme of things. Yet HCFA refuses, at least in
our case, to heed its own panel of experts.
However, when the disproportionate share issues came up
recently in the State of New York, where many more dollars were
at stake, HCFA sought to continue disproportionate share
payments to the New York State hospitals. Certainly the amount
of money involved with New York State hospitals is
significantly more than the amount of money involved with the
12 hospitals across the entire country.
HCFA's inconsistency in interpreting its own guidelines
continues to cause extreme frustration and wreak financial
havoc on our and other health care institutions.
In conclusion, I would like to state that the hospital's
first priority is to provide high-quality patient care. A small
percentage of these voluminous regulations that we are
discussing this morning contribute to our efforts to provide
that quality care. The rest simply drain resources away from
that goal. These burdensome regulations continually place a
financial strain on the providers who are already reeling from
the drastic provider cuts included in the 1997 Balanced Budget
Act.
We all agree that the health care industry should be
regulated to some extent. There are valid reasons why HCFA and
other regulatory agencies should monitor hospital activities.
However, the strain of numerous agencies issuing thousands and
thousands of pages of conflicting and unnecessary rules,
instructions and laws is hurting the health of our nation's
hospitals and putting their financial viability at risk.
Programs such as Medicare and Medicaid were designed to
make health care more accessible to our senior and less
fortunate citizens in this country. Sadly, the continued
promulgation of unreasonable and ill-conceived regulations
would jeopardize the provider's ability to provide quality
care, and ultimately perhaps reduce accessibility for
beneficiaries. Ironically, these programs may very well hurt
the people they were intended to help.
I appreciate you listening to my comments and the
opportunity to speak with you this morning. Thank you.
[The prepared statement of Robert D. Fraraccio follows:]
Prepared Statement of Robert D. Fraraccio, Chief Executive Officer,
Clark Regional Medical Center
Good morning, my name is Bob Fraraccio and I am the CEO of Clark
Regional Medical Center. I have held this position since June 1993.
Clark Regional is a free-standing, not-for-profit, community hospital
located in Winchester 15 miles east of Lexington. The hospital opened
in 1917 and it is licensed for 100 beds.
I appreciate the opportunity to speak this morning to the Task
Force on Health about the Federal regulatory burden on hospitals. I
would like to focus my remarks on three areas.
1. The sheer volume of regulations.
2. The lack of sufficient planning prior to their implementation.
3. The inconsistency with which these regulations are administered.
volume of regulations
Without a doubt the healthcare industry is the most regulated
industry in the country. In addition to Medicare, hospitals are subject
to regulations from numerous other agencies including Medicaid, OSHA,
EPA, Center for Disease Control, and the IRS-to name a few. For
Medicare alone hospitals are subjected to more than 132,000 pages of
Medicare rules. These rules are extremely complex and costly for
hospitals.
One example would be how HCFA has delegated to its fiscal
intermediary the method for determining the medical necessity of
outpatient testing. The vehicle for this determine is a publication
called the local medical review policy (LMRP). LMRP may be used for
surgical procedures, laboratory tests, radiology tests, and respiratory
tests. In short, almost all outpatient diagnostic testing requires
LMRP. In order to be reimbursed hospitals are required to collect ICD-9
coded diagnoses for the requested services. The vast number of
physicians do not routinely provide specific ICD-9 coded diagnosis
information when ordering tests for the simple reason that the test
itself may be needed to make the diagnosis.
Nonetheless, Clark Regional and other hospitals have been forced to
implement the LMRP process which results in long delays for patients
requiring simple tests while we spend inordinate amounts of time and
money tracking down physicians for the appropriate ICD-9 codes. In some
cases the hospital is not paid at all since Medicare often rejects the
general ICD-9 codes.
If the information cannot be obtained in a timely manner, an
Advance Beneficiary Notice (ABN) is issued to the patient stating that
if Medicare does not pay for the service, the patient becomes
responsible for payment. The patient then has the option of refusing
treatment or risk additional out of pocket expense. In addition to
costly delays the LMRP creates a major public relations problem. You
can imagine that patients can become extremely upset in these types of
situations and they take their frustrations out on the hospital as well
as the physicians, but certainly not the fiscal intermediary nor HCFA
itself.
lack of sufficient planning prior to implementation
The next area I would like to address is lack of planning when
implementing new regulations. Through the Balanced Budget Act of 1997
Congress sought to simplify outpatient reimbursement by requiring HCFA
to implement a prospective payment system. Hospital support Congress'
effort for an outpatient prospective payment system that is simple,
predictable, and fair. Unfortunately between the enactment of the law
and the drafting of the regulatory language, the new system is anything
but simple, predictable, and fair.
The ambulatory payment classification (APC) system which took
effect August 1 of this year, is more complex than the inpatient
prospective payment system implemented in the early 80's. It is most
likely the most significant, comprehensive, and complex program ever
implemented by HCFA. Yet the final regulations for APCs were issued on
April 2000 leaving hospitals a mere 3 months to prepare for such a
massive change.
Despite repeated requests on the part of the American Hospital
Association for HCFA to delay implementation of the regulations until
providers had a better opportunity to prepare for the changes, HCFA
insisted on implementing this new program even though HCFA's training
material was inaccurate, misleading, and lacked detailed information
that hospitals needed to properly comply with its directives. If past
experience is any indication, we can expect that HCFA will follow with
correction notice after correction notice, thus complicating and
hindering hospitals ability to implement changes in a timely and
appropriate fashion while at the same time increasing their risk of
losing reimbursement for outpatient procedures.
inconsistency of regulatory interpretation
Throughout the years, HCFA through its fiscal intermediary has
consistently interpreted many of its regulations in an inconsistent
manner. A critical example for Clark Regional deals with
disproportionate share payments. In recognition of the additional costs
incurred by hospitals treating a disproportionately high share of
indigent patients, Federal law requires that the Medicare program make
additional payments to such disproportionate share hospitals.
Hospitals with 100 or more beds with at least 15 percent Medicaid
utilization qualify for these additional payments. Clark Regional is
licensed for 100 beds and has been receiving disproportionate share
payments for several years.
In June 1997 Medicare's intermediary, Administar, notified Clark
Regional that it would no longer receive disproportionate share funding
due to a different interpretation of the Medicare regulations.
Subsequently, the intermediary reversed its position, stating that we
would indeed continue to receive those funds, and shortly thereafter
reversed itself for a second time denying payment of those funds. In
addition, Administar chose to reopen closed cost reports retroactively
to 1992 and take back payments that already had been made to Clark
Regional Medical Center. This total amounted to $2.5 million dollars, a
staggering amount for a hospital the size of Clark Regional.
HCFA's rationale was that Clark Regional failed to meet the 100 bed
threshold due to the fact that when a patient was considered an
observation patient as opposed to an inpatient the hospitals bed count
dropped below 100. HCFA's argument claims that using an existing bed to
temporarily observe a patient changes the size of the hospital.
Presumably, according to HCFA, the hospital size changes yet again when
that same patient stays in the same bed but becomes an inpatient. In
making its argument, HCFA is actually contradicting its own guidelines.
Those guidelines make clear that observation beds are not to be
excluded from the hospital bed count.
The hospital appealed this matter to the Provider Reimbursement
Review Board (PRRB). This board is appointed by HCFA and is composed of
experts in the field of reimbursement. It is empowered to conduct
hearings and rule in the manner that ``affords great weight to the
interpretive rules, general statements of policy, and rules of agency
organization, procedure, or practice established by HCFA.''
On September 2, 1999, the PRRB released a decision fully favorable
to Clark Regional Medical Center. The board held that the beds at issue
met all the program requirements to be included in the bed size
calculation to determine disproportionate share eligibility.
On November 8, 1999, the HCFA Administrator unilaterally reversed
the decision of the PRRB. The Administrator's decision did not even
attempt to address the aspects of HCFA's own guidelines, stating that
changes and day-to-day use in beds did not change the bed count and
that the bed count should only change when the size of the facility
changes. Subsequently, Clark Regional filed a lawsuit contesting the
Administrator's decision in the United States District Court for the
Eastern Kentucky District.
In addition to having to repay HCFA $2.5 million dollars, the
hospital has incurred significant legal expense for the PRRB appeal and
continues to incur significant legal expense preparing for the trial
which is expected to take place later this fall. All the while, HCFA
has held our money which could have been used to make improvements in
patient care services.
In Kentucky, Clark Regional and Pattie A. Clay in Richmond are the
only two hospitals that have been impacted by this disproportionate
share ruling. Throughout the country we have been able to find
approximately 12 other hospitals in this same situation contesting a
total of approximately $30 million dollars. While the dollars involved
for each individual hospital are significant, it is a relatively small
amount of money for HCFA in the overall scheme of things. Yet HCFA
refuses, at least in our case, to heed its own panel of experts.
However, when disproportionate share issues came up recently in the
State of New York, where many more dollars were at stake, HCFA sought
to continue disproportionate share payments to New York State
hospitals. Certainly the amount of money involved with New York State
hospitals is significantly greater than the amount involved with 12
hospitals across the entire country.
HCFA's inconsistency in interpreting its own guidelines continues
to cause extreme frustration and wreak financial havoc on our and other
healthcare institutions.
conclusion
In conclusion, I would like to state that hospitals' first priority
is to provide high quality care to our patients. Only a small
percentage of these voluminous regulations contribute to our efforts to
provide that quality care. The rest simply drain resources away from
that goal. These burdensome regulatory rules continually place a
financial strain on providers who are already reeling from the drastic
provider cuts included in the 1997 Balanced Budget Act.
We all agree that the healthcare industry should be regulated.
There are valid reasons why HCFA and a host of other regulatory agency
should monitor hospitals' activities. However, the strain of numerous
agencies issuing thousands and thousands of pages of conflicting and
unnecessary rules, instructions, and laws is hurting the health of our
nation's hospitals and putting their financial viability at risk.
Programs such as Medicare/Medicaid were designed to make healthcare
more accessible to our senior and less fortunate citizens in this
country. Sadly, the continued promulgation of unreasonable and ill-
conceived regulations will jeopardize the providers' ability to provide
quality care and ultimately reduce accessibility for beneficiaries.
Ironically, these programs may very well hurt the very people they were
intended to help.
I thank you for the opportunity to come before the Task Force this
morning.
Chairman Chambliss. Thank you very much, Mr. Fraraccio.
And I jumped the gun just a little bit, I want to give Dr.
Fletcher an opportunity to introduce all of our panel members
before we get to each one of them.
Mr. Fletcher. Let me go back with Robert Fraraccio, and we
thank you for your testimony and for coming. You are the Chief
Executive Officer of Clark Regional Medical Center in
Winchester, served there since June 1993. Before that, served
as Chief Executive Officer of Montgomery Regional Hospital, a
150-bed facility located in Blacksburg, Virginia. He has also
served as assistant administrator in Bluefield Community
Hospital, Bluefield, West Virginia, and Johnston-Willis
Hospital in Richmond, Virginia.
He received his master's degree in hospital administration
from the Medical College of Virginia in 1974, and this past
year, Mr. Fraraccio has served as Chairman of the Kentucky
Hospital Association. We thank you for your testimony and for
coming here.
Let me introduce Dr. Barbara Reynolds, a physician serving
as the Medical Director of the Emergency Department at
Frankfurt Regional Medical Center. She graduated from
Washington University School of Medicine with an M.D. degree,
undergraduate in Connecticut College, Washington University
School of Medicine where she did a research fellowship, the
Departments of Surgery and Gastroenterology, the general
surgery at Barnes Hospital, Washington University, and
internship and general surgery, she completed that there as
well.
Additionally, let me find that, I think you are President-
elect of the Kentucky Chapter of American College of Emergency
Physicians, and we certainly would welcome you here.
Mr. William E. Stauter works at Sayre Christian Village
Nursing Home. He is the Administrator/Chaplain since January
1998 to the present. Prior experience with the Christian
Benevolent Association, Director of Pastoral Services. There
additionally, Mount Healthy Christian Home, Cincinnati, Ohio,
was the Administrator there from 1990 to 1997. Worked also with
Woodland Lakes Christian Camp, 1972 to 1983. Graduated from
Cincinnati Baptist--Bible College, rather, and Seminary
University of Illinois, College of Commerce and Business
Administration, and certainly we welcome you here with Sayre
Christian Village, and we look forward to hearing your
testimony.
Mr. Lennie House is the owner and President and CEO of
Nurses Registry and Home Health, the largest home health agency
in Central Kentucky with over 200 employees and operations in
16 counties. Mr. House has been a strong advocate for home
health care, and its indisputable benefits for patients and
their families and brings many years of experience to the
subject. He has been involved, participant in, a witness to all
of the ups and downs of the home health field over the past 15
years. He is married to Vickie S. Fell-House, has been
executive director of Nurses Registry and Home Health for many
years. Has two daughters, and they are residents of Georgetown,
Kentucky. We welcome you and look forward to hearing your
experience, too.
I am not sure I have got--let me make sure I have got the
rest of the CVs up in front of me here. I introduce Dr. Charles
Shelton who is a physician and doctor of osteopathy. He is with
the Lexington Psychiatric Group, a general adult psychiatrist,
inpatient-outpatient consulting psychiatry, specializing
interests in forensic and geriatric psychiatry. He was at the
University of Kentucky Department of Psychiatry, he was the
chief resident in 1993 and 1994. Did his residency at the
University of Kentucky. Additionally, is on the active medical
staff here at St. Joseph Hospital, been consultant medical
staff at Central Baptist, as well as an active medical staff at
Charter Ridge and Lexington Hospital, and River Hospital in the
past in Huntington, West Virginia. From 1999 to the present, he
has been Chairman of Behavioral Health Services, St. Joseph
Hospital, and also on the medical executive committee at St.
Joseph Hospital, and we certainly appreciate yours, and look
forward to your testimony, too.
And we welcome Robert Hudson. Robert J. Hudson is vice
president of Fiscal Services at Pattie A. Clay Hospital,
Richmond, Kentucky. He is a graduate of the University of
Kentucky with a B.S. in accounting. After serving in the
military, he worked 6 years at the University of Kentucky
Medical Center and has been at Pattie A. Clay Hospital for 20-
plus years. In the early 1990's, he served as the president of
the Kentucky Chapter of the Health Care Financial Management
Association. We look forward to hearing your testimony as well.
Mr. Chairman, I yield back.
Chairman Chambliss. Thank you very much, Dr. Fletcher. It
is certainly a distinguished panel, and one we look forward to
continuing to hear from. And Dr. Reynolds, we will now turn to
you.
STATEMENT OF BARBARA J. REYNOLDS, M.D., PRESIDENT-ELECT,
KENTUCKY CHAPTER, AMERICAN COLLEGE OF EMERGENCY PHYSICIANS
Dr. Reynolds. Good morning, Chairman Chambliss and Dr.
Fletcher. And I want to thank you for holding this hearing here
in Kentucky and for asking for representation from the Kentucky
Chapter of the American College of Emergency Physicians.
Emergency physicians provide a unique role in health care
in the United States. America's emergency departments are the
nation's health care safety net. Because of this unique role
and the constraints inherent in our practice of emergency
medicine, HCFA's burdensome rules and regulations have had a
particularly detrimental effect. All the regulations affecting
physicians, and many of those affecting hospitals, impact the
practice of emergency medicine.
We will highlight three specific subsets of HCFA
regulations that have significantly impacted emergency
physicians. These are the evaluation and management
documentation guidelines, EMTALA, and accusations of fraud and
abuse.
Firstly, regarding documentation guidelines, these are
constantly-changing regulations. HCFA has issued rules for
physician documentation in 1995 and in 1997. In addition, in
1999, in conjunction with the AMA CPT editorial panel, another
set of rules were submitted to HCFA. These 1999 rules, however,
were never issued because they were felt to be too complex.
HCFA is now in the process of drafting yet another version of
the evaluation and management guidelines. Currently, either the
1995 or the 1997 guidelines are considered acceptable for
billing purposes.
Needless to say, there is a lot of uncertainty in which
rules to use, and this is confusing for everyone. A
considerable amount of time must be spent in learning the
various rules and how to comply with them. Consequences of not
complying are great. Not only can non-compliant charts be down-
coded and thereby decrease physician and hospital
reimbursement, but doctors and hospitals may be subject to
significant fines and penalties as well.
Doctors as well as hospitals and billing entities spend
enormous amounts of time learning how to comply with the rules
and regulations. The documentation guidelines and many other
regulations create intense frustration for doctors for several
reasons. First, the rules and regulations do not improve
patient care, and often detract from it by making doctors focus
on overly-burdensome charting requirements, when they should be
and want to be focusing on caring for their patients.
Second, most time spent learning the rules is often wasted
because the rules change almost as soon as they are learned.
Thirdly, the time spent learning to comply with these
unnecessary regulations could be better spent learning about
advances and updates in medical knowledge. The limited time we
have for continuing medical education is instead taken up with
trying to learn about HCFA's latest rules and how to comply
with them.
There is interference of the doctor/patient relationship.
Because documentation requirements must be met in order to
charge for the various levels of care, doctors are spending
time counting elements of the chart instead of taking care of
patients. For example, if a doctor cares for a patient with a
life-threatening medical problem, such as a heart attack, he or
she would normally charge a level 5.
However, in order to receive reimbursement at a level 5,
the review of systems section of the charge must show that ten
or more systems of the body were discussed with the patient.
This means, for instance, that a doctor must ask a patient a
lot of unnecessary and irrelevant, and frequently annoying
questions. For instance, a doctor would need to inquire whether
a patient was having problems with their skin, bone and joints,
eyes and ears or mental health. For a patient with a serious
medical condition such as a heart attack, these are usually
irrelevant, and frequently annoying. However, should the doctor
fail to do this, the chart will be down-coded to a level 4 or
possibly a level 3. This could amount to a decrease of several
hundred dollars per patient. Needless to say, a doctor will
spend time meeting these unnecessary requirements when they
should be at the patient's bedside.
This wasting of time with unnecessary requirements is
definitely problematic in the emergency department where we are
under constant pressure to work as quickly as we can, and often
are making critical decisions with patients who are seriously
ill or injured where every second counts. The last thing that
should interfere with our efforts to take care of our patients
is unnecessary charting regulations. In the book, ``Time to
Heal,'' author Kenneth Ludmerer, M.D. emphasizes that a key
element in the decline of quality medical care in this country
relates to the lack of time that physicians now have with their
patients. Although physicians recognize the need to provide a
medical record that is complete, and justifies the medical
complexity and decision-making that is taking place, the
current regulations do not provide for this and actually work
against both the doctor and the patient, especially in the
emergency department.
We have increased and not decreased costs for the patients
because of these regulations. The complexity of the rules means
that the extra people that must be hired by physicians and
hospitals to ensure compliance with these rules which have
become so burdensome that there are now additional entire full-
time equivalents that are hired for these roles. These include
coders, billers and lawyers. The cost of employing these people
is passed on to the patients.
Secondly, I would like to address the rules of EMTALA. This
has basically become an unfunded mandate for emergency
physicians. As emergency physicians, we are required by law to
see all patients who present to the hospital for medical care.
As directed by EMTALA, all patients must receive a medical
screening exam and be stabilized. This HCFA obligation applies
to all patients, not just Medicare beneficiaries. Emergency
physicians provide this care without concern for the patient's
insurance coverage or ability to pay. Because of this, we have
become the nation's health care safety net by providing care
for patients who cannot afford to go elsewhere.
Most doctors' offices require some form of payment up front
for their medical care. Because emergency physicians cannot do
this, those who cannot pay often come to the emergency
department for their medical care. The cost of caring for
patients in the emergency department is great, and it often
goes uncompensated. Many patients pay much less than the cost
of their services, and frequently nothing at all.
Although emergency physicians strongly support our role as
providers of the health care safety net, we do not understand
why it has been legislated, in effect, that we work for free. I
am not aware of any other segment of society that is required
by Federal law to perform any work or service for which there
is no reimbursement.
If we are required by law to do a job, adequate
reimbursement should follow. Since it does not, the end result
is that either other patients are charged more so that expenses
can be met, or hospitals and doctors will lose so much revenue
that hospitals will be forced to close and doctors will leave
their practices. This is not idle speculation. Emergency
departments and/or hospitals are closing at a steady rate in
all areas of the country. When a hospital closes, everyone
loses.
The unfunded mandate presents a threat to the health care
safety net. We have already seen this across the nation in
emergency department overcrowding that occurs in areas where
patients have no other access to health care. Waiting times to
see a doctor are not consistent with safe medical care, and
many people have suffered from the delays and mistakes that are
unavoidable in these circumstances. Worst of all is a patient
arriving at a hospital with a life-threatening emergency only
to find the doors closed and no one there to help them.
Congress must address this problem and provide funding for
essential services provided by emergency physicians. Congress
must also require HCFA to recognize the true cost of providing
emergency care.
Next I would like to address new regulations known as
advance beneficiary notices. This creates a conflict of
interest. HCFA regulations have become so complex that they
have now created new regulations that are in violation of their
old ones. New requirements by HCFA state that lab tests cannot
be ordered without a diagnosis that justifies the test.
However, in the emergency department, we are usually doing the
test in order to obtain a diagnosis. Often there is no old
chart to review and the patient is unable to give any history
due to the seriousness of their medical condition.
In cases where there is no diagnosis prior to ordering the
tests, HCFA how requires that a patient sign an ABN, or advance
beneficiary notice, stating that they will be responsible for
the charge. What is created here is a situation where
physicians must either violate EMTALA by seeking insurance
information and proof of ability to pay prior to completion of
the medical screening, or we must violate HCFA requirements by
ordering the tests without a diagnosis. It is simply not
possible to satisfy HCFA requirements for lab tests in the
emergency department without violating HCFA--or rather, EMTALA
by asking for inappropriate information and/or delaying care.
In addition, HCFA's recently issued Medicare Hospital
Outpatient Prospective Payment Systems Regulation requires the
hospital outpatient department to provide a Medicare
beneficiary, or an ABN, prior to delivery of services. This
requirement conflicts with previous guidance issued by HCFA and
the OIG. In November 1999, OIG and HCFA issued a special
advisory bulletin on the patient anti-dumping statute. The OIG
and HCFA stated that a hospital would violate EMTALA if it
delayed a medical screening exam or necessary stabilizing
treatment in order to prepare an ABN and obtain beneficiary
signature. When it is not possible for doctors and hospitals to
comply with one rule without violating another, we have a
problem.
Thirdly, concerns regarding fraud and abuse. The
complexity, contradiction and overall confusion HCFA has
created make it almost impossible to avoid errors in coding and
billing. However, the assumption is that inaccurate coding and
billing is fraud. Some fraud and abuse may occur in medicine,
just as in any segment of society.
We believe that in medicine, this pertains to a very small
minority of doctors. The overwhelming majority are honest and
very hard working. Physicians and their billing staffs are
overwhelmed by the number and complexity of regulations, and
even those who have a full-time job interpreting the rules do
not know them all or agree on how to interpret them. With over
100,000 pages of Medicare rules and regulations, many of which
are vague or contradictory, it is no wonder that mistakes are
made. However, instead of educating physicians and their
staffs, HCFA chooses to assume that doctors are guilty of fraud
and to actively pursue enforcement initiatives.
The truth is that the vast majority of doctors are honest
and are struggling to understand and comply with an impossible
system. The fear of audits, prosecution and fines of many
thousands of dollars has had a devastating effect on physician
morale. In addition, we have to cope with more patients, sicker
patients, unnecessary paperwork, decreased time with our
patients and decreased reimbursements. It should come as no
surprise that physicians are leaving the practice of medicine.
In conclusion, government regulations have become so
complex and burdensome that doctors can no longer practice
medicine. All we want to do is take care of our patients. We
want to function as physicians, not lawyers, accountants or
lawmakers. As emergency physicians, we want to ensure access to
emergency care for everyone who feels they have an emergency
medical condition, and to secure the health care safety net.
Rules and regulations that waste our time and interfere with
our ability to care for our patients must be eliminated.
Adequate and fair reimbursement must be secured for
services that we provide. And freedom from fear of prosecution
for fraud and abuse must be ensured in the honest practice of
medicine.
Thank you for holding these hearings and for the
opportunity to submit this testimony for the record.
Chairman Chambliss. Thank you very much, Dr. Reynolds. You
raised some very interesting questions.
And now we will move on to Mr. Stauter.
[The prepared statement of Barbara J. Reynolds follows:]
Prepared Statement of Barbara J. Reynolds, M.D., President-Elect,
Kentucky Chapter, American College of Emergency Physicians
Emergency physicians provide a unique role in healthcare in the
United States. America's Emergency Departments are the nation's
healthcare safety net. Because of this unique role and the constraints
inherent in our practice of Emergency Medicine, HCFA's burdensome rules
and regulations have had a particularly detrimental effect. All of the
regulations affecting physicians and many of those affecting hospitals
impact the practice of Emergency Medicine. We will highlight three
specific subsets of HCFA regulations that have significantly impacted
Emergency physicians. These are the E/M Documentation Guidelines,
EMTALA and accusations of Fraud and Abuse.
1. documentation guidelines
A. Constant changing of regulations. HCFA has issued rules for
physician documentation in 1995 and 1997. In addition, in 1999, the
AMA's CPT editorial panel submitted another proposal to HCFA. The 1999
rules were never issued by HCFA because they were felt to be too
complex. HCFA is now in the process of drafting yet another version of
the E/M guidelines. Currently either the 1995 or 1997 guidelines are
acceptable for billing purposes. Needless to say this constant
uncertainty and changing of the rules is confusing for everyone. A
considerable amount of time must be spent teaming the various rules and
how to comply with them. The consequences of not complying are great.
Not only can noncompliant charts be downcoded and thereby decrease
physician and hospital reimbursement, but doctors and hospitals may be
subject to significant fines and penalties as well. Doctors as well as
hospitals and billing entities spend enormous amounts of time learning
about how to comply with rules and regulations. The documentation
guidelines and many other regulations create intense frustration for
doctors for several reasons. First, the rules and regulations do not
improve patient care and often detract from it by making doctors focus
on overly burdensome charting requirements when they should be, and
want to be focusing on caring for their patients. Second, the time
spent learning the rules is often wasted since the rules change almost
as soon as they are learned. Third, the time spent learning to comply
with these unnecessary regulations could be better spent learning about
advances and updates in medical knowledge. The limited time that we
have for continuing medical education is instead taken up with trying
to learn about HCFA's latest rules and how to comply with them.
B. Interference in Doctor-Patient Relationship. Because
documentation requirements must be met in order to charge the various
levels of care, doctors are spending time counting elements of the
chart instead of taking care of patients. For example, if a doctor
cares for a patient with a life threatening medical problem such as a
heart attack, he or she would normally charge a Level 5. However, in
order to receive reimbursement at a Level 5, the Review of Systems
section of the chart must show that 10 or more systems were discussed
with the patient. . This means that the doctor must ask the patient a
lot of unnecessary and irrelevant questions. For instance the doctor
would need to inquire whether the patient was having problems with
their skin, bones and joints, eyes and ears or mental health. For the
patient with a serious medical condition such as a heart attack, these
are usually irrelevant. However, should the doctor fail to do this, the
chart will be downcoded to a level 4 or even a 3. This can amount to a
decrease of several hundred dollars per patient. Needless to say,
doctors will spend time meeting these unnecessary requirements when
they could be with their patients. This wasting of both physician and
patient time is especially problematic in the Emergency Department
where we are under constant pressures to work quickly and often take
care of critically ill or injured patients for whom every second
counts. The last thing that should interfere with our efforts to care
for our patients is unnecessary charting regulations. In ``Time to
Heal'' author Kenneth Ludmerer, NM emphasizes that a key element in the
decline of quality medical care in this country relates to the lack of
time that physicians now have with their patients. Although physicians
recognize the need to provide a medical record that is complete and
justifies the medical complexity and decision making that has taken
place, the current regulations do not provide for this and actually
work against both the doctor and patient, especially in the Emergency
Department.
C. Increased not decreased costs for patients. The complexity of
the rules means that extra people must be hired by physicians and
hospitals to insure compliance with the rules. These extra people
include coders, billers and lawyers. The cost of employing these people
is passed on to patients.
2. emtala
A. Unfunded mandate. As Emergency physicians, we are required by
law to see all patients who present to the hospital for medical care.
As directed by EMTALA, all patients must receive a medical screening
exam and be stabilized. This HCFA obligation applies to all patients,
not just Medicare beneficiaries. Emergency physicians provide this care
without concern for the patient's insurance coverage or ability to pay.
Because of this we have become the nation's healthcare safety net by
providing care for patients who cannot afford to go anywhere else. Most
doctors' offices require some form of payment ``up front'' for medical
care. Because Emergency physicians do not do this, those who cannot pay
often come to the ER for their medical care. The cost of caring for
people in the Emergency Department is great and often goes
uncompensated. Many patients pay much less than the cost of the
services and frequently nothing at all. Although Emergency physicians
strongly support our role as providers of the healthcare safety net, we
do not understand why it has been legislated, in effect, that we work
for free. I am not aware of any other segment of society that is
required by Federal law to perform any work or service for which there
is no reimbursement. If we are required by law to do a job, adequate
reimbursement should follow. Since it does not, the end result is that
either other patients are charged more so that expenses can be met or
hospitals and doctors will lose so much revenue that the hospitals will
be forced to close and doctors will leave their practices. This is not
idle speculation. Emergency Departments and/or hospitals are closing at
a steady rate in all areas of the country. When a hospital closes,
everyone loses. The unfunded mandate presents a threat to the
healthcare safety net. We have already seen this across the nation in
the Emergency Department overcrowding that occurs in areas where
patients have no other access to healthcare. Waiting times to see a
doctor are not consistent with safe medical care and many people have
suffered from the delays and mistakes that are unavoidable under these
circumstances. Worst of all is a patient arriving at a hospital with a
life-threatening emergency only to find the doors closed no one there
to help them. Congress must address this problem and provide funding
for the essential services provided by emergency physicians. Congress
musts also require HCFA to recognize the true costs of providing
emergency care.
B. Advanced Beneficiary Notices create conflict of interest. HCFA
regulations have become so complex that they have now created new
regulations that are in violation of their old ones. New requirements
by HCFA state that lab tests cannot be ordered without a diagnosis that
justifies the test. However in the Emergency Department we are usually
doing the test to obtain a diagnosis. Often there is no old chart to
review and the patient is unable to give any history due to the
seriousness of his medical condition. In cases where there is no
diagnosis prior to ordering the tests, HCFA now requires that a patient
sign an ABN stating that they will be responsible for the charge. What
is created here is a situation where physicians must either violate
EMTALA by seeking insurance information and proof of ability to pay
prior to completion of medical screening or we must violate HCFA
requirements by ordering tests without a diagnosis. It is simply not
possible to satisfy HCFA requirements for lab tests in the Emergency
Department without violating EMTALA by asking for inappropriate
information and/or delaying care. In addition, HCFA's recently issued
Medicare Hospital outpatient prospective payment system regulation
requires hospital outpatient departments to provide a Medicare
beneficiary and an ABN prior to delivery of services. This requirement
conflicts with previous guidance issued by HCFA and the OIG. In a
November 1999 OIG/HCFA ``special advisory bulletin'' on the patient
antidumping statute, the OIG and HCFA stated that a hospital would
violate EMTALA if it delayed a medical screening exam or necessary
stabilizing treatment in order to prepare an ABN and obtain a
beneficiary signature. When it is not possible for doctors and
hospitals to comply with one rule without violating another, we have a
problem.
3. fraud and abuse
The complexity, contradictions and overall confusion HCFA has
created make it almost impossible to avoid errors in coding and
billing. However the assumption is made that inaccurate coding and
billing is fraud. Some fraud and abuse may occur in medicine just as in
any segment of society. We believe that in medicine, this pertains to a
small minority of doctors. The overwhelming majority are honest and
very hard working. Physicians and their billing staffs are overwhelmed
by the number and complexity of the regulations and even those who have
a full time job interpreting the rules do not know them all or agree
with how to interpret them. With over 100,000 pages of Medicare rules
and regulations, many of which are vague or contradictory, it is no
wonder mistakes are made. However, instead of educating physicians and
their staffs, HCFA chooses to assume doctors are guilty of fraud and to
actively pursue enforcement initiatives. The truth is that the vast
majority of doctors are honest and are struggling to understand and
comply with an impossible system. The fear of audits, prosecution and
fines of many thousands of dollars is having a devastating effect on
physician morale. In addition we have to cope with more patients,
sicker patients, unnecessary paper work, decreased time with our
patients and decreased reimbursements. It should come as no surprise
that physicians are leaving the practice of medicine.
conclusion
In summary, Government regulations have become so complex and
burdensome that doctors can no longer practice medicine. All we want to
do is take care of our patients. We want to function as physicians, not
lawyers, accountants, or lawmakers. As Emergency physicians we want to
insure access to emergency care for anyone who feels they have an
emergency medical condition and to secure the healthcare safety net.
Rules and regulations that waste our time and interfere with our
ability to care for patients must be eliminated. Adequate and fair
reimbursement must be secured for the service we provide. Freedom from
fear of prosecution for fraud and abuse must be insured in the honest
practice of medicine.
Thank you for holding this hearing and for the opportunity to
submit testimony for the record.
STATEMENT OF WILLIAM E. STAUTER, ADMINISTRATOR, SAYRE CHRISTIAN
VILLAGE NURSING HOME, INC.
Mr. Stauter. Chairman Chambliss, Dr. Fletcher, I thank you
for the opportunity to be here today and to share in the panel.
I need to tell you a little bit about my perspective. We
represent a nursing home here in Lexington. That is a little
different from hospitals and doctors, but we certainly tie
together with hospitals and doctors. Sayre Christian Village
Nursing Home, which is also known as Moberly Manor, is 109-bed
church-related, non-profit facility. All of our beds are duly
certified for Medicare and for Medicaid. We have been serving
the community for 16 years as a part of a village known as
Sayre Christian Village.
On campus with us are two apartment buildings for
independent seniors. The first one is known as the Baunta
Building, which is a HUD subsidized facility which provides
direct rent payment for low-income seniors. Friendship Towers,
the other building, is a market-rate apartment building. As a
part of our campus arrangement, folks who live in those
apartments have priority admission when they need to come to
the nursing home for any reason.
Because we have a good organization, we have two apartment
buildings with over 100 residents in each building, we have a
good reputation in the community, and we have a good link with
our supporting churches in the area, the independent Christian
churches, we find ourselves in that interesting position where
we are always full in the nursing home.
When hospitals have someone who needs nursing home
placement, they call us to inquire, and we inform them often
that we have no vacancy. So our facility is not full of high-
care Medicare residents. Rather, we find ourselves serving
about a 4-percent Medicare population in our facility. The
bigger problem for us is the issue of Medicaid, which is also a
HCFA program, but we have 75 Medicaid recipients, typically, in
our facility, 70 percent of our population is Medicaid. Our
residents, about 45 percent of them come from our sponsoring
churches, about 35 percent of them come directly from our
apartments. So there is that very good tie.
Two issues I would like to speak to today to are
reimbursement, one, and the other being regulations. I am going
to give you a rather simple overview of this. HCFA oversees
these two programs, and these recent reductions we have heard
about through the prospective payment system have also affected
the nursing homes in a significant way.
In the past we were reimbursed on the basis of cost reports
that we submitted annually. So we were submitting our costs and
being reimbursed on that level. That system has changed now for
nursing homes in that we are told what the rate will be to care
for a particular resident, a particular kind of resident, based
on their care needs, based on an average for the cost of that
care in the past. Now that payment comes to the nursing home,
and the nursing home pays for the ancillary services--such
things as laboratory services, x-ray services, oxygen and
physical therapy and pharmacy--and we keep what is left to
cover our expenses. So we find ourselves often, in the Medicare
arena at least, scrambling to cover our expenses because we are
getting less and less money for our services.
We hear of individuals who cannot find placement in a
nursing home because the nursing home has figured out they
simply cannot afford to provide the kind of care that that
person needs at that reimbursement level. An example would be a
resident who needs to have regular kidney dialysis where they
would be transported to a dialysis unit and then returned to
the nursing home. The nursing home is responsible for the
ambulance transport back and forth, and for the payment of the
dialysis unit. And the reimbursement for those services is such
that there is virtually nothing left to cover the expenses of
feeding that resident and providing the bed and so on.
The timing of the implementation of the prospective payment
system also had an impact on us. Even though we only have 4
percent Medicare generally, when the system was put in place,
we were moved really much too quickly from the old system--the
computer system I am speaking of here, which worked--to a new
system which had to be developed rather quickly because of HCFA
deadlines. So when we went to the new system, Administar simply
was not able to process claims. And we went for a period of
about 5 months not being able to get any payment for any of our
Medicare claims.
And then when the system finally was opened up to us, we
had to process all of the 5-month-old claims and get them
cleaned up before we could go to the next month and begin
looking at the 4-month-old claims. So this slow-down in our
reimbursement really did have an effect on us. We budget
basically to break even, we do not budget to make any money.
But when you do not receive all the revenue you have coming, it
does have a major impact on your operation.
The most significant issue we face in the nursing home is
the Medicaid reimbursement. We are delighted to say that the
Medicaid program in Kentucky has been revamped and a new system
of reimbursement was put in place as of January 1. But prior to
that, the anticipated revenue, based on our expenses, basically
was not happening. In the time when we were competing for nurse
aides, basically--that is our most obvious level of employee--
competing for nurse aides with many other nursing homes and
hospitals, and fast-food restaurants and places like Wal-Mart
and K-Mart who were paying more money than we could afford to
pay, we had to raise rates of pay in order to maintain and
attract staff to give decent care.
When we submitted our cost report to Medicaid, they said,
your wages are way out of line, we cannot afford to pay that.
We submitted the proper Schedule J in Kentucky, which is a
request for an exceptional payment because of unusual
circumstances. That was denied 2 years in a row.
The result of that is, for our Medicaid patients, we were
reimbursed at a rate that was $23 per patient per day less than
our actual cost. Under the new system, that is much improved.
We are now only receiving $10 a day less than it costs for us
to provide care for those Medicaid residents.
When you think about that, you think about per day per
patient so you can understand what it means, but if you lose
$23 a day per Medicaid patient, and you have 75 patients in the
facility, you are losing $1,700 a day. You are losing $50,000 a
month. You are losing $600,000 a year. Now we offset that in
other ways. We charge private pay people more than their fair
share, and the private pay people are actually subsidizing the
Medicaid patients in our facility. Under the new system, where
we only lose $10 a day--and I emphasize only lose--we lose $750
a day now. We lose $22,000 a month, we lose $270,000 a year on
these folks.
How do we cover this revenue shortfall? This is a question
we asked. We have chosen in our facility not to cut back on
patient care. We have not eliminated any staff, we have had to
make cuts in our expenditures that have been costly and have
affected our operation significantly, but I can state
unequivocally that patient care in our facility has not
suffered. We chose to borrow money to be able to make our
expenses. And from about Christmastime 1998 through 1999, we
borrowed right at $300,000 in order to pay our expenses.
The new Medicaid reimbursement system is helping us, we are
breaking even, maybe even gaining a little bit, but nothing
like what it is going to take to pay back $300,000. We are in
the process right now of developing our budget for next year,
and the question is, how much more do we have to charge our
private pay folks to subsidize the Medicaid folks? Another way
of stating that is, what would happen to the Medicaid folks if
we could not accept them? There are a number of facilities who
are not participants in the Medicare/Medicaid program. Their
annual survey or annual licensure is a much more simplified
process than the process we go through when we have Medicare/
Medicaid certified beds. The inspection process is much more
complicated.
There are folks who are saying, if we cannot break even on
these folks, maybe we ought to get out of that business. And
they are attempting to get out of the Medicaid/Medicare
business. There are not enough private pay residents out there
to keep all the nursing homes full, and even if we opted out of
the system, present regulations say we cannot just put Medicaid
folks out on the street. We have to find a place for them, and
they have to be willing to go.
So the practical effect of that is, if we decided not to
serve the Medicaid population, we have to serve the Medicaid
population anyway until they no longer need nursing services,
which in many cases means for the rest of their life.
We understand and appreciate the government's need to
monitor expenses. We all need to do that. But when we cut back
spending at the Federal level at the expense of nursing home
facilities and others, we are just passing the problem to
another area. We regularly hear of nursing homes filing for
bankruptcy. The trade literature says that over 10 percent of
the nursing homes in the United States are presently receiving
bankruptcy protection. And the news on a regular basis reports
additional facilities that are going into bankruptcy. That is a
concern.
The second area I want to address is the area of
regulations, and I am not going to go into a lot of detail, we
have already heard a good bit of that.
But when I began working in long-term care some 17 years
ago, I was surprised to hear that long-term medical care, as an
industry, is the second-most regulated industry in the United
States, second only to nuclear power plants. We were not saying
that proudly, saying, look at us, wow, we have lots of
regulations. We were complaining that we were burdened with
this crushing weight of regulations.
And since that time, in response to our plea, we have
received additional layer after layer after layer of
regulations. These drive up our costs and make our
administration of our facilities very complex, very difficult.
One option that is not realistically available to us is to
simply cut back on the care we provide our residents. If we
participate in the program, we must meet their standards. And
the program that determines these standards also determines how
much pay we will get, and they are saying we cannot afford to
pay you what it costs you to operate because your facility's
operation is so expensive.
We might look at the state surveyors who come in for our
annual survey and certification licensure inspections.
Surveyors are increasingly becoming more thorough, to the point
of being nit-picky. One of the problems is that the Federal
folks, the HCFA folks, have what they call look-behind surveys.
If they come into our facility after the state surveyors have
been here and find something, we are in trouble because we did
not do it right, but the state surveyors are in trouble because
they did not find it. So they do not leave any stones unturned.
The number of surveyors on survey teams gets more and more
every year. The length of the stay in the facility gets longer
every year, and the process has changed in its attitude. HCFA
has put in place civil money penalties, fines when we do not do
something just right, as an attempt to make everybody meet
their standards. The process has clearly changed from a
collaborative effort, where we are trying to provide good care
and make sure that that is done, to a punitive program, an
adversarial relationship, where we fear the surveyors coming in
because they are going to do something bad that will hurt our
operation.
We often complain about the record-keeping that we are
required to maintain. One example might help you to understand
that. As a part of the PPS program, I think all at once it came
along, we now have to transmit a minimum data set on every
resident on a regular cycle, when they are admitted, a few days
after that, quarterly, any time there is a significant change,
we have to submit a minimum data set report, an MDS report, by
computer, electronically, to a central location where it is
reviewed.
We were not doing that on a computer. Most facilities in
Kentucky were not, so we had to find computer software that
would do what we needed to do. We had to buy hardware to
accomplish that, and then we had to earmark staff to make sure
that it was done right. We were told very bluntly up front,
your reimbursement is going to be based on what is in that
report, so you want your report to be right.
So we designated two RNs to run this system, and we found
out rather quickly that that will not work because RNs have
days off, there are holidays, there are vacations, there are
times when they were sick, so we have to have backup staff
trained to fill in for them when they are not there.
Do you have a guess what an RN costs for a year? Two RNs
and backup RNs, plus the computers plus the room to put the
computer in and all the work that they do, that is an
additional layer of expense to us. It did not eliminate
anything, we still have to do all the other things, we keep the
charts at the nurse's stations, keep all the medical records up
to date there, but we have now a duplicate system tied in to
the computer.
And it is interesting that, if one of those codes that is
sent in--a code might be, for instance, that a one says they
walk without assistance, two might mean they need some help,
three might mean they cannot walk at all. Those codes, when
they are put in the record, just because of the volume of those
records, you can make a mistake. The attitude coming down from
HCFA is, any mistake must be fraudulent, not just an honest
mistake, and the attitude is something that I am greatly
concerned about.
Additionally, the MDS system says, tell us everything that
is going on in the life of every person in your facility, so
that before the surveyors come out they know everybody who has
decubitus ulcers, they know everybody who has had excessive
weight loss, they get all these reports computerized and sorted
out, they come in our facility and go right to the room of the
person who has had a problem. It seems to be that they are just
using our own information against us to punish us for reporting
what is going on in our facility for reimbursement.
Some facilities we talked about are opting out of the
program. One of the reasons why I think people might be opting
out, either facilities out of the program or individuals opting
out of the business and doing something else for a living is
the attitude that is increasingly seen, at least coming out of
Washington, as hostile to nursing homes.
A recent HCFA study was reported in an article in the
Herald Leader here in Lexington. It was an Associated Press
article, so the Herald Leader did not write it, and I am not
criticizing Herald Leader in any way. The article states that,
many of the nation's nursing homes are so understaffed, they
may be endangering the welfare of the patients. The headline on
the article was a quote from Senator Chuck Grasley from Iowa,
and it simply said, Nursing Home Woes Turn Stomach. And they
were describing an incident where a resident had skin break-
downs and weigh loss and some major problems.
And they were saying basically all nursing homes are like
that. They are full of people who are in it to defraud the
government, they do not care about giving decent care. I want
to say that that is not true. Those of us who are in this
business care very deeply for our patients. We want to care for
our patients. One of the problems is the regulations drive our
costs up to the point where we do not make enough money to
cover our costs, and we need to address that issue.
State surveyors used to be called consultants. I remember
the first time, brand-new in a nursing home, I met with the
survey team, and I called them inspectors. And they quickly
told me they were not inspectors, I could call them surveyors,
I could call them consultants. We are in this together, we are
here to help you. One of the three greatest lies, I guess, I am
from the government I am here to help you. [Laughter.]
The surveyors, the consultants worked with us to help us
solve problems. These folks go from facility to facility to
facility. They know what is going on. And if we have a problem
and we have not figured out how to do it, they can say, ABC
Nursing Home did this or that, and that really worked, you
might try that.
I remember clearly the day the team leader of a survey team
said to me, we are no longer consultants. We are no longer here
to help you, we are here to find deficiencies, we are here to
write citations. If you need help, hire a consultant.
I just think that change has really affected the nursing
home operation. Quality care for our residents ought to be our
common goal and we ought to work together for that.
The implications, I think, of all of this are ominous to
me. The pendulum swings, we know that. Something has changed,
the pendulum swings, it will come back. And this pendulum will
come back. My question is, how many nursing homes will go out
of business before it comes back to a more reasonable place?
Let us remember that any changes that are made at the Federal
level have an impact on lots and lots and lots of people all
across the country. They affect our industry, our ability to
survive first, our ability to maintain adequate staffing, our
ability to provide good patient care. I hope we can work
together to provide the resources and achieve a balance between
the quality of care we can provide and the cost of providing
that care so that our organizations can become stable and solid
and able to meet the needs of our residents on a long-term
basis.
Thank you.
Chairman Chambliss. Thank you very much, Mr. Stauter. And
we will move on to Mr. House.
[The prepared statement of William E. Stauter follows:]
Prepared Statement of William E. Stauter, Administrator, Sayre
Christian Village Nursing Home, Inc.
patient care issues and hcfa
Sayre Christian Village Nursing Home, Inc., also known as Moberly
Manor, is a 109 bed, church-related not-for-profit facility. All our
beds are dually certified for Medicare and Medicaid. We have been
serving the community for over sixteen years as part of a village
operated by our parent organization, Christian Benevolent Outreach,
Inc. This village is C.B.O.'s only operation. Sayre Christian Village
also includes a HUD subsidized senior apartment building (The Baunta
Building) and a Market rate senior apartment building (Friendship
Towers). Over one hundred residents live in each of these buildings.
About forty-five percent (45 percent) of our nursing home residents
are members of Independent Christian Churches, our sponsoring church
group. Some thirty-five percent (35 percent) of our nursing home
residents lived in our apartments prior to their admission to the
nursing home. In accepting new admissions, we give priority to our
apartment residents and then to Christian Church members.
Because of the apartment buildings on campus, our close ties with
our sponsoring churches, and our excellent reputation in the community,
we maintain nearly 100 percent occupancy. When hospitals inquire about
admitting higher care patients, we often cannot accept them because no
bed is available. Thus, Medicare residents represent only 4 percent (4
percent) or less of our nursing home population. On the other hand, our
census includes some seventy-five (75) Medicaid recipients. They make
up about seventy percent ( 70 percent) of our total population.
HCFA activities have a strong impact on our operations. They can be
divided into two major categories.
i. reimbursement
HCFA (Health Care Financing Administration) is the Federal agency
which oversees two major programs, Medicare and Medicaid. These two
programs represent a significant portion of the revenue to nursing
homes.
Recent reductions in Medicare payments have taken their toll on the
financial operation of all nursing homes. A major change was the
recently implemented Prospective Payment System. In the past, we were
reimbursed for actual costs based on reports filed by each facility
annually. Under PPS, the nursing home now receives payment for the
total care of the patient based on past average costs. We pay for the
``outside'' services such as labs, x-ray, oxygen, therapy, and pharmacy
and keep what is left to cover our expenses. In many instances, this
results in the nursing home ending up with less money to cover its
expenses. We hear of individuals who cannot find placement because
nursing facilities cannot afford to provide the care. Kidney Dialysis
is a prime example of a long term procedure where the nursing home will
lose money.
The timing of the implementation of the PPS system also caused us
some financial hardship. We were moved too quickly from the ``old''
computer system which worked, to a ``new'' system which did not work
initially. Our reimbursement for Medicare residents was delayed as much
as 5 months. This was a temporary problem, but it did have significant
impact on our operation. As a facility, we budget to ``break even''
financially. Such delays are painful.
The most significant financial issue we face is Medicaid
reimbursement. Because we are a benevolent organization, we desire to
provide services to people in our community regardless of their ability
to pay. Because we serve a HUD facility where residents have low
income, we may have higher than normal Medicaid usage in our facility.
We have seen an improvement in the Medicaid system in Kentucky with
the implementation of a new system as of January 1, 2000. We are
grateful that the industry was able to have significant input in the
development process. We can now report that we receive only $10.00 per
day less than our actual costs to care for a Medicaid resident. Prior
to the implementation of the new system, we were losing as much as
$23.00 per day per resident.
We talk about Per Patient Day revenues and expenses in order to
understand what is happening. We must recognize that to lose $23.00 per
day for seventy-five residents is to lose $1,700.00 day, $50,000.00 a
month, $600,000.00 a year. When our reimbursement is improved to cause
us to lose ``only'' 10.00 per day, we understand that we now lose
``only'' $750.00 day, $22, 000.00 a month, $270,000.00 a year to care
for indigent residents.
How do we cover this revenue shortfall? We have chosen not to cut
back on care provided to our residents. I can state unequivocally that
resident care has not suffered in our nursing home. We chose, instead,
to borrow $300,000.00 during 1999 to stay in operation. We are now
preparing our budget for next year. Will we charge our private pay
residents more than their fair share to cover the shortfall from our
Medicaid population? Will we be able to raise additional support from
our constituency? It should be obvious to all that we cannot continue
to lose money every month and stay in business.
The Boren Amendment (1980) guaranteed reasonable and adequate
Medicaid reimbursements to efficiently and economically operated
facilities. Unfortunately, it was repealed in 1997. I strongly urge its
reinstatement.
We understand and appreciate that the government has a major
concern with their expenditures. Cutting back on spending sounds good
until we realize that nursing homes across the country now must do
their jobs while receiving significantly less revenue. We regularly
hear reports of nursing homes filing for bankruptcy. Nationally, about
10 percent (10 percent) of all nursing homes have filed and new reports
continue to arrive.
ii. regulations
When I began working in long term care some seventeen years ago, I
was surprised to learn that we are the second most regulated industry
in the country, following nuclear power plants. Since that time, the
regulations have regularly been increased. Layers upon layers of new
regulations drive up our costs and make our operations very complex and
difficult to administer.
One option which is not realistically available to us is to cut
back on the care we provide our residents. It is paradoxical that,
while our funding is being reduced, we are being held to ever higher
standards. In order to participate in the Medicare and Medicaid
programs, annual certification surveys are conducted by the state. The
state surveyors are themselves subject to Federal look-behind surveys.
The threat of backlash from the Federal level causes state surveyors to
be extremely thorough in their inspections. The number of inspectors on
each survey team is increasing, and the number of days spent in
facilities is also greater over time. The institution and expansion of
fines for deficiencies is used to assure compliance with regulations.
The process has clearly changed from collaborative to punitive.
We often complain of the burden of record keeping in long term
care. An example may help you to understand our plight. Not long ago,
we were required to begin transmitting resident data (MDS--Minimum Data
Set) by computer to a central agency where evaluation and monitoring
could be done. Our reimbursement is based on these transmittals, so
accuracy is extremely important. In order for us to comply with this
requirement, we had to make a major study to find computer software
that would meet our needs, then make a significant purchase of computer
hardware. To operate the system, we assigned two full time Registered
Nurses to learn the system and to operate it. Additional staff of this
quality (and cost) have been trained to cover for vacations and
illnesses. This extra program did not eliminate any paperwork, but it
certainly added to our operating costs.
Additionally, the MDS system is a massive Federal program to
identify what is going on in each facility. Information from this
system is the starting point for future surveys, giving them very
specific information about ``problems'' within the facility which must
be addressed.
Some facilities who have been participants in Medicare and Medicaid
are opting out of those programs. Nursing homes who do not to
participate in these programs are inspected annually for state
licensure, but the survey process for them is much simpler. Even when
facilities chose to opt out of Medicaid, they find it difficult to
discharge Medicaid residents if they desire to stay. So, they provide
care at less than their costs for an extended period of time. We must
ask what would become of the indigent if many facilities decided to opt
out of Medicaid?
The attitude coming from Washington seems to be increasingly
hostile toward nursing homes. A recent HCFA study, according to a
newspaper report in the Lexington Herald-Leader, states that ``many of
the nation's nursing homes are so understaffed they may be endangering
the welfare of the patients.'' The lead for the article states
``Nursing homes' woes `turn stomach' '', quoting Sen. Chuck Grassley,
R-Iowa.
State surveyors used to serve as consultants. They worked together
with nursing homes to identify and solve problems. I remember clearly
the day a survey team leader told us they were no longer able to help
us solve problems. They were in our facility simply to identify
problems and issue citations. If we needed help, we could hire
consultants. We believed then and now that the state surveyors are in a
excellent position to offer significant help. Quality resident care
should be our common goal.
implications
The implications are ominous. Those of us who really want to
provide quality care for our nursing home residents understand that the
pendulum swings. Sometimes it swings too far, but it always returns.
Let us remember that any changes at the Federal level can have
significant impact on the industry and our ability to survive, to
maintain adequate staffing and to provide good patient care. May we
work together to achieve a balance between quality of care and costs of
operation so we can maintain solid and stable organizations. Only then
can we serve our population well.
STATEMENT OF LENNIE G. HOUSE, CHIEF EXECUTIVE OFFICER, NURSES
REGISTRY AND HOME HEALTH
Mr. House. Mr. Chairman, Dr. Fletcher, I would like to
thank you very much for allowing me to speak on my firm,
company and industry.
We have been through many, many changes since the inception
of the Balanced Budget Act of 1997. From the change of a cost-
based system to a for beneficiary limit cost system, home care
saw 40 percent of their agencies close the doors. Prior to the
implementation of the Balanced Budget Act, home health
expenditures were budgeted for 5 years at $136.6 billion. When
the Balanced Budget Act was presented to Congress, the goal was
to save 16.1 billion. HCFA now estimates that the 5-year
spending will reach only 58.4 billion. This is a cut of 78.2
billion for a percentage of 57.2 percent to the originally-
presented budget. This is a far cry from the promised reduction
of 16.1 billion. And yet our biggest challenge still lays
before us.
The prospective payment system, known as PPS, is scheduled
to take effect October 1, 2000. As we have been anxious to move
into this new payment system, the fact remains that the final
PPS regulations have caused a great deal of concern to us and
to our beneficiaries. HCFA had the opportunity to transition
the PPS system in over a 4-year period. Instead, they decided
to transition all agencies in over the same period which begins
October 1, 2000.
As of July 3rd, the final regulations have been published.
This allows agencies 2 months to initiate software, billing,
clinical, financial and other changes to meet the needs and
demands of the PPS system. This is literally an impossible
task, and will probably be the demise of many, many agencies.
The PPS plan allows for projected expenditures for this
year of 11.3 billion. Because of the influx of baby-boomers
needing home health care, projected expenditures should not be
reduced from the proposed amount of 17 billion. The PPS plan
also calls for a 15 percent cut to home health expenditures
scheduled in the fiscal year for 2001. Combined with a low
reimbursement payment rate of 60 percent for initial claims and
a 40 percent catch-up at the end of the 60-day episodic period,
this, quite frankly, as a cost--cash flow is practically
impossible.
All of the above is cause for alarm. The PPS plan also does
not give agencies any administrative or judicial review with a
physical intermediary on PPS issues. And to my knowledge, this
is a first. We have no rights. Providers should have the right
to appeal, we should have the right to challenge the payments,
reimbursement and denial of care of our beneficiaries.
Surely Congress did not intend for HCFA to cut 57 percent
just for home care providers in the Balanced Budget Act of 1997
when the reduction was only intended to be 11 percent over 5
years. If our concerns are not heard, our patients will not be
able to receive home care benefits due to home health agencies
closing their door and inadequate payment for high-acuity
patients. Our elderly population, our parents, our grandparents
will be forced to leave their homes and obtain health care from
hospitals, nursing homes and other more costly alternatives to
home care. This threatens to destroy the infrastructure of home
care, which is the only barrier to the high cost of
institutional care.
I ask that you restore funding to the home health benefit
for PPS and to eliminate the bundling of services or supplies,
the 15 percent additional cut that is scheduled for the fiscal
year of 2001, and set an episodic reimbursement rate of 80
percent for the initial with a subsequent claim being paid at a
rate of 20 percent. I think with your help, your understanding
and support, home health agencies might be able to survive in
this new environment, but I very seriously urge you to take
into consideration the unbelievable obstacles that we have. To
go back and summarize, we have 2 months to meet the demands of
PPS.
As recently as this morning, before I came to testify at
this hearing, we are still struggling to find a computer system
that will allow us to bill and keep track of our receivables.
Because of the nuances in the payment, there is no software out
there at this time. I have tried every major vendor from Cimeon
Central. We have a outside vendor that we bill through
sometimes called CDP. They cannot supply it. So we are
literally at a loss to bill an account for our receivables. Two
months is not enough time for a home health agency to prepare
what it took HCFA 3 years to put the plan together.
Thank you very much.
Chairman Chambliss. Thank you very much, Mr. House. And I
am told by technicians that we are getting a little feedback on
the microphones so if you all will be sure and pull it closer
to your mouth as you speak, I think we will avoid that
feedback.
We will move on now to Mr. Hudson.
[The prepared statement of Lennie G. House follows:]
Prepared Statement of Lennie G. House, Chief Executive Officer, Nurses
Registry and Home Health
Thank you for allowing me to speak on behalf of Nurses Registry and
Home Health and the home health industry. We have been through many
changes since the inception of the Balanced Budget Act (BBA) of 1997.
From the change of a cost based system to a per beneficiary limit cost
system, home care saw 40 percent of agencies close doors. Prior to the
implementation of the BBA, home health expenditures were budgeted for 5
years at $136.6 billion. When the BBA was presented to Congress, the
goal was to save $16.1 billion. HCFA now estimates that the 5-year
spending will only reach $58.4 billion. This is a cut of $78.2 billion
or a cut of 57.2 percent of the original budget. This is a far cry from
the promised reduction of $16.1 billion.
And yet our biggest challenge still lies before us. For you see,
the Prospective Payment System (PPS) is scheduled to take effect
October 1, 2000. As we have been anxious to move into this new payment
system, the fact remains that the final PPS Regulations have caused a
great deal of concern to us and to our beneficiaries. HCFA had the
opportunity to transition PPS in over 4 years. Instead they decided to
transition ALL agencies in over the same period of time (October 1,
2000). As of July 3, the final regulations have been published. This
only allows agencies 2 months to initiate software, billing, clinical
and financial changes for PPS. This is an impossible task and will be
the demise of some agencies.
The PPS plan allowed for projected expenditures for this year of
$11.3 billion. Because of the influx of baby boomers needing home
health, projected expenditures should not be reduced from the proposed
amount of $17 billion. The PPS plan also calls for a 15 percent cut to
home health expenditures scheduled in fiscal year 2001, a low
reimbursement payment rate of 60 percent for initial claims and 40
percent at the end of 60 days and then 50 percent for all subsequent
claims. PPS also includes the bundling of non-routine medical supplies
from Part B suppliers. All of the above is cause for alarm. The PPS
Plan also does not give agencies any administrative or judicial review
with the fiscal Intermediary on PPS issues. Providers should have the
right to appeal and challenge the payment, reimbursement and denial of
care of the beneficiaries.
Surely, Congress did not intend for HCFA to cut 57 percent just
from home care providers in the Balanced Budget Act of 1997 when the
reduction was only supposed to be 11 percent over 5 years.
If our concerns are not heard, our patients will not able to
receive home care benefits due to home health agencies closing and
inadequate payment for high acuity patients. Our elderly population,
our parents, our grandparents will be forced to leave their home and
obtain healthcare from hospitals and nursing homes, a much more costly
alternative to home care. This threatens to destroy the infrastructure
of home health, which is the barrier to the high cost of institutional
care.
I ask that you restore funding to the home health benefit for PPS
and to eliminate bundling of supplies, the 15 percent additional cut
scheduled for Fiscal year 2001 and set an episode reimbursement rate of
80 percent for initial and subsequent claims with 20 percent at the end
of the episode.
I believe with your help, we can care for our elderly in their home
for many more years to come. Thank you very much.
STATEMENT OF ROBERT J. HUDSON, CHIEF FINANCIAL OFFICER, PATTIE
A. CLAY REGIONAL MEDICAL CENTER
Mr. Hudson. Thank you, Mr. Chairman and Dr. Fletcher, for
the opportunity to address you regarding the problems with
administering the delivery of health care under Medicare and
other regulations.
It is estimated that hospitals are subject to 132,000 pages
of regulations. I do not think you have heard that today yet,
but I will tell you that. Hospitals and providers have to apply
these rules and regulations to the 200,000 claims that are
submitted daily, and on an annual basis, that amounts to 72
million claims per year. In 1997, close to 12 million Medicare
beneficiaries received acute care services, and for hospitals
to be reimbursed for these services, they must follow the maze
known as the Medicare inpatient hospital billing system.
Complying with this Medicare billing maze is no small task,
as you can imagine. It requires a specialized computer system
that needs to be purchased, it has to be maintained, and you
have to have the personnel that is knowledgeable in the system,
as well as the regulations. Matter of fact, I estimate on
Pattie A. Clay's part that we spend, on an annual basis, about
a little less than $100,000 on the system, system maintenance
and training of personnel, just on the inpatient side.
The Health Care Finance Administration has contracted with
43 Medicare Part A fiscal intermediaries, and 28 Medicare Part
B. Needless to say, the consistency in instructions can vary
from intermediary to intermediary, and a good example in this
point is the delegation of the medical necessities to the 43
local fiscal intermediaries for the Part A. The vehicle that is
used is the local medical review policy, and a good example of
it is would be that there could be something that is
diagnostically performed in Ohio that is covered and something
in Kentucky that is not covered, or vice versa. And to make it
a little bit more difficult, physicians do not work under the
same policy. So they could be doing something in their office
that is medically necessary but would be not medically
necessary in the hospital, or vice versa again.
Pattie A. Clay currently generates about 18,000 in Medicare
charges each month that do not meet the Kentucky medical
necessity criteria. Again, these tests could be medically
necessary outside Kentucky. For the most part, these charges
are generated in the emergency room or on observation patients.
And as you previously heard, the ABNs just cannot be done in
the emergency rooms at all. Yes, we could take the time to
train the physicians on the medical necessity, but personally I
would rather have the physicians keep up on their medical
knowledge instead of the reimbursement knowledge. So we totally
ignore--we do not ignore it, but we inform them, and--but we do
not ride them related to that. They have to treat the patients.
Pattie A. Clay also has a committee that works on and
reviews medical necessity. I serve on that committee. One of
the things that we have to balance is medical necessity and the
standard of care. For example, a very healthy patient may need
a surgical operation. However, the person may have smoked for
40 years. The standard of care would be that the patient would
have a chest x-ray and an EKG. This is not medically necessary.
If something happened during the surgery, we would definitely
have a legal situation on our hands.
In addition to Medicare regulations, hospitals have to
contend with Medicaid, OSHA, EPA, Center for Disease Control,
IRS and there is 29 other organizations that issue some type of
rules, regulation or instructions to the hospitals. It is very,
very easy to imagine the conflicts and the confusion in the
various rules.
Just last week, on August 1, HCFA implemented the
outpatient prospective payment system. To do so, they used a
patchwork of 13 different payment formulas. Medicare outpatient
reimbursement is complicated and administratively costly for
hospitals and, I would think, for the Medicare program as well.
The coding requirements far exceed the inpatient prospective
payment system known as DRG. And matter of fact, it is at least
three times as complicated as the inpatient side. And we are
talking about, on the inpatient side at Pattie A. Clay, the
bill is maybe let us say $6,000 on the average, outpatient bill
would be less than $500. Yet it is going to take three times
the administrative hassle to code that chart. It is
unbelievable.
Again, this requires a special computer system, the
inpatient side would not work with it so you have to maintain
it, you have to train your personnel.
Without getting into the detailed complexities of the
outpatient prospective payment, I would like to point out about
three things. One, the huge benefits for the APCs and
implementing them was that it was going to benefit the Medicare
beneficiaries in their copayments. That is a partially true
statement, but in the State of Kentucky, it is going to hurt
the Medicare beneficiaries. The copayment is based on a
national average of charges. Since Kentucky is a low-charge
State versus the State of New York, that is going to end up
that the copayments are going to be larger for Kentucky versus
the person up in New York, which also places greater risk on
the facility, because now we have to collect that copayment.
APC system delays, and I am not talking about the delay on
HCFA. To put the system in, it is really--the vendors that you
have to contract with to obtain the software had a very, very
difficult time. The system went in August 1, and yet the
software vendor--and we are talking the primary or one of the
primary software vendors--could not deliver the software to the
hospitals until the fourth week of July. No training, here is
the diskette, install it, we will catch you as soon as we can.
HCFA cannot process a claim until August the 14th, yet we
have to, as of August 1, start the process. August 14th, they
do not know if the system will work or not, yet we are subject
to submit a perfect claim at that particular point in time.
Thirdly, the fiscal intermediaries do not receive adequate
training, at least that is what it appears to me. I asked for a
number of pieces of information weeks ago, and believe it or
not, the day it ended up on my desk was August 1, dated July
26th. So the trainers who we count on were not even trained
properly associated with it.
The other thing, on the heels of the outpatient prospective
payment, we have the upcoming provisions to comply with the
Health Insurance Portability and Accountability Act. And the
estimates I have on the cost of implementing that program
nationally is, over a 5-year period of time, is 3.8 billion to
a large sum of $43 billion. So we do have that cost coming in
down the road, too.
Complying with the growing number of rules and regulation
has a high administrative price tag. And HCFA's most recent
comparison of wages, medical records or health information and
administration cost centers showed the largest increases from
1996 to 1997. Pattie A. Clay takes corporate compliance
seriously, as does the industry. To do so has a price tag.
For example, to validate coding on a patient's chart, we
have to contract with somebody to do that. We cannot do it
internally. But also you have to educate employees on the
importance of corporate compliance and what to do if an issue
arises. And again, you have specialized programs that are used
to perform certain edits to protect you from fraudulently
billing or fraudulently submitted a claim.
Pattie A. Clay, as well as other hospitals, their objective
is to provide high-quality care to the patients. That is our
first goal. Only a small percentage of the vast amount of
regulations contribute to that effort. Simply the rest really
drains from the resources. In 1997, the Balanced Budget Act cut
$116 billion from the 1999 to 2002 projected Medicare spending,
according to the Congressional Budget Office. It was estimated
at that time 50 billion of it would come the hospital inpatient
side on Medicare, and about 10 billion coming from the Medicaid
side.
The recent projections are that the cuts are not 116
billion, but they are 232 billion. And on the hospital side
alone, that the savings about way over $75 billion. I would
suggest that at least returning back the excess over the
intended cuts. The impact on the financial cuts on Pattie A.
Clay is what I assume to be similar to other facilities.
Specifically new programs are placed on hold, old programs are
evaluated and re-evaluated. Replacement of equipment, both
clinical and non-clinical, is delayed, and system procedures
are reviewed and modified. Not all of these are necessarily
bad, but some of them do have long-range impact.
It is really funny when you are evaluating old programs,
that kind of a thing. Pattie A. Clay has a pulmonary rehab
program, which is used pretty much by the Medicare population.
We also have a home--we also have a nurse midwife practice that
really treats the indigent patients. When we implemented the
pulmonary rehab department, the selling point was it was going
to keep people out of the hospital. You were taking the COPD
patient that basically you could count on being in the hospital
four times a year, it would keep them out of the hospital. And
I thought, yeah, yeah, that really will work. Three years down
the fact, it does work. The problem of it is, we lose on that
program under reimbursement. And if they were on the inpatient
side, we would make money off of it. But the real thing of it
is, if you are providing the community service and promoting
health, you need the pulmonary rehab.
On the nurse midwifery practice, there is absolutely no way
to make money. We established that 10 years ago. We have nipped
it back best we possibly can, but if you want to provide
prenatal care to the ladies, you have to have that program, and
that is in conjunction with the Health Department. But we lose
money on it. And the only way to make it up, I guess, and the
other thing that you do is you form a foundation hopefully to
get charitable contributions to offset some of it.
Another aspect of the BBA is the payment updates are below
the market index. This occurs at the time when the cost of
prescription drugs have increased dramatically. As a matter of
fact, the average cost of a new drug is $71, more than twice
the average price for previously existing drugs. It also occurs
at a time when the Food and Drug Administration will soon
approve new blood screening techniques to make our blood supply
safer. However, this will increase the cost of a pint of blood
by $40 or $50.
I, along with the other hospitals, request that the BBA
relief package include the following top priorities, one for
Medicare and one for Medicaid. Under the Medicaid program,
strongly support the repeal of the Medicare inpatient update
reductions set for fiscal year 2001 and 2002. Providing
hospitals with a full inflation update is very, very essential.
On the Medicaid side, we strongly support protecting
Federal disproportionate share allotments by freezing
reductions at the fiscal year 2000 level, and providing for
growth in both fiscal year 2001 and 2002. And that payment is
very essential for the nation's growing uninsured population.
I would be remiss, I guess, speaking of DSH, if I did not
mention that I am one of the two hospitals here related to the
appeal related to--this is on the Federal side--the
disproportionate share payment. It occurred the same time as
Clark County. We are appealing together, and the complexities
of the rules, it seems so ridiculous that you have to appeal
what is a bed, you know. It should not be that complicated, it
should be cut and dried.
To us at Pattie A. Clay, that meant $5.2 million. And it is
very, very interesting it happened to us, what, 3 years ago,
and we are just getting phone calls from the State of
Washington where they are being impacted on that
interpretation. So the rules have not been applied consistently
across the country at all.
The two initiatives I mentioned earlier, the restoring of
the updates and protecting the disproportionate share
allotments, represent our top priorities. It is not an all-
inclusive list. We urge you as you begin your BBA relief
package, that you do so solely from funding from the surplus.
However--and hopefully we will not receive any more lower
payment.
We agree that the health care industry should be regulated,
but there should be coordination between agencies. We should
not have rules that appear to be issued in vacuums with no
regard to fiscal consequences or compliance.
I know I can speak for the hospitals across the State, as
these apply to both large and small. Hospitals are ready and
willing to continue to work with HCFA and other agencies to
improve the way rules and regulations are developed and
implemented. We pledge to do so, not just make the regulatory
system better, but make the system better for our patients and
community.
I thank the committee for allowing me to talk and I will be
glad to answer any questions.
Chairman Chambliss. Thank you very much, Mr. Hudson, and we
will move on to our final witness, Dr. Shelton.
STATEMENT OF CHARLES SHELTON, LEXINGTON PSYCHIATRIC GROUP
Dr. Shelton. OK. Thank you so much. I appreciate the both
of you allowing me to testify at this hearing.
As a psychiatrist in private practice, I would like to take
a few minutes to discuss my views on the impact of regulation
on delivery of psychiatric services to Medicare recipients. Now
I am going to break it up into three pertinent issues: first
being parity; second being prevention; and then the third being
the inclusion of a drug benefit.
Now parity, we have all heard that mental illness does not
receive the parity that other medical illnesses receive. Two
issues I see that are significant regarding the parity issue
include patient accessibility. Patients that are not able to
access care are, in essence, going to have a perpetuation of
their illness.
The other thing that the limited access brings about is
enhancement of the stigma that is already attached to
psychiatric illness. It is a considerable problem. It is not
uncommon for me to hear of individuals who cannot access
psychiatric care. Just the other day, one of my neighbors who
lives three houses down from me came seeking some advice from
me. She had been separated from her husband, she cannot find a
provider on her list. She is asking me who she can see and who
are the adequate providers, or who would be good for her to
see?
This is concerning. This causes frustration for the
afflicted individual, and as a result lends toward an
exacerbation of their illness. When an individual cannot get in
to see a psychiatric provider for three to 4 months, or they
cannot find a provider in and around their locality, it is very
frustrating.
Now granted, primary care physicians can take care of many
of these illnesses, they do an excellent job. But there are
approximately a third of these patients who are resistant and
who are refractory to using one medication, and as a result
fall out of the auspices of being adequately treated under the
primary care physician.
The second issue involves reimbursement. Now if we take
into account the 80 percent allowable that all physicians must
agree to in terms of reimbursement for Medicare, keep in mind
that psychiatrists are only reimbursed at 62.5 percent of that
80 percent allowable. This is also a significant problem. It is
causing concerns for me because I am seeing a number of things
happen as a result of the lack of reimbursement.
First and foremost, we are seeing numbers of psychiatrists
who are opting to drop out of the Medicare program. If you take
into account the reimbursement, in addition to the excessive
documentation that is required to offset the potential for
fraud, it is not a cost-effective endeavor for many
psychiatrists.
The second thing that is happening is many psychiatrists
are opting to get out of the inpatient venue. What is happening
is we are seeing more and more psychiatrists opting not to do
inpatient work. Let me give you an example within this own
institution what has happened in terms of our inpatient
psychiatrists. Six years ago when I began practice here, we had
15 psychiatrists on staff. OK, we all took call and it averaged
out to approximately two nights of call per month. Now that was
do-able, that was something that we could sustain, we could go
ahead and care for the indigent population and not have that
adversely affect our patient practices, or our private
practices, that is.
Now over the course of time, one by one, psychiatrists
began leaving and they canceled their inpatient privileges. We
got down to a situation with four psychiatrists that were
taking call. So I am now on call for this institution one in
four nights, and it is very difficult for us to take care of
these individuals, especially when we have a rate, an indigent
rate here in this hospital that may border 30 percent or
greater for those that are self-pay. So reimbursement is
leading to individuals--and also the lack of parity that
reimbursement falls under, it is leading to individuals with
psychiatric illnesses not getting appropriate care.
The other concern that I see is prospective medical
students. When they go to make a career choice, many medical
students are bypassing psychiatry as a career. They see the
lack of parity, they see the lack of reimbursement, and they
choose to go into other areas.
What I am seeing--OK, what my concern as a psychiatrist is
that we are going to see more and more prevalence and incidence
of psychiatric illness and less and less of an ability to treat
these illnesses. So unless something is done, psychiatric
illness is going to become epidemic at some point. The lack of
parity lends toward increased incidence and prevalence of
psychiatric illness which, in turn, lends toward increase in
morbidity and mortality of not only psychiatric illness but
also of physical illness, and also lends toward increased
costs.
Now if we look at my role as a psychiatrist here in this
institution, I am admitting patients, especially Medicare
patients whom are older, whom are medically compromised and
whom also have psychiatric illness. So I am admitting patients
to this institution, and I am making complex medical decisions
regarding these patients. Not only do I have to assess them
from a psychiatric standpoint, I also have to have a good grasp
of their medical problems. As an attending physician on our
psychiatric unit here, I have got to be able to treat their
medical problems. So in essence, I feel that, as a
psychiatrist, I am making medical decisions that are, in
essence, no different from my internal medicine colleagues. Yet
the reimbursement to psychiatrists remains less.
Let me give you another example. ECT, or electro-convulsive
therapy is a treatment--is the only procedure that
psychiatrists do nowadays. Many of you may not be aware, but it
is very effective, it is our--in terms of treating depression,
it is the most efficacious treatment that we have. As with all
procedures, Medicare has taken the lead in thrusting procedures
to be done on an outpatient basis. This mandate precludes many
of my patients from getting ECT because ECT is done in a
series. We do not just do one treatment, we do treatments
Monday, Wednesday and Friday, typically, and we do anywhere
from five to six treatments in a series.
So if I have a patient from eastern Kentucky who requires
ECT, and I tell them that they have to do the ECT on an
outpatient basis, are they going to be able to come to
Lexington and provide themselves with shelter and food while
they do the treatments on an outpatient basis? Not many of them
can do it. And as a result, we have seen one of our most
efficacious treatments, the frequency that we are doing it is
going down.
Let me give you another example as to what we are seeing in
terms of reimbursement for this outpatient ECT. If I have a
patient that comes in for outpatient ECT, I have got to do a
history, I have got to know the patient, I have got to do a
physical examination on them. The psychiatrist--and let me make
this clear--the psychiatrist, not the anesthesiologist, makes a
determination as to which drugs and what specific dosages are
used in order to put the patient to sleep for the treatment.
I then have to go back and do the treatment, and I have to
take a significant amount of risk. Now ECT basically causes
quite a bit of strain on the cardiovascular system, or on the
heart and lungs. And so if you have a medically compromised
patient, you take quite a bit of risk. So for one outpatient
ECT, I have about 1 hour to an hour and a half of time
involved, plus a significant amount of risk and liability.
Now what does Medicare reimburse me for that time as a
psychiatrist? Anyone have an idea? OK. I am reimbursed at the
rate of about $41.42 for that time. Now the anesthesiologist,
on the other hand, who puts the patient to sleep--and keep in
mind, I make the recommendations for the doses of the
medications, and what specific medications that we use, and the
anesthesiologist, on the other hand, is reimbursed anywhere
from $300 to $400, his typical fee. Is this fair? I ask you to
render your decision.
So as a result, many psychiatrists are opting to get out of
treating Medicare patients and are not doing inpatient
psychiatry anymore, which is sad, because many individuals,
when they get to the point where their depression or other
psychiatric illness is severe, need inpatient care.
OK. My second issue involves prevention. Now with the
inception of Medicare in 1965, the average life expectancy was
70. OK, so Medicare had to provide benefits for individuals on
the average of 5 years. Over time, with the advent of medical
technology, we have seen a dramatic increase in life
expectancy. As a result, we have seen an increase in the cost
of caring for our older population. In my mind, this
necessitates implementing prevention as an adjunct to offset
treatment costs. In other words, we need to implement
prevention modalities. Now I would like to applaud HCFA,
because there has been the provision for a number of preventive
services. OK, these include screenings for cervical cancer, for
colorectal cancer, for mammography. We are doing screenings for
bone density now, we are doing diabetic self-management, to
name a few. OK. So HCFA, I think, is going in the right
direction in terms of prevention.
But I would like to let you know that we can screen
effectively for depression. A depression screening is very
inexpensive, it is user friendly, and it is accurate. And it
typically involves asking the patients five to ten to 15
questions. This can be done by any health care provider, and in
my opinion would lend toward identifying depression, other
psychiatric illnesses early, lending toward treatment and the
long-term consequence would be decreased costs, and also it
would lend toward decreasing the disparity that we are seeing
amongst the psychiatric illnesses.
Now the last thing that I think everyone here is aware of
is the drug benefit. It is very disconcerting to me when I have
treated a patient in this hospital, I work very hard to get
their depression better. And then when they come back to see me
in the office, or they call me and they convey to me that, Doc,
I had to stop the medication. And of course, I am going to
inquire as to why, and the number one answer that I get is due
to cost.
Now many individuals are going to view their medical
illnesses or their medical maladies as being more life-
threatening than their psychiatric illness, for instance,
depression. So typically what would happen, if you have an
elderly individual who is on a fixed income, they are going to
choose to stop their psychiatric medications over their other
medications for their blood pressure, say for instance.
I have also heard stories of individuals having to eat cat
food because they have to spend money to buy their medications
that keep them alive. It is very sad when we cannot afford to
provide medications for our citizens.
Now one of the things--another interesting thing that I
just read that really hit home with me is that if we take into
account the cost of medication--now costs of medications have
gone up dramatically. Let me give you a few figures here. In
1992, the average cost for medication for Medicare recipients
was $552. In the year 2000, the costs are estimated at $1,205.
By the year 2010, it is estimated that the costs will go up to
$2,810 per year. OK, the costs are prohibitive.
Now the thing that we have got to keep in mind also is that
individuals that are Medicare recipients that do not have a
drug benefit as well as those that are uninsured are the only
individuals that pay the full retail cost of medications. You
can bet that my HMO is not paying the full cost for my
medication due to the fact that they have got bargaining--you
know, collective bargaining by virtue of purchasing medications
in large volumes. And if a drug benefit could be instituted,
the government could use purchasing in volumes to offset costs.
So this is something that is definitely needed. We do need
drugs. What we see is that patients will--can get their
medications on an inpatient basis, they are typically not
taking medications or they cannot afford them on an outpatient
basis. This in essence is increasing morbidity and mortality,
and as a result increases costs.
The cost of the drug benefit plan in the short term is
going to be very expensive. In my opinion, especially for
psychiatric illness, in the long term, the drug benefit plan
would save money.
Thank you very much.
Chairman Chambliss. Thank you very much, Dr. Shelton. And
we have run over our time already. And I want to make a couple
of comments and allow Dr. Fletcher to do so before we take some
quick comments from the audience.
Just so our folks that are representing our hospitals will
know, we have previously heard some testimony from some
hospital administrators about some particular problems relevant
to the questionnaire that is required to be answered every time
a Medicare patient comes into the hospital, and also from a
problem concerning the required length of record keeping that
Medicare puts on you. I know of no other Federal agency outside
of HCFA that requires that medical--that any sort of records be
kept for 10 years. And we have made a written request of HCFA
to examine both of those areas, and have received some
favorable response from them already. But we are hoping we are
going to see an immediate change in that and begin down this
road of trying to reduce some of those burdensome regulations
that they have got placed on you.
And just as a comment to what you just alluded to, Dr.
Shelton, you are exactly right. We know that we have got a
problem in this country from the standpoint of having some
individuals who are Medicare beneficiaries and have a very
meager income on which they have to live on each month, and at
the same time they have a very high drug bill. It is not just
in the area of psychiatry, it is obviously in other areas also.
And we need a drug plan that will take care of those
individuals who have a low income and a very high drug bill.
The government needs to step in and provide them a helping
hand.
Other individuals who have a higher income but also a
higher drug bill need a helping hand from the government. And
Dr. Fletcher and I have been working very diligently to try to
come up with a plan along with our other colleagues in the
House, as well as in the Senate, that will be of benefit to all
Medicare beneficiaries. And unfortunately, we have not seen
much cooperation from our colleagues on the other side. This is
an election year, they see an opportunity to seize on this as a
political issue, and it just ought not to be. It is kind of
like every one of you all have alluded today to the fact that
we have got problems with HCFA.
We have got problems in the Medicare and the Medicaid
systems. And what gets lost in all of this dialogue and all of
these burdens that are placed on you is what is best for the
patient? And that is exactly what we have got with reference to
the prescription drug benefit that ought to be dealt with in a
way in looking out for what is best for the patient, not what
is best for the politician. And unfortunately it has gotten to
be a political issue.
But we are going to deal with it, and we are going to deal
with it fairly, we are going to deal with it adequately so that
we make sure that all of our Medicare beneficiaries do receive
a helping hand from the Federal Government.
I want to thank all of you all for your comments. And
before we open it up to comments from the audience, I want to
turn to Dr. Fletcher for any questions or comments you have
got, Ernie.
Mr. Fletcher. Well certainly, I concur, Mr. Chairman, and
appreciate the testimony. We have covered a whole lot of ground
and it does take quite a bit of time. But I think you have
given us a tremendous amount of information. Looking at some of
the things we can summarize, first on the prescription drug,
you are absolutely right. If we use some negotiations, buying
in larger quantities, it is estimated that the bill we passed
out of the House for prescription drugs by the CBO, that it
would reduce the cost to seniors walking in by up to 39
percent. And that is a substantial difference and a substantial
savings, as well as offering coverage for low-income and those
with high drug cost, and covering all seniors.
Some of the things I have written down here just briefly,
because I want to get to some statements there. Quality, and my
concern is, HCFA has not focused on the patient but rather has
focused on the money, and focused on making sure, it looks
like, developing a relationship that is adversarial rather than
collaborative, as I think Mr. Stauter pointed out. And that is
something that I do not think needs to exist. I think HCFA
needs to be an organization, from what we hear, that works
alongside providers with the patient's interest at heart.
Obviously there are financial concerns and constraints that
we all have to operate in. But quality of care, I have found
often, is the most efficient and cost-effective care in most
cases. You mentioned, Mr. Hudson, about your COPD, chronic
obstructive pulmonary disease program, and the savings of that,
and it disturbs me, the same way with outpatient colonoscopy
and other things, we do not have a system that increases
efficiency, and yet at the same time, we have got HCFA coming
in and assuming that all providers are guilty until proven
innocent. And that is a problem.
Efficiency, it is not working well. Equity, the payments
here were about $365 a month a few years ago when I was
negotiating for Medicare-Plus Choice, versus 600 in Florida or
New York. Why the disparity? And we need some equity in
reimbursal as well as regulation, and I think that would be
helpful.
The future, I am very concerned. We have had--if he is
still here, I do not know if Frank Miller had to leave. He
probably did, from the University of Kentucky. I am concerned
about what Medicare and HCFA has done with our graduate medical
education. Because as some mentioned, and I think Dr. Reynolds,
you mentioned, physicians or young individuals now are not
looking at going into medicine, and are we going to attract? We
have had early retirements of physicians because of the
burdensome practice of medicine. And I am very concerned about
the future when we deal with reimbursement for graduate medical
education as well as the complexity of delivering health care
and the hassles that physicians go through, and other
providers. We are not going to attract the best and the
brightest if we do not make some changes, and I think that is
critical.
Access also is obviously very important. So I appreciate
the testimonies you all have given, and Mr. Chairman, I yield
back the time.
Chairman Chambliss. Dr. Fletcher, thank you.
Mr. Fraraccio, let me just say to you, you raised one issue
regarding this appeal to the PRRB. And we have got one of our
committee staff lawyers here, and Les, I want you to look into
this issue. I do not understand why we have got the PRRB set up
with an appellate process for you to go through if we are not
going to use that as a binding body, the decision-making
process being a binding body. And Les, I want you to take a
look at that and let us see what that says, if it is set up by
law or if it is set up by regulation, and why that decision is
not binding on those folks. I am sure if you had lost that
decision, it would have been binding as far HCFA is concerned.
Somehow I think that is the case.
At this time, we want to throw it open to any comments or
questions from anyone in the audience. As I say, we are a
little short on time, but you folks have been very patient and
we appreciate very much you being here. We have got a traveling
microphone, and if anybody has a question or comment, if you
will raise your hand, we will get the microphone to you.
Dr. Brislin. Thank you. I am pharmacist John Brislin with
Pharmacists Consultation Services here in Lexington. I am a
consultant, work with hospitals, home health agencies, home
infusion pharmacies and even physicians to improve the
efficiencies and marketing of their practices.
My biggest concern is the issue which has already been
appropriately brought up about average wholesale prices of
drugs. And we now have the Department of Justice across the
board, dictating from their own survey what prices they will
pay for reimbursement to home health agencies, home infusion
pharmacies and pharmacists, and this, to me, seems totally
backwards. And there will be home infusion pharmacies and home
health agencies and other providers who go out of business, and
these poor patients will have to go back into the hospitals,
which ultimately will cost State Medicaid programs and the
Federal Medicare program many millions of dollars that are
unneeded.
Thank you.
Chairman Chambliss. Well, I think Dr. Carloss alluded to
one of those problems with respect to what is going on in the
area of oncology. And we are addressing that with a rifle shot,
and we hope that will shake up some folks over there and maybe
we can ensure that we can continue to encourage people to
receive treatment at home where they are oftentimes better
served, and get the proper reimbursement rate there, not just
from the standpoint of wholesale drug prices, but in other
areas also that Mr. House alluded to with respect to
reimbursement rates in home health care.
Yes, ma'am.
Ms. Henkle. My name is Karen Henkle, I am Executive
Director of the Kentucky Home Health Association.
To follow up on your comment there, there is one aspect of
the Balanced Budget Act and the prospective payment system that
Mr. House mentioned that has lots of problems. And in fact,
some of the HCFA reps and FIs are doing training today on that
implementation that is due in October. The bundling of all the
costs of non-routine medical supplies for a home health patient
is now to be a part of that episode payment. And this means
that if a physician has been caring for a patient and ordering
those supplies, maybe someone whose routine catheterization or
some other chronic illness, once they are now under a home
health plan of care, the home health agency is going to be
responsible for all of those medical supplies. And if a Part B
provider, a pharmacy, an HME provider supplies those and
submits a claim, that is going to be rejected.
We are concerned that we are facing both a tremendous PR
issue and problems in coordination of services, but the
reimbursement scheme has not been designed to adequately
reimburse the home health agencies for that. I think there is
probably a total of about $15 added to the payment rate to
cover supplies. And anyone interested in looking at the cost of
room care supplies for those patients, it is tremendous. This
issue has got to be addressed.
HCFA themselves say this is their interpretation based on
what they think the law says, but it is going to be a disaster
come October 1 for individuals who require home health care,
but yet who have substantial needs for non-routine medical
supplies.
Mr. Fletcher. Let me ask you, make sure we understand that
clearly. In other words, the bundling, if all the supplies that
are needed, even though it may be a supplier outside--well,
obviously an outside supplier, has there been any provisions
made for how reimbursement will be made to those or will the
home health agency itself have to negotiate some sort of
contract and reimbursal with the supplier?
Ms. Henkle. The bottom line is that, for those non-routine
supplies which HCFA, under the home health benefit, says are
covered, the home health agency costs are supposed to be
covered within the episode payment. However they pay for those.
And so it is up to them to either purchase those items from a
supplier, get a good wholesale price, a group purchasing
contract, or to work out arrangements with local suppliers in
order to reimburse them.
They can negotiate whatever kind of working arrangement or
contract is done, but it has all got to be ultimately within
the bounds of what they are receiving payment for. And right
now, in many cases, the costs for some kinds of supplies will
exceed the overall reimbursement that that agency will receive
for that patient.
Mr. Fletcher. Let me ask you a question specifically. Say
you have got a patient who needs wound dressing, and you are
going out and say you are going out and you are doing it at a
certain frequency. It looks like this sort of payment would
certainly encourage you to decrease the frequency of wound
dressings, for example, which may, many times, probably would
not be at the best interest of quality care to the patient. And
yet we are putting on a pressure here of cutting corners, and
at the same time HCFA comes around and is going to be
inspecting and demanding that the wound care is adequate and
all these things. It seems very counter productive.
Do you have any idea of how the industry is going to deal
with this pressure economically, because if it does not cover
the cost, it will encourage decreased wound dressings or in and
out caths, or whatever they need.
Ms. Henkle. I think an excellent point, Dr. Fletcher, and
you are exactly right. The bottom line is going to mean that
agencies are going to review their admission criteria very
carefully, and they are going to be selective about the
patients they admit. And so physicians who have patients who
have perhaps decubitus or perhaps because of their immune
system they are not healing from surgical wounds, the agencies
are going to be forced to say, we cannot afford to accept that
patient, because it is going to require for 2 weeks, three
times a day, dressing changes with substantial cost of
supplies, and then we decrease that.
You are right. If they choose to accept those patients,
they are going to be challenged to provide those in as few
visits, teaching the families. Sometimes this may be an aged
family member who is being taught to change--if they are
sterile dressings, of course, that is not a choice, it is going
to greatly complicate the care that individuals who have those
intensive care needs receive.
Mr. Fletcher. Is this going to include, say, administration
of antibiotics for a particular infectious disease that are
much more efficiently delivered at home, say, that are needed
for a long period of time? Would the bundling include that or
is that not going to fall out of that criteria?
Ms. Henkle. If they are items--and of course, the drugs,
some of those drugs are paid for. But those are paid for
separately, it is not part of that episodic----
Mr. Fletcher. What about the IV administration, the tubing
and things?
Ms. Henkle. Some of the materials and supplies, if they are
now considered a DME item, and there is a fee schedule item,
those would be covered under that fee provision. And that is
another thing. There is questions about which items are non-
routine medical supplies, which are DME items, which are
covered under the home health benefit, which are covered under
the carrier part B, and sorting out all that detail. The
opportunity for making errors and for mistakes is tremendous.
But it is greatly going to compromise the services and
materials that are available for many of these folks who
desperately need it.
Mr. Fletcher. Thank you. And I find that very disturbing.
Chairman Chambliss. There is time for maybe one other
comment or question. Yes, sir.
Mr. Heitzenreiter. Yeah, I am Jim Heitzenreiter from Martin
Wallace Hospital. And one of the concerns I have is, as we
listened to all the testimony this morning, the one thing that
I do not think has been addressed is we know, which is coming
down the road, will be a prescription drug program. And I am
not hearing anything addressing the cost of the--to the
hospitals and to everybody for the cost of the drugs. That is
going to be able to regulate and control the costs coming from
the pharmaceutical companies. They are out there free, doing
whatever they want to do, and then we are going to be
restricted, and they are going to tell us, this is the X amount
of money we will pay you, and this is how you are going to do
it. But that is not restricting what our supplies are going to
be. Our disposable supplies keep going up, they go up
irregardless of what we can increase our rates and collect with
the reimbursement--with the reduction in reimbursements over
the last few years.
So my concern is that we address this, that we do not open
the floodgates to make the pharmaceutical companies and medical
suppliers rich by having a program that allows them to collect
the money that they want to charge, and yet we are restricted
on what we can do. So it is a real concern as we develop the
programs coming up in the future, of how we are going to
control even what our costs are going to be, even if we get
partial reimbursement or reimbursement for that.
Chairman Chambliss. Well, you have raised an excellent
point, and I wish Ernie and I had the answer to that this
morning. We have discussed this, in discussing our drug
proposal that we ultimately passed on the floor of the House.
In fact, our colleague, Tom Coburn, who is an OB/GYN in
Oklahoma, raised this issue along with Gil Gutknecht from
Minnesota, after having done a significant study on the fact
that--and come up with an answer with reference to the fact
that you can buy the same drugs in Mexico and Canada cheaper
than you can buy them in the United States today, and they come
on the market quicker in those countries than they come on the
market today.
And the obvious reason why that is the case are the serious
regulations and hoops that we require our drug manufacturers to
jump through. Now that is part of the problem. That is not the
total reason why drugs are coming on the market quicker outside
the United States and why they are less expensive outside the
United States.
But you get into a very gray area if you try to mandate to
anybody what they can charge for a service. We get back to the
Clinton Health Care Plan of 1993, where there was going to be a
mandate on what hospitals could charge and what physicians
could charge. We all believe in the free and open market, but
by the same time, we have seen the cost of drugs go up--
somebody alluded to it earlier that the cost of a new drug
coming on the market, coming into the hospital or the doctor's
office today is $71, or increase of $71 over what it was a
short time ago.
There has got to be an answer somewhere to how we can
control that. Now we have tried to reduce the regulatory burden
on pharmaceutical companies, and other companies. For example,
farm chemicals is another area where this has impacted the
State of Kentucky, just like it has impacted my State from an
agricultural perspective. There are just too many regulations
that burden manufacturers on the books right now that cause
that ultimate retail price to go up more than what it should.
And we are struggling with that. We are struggling to find a
way to do that.
But you make an excellent point because, frankly, one thing
that we have found is that when the government gets involved,
from a payment standpoint, and the end seller of a product has
the assurance that the Federal Government is going to pay for
it, prices always go up even more. And we have got to ensure
that does not happen. We do not want to put price controls on,
obviously, but we have got to try to figure out some way to
slow down that increase. And it is very troublesome to us.
Mr. Fletcher. Let me make a comment to that, because we--
recently we passed, actually three pieces of legislation. Gil
Gutknecht's bill that--and Tom Coburn worked on that--referred
to which directed the FDA, encouraged the FDA to look at
prescription drugs that are sold overseas at a reduced cost,
and look at the possibility of reimportation. Pharmaceuticals,
obviously, were not real fond of that. There was a couple of
amendments that looked at that.
But we do have--I mean, there is price controls and
subsidies in other countries that reduce the cost of drugs to
about half, for example, in England, to what our patients pay
here in the United States. We can reduce it up to 39 percent
outpatient, and you are talking about inpatient--outpatient, by
negotiating with PBMs, the pharmaceutical benefit managers that
buy in bulk rate and negotiate.
But we have to look at several things. One, we are
subsidizing the world in our pharmaceutical research here,
about $24 billion goes into that, because we pay higher cost of
drugs, and yet other countries certainly benefit from that.
There are some other countries that use other taxes to support
more research, and so they subsidize some of the research, but
we, by and large, do the bulk of the international research.
I think we need to look at, you know, the international
market, and make sure that we can see if there is not better
ways of equity, more competition to bring prices down. There is
two choices: Increase competition and make sure that we look at
what we are doing internationally, as well as being able to
contract in a better way with pharmaceuticals. The other choice
is price controls. And we develop a lot of new medications,
cancer, for example, that are doing some wonderful things. And
if we get price controls that inhibit research and development,
we are not going to be able to cure a lot of the disease that I
think morally we are obligated to continue our search in doing.
So it is a tough problem, but it does need addressing, and
there is a lot of attention to it because it is going to bust
the budget if we do not.
Chairman Chambliss. Well, let me once again thank all of
you all for being here. I particularly want to thank our
witnesses for your testimony this morning, and let me assure
you that we are going to take your testimony back to Washington
and incorporate it into the thoughts and ideas and legislation
that is going to be forthcoming. We know this is a serious
problem. You have reiterated what we have heard from some other
folks, but you have also pointed out some new problems to us
that we were not aware of that we have got to address.
A lot of it money, a lot of it just involves reimbursement.
But there are obviously a multitude of other things that have
to be done and we are going to look at those other problems in
addition to just reimbursement.
And I will have to tell you that we are embarking on some
new territory here. This is the first time that the Budget
Committee has created task forces, and we are one of six task
forces that have been created to do oversight of Federal
agencies. And Ernie and my area happens to be the health task
force, but we are also looking at defense and any number--
agriculture and any number of other areas out there.
And John Kasich and I came up with this idea of sort of
creating these subcommittees last year, and we are real excited
about this. And Ernie and I are not going to be able to solve
all of the problems within this task force in the short period
of time, but we are laying a foundation that we look forward to
carrying forth into the next Congress and in future Congresses,
where we can come back down here to Lexington and say, look,
you remember in August of 2000, we talked about this problem,
and here is what we did. We took this back to Washington, and
we ultimately made some corrections and we made some changes
that hopefully will make life better for you, both from a
practitioner's standpoint and a health delivery standpoint, as
well as from a beneficiary's standpoint on the other end of it.
That is our goal, and we cannot do this without input from
you folks, and I just cannot tell you how much we appreciate
you all being here and giving us your thoughts and your ideas,
how much we appreciate you folks coming in and listening as
well as participating in the discussion.
Once again, I want to say to St. Joseph's how much we
appreciate them hosting us. They have been very gracious to
give us this time in their auditorium this morning, and to
Ernie and all your folks, your staff here that have been so
gracious and hospitable to us, we appreciate you very much. And
we invite all of you to come to Macon, GA, on Monday, because
we are going to have another hearing like this. And we will
show you some more good southern hospitality down there.
So thank you very much, and our hearing will be concluded.
[Whereupon, at 12:36 p.m., the Task Force was adjourned.]