<DOC>
[106th Congress House Hearings]
[From the U.S. Government Printing Office via GPO Access]
[DOCID: f:65913.wais]
MEDICARE'S MANAGEMENT: IS HCFA'S COMPLEXITY THREATENING PATIENT ACCESS
TO QUALITY CARE?
=======================================================================
HEARING
before the
SUBCOMMITTEE ON
HEALTH AND ENVIRONMENT
of the
COMMITTEE ON COMMERCE
HOUSE OF REPRESENTATIVES
ONE HUNDRED SIXTH CONGRESS
SECOND SESSION
__________
JUNE 27, 2000
__________
Serial No. 106-125
__________
Printed for the use of the Committee on Commerce
__________
U.S. GOVERNMENT PRINTING OFFICE
65-913 WASHINGTON : 2000
COMMITTEE ON COMMERCE
TOM BLILEY, Virginia, Chairman
W.J. ``BILLY'' TAUZIN, Louisiana JOHN D. DINGELL, Michigan
MICHAEL G. OXLEY, Ohio HENRY A. WAXMAN, California
MICHAEL BILIRAKIS, Florida EDWARD J. MARKEY, Massachusetts
JOE BARTON, Texas RALPH M. HALL, Texas
FRED UPTON, Michigan RICK BOUCHER, Virginia
CLIFF STEARNS, Florida EDOLPHUS TOWNS, New York
PAUL E. GILLMOR, Ohio FRANK PALLONE, Jr., New Jersey
Vice Chairman SHERROD BROWN, Ohio
JAMES C. GREENWOOD, Pennsylvania BART GORDON, Tennessee
CHRISTOPHER COX, California PETER DEUTSCH, Florida
NATHAN DEAL, Georgia BOBBY L. RUSH, Illinois
STEVE LARGENT, Oklahoma ANNA G. ESHOO, California
RICHARD BURR, North Carolina RON KLINK, Pennsylvania
BRIAN P. BILBRAY, California BART STUPAK, Michigan
ED WHITFIELD, Kentucky ELIOT L. ENGEL, New York
GREG GANSKE, Iowa TOM SAWYER, Ohio
CHARLIE NORWOOD, Georgia ALBERT R. WYNN, Maryland
TOM A. COBURN, Oklahoma GENE GREEN, Texas
RICK LAZIO, New York KAREN McCARTHY, Missouri
BARBARA CUBIN, Wyoming TED STRICKLAND, Ohio
JAMES E. ROGAN, California DIANA DeGETTE, Colorado
JOHN SHIMKUS, Illinois THOMAS M. BARRETT, Wisconsin
HEATHER WILSON, New Mexico BILL LUTHER, Minnesota
JOHN B. SHADEGG, Arizona LOIS CAPPS, California
CHARLES W. ``CHIP'' PICKERING,
Mississippi
VITO FOSSELLA, New York
ROY BLUNT, Missouri
ED BRYANT, Tennessee
ROBERT L. EHRLICH, Jr., Maryland
James E. Derderian, Chief of Staff
James D. Barnette, General Counsel
Reid P.F. Stuntz, Minority Staff Director and Chief Counsel
------
Subcommittee on Health and Environment
MICHAEL BILIRAKIS, Florida, Chairman
FRED UPTON, Michigan SHERROD BROWN, Ohio
CLIFF STEARNS, Florida HENRY A. WAXMAN, California
JAMES C. GREENWOOD, Pennsylvania FRANK PALLONE, Jr., New Jersey
NATHAN DEAL, Georgia PETER DEUTSCH, Florida
RICHARD BURR, North Carolina BART STUPAK, Michigan
BRIAN P. BILBRAY, California GENE GREEN, Texas
ED WHITFIELD, Kentucky TED STRICKLAND, Ohio
GREG GANSKE, Iowa DIANA DeGETTE, Colorado
CHARLIE NORWOOD, Georgia THOMAS M. BARRETT, Wisconsin
TOM A. COBURN, Oklahoma LOIS CAPPS, California
Vice Chairman RALPH M. HALL, Texas
RICK LAZIO, New York EDOLPHUS TOWNS, New York
BARBARA CUBIN, Wyoming ANNA G. ESHOO, California
JOHN B. SHADEGG, Arizona JOHN D. DINGELL, Michigan,
CHARLES W. ``CHIP'' PICKERING, (Ex Officio)
Mississippi
ED BRYANT, Tennessee
TOM BLILEY, Virginia,
(Ex Officio)
(ii)
C O N T E N T S
__________
Page
Testimony of:
Coble, Yank, Board of Directors, American Medical Association 80
Fleming, Dave, Group Senior Vice President, Diagnostic
Products and Genetics, Genzyme Corporation on behalf of
AdvaMed.................................................... 65
Gottlich, Vicki, Center for Medicare Advocacy and the
National Academy of Elder Law Attorneys.................... 89
Hash, Michael, Deputy Administrator, Health Care Financing
Administration............................................. 12
Mangano, Michael F., Principal Deputy Inspector General,
Office of Inspector General, Department of Health and Human
Services................................................... 73
Waller, Robert R., Chairman, Healthcare Leadership Council... 58
Material submitted for the record by:
American Association of Orthopaedic Surgeons, prepared
statement of............................................... 107
American Psychiatric Association, prepared statement of...... 110
Hash, Michael, Deputy Administrator, Health Care Financing
Administration, responses for the record................... 120
Mangano, Michael F., Principal Deputy Inspector General,
Office of Inspector General, Department of Health and Human
Services:
Letter dated July 6, 2000, to Hon. Tom Coburn, enclosing
response for the record................................ 116
Letter dated July 6, 2000, to Hon. Charles Norwood,
enclosing response for the record...................... 117
Waller, Robert R., Chairman, Healthcare Leadership Council,
additional comments for the record......................... 114
(iii)
MEDICARE'S MANAGEMENT: IS HCFA'S COMPLEXITY THREATENING PATIENT ACCESS
TO QUALITY CARE?
----------
TUESDAY, JUNE 27, 2000
House of Representatives,
Committee on Commerce,
Subcommittee on Health and Environment,
Washington, DC.
The subcommittee met, pursuant to notice, at 10:07 a.m. in
room 2322, Rayburn House Office Building, Hon. Michael
Bilirakis (chairman) presiding.
Members present: Representatives Bilirakis, Upton, Stearns,
Greenwood, Burr, Whitfield, Ganske, Norwood, Coburn, Bryant,
Brown, Strickland, Barrett, Capps, and Eshoo.
Staff present: Tom Giles, majority counsel, Carrie Gavora,
majority professional staff, Kristi Gillis, legislative clerk,
Bridgett Taylor, minority professional staff, and Amy
Droskoski, minority professional staff.
Mr. Bilirakis. I am pleased to convene this hearing on the
management of the Medicare Program by the Health Care Financing
Administration.
As this Congress has considered proposals to expand
coverage of prescription drugs under Medicare, I have been
struck by one of the common themes throughout several of the
proposals.
On both sides of the aisle there seems to be a pervasive
belief that any additional Medicare benefit, especially one as
important and difficult as prescription drug coverage, should
not be administered by HCFA.
This hearing is especially significant because any effort
to reform Medicare must include a careful review of the agency
that administers the program.
I do not intend to bash HCFA; rather, I want to conduct a
thorough examination of the Health Care Financing
Administration, its regulations, policies and interactions with
stakeholders as well as the impact with Congressional mandates.
In the last Congress this subcommittee took a hard look at
the Food and Drug Administration and crafted legislation to
make that agency more consumer-friendly, more user-friendly,
and more patient-friendly.
I believe that the time has come to begin a similar review
of HCFA as part of a broader effort to modernize both the
agency and the Medicare Program.
Beginning with this hearing, it is my plan to launch a
serious, responsible, and bipartisan HCFA reform effort.
Today we will hear from the medical device industry and
health care providers, as well as Mr. Mike Hash, the Deputy
Administrator of HCFA. I am hopeful that we will begin to
understand some of HCFA's delays in implementing Federal law,
including the hospital outpatient prospective payment system
rule and the long-term care hospital prospective payment system
rule.
This Congress continues to debate managed care reform and
prescription drug coverage. There is also considerable interest
and speculation regarding the budget surplus and further
refinements to the 1997 Balanced Budget Act.
My staff is currently working to identify additional
changes necessary to remedy unintended consequences of the
Balanced Budget Act and to restore essential funding.
In addition to HCFA reform, we welcome the input of the
larger health care community on these issues. However, I hope
we can keep this hearing focused on the critical issue before
us and that is HCFA modernization and reform.
I look forward to hearing from the agency and its
stakeholders today. We must continue to work together to
improve HCFA until it is truly consumer-friendly, user-
friendly, and patient-friendly.
I would say at the outset that the opening statement of all
Members of the subcommittee will hereby be made a part of the
record and I will now yield to Mr. Brown for an opening
statement.
Mr. Brown. Thank you, Mr. Chairman. I would like to welcome
Mike Hash and our other distinguished witnesses. Thank you for
joining us.
Most of us actually on this side of the aisle, many in this
Congress do believe that prescription drug should in fact be
administrated by HCFA.
I don't question, Mr. Chairman, the value of this hearing.
If there are ways HCFA can improve, can streamline its
operations, as I am sure there are, we should encourage those
changes. Coverage decisions should be made on a fair and timely
basis.
If there is any question as to whether those standards are
being met, we should hear about it; similarly, with the efforts
of Congress and the administration, to rout out fraud and
abuse. There is a fine, but important, line between aggressive
and abusive scrutiny of Medicare providers.
However, if the goal truly is to do what is best for
Medicare beneficiaries and not to bash HCFA, then I would like
to suggest the following:
First, HCFA does not operate in a vacuum. If there are
problems in the administration Medicare Program, we in Congress
share the blame. The executive branch shares the blame and
Medicare providers share the blame.
We starve HCFA and at the same time multiply its
responsibilities. We legislate payment policy. We legislate
restrictions on Medicare's use of cost containment mechanisms.
We even legislate the specifics of complex payment systems and
then we complain that HCFA just isn't flexible enough. We fault
HCFA for red tape that if we took the time to trace it back,
probably derives from pressure that we on this subcommittee and
we on this full committee and we in this Congress placed on the
agency.
Medicare providers lobby us to restrict HCFA's authority,
to dictate their every action, and the same providers vilify
HCFA for their ``by the book'' bureaucratic approach.
Last January 14, top health policy experts from across the
political and ideological spectrum got together and wrote an
open letter to Congress and to the administration. I am not
exaggerating the diversity or credentials of this group,
Marilyn Moon, Stewart Butler, Gail Walinsky, Robert Helms, Uwa
Reinhardt, Robert Reicher, William Roper, a virtual who's who
across the ideological spectrum in health policy, all signed
their name to this document.
This letter, which I would like to submit for the record,
was published in the Journal of Health Affairs. I want to share
some of the letter with you, beginning with the first
paragraph.
``The signatories to this statement believe that many of
the difficulties that threaten to cripple HCFA stem from an
unwillingness of both Congress and the Executive to provide the
agency the resources and the administrative flexibility to
carry out this mammoth assignment.
``This is not a partisan issue because both Democrats and
Republicans are culpable for their failure to equip HCFA with
the human and financial resources it needs. They continue no
private health insurer after subtracting its marketing costs
and profit, would ever attempt to manage such large and complex
insurance programs with so small an administrative budget.''
They are referring to the fact that HCFA's administrative
expenses represent 1 percent of the Medicare Trust Fund and
only 2 percent of Part B spending. It leads me to my second
point, Mr. Chairman.
If you think private insurers can do a better job than
HCFA, and in part that is what the prescription drug debate is
all about, ask yourself the following questions:
One, when you hear complaints about Medicare, how often are
the complaints actually directed at the private contractors
that administer Medicare benefits?
Two, can you name a private insurer that markets
indiscriminately to the healthy and the sick, that willingly
covers pre-existing conditions, that wouldn't reduce benefits,
that wouldn't drop enrollees if that meant making more money?
Four, how much administrative costs does a private insurer
typically absorb or typically take?
Five, why do an overwhelming majority of Americans believe
we need a patient's bill of rights to ensure that private
insurance plans deliver on their promises?
Six, why are 44 million individuals uninsured?
Seven, why when we receive phone calls and letters from
providers complaining about red tape, questionable coverage
decisions and slow claims turnaround, is it so often the
private insurance industry these providers are referring to.
If there are actions we can take, if there are changes in
what we do and what HCFA does that can improve this program's
operations, let's make those changes.
But I hope, Mr. Chairman, this hearing doesn't just become
a vehicle for some of my colleagues to promote Medicare
privatization or an excuse to deflect responsibility we all
share by making this government agency a scapegoat.
Taking this hearing in either direction would be a
regrettable waste of time.
Mr. Bilirakis. I thank the gentleman. Before I recognize
the other members of the subcommittee, I would ask unanimous
consent that a June 12, 2000 letter signed by better than 60
Members of the House, a very bipartisan letter, a very large
number of Members of the other party are signatories to that
letter requesting this hearing. I request it be made a part of
this record.
Without objection, that will be the case. The letter says:
``We are writing to request that you consider holding oversight
hearings of HCFA and its carriers. We are concerned at the
complexity of the program and the chevron of regulations that
health care providers must now provide are serving as an
impediment to quality health care services for Medicare
beneficiaries, et cetera.''
Then the last paragraph, ``Our overwhelming goal is to
create a stronger and more effective HCFA that will be able to
meet the challenging needs of the growing elderly population.''
I would suggest to my ranking member, who is my very good
friend, that that is the goal of this hearing, and not, as I
said at the outset, to bash HCFA. The paragraph goes on:
``If HCFA is not able to adequately meet these needs we are
worried that access to quality health are services for our most
vulnerable population will continue to get worse.
``In the interest of Medicare beneficiaries and for the
physicians who participate in the program, we urge that your
committee takes prompt action.''
[The letter follows:]
Congress of the United States
Washington, DC
June 12, 2000
The Honorable Thomas Bliley
Chairman
Committee on Commerce
U.S. House of Representatives
2125 Rayburn House Office Building
Washington, D.C. 20515
The Honorable Michael Bilirakis
Chairman
Committee on Commerce
Subcommittee on Health and Environment
2125 Rayburn House Office Building
Washington, D.C. 20515
Dear Mr. Chairmen: We are writing to request that you consider
holding oversight hearings of the Health Care Financing Administration
and its carriers. We are concerned that the complexity of the program
and the sheer volume of regulations that health care providers must now
comply are serving as an impediment to quality health care services for
Medicare beneficiaries.
We believe that every effort should be made to eliminate fraudulent
activity in every Federal health care program. We also are concerned
that Medicare's complex laws and unclear regulatory guidance have
created an environment where honest providers fear that simple mistakes
will trigger punitive fraud investigations. Many honest physicians
believe that the risks are becoming too great and are not willing to
accept new Medicare patients.
The successful management and operation of HCFA and its carriers
are critical to Medicare beneficiaries and health care providers.
Hearings could identify the short-term challenges and the long-term
goals of the Health Care Financing Administration. These topics could
include:
<bullet> Are current HCFA initiatives effective at eliminating truly
fraudulent activity?
<bullet> Have HCFA's initiatives, such as ``Who Pays, You Pay''
program, rooting out fraud, and how much detrimental effect
have these initiatives had on the physician-patient
relationship?
<bullet> Does the emphasis on documentation (quantitative concerns),
have an adverse effect on quality (qualitative) patient care?
<bullet> Are inadvertent billing errors and judgment decisions being
confused with intentional acts to defraud the Medicare program;
what has been the effect of random post payment audits on
honest medical practices?
<bullet> Are there more effective governmental approaches to
eliminating fraud and abuse that do not impose such a ``hassle
factor'' on honest physicians?
Our overwhelming goal is to create a stronger and more effective
HCFA that will be able to meet the challenging needs of the growing
elderly population. If HCFA is not able to adequately meet these needs,
we are worried that access to quality health care services for our most
vulnerable population will continue to get worse. In the interests of
Medicare beneficiaries and for the physicians who participate in the
program, we urge that your Committees take prompt action.
Sincerely,
Signatures on Commerce Committee letter: Donald A. Manzullo, Collin
Peterson, Spencer Bachus, Jim McGovern, John E. Sweeney,
Richard H. Baker, Mark Souder, Van Hilleary, Julia Carson,
Shelley Berkley, Robert Stump, Lloyd Doggett, Darlene
Hooley, Mark Green, Lindsey Graham, David Phelps, David
McIntosh, John Baldacci, Bob Ney, Jack Kingston, Ronnie
Shows, John Shadegg, Edolphus Towns, Martin Frost, Terry
Everett, Tom Cambell, Floyd Spence, Elton Gallegly, Johnny
Isakson, James Sensenbrenner, Jr., Jerry Moran, James A.
Gibbons, Zoe Lofgren, Jim Ryun, Robert A. Brady, Ron Paul,
Mark Foley, Jo Ann Emerson, Louise M. Slaughter, Rodney
Frelinghuysen, Dave Weldon, Roger F. Wicker, Michael E.
Capuano, Earl Blumenauer, Sanford D. Bishop, Jr., George R.
Nethercutt, Jr., Lynn Rivers, Saxby Chambliss, Larry
Combest, Judy Biggert, Pat Toomey, Frank D. Lucas, Patsy T.
Mink, Sherwood Boehlert, Nick Rahall, John M. McHugh, David
Vitter, Wally Herger, Doug Bereuter, Bill Barrett, James E.
Clybrn, and Sue Kelly.
Mr. Bilirakis. That having been said, the Chair now
recognizes Dr. Ganske for an opening statement.
Mr. Ganske. Thank you, Mr. Chairman. I hope that the
committee learns something to day about how the Health Care
Financing Administration can work more efficiently and to the
benefit of the consumers, the beneficiaries, as well as
providers that provide the care.
All Congressman get phone calls and letters into their
office about bureaucratic snafus with all government agencies,
but HCFA is one of those that we receive, and as a past medical
practitioner, I can say that I have had some questions that
have gone into HCFA, too. But I would like to echo Mr. Brown's
sentiments and that is that a lot of the questions that
Congressman and Congresswoman get are generated from laws that
Congress passes and then requires HCFA to implement.
In 1997, BBA was a pretty complicated bill. It required
HCFA to break ground on a lot of things like prospective
payment systems which are not easy to implement, which have
never been done before.
When you starve an agency, I think you need to step back a
little bit before you criticize whether the agency can get its
job done.
So, I have been a supporter of increased funding for the
Health Care Financing Administration for several years,
primarily because I have voted for some of the laws that we
have passed that require HCFA to do an increased job. Let me
give you an example. For several years, Congress has been
interested in HCFA clamping down on fraud and abuse. That
requires a certain amount of manpower.
On the other hand, I have heard questions and comments
about whether they have been over-zealous in that report, which
brings up the never-ending conflict between how Congress writes
laws. Do you write laws that are so proscriptive that the
administrators have no leeway, but then become very, very
complicated or do you write laws that allow some flexibility,
that allow administrators to use some common sense?
However, because some of their decisions may not be liked
by certain providers or groups, they then come back to Congress
and say, ``You need to tighten up the proscriptions on how this
is done.''
It is a never-ending balance. It is not just with this
bill. It is with all the legislation that Congress does. It is
that fine line of writing legislation that accomplishes what it
wants to do, but at the same time allows some common sense.
There was a very good book written on this a few years ago
on how to do common sense legislation and some of the problems
that Congress has had with it.
Finally, I want to say that this hearing should not be used
as a way to promote one prescription drug plan over another.
I went to the rules committee yesterday and asked for a
substitute on my bill which I introduced, H.R. 4743, which
follows some of the lines that the Chairman has done with his
bill, which would basically allow poor Medicare beneficiaries
who are not dual eligible to access State Medicare drug grants
up to 175 percent of poverty.
That solution would not increase the HCFA bureaucracy,
other than the fact that those Medicare beneficiaries would be
able to access drug programs that are already run by the States
and where the States have already achieved discounts with the
pharmaceuticals.
So, my proposal would not increase the bureaucracy or set
up a separate bureaucracy. There are alternatives in this. But
I think that this hearing should not be utilized as a way to
promote one plan or another, to bash HCFA, to say that now we
need to have a separate agency running part of what I think
should be a comprehensive medical package of benefits.
So, with that, Mr. Chairman, I will yield back.
Mr. Bilirakis. I thank the gentleman. As you can see, we
are not here to bash HCFA.
I recognize Ms. Capps for an opening statement.
Ms. Capps. Thank you, Mr. Chairman. I appreciate that you
have decided to hold this most important hearing today on, as
we have discussed, the relationship between Health Care
Financing Administration's policies and the quality of care.
Medicare is a sacred program to many of today's seniors.
They count on Medicare for their health care and I believe we
all agree they should be able to count on being able to do so
in the future.
In administering Medicare, HCFA is involved in a delicate
balancing act. While we don't want to compromise patient care
or medical advances with excessive regulation, we also want to
make sure that the agency preserves a high level of program
integrity and works to reduce fraud, waste and abuse.
That being said, I believe there are many areas that need
improvement when it comes to Medicare's management. I am
concerned about patient access to Medicare technologies.
I have heard repeatedly from device manufacturers who are
unhappy with the HCFA coding and payment system. These systems
make it difficult for beneficiaries to gain access to
innovative technologies and procedures, even when Medicare
covers these therapies.
The manufacturer's primary concern is that technologies are
reaching Medicare patients much too slowly because of delays
and complexities related to these processes.
In my own district, facilities such as Medtronics, PS
Medical and Galleta are feeling the impact of this. Device
manufacturers have also expressed specific concern over HCFA's
rationale behind the new perspective payment system and the
implementation of the transitional pass-through payments for
medical devices.
These concerns have led me to cosponsor HR. 4395 authored
by my colleagues Karen Thurman and Jim Ramstad. This
legislation requires HCFA to adjust and update more frequently
Medicare's payment and coding systems so that Medicare
beneficiaries can receive timely access to medical
technologies.
H.R. 4395 will help shorten the time it takes for medical
products and therapies to reach nearly 40 million Medicare
patients today.
I cite this as one example of the way we need to work
together and not in an adversarial relationship, but in a
cooperative way to increase access, keep competition sharp, but
also just be aware constantly of the difference in health and
in many instances life and death the these decisions and these
processes make with patients who are so dependent on the
regulations that govern this agency.
There are so many exciting new advances in medical device
technology. This is new. When Medicare began I don't imagine
there were more than a handful of technologies, which fit into
this category. Now, they are springing up around the country.
It is incredibly important that we stay sharp and able to
deal with them as they come along. Many companies spend years
navigating the rigorous FDA approval process for these often
life-saving technologies. Then they are subjected to long and
often unnecessary waiting periods by HCFA for administrative
reasons, which to every patient and to every provider must seem
terribly wasteful and pointless.
Sadly, after manufacturers receive HCFA's approval for
coverage, their products are sometimes out of date by that
time. This type of over-regulation hurts the manufacturers. But
in the end it really hurts patients.
I believe that Congress must work closely with HCFA to
create an environment in which medical device manufacturers and
entrepreneurs can bring safe and effective medical devices to
the public with deliberate speed and timeliness.
HCFA has to keep pace with this innovation. To do otherwise
is to short change patients across this country. I believe in
Medicare. And I believe this institution also shares that
conviction.
We must therefore commit ourselves to improving the
administration of the program. We must work with you in HCFA to
help in this balancing act, to preserve program integrity while
encouraging innovation.
I yield back the balance of my time.
Mr. Bilirakis. I thank the gentlelady.
I recognize Dr. Norwood for an opening statement.
Mr. Norwood. Thank you, Mr. Chairman. I have a very
extensive, lengthy statement that I would like to submit for
the record.
Mr. Bilirakis. Without objection.
Mr. Norwood. I will just make a brief comment.
Mr. Bilirakis. Without objection, that will be the case,
too, I trust.
Mr. Norwood. The brief part, right.
Well, first I want to thank you. I think this is a very
important, it is always timely with HCFA to have this type of
hearing and I do believe all of us really think authority you
are correct in what this is about, this change.
You can say it any way you want to. You can call it
modernization. You can call it reform, but what we are really
all screaming for is change in a system today that is not
working well.
I don't think we can find many people who would disagree
with that. Now, I don't care to blame that on the
administrators particularly or the managers at HCFA, although
they share some of the blame. I think Congress shares probably
more blame and certainly the Executive.
But the bottom line is that we have an agency that is not
doing well in terms of the patients of this country and the
providers of care. We need to agree on both sides of the aisle
that change doesn't have to be bad. It can be good. It can be
innovative. That is really all we wanted to do.
The last Georgian that spoke out on this subject was
demagogued for a year. I cannot tell you how many television
commercials. Because he would dare say that HCFA should wither
on the vine. What that really means is that was an agency that
he thought really needed to be overhauled or indeed changed
totally if necessary so that it works for the patients of
America.
I want to thank you first, but encourage you, too, Mike. I
don't think we can do this too often because we have to get to
a point where both sides of the aisle will agree that
legislative change has to be in the making before we are ever
going to have this largest agency in the world improve.
In my office I am proud to report that the IRS is still No.
1 with complaints. But HCFA if close behind. There is no reason
that has to happen. I blame a lot of that on the Congress of
the United States.
With, Mr. Chairman, I thank you for the opportunity.
Mr. Bilirakis. I thank the gentleman. You have sort of
paraphrased, in a way, much of what Dr. Ganske has said.
I think the biggest concern that I have is that I would
like to think that both sides of the aisle are interested in
doing what is right here.
But I have oftentimes in the past asked Mr. Hash and other
members of HCFA why they don't make suggestions to us?
Why don't they approach us and tell us, hey, the language
in this legislation is restrictive and it keeps us from doing
the job that we feel that we want to do as well as we need to
do it.
Those are the concerns that I oftentimes have, just the
lack of needed communication.
Mr. Whitfield.
Mr. Whitfield. Mr. Chairman, thank you and I also am
pleased that you are having this hearing. I think every Member
of Congress spends a lot of time with physicians, hospital
administrators, and other providers relating to health care
because it certainly is one of the most complex problems we
have facing our society today.
Yesterday I had an opportunity to meet with a board, a
nonprofit board connected with a particular church that owns
seven hospitals and they echoed the concerns by many health
providers that I see and that is that the health care system is
so micro-managed today that people really feel like they are
frequently tied up in knots in trying to abide by various
regulations.
I agree with others on this committee who said, you know,
we can't run around blaming anybody for this, but I think we
have to recognize that there are some genuine concerns out
there about whether or not HCFA is unnecessarily interfering in
the delivery of health care.
I am sure that nobody has an answer to that. I was looking
at some of the testimony and, for example, there is a seven-
page guideline as an example describing the examination and
documentation requirements for billing under CPT Code 9215, one
of only approximately 10,000 CPT codes.
Then I know physicians, for example, feel like that their
Practicing Physicians Advisory Council has not been consulted
enough, has not worked on a regular basis with HCFA in trying
to deal with just some practical problems that they have.
So, I am delighted we are having this hearing. I think it
is a very complex subject. Hopefully, we can come up with some
information here that may benefit everyone.
So, thank you very much.
Mr. Bilirakis. I thank the gentleman. Mr. Bryant.
Mr. Bryant. Thank you, Mr. Chairman. Any statement I have I
will put in the record. I do want to welcome our good friend,
Mike Hash, who is almost a member of this subcommittee, I
think, as well as the very distinguished members of the second
panel. Thank you.
Mr. Bilirakis. I thank the gentleman.
[Additional statements submitted for the record follow:]
Prepared Statement of Hon. Fred Upton, a Representative in Congress
from the State of Michigan
Mr. Chairman, thank you for holding today's hearing on HCFA's
management of the Medicare program. As we seek to further modernize the
Medicare program, I want us to give serious consideration to whether or
not the current system--HCFA's delegating claims payment and fraud and
abuse detection to insurance carriers--is working well. Based on my
experiences over the years with health care providers and beneficiaries
and on the hearing that I held in the Oversight and Investigations
Subcommittee on Medicare's management of the carriers, I have every
reason to think that this system is not working well for beneficiaries,
for providers, and for the taxpaying public.
Let me give you just one example of what I see and experience all
to often as I work with my beneficiaries and health care providers.
Nearly a month ago, a physician's office manager in my district called
my office to see if we could help her and the doctor to figure out what
was happening at the carrier. It seemed that they had been receiving
scores of requests for additional information about claims that they
had submitted electronically. When they called the carrier, they were
told that this was a ``pre-payment audit'' that HCFA had directed the
carriers to undertake. When they asked how long the claims would remain
pending, the carrier could give them no estimate. When they asked if
interest would be paid on claims held beyond a certain period, the
carrier told them that HCFA directed them to treat these claims as if
they were in a claim category on which interest is not paid. When my
constituents checked with the regional HCFA office, that office denied
any knowledge of what was going on at the carrier.
The physician now has nearly 40 percent of his Medicare claims
being held by the carrier. And despite my staff's and my effort to get
a straight answer from Medicare about what is going on here, we have
yet to get a complete response--after over a month of prodding.
If my staff person--who has nearly 20 years of dealing with
Medicare issues--is having problems of this nature, what about busy
doctors and confused beneficiaries? I wish this were a rare situation.
It is not. It is in my experience typical of the lack of clear
communication between HCFA and its carriers. And it is totally
frustrating and maddening for everyone.
Further, as you know, Mr. Chairman, last summer I held an Oversight
and Investigations hearing on HFCA's management of its carriers. What
we learned in the investigation leading up to the hearing and at the
hearing itself was very troubling. Too many carriers, which are
supposed to be the first line of defense against Medicare fraud and
abuse, were themselves defrauding Medicare.
Again, thank you for holding today's hearing. We've got to get to
the bottom of these problems.
______
Prepared Statement of Hon. Cliff Stearns, a Representative in Congress
from the State of Florida
Thank you Chairman Bililrakis for holding important hearing. The
purpose of this hearing is to determine whether or not Medicare
patients have access to the newest technologies available in the market
place. Or, does HCFA's bureaucracy limit our nation's seniors access to
medical treatments available to all other Americans. Is HCFA a
bureaucratic nightmare that needs to be streamlined and brought into
the 21st century? Without sounding like I'm piling on and being too
critical, I think the answer has to be yes.
With the many technological changes that have occurred since the
program began and the need to keep pace with future advances that will
be made, it is necessary that the program be overhauled completely. We
need to help seniors gain access to affordable prescriptions and the
newest technology available through insurance coverage and the truly
effective price competition of an active marketplace. That is why I
support the idea of using the Federal Employees Health Benefits Program
(FEHBP) as a model. This would ensure that seniors would have access to
newer drugs and devices because they would choose the plan they want.
In fact, this type of approach would provide Medicare beneficiaries the
same options that most federal employees, including the President and
Members of Congress have. That is why I feel so strongly about the need
to enact the proposal that was developed based on the recommendations
of the bipartisan commission. That proposal is S. 1895, the Breaux-
Frist bill which would restructure Medicare, using the Federal
Employees Health Benefits Program (FEHBP) as a model. This would ensure
that seniors would have access to newer drugs and devices because they
would choose the plan they want. These plans that do not limit the
newest devices and drugs to its beneficiaries and neither should
Medicare.
One need look no further than a recent notice that was published by
HCFA entitled: ``Process to Identify and Obtain Codes for Items
Potentially Eligible for Payment as New Technologies or Transitional
Pass-Throughs Under the Outpatient Prospective Payment System. This is
a good example of how cumbersome the process is and continues to be
when new technologies become available and need to be added to their
list. In order to have a new technology added to HCFA's list you must
apply for a special code. The application process can take up to two
years provided the paperwork was sent in by April 1, 2000. It is
absolutely ridiculous that in order to bring a new device to Medicare
patients that the administrative and procedural requirements could
delay its availability by as much as four or five years. That's not
acceptable.
Mr. Chairman, how can anyone be expected to know whether or not
correct procedures are being followed--there 100,000 pages of HCFA
regulations relating to the Medicare program. Physicians are asked to
do the impossible. Unless they follow certain rules and regulations
they are liable to be accused of fraudulent behavior. Of course, since
what is covered and not covered is decided by HCFA and not the
physician, the physician is placed in a compromising position. For
instance, if a physician believes that a patient should have a
screening evaluation, the physician must state that he thinks a patient
has a certain underlying problem. This is the only way a routine
screening evaluation with a physical examination and preoperative
screening test can be carried out. Why don't we allow physicians to
make such decisions without having to go through such a maze of
bureaucratic red tape?
HCFA is a bureaucracy dictating how physicians should practice
medicine, a bureaucracy that prevents Medicare recipients from having
access to the newest medical technology, and a bureaucracy that runs
our seniors health care program through a maze of paperwork, codes,
rules, regulations, etc., etc.
The answer to the problems that are experienced with anyone using
this program is clear. We need a major overhaul of the entire program.
Thank you, Mr. Chairman.
______
Prepared Statement of Hon. Barbara Cubin, a Representative in Congress
from the State of Wyoming
Often times, it is very difficult to realize the true impact of
issues and legislation on our local communities.
The chain that extends from the federal government to the states is
very long indeed, and each link represents some form of red-tape or
another.
HCFA, for example, is this huge entity that is very far removed
from the people it serves.
I can't tell you how many times my constituents have come to me
with questions about their Medicare benefits because they can find no
one at HCFA who will answer their questions. That just isn't right.
I know all too well the problems that physicians are having when it
comes to Medicare.
Before I came to Congress, I spent years working with my husband in
his medical practice and I know first-hand how difficult it is to deal
with 1000 pages of Medicare regulations, and the endless confusion that
goes along with the coding procedures.
So much time is being consumed by administrative red-tape that
medical practices are having difficultly delivering the care they
should. And over the years, it has only gotten worse.
And that's why it is so important for us as Members of Congress to
get out there and speak with our constituents and learn first-hand what
it is they feel and experience, especially when it comes to health
care.
I wonder, however, if HCFA has bothered to do the same thing??
Today, I hope to get a better understanding of how HCFA develops
its regulations because, frankly, it is just not responding to the
rapidly changing marketplace as quickly as it should.
That needs to be addressed and I hope we can work toward that end.
Thank you, Mr. Chairman.
______
Prepared Statement of Hon. Tom Bliley, Chairman, Committee on Commerce
I want to thank the Chairman of the Health and Environment
Subcommittee, Mr. Bilirakis for convening this hearing today. In 1997,
this Committee improved patient access to drug discoveries by passing
the Food and Drug Modernization Act. Today we are examining similar
issues within the Health Care Financing Administration.
The issue of Medicare complexity has been a growing concern to
Congress. I would like to submit for the record a bipartisan letter I
received earlier this month from over 60 Members of Congress. They are
concerned, as am I, that HCFA is an impediment to Medicare
beneficiaries. I hope today's witnesses, particularly Mr. Hash, can
address these concerns.
Medicare is vastly complex. The burden imposed by the over 110,000
pages of laws, regulations, manuals and other program guidance is
exceeded only by the penalties for failure to comply with these rules.
This complexity has negative impacts.
<bullet> It steals doctor's time from their patients and research
activities.
<bullet> It denies seniors timely access to diagnostic tools and
treatments.
<bullet> It leads to compliance problems for providers trying to do
their best to follow the complex rules, but nonetheless finding
themselves on the wrong side of the rules.
The Health Care Financing Administration, the agency which oversees
Medicare, is an extraordinary bureaucracy. There are approximately
10,000 codes linked to services that physicians and hospitals must use.
HCFA oversees 60 different private insurers or ``intermediaries'' who
process and pay the 900 million claims filed by beneficiaries each
year.
HCFA micromanages the Medicare program in excruciating detail. HCFA
performs tasks such as collecting copays and deductibles, making
coverage decisions, managing contracts with hundreds of private health
plans, and checking quality, payment rates and billing compliance.
Today's hearing is particularly timely given the current debate on
adding a prescription drug benefit to the Medicare program. Both
Democrats and Republicans have introduced separate legislation which
would bring the administration of the benefit under an entity other
than HCFA. The issue of self-injectable drugs which this subcommittee
addressed at a hearing earlier this year, illustrates the potential
problem of allowing HCFA to administer an expanded prescription drug
benefit.
I am hopeful this hearing will shed light on some of the thinking
behind the decisions being made at HCFA. Congress has made many changes
to the Medicare, Medicaid and SCHIP programs, as well as changes to the
private health insurance market with the enactment of the Health
Insurance Portability and Accountability Act, over the past four years.
In part, many of these provisions were enacted to reign in the costs of
federal programs. However, in no way did Congress ever intend to
compromise the quality of care patients in these programs receive.
Mr. Bilirakis. Michael, why don't you come forward? We have
two panels today. Panel One consists of Mr. Mike Hash. You have
already heard his name a number of times this morning. He is
the Deputy Administrator of HCFA.
Mr. Hash was a long-time counsel to this subcommittee and
we have gotten to know him quite well before and after, if you
will.
Michael, you are representing the administration. The clock
is at 10 minutes. Please proceed, sir.
STATEMENT OF MICHAEL HASH, DEPUTY ADMINISTRATOR, HEALTH CARE
FINANCING ADMINISTRATION
Mr. Hash. Thank you, Chairman Bilirakis, Congressman Brown
and distinguished members of the subcommittee. I want to thank
you for inviting us here today to discuss our progress in
attempting to streamline Medicare policies and help providers
participate in the Medicare Program.
I also want to say I am very much heartened by, and very
appreciative of, the remarks that all the Members made in their
opening statements about the purpose of this hearing and about
their willingness to participate, and continue to participate,
in a constructive dialog about how we can strengthen and
improve our program.
I take those offers quite seriously and want to continue
working with all of you toward the ends that you identified,
which we share wholeheartedly.
All of us are interested in minimizing Medicare regulations
and maintaining and strengthening the program's efficiency and
integrity. I think we all appreciate, as some of you observed
in your opening statements, that the challenges that these
goals present, which are sometimes conflicting goals, are very
serious ones.
Such concerns have been heightened, I think, by the
Balanced Budget Act's substantial impact on providers and by
our success in fighting waste, fraud, and abuse in the Medicare
Program.
We are now taking a number of steps to review our policies
for ways that they might be strengthened, streamlined, and
simplified. We are also working to more sharply target our
program integrity efforts and to make sure that providers have
the information they need to do the right thing.
Helping us in these efforts are several steps that we have
recently taken. One is something known as our Physicians
Regulatory Issues Team, or PRIT, as we call it. Its job is to
review, clarify, and simplify rules, and ensure that the
concerns of clinicians are heard and addressed in our programs
and procedures.
This team is developing an impact analysis initiative to
ensure that we explicitly address how our policies affect
practicing physicians.
It is also establishing a sentinel practices system to
query and monitor a selection of physician practices around the
country and to receive ongoing and real time feed back on the
real world day-to-day impact of Medicare rules on the practice
of medicine.
Another important effort we have under way is the
development of simplified evaluation and management guidelines.
One of you in your opening statements referred to the later
testimony in which this is referred to. This is an effort
designed to make simpler the guidelines for physicians as they
make their decisions about coding for the level of visits they
provide to Medicare beneficiaries.
We want to make sure that these guidelines are clear,
unambiguous, and streamline the documentation that is required
to support claims that are submitted for physician services.
We will soon be testing this new evaluation and management
guideline approach to get direct physician input on whether
they are really better in the real world of physician practice.
We are also revamping the advanced beneficiary notices that
providers give to beneficiaries when providing an item or
service that Medicare may not cover.
We want plain language, user friendly notices, explaining
that a given service or item may not be covered and that the
beneficiary may be responsible for paying for the service, so
that the beneficiary can ultimately make an informed consumer
choice.
We have several other initiatives under way that are
addressed in my written testimony. Several of these are
designed to focus more sharply on our program integrity
efforts.
We realize that, in our efforts to reduce waste, fraud, and
abuse in the Medicare Program, we have generated substantial
concerns on the part of the provider community.
We know, and we continue to believe, that the majority of
providers are honest and conscientious and we have no intention
of punishing or pursuing anyone for honest mistakes.
If providers do make billing errors, we want to find these
errors, preferably before we make our payments, but there is a
world of difference between honest errors and the kind of
outright fraud that we have been so successful in fighting.
We do not refer providers to law enforcement for minor or
occasional errors. Only the most serious matters are referred
to law enforcement agencies. In fact, while some 660,000
physicians receive Medicare payments each year, we only review
1 percent of physician claims.
In the past 2 years, physicians have accounted for only 52
of the some 500 criminal health care convictions related to
fraud at a time when the Department of Justice has achieved an
85 percent conviction rate on fraud cases that it brings to
court.
Professor Uwa Reinhardt at Princeton, I think, provided a
key perspective on all of this in a recent op ed piece that
appeared in the Wall Street Journal. He noted that if those
complaining about our regulations were to be brutally frank and
honest, they would have to admit that the complexity is often
the result of special accommodations for specific circumstances
recommended by providers of services to Medicare beneficiaries.
In the end, he says, a compromise must be struck between
rules, which are 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 right balance. The past few years have been
particularly difficult for providers due to the many BBA
changes and our vigorous program integrity efforts.
But now I believe we are turning a corner. We are moving
beyond implementation of the BBA.
We are strengthening and expanding our efforts to help
honest providers and we are more sharply targeting our fight
against fraud, waste, and abuse.
Mr. Chairman, I want to again thank you for holding this
hearing and giving us an opportunity to continue a constructive
collaboration to improve and strengthen our program.
I look forward to responding to any questions that you and
other members of the subcommittee may have.
[The prepared statement of Michael Hash follows:]
Prepared Statement of Michael Hash, Deputy Director, Health Care
Financing Administration
Chairman Bilirakis, Congressman Brown, distinguished Subcommittee
members, thank you for inviting us to discuss our progress in
streamlining Medicare policies and helping providers participate in the
Medicare program.
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. 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.
Provider concerns about these issues 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, as the President has announced, we want to enact further
refinements to ensure that providers receive adequate payment and
beneficiaries continue to have access to quality care.
We have several other initiatives underway to help providers and
better target our program integrity efforts.
<bullet> 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.
<bullet> 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.
<bullet> We have worked with the HHS Inspector General to develop
compliance guidance for providers, including those issued just
this month for physicians, and are inviting public comments on
this guidance.
<bullet> We are studying payment error rates at the contractor level so
we can focus education and error prevention efforts more
sharply.
<bullet> We are requiring all claims processing contractors to
establish toll-free lines for providers to call with billing
questions.
<bullet> We will be testing simplified evaluation and management
guidelines designed to reduce the documentation required for
physicians to justify their claims.
<bullet> This month we sent a letter to more than 800,000 providers on
how to address the most common documentation problems.
<bullet> 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 for all patients served by health care providers, as
well as to support medical education.
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 all HCFA programs. For all these programs including Medicare, we
have issued 1,700 pages of regulations to implement this legislation.
Individual providers need to understand only the fraction of these
pages that relate to the specific services they provide.
Our process for developing and implementing regulations is fair and
open. Providers and other members of the public have ample opportunity
to comment and seek adjustments. They have extensive, rule-based
information on what is and is not allowed, rather than arbitrary
decisions. They have due process rights. And we are held accountable to
providers and other members of the public through the Executive,
Congressional, and Judicial branches of government. This, as providers
know, is far different from the way private insurers conduct their
business.
Virtually everything we do in regulations is in response to
legislative mandates or directives. 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 two 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:
<bullet> 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;
<bullet> surveying health care providers nationwide and analyzing data
collected to develop new education strategies for reaching out
to Medicare providers;
<bullet> developing computer-based training modules for providers on
topics such as proper claims submission, Medicare Secondary
Payer rules, and Medicare fraud and abuse efforts;
<bullet> writing articles on timely topics for fiscal intermediary
bulletins and other publications targeted toward physicians and
other providers;
<bullet> 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;
<bullet> communicating on a regular basis through conference calls with
national and state provider associations and issuing nationwide
mailings on issues of interest;
<bullet> 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
<bullet> working to ensure that contractor toll-free service lines are
responsive to provider questions.
We also are strengthening and standardizing the way in which our
contractors carry out provider education and customer service
activities. We require all contractors to provide information via
printed bulletins and newsletters, as well as via the Internet. Each
contractor is required to link to our website from their website in
order to give providers access to our Medicare learning network. We
established a component within HCFA to specialize in education and
training for the provider community. And we recently notified
contractors that they may no longer charge providers a fee for
attending training on Medicare issues.
Among the most important of our efforts to improve provider
guidance and education is the 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 our staff to review the situation.
As a result, HCFA physicians started over with three goals in mind:
<bullet> simplify the guidelines;
<bullet> reduce the burden; and
<bullet> 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 held a public meeting last 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:
<bullet> 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;
<bullet> conducting additional training sessions for representatives
from national and state hospital associations, as well as
software vendors, in the coming months;
<bullet> posting training materials for providers on our www.hcfa.gov
website;
<bullet> sponsoring a national satellite conference specifically on the
hospital outpatient PPS;
<bullet> 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 websites; and
<bullet> 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, the 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:
<bullet> 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 has already begun piloting these ideas with some
current regulations;
<bullet> 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;
<bullet> developing a ``physician service core group'' 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;
<bullet> enhancing communication at the State and County level by
having our regional offices develop outreach that reflects the
needs and character of local physician communities;
<bullet> 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;
<bullet> 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
<bullet> upgrading our website to provide clearer, more user-friendly
information for physicians.
Other Administrative Action
We also are taking 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. For example:
<bullet> 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 has recently
been reviewed by our Practicing Physicians Advisory Council,
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.
<bullet> 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 one-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.
<bullet> We are expanding the number of medical devices for which
``pass-through'' payments will be made under the new outpatient
prospective payment system and continuing to work with the
device industry to determine additional devices for which these
payments can be made under the law. We also have committed to
making unprecedented quarterly updates to the pass-through list
to ensure that the outpatient prospective payment system does
not inhibit development and use of new technologies.
<bullet> We are postponing expansion of the BBA's ``transfer policy''
for all hospitals for a period of two 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.
<bullet> 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 outpatient payment rates that
is used to calculate inpatient rates.
<bullet> We are helping home health agencies by extending the time
frame for repaying interim payment system overpayments from one
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.
<bullet> We are helping skilled nursing facilities by refining the
payment classification system in a budget neutral way to
increase pay for medically complex patients.
Assisting Medicare+Choice Plans
We also have taken important steps to help managed care and other
health plans participate in the Medicare+Choice program. Final
Medicare+Choice regulations announced last week incorporate many
industry recommendations. They include several provisions that reduce
administrative requirements for plans while maintaining strong
beneficiary protections.
For example, they:
<bullet> permit flexibility to tailor benefits under M+C plans through
the use of full-county segmented service areas with differing
benefits;
<bullet> reduce quality assurance requirements for Preferred Provider
Organizations, as defined by the statute;
<bullet> implement deeming procedures and expansion of deemable
categories to include not only quality assurance and
confidentiality requirements but also access standards, advance
directive requirements, and provider participation and anti-
discrimination requirements; and
<bullet> reduce the re-entry limitation for M+C organizations that
terminated participation from 5 years to 2 years.
We also earlier announced plans to modify our current risk adjusted
payment system to pay more for the higher costs of providing high
quality care for patients with congestive heart failure. We are
developing a revised phase-in schedule for risk adjustment in
conjunction with the Medicare Payment Advisory Commission, health
plans, and beneficiary groups. And, of course, our proposed
prescription drug benefit would result in more than $50 billion over 10
years in additional payments to Medicare+Choice plans.
We realize that health plans choose to participate in
Medicare+Choice based on business decisions, but these changes and
other initiatives we've announced underscore our willingness to be
responsive to constructive industry suggestions by granting flexibility
when possible.
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. 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. As we have said time and time
again, we know the vast 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.
We 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, in
the past two 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.
Mr. Bilirakis. Thank you, sir. You know in addition to
trying to understand as much as possible all the complex
legislation that goes through this House of Representatives
that we have to ultimately vote upon in committee, if you will,
in subcommittee and certainly on the floor, I have found that
the most difficult part of our job is trying to understand the
consequences of our acts, the unintended consequences, if you
will, that quite often result from things such as BBA-97 and
things of that nature.
I have always been curious, Michael. We all get ill, so we
all go to doctors. That is one thing about health care, we can
talk about an awful lot of issues here in the Congress, but
many of them we personally, we Members of Congress have not
personally experienced.
But when it comes to going to the physicians, to the
providers, we all do that, I think. Certainly, if we don't
experience it ourselves we do it with members of our family.
You know, every time I go in and the doctor finds out that I am
out in the waiting room waiting for my wife or whatever the
case may be, obviously, I get a visit right away and an
invitation to come in and sit down with the people who do the
coding and things of that nature.
I guess the thought comes to my mind, maybe a fundamental
question, how much of that, the actual real world type of
experience, does HCFA do in the process of doing their job?
Mr. Hash. Well, Mr. Chairman, I think we need to do more of
it. Clearly, the ability to assess both before we make policies
and after we put them into place, what their impact is is a
responsibility that we have.
We are trying to use more effectively some of the resources
that I referred to in my testimony regarding the Practicing
Physicians Advisory Committee, and the new internal group
called the Physicians Regulatory Issues Team. These are ways in
which we are seeking to reach out and evaluate more
appropriately, and more rapidly, the effect of our policies.
We also have a huge obligation, I think, Mr. Chairman, and
probably not sufficient resources to provide education and
technical assistance to individuals who are participating in
our programs.
That is an enormous challenge and one where now we are
trying to add a lot of resources related to phone lines for
providers and physicians to get help and information. We are
trying to do more educational programs.
We now have on our web site self-training programs for
physicians that are free of charge that they can download that
helps them to understand how to code and how to answer
questions about common billing issues.
We need to do more of that. That is very important in
supporting the providers who are serving our beneficiaries and
that is what many of our initiatives are about.
Mr. Bilirakis. Well, I know that you are an awfully busy
guy. God knows you have a pretty tough job. I think we all
recognize that, even those who chose to sometimes bash HCFA.
I would suggest it would be great to just take some time
and go down there where the grass roots are and take a look and
see what these physician providers really go through in their
offices.
As I have said before, you may have heard me, 2 or 3 years
ago my son opened up his own medical practice and he couldn't
afford to get the computerized stuff so he used this manual
method.
I spent, I guess, 2 months, our January and February break,
just sitting in there trying to do as much of that as I could
and seeing the complexity of the coding. So, it is quite an
experience, really, quite an education. When we talk about
educating them, I sometimes think we need to be more educated
than they do.
The Chair will now yield to Mr. Brown.
Mr. Brown. Mr. Chairman, thank you. I spent much of the
break in a hospital observing from another angle. So, I would
prefer your way next year. Thank you.
Mr. Hash, the whole complexity of HCFA which is the subject
of the hearing today, the complaint from some is that the
private sector is so much simpler.
Run through for us, if you would, sort of what you do when
HCFA makes a decision in terms of the process that HCFA uses to
develop regulations, making policy decisions, getting public
input.
Run through that process briefly, if you would.
Mr. Hash. Yes, sir. Generally, Mr. Brown, we are subject to
something called the Administrative Procedures Act, which
governs all executive branch agencies as they make rules that
have the effect of law to those who are subject to them.
That process requires consultation with interested
stakeholders, affected stakeholders. It requires generally the
publication of proposed rules with opportunities for comment,
but then of course requires us, after the comment period is
closed, to respond to all of the comments and indicate why we
didn't accept them or if we did accept them, why we did agree
with the commenter.
Then we put the regulations into final form. That process
is subject to extensive review within the executive branch.
Once the Health Care Financing Administration completes any
rule or regulations, it is then reviewed by the Department of
Health and Human Services because these are ultimately under
the law regulations of the Secretary.
Then the Office of Management and Budget also reviews them
for their consistency with the programs and the policies of the
President. So there is a lengthy review process for all of
these.
Mr. Brown. How long does it take generally for the whole
process and how much of that time is sort of open to public
comment where providers and others affected can have very
specific input into the process?
Mr. Hash. Well, typically when the Congress passes new
legislation that requires the issuance of implementing
regulations. We have a whole series of meetings, usually, when
we are meeting with providers to get their input on what they
think the implementation rules ought to look like.
That is followed by us putting together, over a month or 2,
an actual proposed rule, which we then publish formally in the
Federal Register. Then interested parties again have an
opportunity to submit written comments to us and many
organizations and individuals not only submit written comments,
but also come in and meet with us during the comment period to
amplify their concerns and recommendations. After the closure
of that public comment period, we are required to review all of
the comments, to respond to all of them in the preamble of the
final regulation, and then publish the final regulation with
our final decision.
Mr. Brown. Once it is published in the Federal Register for
public comment, you typically gets hundreds, thousands, tens of
thousands, what is typical?
Mr. Hash. It depends on the rule. Typically it is several
hundred on any major rule. But on occasion, for example, we
published rules modifying the conditions of participation for
hospitals. We received over 60,000 comments on that set of
rules alone; 20,000 of which were related to a specific issue
in that particular regulation.
So, it can go all the way from several hundred, which is
routine, to several thousand.
Mr. Brown. Now, contrast your decisionmaking process to
what we might see if Medicare over time is just turned over, is
just privatized, turned over the private sector one way or the
other and in the process of HCFA today with the process of
private insurance when it makes decisions in the area of
developing and implementing payment policy decisions, education
material, what plays out that way?
Mr. Hash. Well, I think for the most part, Mr. Brown,
private insurance plans don't have the obligations and
responsibilities that the Medicare program has on behalf of its
beneficiaries. For example, we have rules and regulations about
appeals and grievance procedures.
There are usually no such arrangements in private health
plans. We have rules on monitoring the quality of health care
services and to ensure that quality improvement is going on. To
my knowledge, not much of that is done in private plans at all.
We have requirements to implement very specific payment
policies associated with our programs and generally speaking
private plans announce their payment arrangement, sometimes
negotiate with providers, sometimes don't.
Last, we have a very large obligation to go through a
public and transparent process for determining the coverage of
the program for specific services and items. Many private plans
don't have any public coverage review process. They just
announce by fiat what they are covering and what they are not
covering.
So, it is a very different environment largely driven by a
much greater array of responsibilities that we have relating to
our beneficiary protections, to quality, to coverage of our
services and to payment of our services.
Mr. Brown. Last question, Mr. Chairman. So, if we were to
follow a sort of insurance company prescription drug program,
you would see a very different HCFA versus using private
insurance in terms of formularies and in terms of extent and
breadth of coverage, all of those issues. You would see a very
different prescription drug plan?
Mr. Hash. That would be correct because it would be subject
to decisions about marketing on behalf of private insurance
companies, what kinds of plans and under what circumstances and
in what areas they would make those plans available.
Mr. Bilirakis. Mr. Ganske.
Mr. Ganske. Thank you, Mr. Chairman. I have always thought
that it would be interesting to more often have panels
constituted where, for instance, we could have the HCFA
representatives sitting at the same table with some of the
other people giving testimony today and let you go back and
forth a little bit more.
Mr. Bilirakis. The trouble is, I don't think HCFA would go
along with that. We have tried that in the past.
Mr. Ganske. Mr. Hash, would you have a problem with that?
Mr. Hash. Speaking on behalf of the administration, I
believe that we have a policy at the Department of Health and
Human Services that representatives of the administration would
typically appear on their own.
Mr. Ganske. Well, let it be noted for the record that if I
were running HCFA I wouldn't mind sitting at a table and
answering some questions in public.
Mr. Hash. I understand, Dr. Ganske.
Mr. Ganske. On the other hand, I am not asking for the job.
I just want to make that clear.
Well, let me take some of the questions that some of the
others have because they won't be able to ask you this
directly.
Dr. Coble, who is testifying for the American Medical
Association, points out that carriers generally refuse to
answer physicians queries in writing and that physicians should
be able to obtain a file copy.
The question later arises, when I was in practice, for
quite a while Medicare would provide me with a pre-
authorization for certain reconstructive procedures. Let us say
a breast reduction on an elderly woman who had huge breasts
that were causing a lot of back and shoulder pain and deformity
and problems.
That is typical practice for HMOs, for traditional
indemnity insurers. One would examine the patient to make
estimates for the amount of weight to be resected, even provide
an authorized photograph from the patient to the insurer, not
with any faces included, obviously.
Then you would get a determination from the insurer and it
used to be that Medicare would do the same thing. But then a
number of years ago Medicare stopped doing that. Instead, they
would write a letter to the beneficiary saying, ``Well, you can
go ahead and have this procedure, but if we decide after you
have had the procedure, then you are going to be responsible
for the cost.''
Now, was that just my local carrier's decision or was that
a nationwide policy? This also has to do with a whole bunch of
other procedures, types of eye procedures, and other things
like that?
Mr. Hash. Dr. Ganske, I actually don't know offhand, but I
would be happy to find out and supply for the record when that
changed and why it changed. But I would assume that it has to
do with resources and workload.
We have a very substantial volume of claims, as you know,
660,000 practicing physicians around the country. I think our
ability, and therefore our contractors' ability, to actually
provide pre-authorization for a large volume of potential
services was something which we could not finance.
Mr. Ganske. With all due respect, Mr. Hash, it occurs
anyway. It just occurs afterwards for a lot of these
procedures. So that if the patient does decide to take the risk
of being financially liable and goes ahead with it, then in
every situation like that----
For instance, let us take an eye surgeon where a patient
has eyelids that are hanging over their eyelashes and
restricting their peripheral vision so that when they are
driving down the street they can't see a car alongside of them.
That is typically something that if you would do that
procedure, every time HCFA would ask for documentation of
visual fields or that the procedure was necessary. But it would
occur after the procedure.
So, there is no saving any time there for the bureaucrats.
It is just simply a matter, it seems to me, that you are trying
to scare patients from getting medically necessary procedures.
So, I want to ask you, will you reconsider that type of
policy and start to allow prior authorizations?
Mr. Hash. I would be happy to look at it, Dr. Ganske, and
see what the reasons are for why it is the way it is. I just
don't have that information available to me.
I would say that the kinds of examples that you are giving
me tend to relate to what we would call ``non-covered
services,'' potentially. The issue here is distinguishing, as
you know, between what would be an elective cosmetic kind of
procedure versus what is a medically necessary procedure under
the rules of the Medicare coverage.
That distinction that you made very clearly here is the one
that carriers are obligated to make when they get a claim that
involves the provision of services that potentially may be non-
covered services.
[The following was received for the record:]
The law did once require prior authorization by Medicare Peer
Review Organizations (PROs) for certain elective surgeries in order for
payment of claims by Medicare carriers. However, the vast majority of
surgeries were approved and the requirement was perceived as
unnecessary red tape by many physicians. The requirement was repealed
in the Social Security Amendments of 1994. There now is no requirement
or specific authority under the law for prior authorization of claims
by either the PROs or the carriers. The law merely requires that
carriers determine whether a claim is for medically necessary services
upon receipt of the claim.
Whether there may be an appropriate and cost-effective role for
prior authorization in Medicare is something that we are now exploring.
Specifically, we are exploring the feasibility of a program for
voluntary prior authorization for hospice services. This effort is in
response to concerns that the benefit is under-used due to the
difficulty in determining that a patient has six months or less to live
and is therefore eligible for the benefit under the law.
Mr. Ganske. Well, you might as well----
Mr. Bilirakis. Without objection, the gentleman is given an
additional 2 minutes.
Mr. Ganske. Thank you, Mr. Chairman.
Mr. Bilirakis. That shocked you; didn't it?
Mr. Ganske. It isn't just reconstructive procedures that we
are talking about. There are other types of procedures as well.
You know, it is that type of a hassle that both patients and
providers go through that drives them nuts.
It is hard for me to understand how in the end it is saving
the HCFA any work unless you are scaring beneficiaries from
having the procedure done that they need and then they just
don't pursue it. And I don't think you want to do that.
Mr. Hash. No, Dr. Ganske, definitely not. We want to make
sure that our beneficiaries get services to which they are
entitled and to which they are entitled under our programs.
Mr. Ganske. Well, what I would like is, I would like a
letter back from you specifically addressing that. This is the
type of thing, then, if there isn't a common sense solution,
then you are forcing Congress to become much more prescriptive
and proscriptive in terms of its legislation which I think then
complicates your job.
I appreciate the extra time, Mr. Chairman.
Mr. Bilirakis. I thank the gentleman.
Ms. Capps may inquire. Ms. Capps, you are welcome to have 7
minutes.
Ms. Capps. That is very kind of you in advance.
Mr. Hash, thank you for being present here. If you wouldn't
mind, I would like to continue along the lines that I began in
my opening statement.
Mr. Hash. I suspected that you would.
Ms. Capps. Again, this is a good opportunity, I think, for
us to discuss some of these issues that are on the minds of
many of my constituents.
This has to do with the speed at which Medicare covers new
technologies. For example, when the President announced a few
weeks ago that Medicare will begin paying for routine costs
associated with clinical trials, this was good news.
My question, and I will be as brief as I can to allow you
to explain how you are doing that, but even more, what else are
you doing in this kind of area? For example, I understand the
agency is going to make additions this very week to the
outpatient pass through list, products that serve a unique
patient population.
Many clinical trials that fall under that have no
alternative therapies available to them. If these products
don't make the list, therefore, patients don't get access to
them starting August first. What adjustment can you make or
hope that you can give these people?
Mr. Hash. Let me mention three things, if I could. First,
with respect to coverage of routine costs of Medicare
beneficiaries in clinical trials, as the President announced
several weeks ago, what we are doing is implementing
recommendations that were made by the Institute of Medicine
about Medicare's participation in clinical trials to make it
clear that when our beneficiaries voluntarily elect to
participate in an approved clinical trial, that the routine
costs that would otherwise be covered for them but for the fact
that they are in a clinical trial would not in any way be
withheld from coverage for those individuals.
So, we are going to be putting forward notices to our
contractors so that they in fact will recognize and cover the
costs of individuals' routine costs associated with the
provision of clinical trial services. So, that is well under
way.
Second, as you know, about a year ago we began a very
extensive and fundamental change in our coverage process in
general in Medicare, how we recognize new advancements in
health care delivery. That is now a transparent public process.
We created a FACA compliant, a Federal Advisory Committee
compliant advisory group on coverage policy of over 100
distinguished scientists and clinicians from around the
country. We committed ourselves to a set timeframe of 90 days.
We committed ourselves to evidence-based decisionmaking and we
are putting up on our web site all of the applications for
coverage decision process, where they are in the process, so
that the public can not only participate in this process, but
is fully aware of the status for these activities.
Last, in connection with the outpatient hospital payment
system, what we have done is, as you noted, we have tried to
work with the industry, particularly the device and drug
industry, to make sure the pass-throughs to which they are
entitled for new technologies that have come about since 1996
are recognized for pass-through in our outpatient system.
We are also recognizing that there are going to continue to
be new advancements in devices and drugs and therefore, we
committed to quarterly update the technology pass-through
provisions that were put into the Balanced Budget Refinement
Act.
So, in a number of ways I think we are trying to address
the issue of the rapidity and the openness of the process by
which we make coverage decisions and bring advancements in
health care rapidly to the bedside or to the clinic site for
our beneficiaries.
Ms. Capps. That is great. Just to clarify it a little bit
more, maybe this is getting too picky, but in the BBRA of 1999
cancer and orphan drugs have to automatically need to make that
pass-through list.
But if an orphan drug whose application was otherwise
complete has been left off the list, what is the process then
that they would have to go through to get it on before August
first, for example?
Mr. Hash. Well, what we did was, we set a deadline back in
the spring of the first of April for device and drug companies
to give us information about any items that we did not already
have on our pass-through list. We got over 300 applications.
I think we announced in May about 230 of them had been
approved for the first quarter of the new payment system. We
have since been meeting with the device industry and have found
a number of errors that we made, or omissions that they may
have made in their submissions.
We are about to announce, as you mentioned a moment ago,
probably an additional hundred items by the end of this week,
which will be effective for the payment system in August.
For any that are still not approved in-house, we will be
reviewing and completing our action on them in time for the
October first quarter update and there will be quarterly
updates for each quarter thereafter.
Ms. Capps. This sounds promising to me. Do you feel there
is good enough connection between what you are doing and the
providers? Is the website the best way?
Mr. Hash. I think it facilitates it. We have also been
doing a lot of meetings with not only the Association of
Manufacturers but also individual manufacturers themselves.
I think because of the nature of this new system, we have
had to develop a much closer working relationship with the
biotechnology and the drug and device industry than we
previously had.
That has not gone, initially, as smoothly as we would have
hoped and liked, but I think over time this process of having
quarterly adjustments to the outpatient payment system will
ensure that new things that come on to the market that are
approved by the FDA will be made available to our beneficiaries
in the outpatient setting.
Ms. Capps. Thank you. In our next panel, perhaps we will
hear another side to this, but I also am hopeful that this is a
way to think about HCFA in general, that it is much more
responsive to the provider community as well as to the drug and
device manufacturing community, that there is a communication
that doesn't have to go through lots and lots of red tape.
I don't know if there are other ways that you can see this
being applied to the agency in general.
Mr. Hash. Well, I think our coverage process that I
mentioned, I mentioned a broader one that we are doing as of
last July. We started a cycle of 90-day reviews.
I think of it as really greatly compacted and accelerated,
the process by which we go through and evaluate new things, new
techniques, new procedures that have been developed for medical
care and health care and hopefully can evaluate them based on
evidence more quickly and then make them available under
coverage to our beneficiaries much more quickly than has been
the pattern in the past for Medicare coverage decisions which
frequently took several years.
Mr. Bilirakis. Dr. Norwood is recognized for a ``hard'' 7
minutes.
Dr. Norwood. Thank you, Mr. Chairman. I have my own line of
questions, but I can't, Mr. Hash, leave this alone, what Dr.
Ganske brought up to you about pre-authorization. First of all,
it is totally unrealistic, in my view, for you not to simply
tell the patient and tell the provider will you cover this or
won't you? In the situation which he described, in which you
are basically saying to the patient, ``Well, go ahead and have
the procedure and we will decide later if we will pay for that
benefit'' first of all has a very chilling effect on many
patients receiving the treatment that the physician has
prescribed for them.
I can't for the life of me understand how that is useful to
you frankly to not pre-authorize things like this and let
people know if it is or isn't covered.
Now, if it isn't covered, why don't you just say so?
Mr. Hash. We try to, Dr. Norwood. I really think this is an
issue that involves resources, about being able to make those
decisions in a timely manner prior to the provision of the
service.
But as I indicated to Dr. Ganske, I intend to get back to
all of you about why we have discontinued that practice and for
what reasons.
Mr. Norwood. Let me ask you, and Dr. Ganske can correct me
if I am wrong, but generally this is not an emergency
procedure. The case he used, the breast reduction, and I know
what you are concerned about, it is do you really medically
need that or is this cosmetic.
But basically, I don't understand. If you want to be the
administrator, then you have to be the administrator. That is
not the way, in my view, to save money.
I want a copy of that letter, too, because I am anxious
about that, too.
I want to review some of your testimony to make sure I have
it right. I understood you to say that you have 660,000
physicians that you deal with around the country. In reviewing
their claims and looking for waste, fraud, and abuse, you
typically look at about 1 percent. Over the last year you have
actually found some claims where abuse at least has taken
place.
What percent of those have you found guilty of abuse?
Mr. Hash. Well, we had an audit by our Inspector General of
the accuracy of our claims processing system. they determined
on a sample basis that we in fact had an error rate of close to
8 percent, 7.97 percent.
So, I think the empirical answer based on their work was we
have an error rate of about 7 percent.
Mr. Norwood. But you said you had actually believed 52
cases in which you had found them guilty?
Mr. Hash. Those were actual convictions of individuals who
were convicted of criminal fraud in the Medicare Program who
happened to be physicians out of a universe of a much larger
number. Of 500 convictions for Medicare fraud, only 52 of them
were physicians.
Mr. Norwood. Of that, did that return any money to the
Treasury?
Mr. Hash. Yes, sir, it did. Well, I should say not the
conviction itself, necessarily, but the claims that were
subsequently not paid, or were collected on, resulted in
collections to the Treasury and to the trust fund.
Mr. Norwood. Can you compare for me the cost of the review
versus the return to the trust fund?
Mr. Hash. Well, I can't, Dr. Norwood, but I would be happy
to try to get it together because a lot of the cost of the
review is associated with the costs that were incurred by law
enforcement to actually develop the prosecution and make the
case.
[The following was received for the record:]
On average, the return is $17 for every dollar spent on cost
review. We file a biannual Medicare Integrity Program savings report,
which provides greater detail on savings from medical review, Medicare
secondary payer, and cost report auditing. We do not claim savings from
fraud referrals. Those referrals are counted by the Office of Inspector
General and the Department of Justice (OIG/DOJ) and are referenced in
their own reporting on Health Care Fraud and Abuse Control (HCFAC)
funds. According to a 1999 report they released in January 2000,
prosecutors filed 371 criminal indictments, convicted 396 defendants,
won or negotiated $524 million in judgments, settlements and
administrative fines, collected $420 million from those activities as
well as prior year obligations, returned $369 million to the Trust Fund
and $4.7 million as the Federal share of Medicaid restitution. The HHS
Inspector General excluded 2,976 individuals from participation in the
Medicare and Medicaid programs. The HCFAC account was appropriated
$137.5 million in 1999, and the FBI was appropriated a separate $66
million. We would defer to the OIG or DOJ as to whether they supplement
the HCFAC money with direct appropriations.
Mr. Norwood. Would you do that for me, Mr. Hash? I am not
questioning you here at all. I am curious, is that a wise
expenditure of money, looking at the big picture of the trust
fund?
Mr. Hash. Most of those expenses are not from the trust
fund, Dr. Norwood. They are from the budgets of the law
enforcement agencies, either the Inspector General's budget at
HHS or the Department of Justice or the U.S. Attorneys offices
around the country.
Mr. Norwood. I understand. But it all comes out of the same
pocket, whether it goes to the trust fund or whether it goes to
the Treasury to be used at Justice, that taxpayer back home is
paying that now.
Mr. Hash. That is correct.
Mr. Norwood. Do you think the 7 percent mistake rate, I
guess that's the way to say that, do you consider that high or
low?
Mr. Hash. We consider it too high. We have indicated that
when we started having these audits back in 1996. Our error
rate was then about 14 percent. We have cut it in half, but we
have set a goal of less than 5 percent for claims error rate on
a volume of 1 billion claims a year.
Mr. Norwood. If you were to stack your regulations up on
this desk, how high would they go?
Mr. Hash. Well, I don't think they would go as high as some
people think they would. We have about 1300 pages in the Social
Security Act for the Medicare Program, about 900 pages, I
should say.
We have about 1300 pages in the Federal Register in
codified Federal Regulations and we have a number of manuals
and other issuances that also support and explain the Medicare
Program.
Mr. Norwood. A foot would be okay, wouldn't it? I wouldn't
be out of line saying 12 inches high worth of regulations?
Mr. Hash. Not for regulations, it would not, no, sir.
Mr. Norwood. The rules that a physician has to be aware of
in order to treat a Medicare patient?
Mr. Hash. Well, I would be happy to go through and give you
the actual count of pages associated with-or submit it for the
record.
Mr. Norwood. Dr. Coburn says his are 18 inches high. So,
that is good enough.
My point though is, considering that it is the job of the
physician to make the patient well, and he has 18 inches or
regulations to follow from HCFA, do you still say a 7 percent
honest error rate is out of line?
Mr. Hash. The 7 percent error rate is too high. That is a
very significant amount of dollars, public dollars, that are at
risk as a result of that. We don't feel like we are doing our
job as stewards of the program to tolerate an error rate of 7
percent.
Mr. Norwood. Are you doing anything in your job to lower
that stack of regulations from 18 inches to 12?
Mr. Hash. Yes, sir, we are. I tried to identify some of
those steps in my testimony.
Mr. Norwood. I will yield. Dr. Ganske, do you want to have
a follow up?
Mr. Bilirakis. Well, you don't have any time left.
Mr. Norwood. Okay. I yield back.
Mr. Bilirakis. You yield back zero, yes.
Ms. Eshoo is recognized to inquire.
Ms. Eshoo. Good morning, Mr. Chairman. Good morning, Mr.
Hash, it is nice to see you. I think after trying to make
optimum use of the time we have, 5 minutes, I am going to try
something new.
I am going to read all of my questions and then give them
to you because usually once the witness gets the first
question, you don't' get to ask the second and the third. Let
me just start out that way.
But let me thank you, Mr. Chairman, for having this hearing
because I think that there are a whole host of issues that
really fall into the realm of this hearing. I think that it is
well timed.
I have long been concerned about delays at HCFA because a
delay, I believe, represents preventing Medicare beneficiaries
from benefiting from the best that medical technology has to
offer in our country, certainly at the high end in our nation
we know that we have the best. I mean it is absolutely second
to none.
I understand that it can take up to 4 years for HCFA to
make a coverage decision. That severely, again, delays the
access for Medicare beneficiaries.
Cardiac stents, for example, were available on the market
long before they were made available to Medicare beneficiaries,
and these products were available in Europe and Asia in their
reimbursement systems before we did it here.
Now, I know that FDA has specific statutory timeframes
within which they are required to review and approve medical
technology operations.
My question is does HCFA keep track of the timeframes
involved in making the coverage decision so that we can see
what they are?
Mr. Hash. We do.
Ms. Eshoo. We do? Then once you keep track of them, what
happens? I mean, do you acknowledge where your 3\1/2\ years
flow? It is one thing to track it. It is another thing to do
something with it. Is there any effort on the part of the
agency, that is probably the larger question, to shorten the
timeframes.
My other question is that in following HCFA on the
outpatient pass-through payment list, you know that I have
concerns about it. I have written to HCFA expressing my
concerns with this brand-specific approach to placing products
on the list.
I just have to tell you just right off the top that I think
that is really faulty. Now, I guess a manufacturer whose
product has hit the list is thrilled. But just for an example,
rather than listing dual chamber pacemakers first, the list
only includes Medtronic's Kappa 700. Medtronic even raised a
question about that.
So, I really don't understand the method for the madness of
this. I know that sounds so disrespectful, but it really is
making an awful lot of people scratch their heads about what
your process is, how well thought-out it is, and, of course, it
is not just for the technology people and the manufacturer of
their products, we are here to talk about the people that we
represent.
You know they say that justice delayed is justice denied.
Well, then I think in this case access delayed is quality
patient care denied.
So, it is in that context that I ask this, so maybe you can
touch on what HCFA's rationale for listing specific brands of
medical devices rather than product categories. Again, I think
that it seems like an arbitrary decision. So far I don't think
it is so workable because you have had to go back at it.
You have people all over the country scratching their heads
and they are up in arms. But if you explain it to us we might
appreciate the underlying reasons.
My last question is, when FDA-and some of us have had a
little more experience with this than others because we were so
involved in writing the legislation that brought about the
reforms at FDA relative to medical devices. There are very
favorable reviews on how that is working now which pleases me a
great deal.
When FDA goes through the process that it goes through so
that a product is finally approved for use in our country, why
is it that HCFA goes through a duplicative process? That is it.
Mr. Hash. Okay. Those are great questions. Let me take them
and try to do it quickly.
First on the coverage process, about a year ago we
announced a complete revamping of our coverage process. What we
said was we were going to commit ourselves to specific
timeframes, i.e., 90 days; that we were going to do evidence-
based coverage decisions that could be initiated by any
individual, any company, any beneficiary, any person.
We also created, just as the FDA had done, a national
coverage advisory committee. Over 100 distinguished scientists
and clinicians from around the country participate in that.
We started that process last July. We have been making
decisions within that 90-day timeframe. This is for coverage
under the Medicare Program.
We put up each and every application that comes in for that
process on our web site. We update those entries all the time
so people can look and see. We have been doing that, it will be
a year this July 1.
So, it is a complete revamping. For all of the reasons that
you just said is why we did it. We are putting together
additional guidance on the criteria that we are applying in
that coverage process and as the FDA has done, we are
developing sector specific guidance for devices, for drugs----
Ms. Eshoo. That is what I don't understand. This sounds
like a very tidy, needed process. But if, with what you just
described, why you ended up in the mess with this outpatient
pass-through payment thing?
Mr. Hash. That is question two.
Ms. Eshoo. How does one thing lead to the other?
Mr. Bilirakis. Brief response now, because the 7 minutes
are about up.
Mr. Hash. The brief response is that the BBRA, last
December when it was enacted, included direction for us to
modify our outpatient payment system to recognize products that
came on the market since 1996, which is the base year for
establishing the outpatient payment rate.
So, we had to identify which items of new technologies were
actually put on the market for the first time after 1996 and
therefore wouldn't be reflected in the data for the rates that
were being established.
That was a process that we believed required an item-by-
item review. That is what we have done. We are cognizant very
much of the desire of people to move to a categorization scheme
where in fact you would group like items and do it that way.
The difficulties are, one, the categorization scheme does
not exist.
Ms. Eshoo. What does that mean?
Mr. Hash. That means there is no agreed upon system for
grouping hundreds of different devices that are similar and
what defines what is similar and what is different enough to be
in a different category.
Furthermore, the way the law is written, if you had an item
in a category that was actually on the market prior to 1996 and
the rest of the items came on to the market after 1996, that
whole category would not be eligible for the pass-through which
is an outcome I don't think people would like to have happen
either.
Mr. Bilirakis. The gentlelady's time has long expired.
Ms. Eshoo. Mr. Chairman, can I just state something for the
observation of the committee?
Mr. Bilirakis. You are in the 9th minute.
Ms. Eshoo. Oh, all right.
Mr. Hash. Mr. Chairman, I would be happy to get back to you
on that.
Mr. Bilirakis. Yes, I think that is necessary, certainly in
writing, too.
[The following was received for the record:]
We have been engaged in discussions about the OPD pass-through
issue with device manufacturers. As we have explained to them, there
are significant problems with the category approach they have proposed.
To be eligible for a pass-through payment, the law requires that,
``payment for the device, drug, or biological, as an outpatient
hospital service under this part was not being made as of December 31,
1996.'' As a result, many of the devices we have approved would likely
not have qualified under the category approach. That is because, under
a category approach, if any device in the category was being reimbursed
by Medicare as of December 31, 1996, the entire category of devices
would not be eligible for pass-through payments. I do not believe that
this is the result Congress intended (nor a result device manufacturers
would desire). Nevertheless, we have indicated many times our
willingness to continue to work with device manufacturers and with the
Congress to address your concerns and to provide technical assistance
should Congress decide to make revisions to the statute.
Mr. Bilirakis. Mr. Whitfield.
Mr. Whitfield. Thank you, Mr. Chairman. I actually was
going to ask some questions about the documentation
requirements for the CPT 99215 and then after I started going
through the seven pages, it was so complicated that I decided I
was going to give that to Dr. Coburn to ask. So, he will talk
to you about that, I think, maybe.
Mr. Coburn. Don't worry. I will.
Mr. Whitfield. One of the questions I wanted to ask you,
relating to audits, which I know is very important, but it
seems to me some of the testimony that I have read about post-
payment audits and the testimony here is that physicians should
enjoy the same due process rights as taxpayers undergoing IRS
audits, who can appeal IRS fines, penalties and findings.
It says that once Medicare conducts an audit or a carrier
conducts an audit and they arrive at a projected overpayment
amount by extrapolation, that a physician has three options:
One, they can repay the extrapolated amount and waive their
appeal rights. Two, they can repay the extrapolated amount and
submit additional information while waiving their appeal
rights. Or three, they can just open up their practice to a
statistically valid random sampling of claims during the same
period.
So, your manual actually prevents physicians from retaining
their due process rights unless they agree to open up their
practices to a larger SVRS audit. Now, I would like to know
what is the rationale for that type of practice?
Mr. Hash. Mr. Whitfield, that practice is actually not a
widespread practice in terms of what our carriers do in terms
of doing sampling and extrapolation. But when it is used my
understanding is that physicians do have the option of not
waiving their appeal rights if in fact they want to challenge
the basis for either the judgment about the individual claims
in the sample or the validity of the extrapolation itself.
Mr. Coburn. Would the gentleman yield? This is exactly the
same situation where we were with IRS. You can do that, but any
claim you file, they are not going to pay you. They are going
to take the money out of the claim. So, in fact, you have given
up all rights.
So, to answer in that way, Mr. Hash, is actually not
correct, because you don't have any rights once they say you
owe them the money. You are going to take the money from them;
correct?
Mr. Hash. I believe that is correct.
Mr. Whitfield. Then also, I noticed that if a physician
determines himself or herself that they received an overpayment
and they pay that back, evidently HCFA has instructed its
carriers to begin auditing physicians who submit too large of
an overpayment remittance.
Mr. Hash. I have heard that, Mr. Whitfield, but the best
that I have been able to do to get an answer to that is that I
cannot in fact find any evidence that that is going on. But I
would certainly be open to further inquiry.
We don't intend that that be the policy at all by our
contractors. I have been inquiring about that and have been
unable to find any written instructions to that effect.
Mr. Whitfield. So you would actually encourage the
repayment of overpayments voluntarily then, I am assuming.
Mr. Hash. We would, yes, sir.
Mr. Whitfield. But this testimony says that HCFA has
instructed its carriers to begin auditing physicians who submit
these overpayments.
Mr. Hash. If I am in error, I want to correct that. I knew
this was an issue that was going to be raised. I am unaware
that we have done any of that kind of instruction.
Mr. Whitfield. Just going through some specific rules here,
I could go through some relating to hospitals, but I just have
the physician rules before me.
It says a rule proposed in 1997 which still has not been
finalized, details position supervision requirements for
numerous office procedures.
The regulation actually dictates during which procedures a
physician must supervise from within the office suite, but not
necessarily within the examining room.
It seems to me that when you are dealing with these
physicians who are professionally trained that this removes a
lot of flexibility from them. I was just wondering if you might
comment. It is so micro-managed that I guess you will reimburse
if oversee it or supervise it within the examining room in some
instances and in the office suite in other instances.
Mr. Hash. That is correct, Mr. Whitfield. I know we have in
our regulations standards that distinguish between what we
would call general supervision which means that for individuals
who are employed by or contracted by a physician, the physician
needs to be present on the premises where the services are
being rendered.
Then we have under some circumstances a requirement that
the physician must be physically present during the service
provided by another health care professional.
Mr. Whitfield. Can you give an example of one or both?
Mr. Hash. It has to do largely with the license
restrictions on these non-physician practitioners and what they
are able to do without direct supervision and what requires
direct supervision. I would be happy to get you a list of those
kinds of circumstances, but I think it involves services such
as some of the therapy services by therapy assistants.
It turns very much on the qualifications and license
restrictions of the individual health care professional vis-`-
vis the physician who is employing or contracting them.
I would just say in general, the reasons for these
requirements, as they are for the licensure requirements, is to
ensure that quality of care is provided by people who are
properly credentialed and properly supervised.
Mr. Whitfield. Speaking of that, where are you all on this
decision regarding anesthesiologists and nurse anesthetists?
Are you all coming forth with something?
Mr. Hash. We have separated that particular part of the
rule which was published in December 1997 which was the
hospital conditions of participation regulation and we are
pulling that piece out and expecting to finalize it this
summer.
At the time, about a month ago, when we made this decision,
the administrator communicated with a number of folks in the
Congress indicating that it was our intention to finalize this
reg as we had published it in the Federal Register. The
regulation is now in clearance.
Mr. Whitfield. Mr. Chairman, I assume my time has expired.
Mr. Bilirakis. Yes. Dr. Coburn will inquire. You have 7
minutes.
Mr. Coburn. Mr. Hash, welcome. The intensity of my
questions are no reflection upon you. I want you to know that.
I am a thoroughly frustrated family practice doctor.
You know I have a question. Why is it your carriers
interpret different things? Why is it one carrier will tell me
one thing and another will tell me something else? Where is the
breakdown in the system that we don't have one Medicare agency,
that we have several and that if I ask exactly the same
question in written form I get a different answer with a
different interpretation.
Why is that?
Mr. Hash. The reason I think largely, Dr. Coburn, is the
historical fact that when Medicare was enacted in 1965, the
plan was to do the administration of the program through
private contractors, basically private insurance companies.
At that time, it was felt that those insurance companies
had the expertise and the experience about what local medical
practice was like and the expectation was they would attempt to
conform the Medicare Program.
Mr. Coburn. I understand that. Why now?
Mr. Hash. Well, now we have been trying to take steps to
move toward more uniformity and consistency.
Mr. Coburn. How can it not be uniform when you all send in
exactly the same information on ``here is what we are going to
do?''
Why is it not uniform? Why is it the family practice or the
ACOG or the Society of Surgeons or the AMA can't get something
that is the same throughout the country as far as the rule?
Mr. Hash. The reason for that is that within the scope of
responsibilities, carriers, contractors, they have discretion
under the leadership of their medical directors to make certain
decisions and to establish publicly local medical review
policies which can vary from one contractor to another.
We are trying to evaluate whether or not we should move to
a different system which restricts the ability of local
carriers to make individual local medical review policies and
to remove that discretion from those contractors.
We have not arrived at that decision yet, but the reason
there are differences is that there is a good bit of discretion
at the local level for carriers to establish review policies on
their own based on evidence and judgment that they bring to
bear.
Mr. Coburn. I just thing that is poppycock. We are not
treating pneumonia different throughout this country. We are
not seeing a person longer in Muskogee, Oklahoma than we are in
Columbus, Ohio for the same thing. That may be 1965 policy, but
that is ludicrous, especially in light of your practice
parameters and guidelines and recording.
I want to spend some time on that. Congressman Whitfield
brought up a Level 5 office visit. I want to tell you, and I
talked to Paul before this was instituted and I want to tell
you it is happening.
Is it in fact the case that when you all go in to audit and
you decide that somebody has a 7 percent or an 8 percent
upgrade, that your penalty for that is you apply that over all
the payments that you made that year.
In other words, you put the ``retro spectroscope'' on it
and you assume, based on what is in the medical records of the
few charges that you audit that they are guilty on everything;
is that not the policy?
Mr. Hash. We use what is called the sampling technique that
has been statistically validated and from which we extrapolate
the likely rate of error.
Mr. Coburn. Out of that 7.97 percent error rate, how much
of that do you perceive is up-coding?
Mr. Hash. We have not been about, actually, I should say
the Inspector General has not been able to break down the
individual reasons for, or the causal factors for, the error
rate, except it falls into, from their point of view, four
areas.
The largest area of error rate from their audits has
consistently been the failure of the medical record to
support----
Mr. Coburn. That is up coding. That is exactly what I am
asking you. The point is you all have set in place a rule that
is driving every doctor in this country crazy. Here is the
rule: If it is not documented in the chart, completely to the
satisfaction of somebody outside, then you didn't do it.
Now, here is what is happening. We have wonderful computers
now. I can generate you the biggest line of medical BS that is
going in the record. It is going in all across this country.
When you go in to audit it, you are going to find that it
meets everything that you need. But it has nothing to do with
reflecting that patient's condition because over on the side is
going to be the scribbling, mine, that you can't read and I can
barely read, to tell me, because I know if I fail to make
proper everything I said to that patient after seeing 22
patients that day and not getting a chance to dictate it at the
time, that in fact you are going to come in and kick my rear.
So, you all are ruining the quality of care in this country
because the medical record means nothing now. In your attempt
to make it mean something to say every physician in the country
is cheating Medicare, you have destroyed the quality of the
medical record.
My question to you is, when you have everybody down to
where we have a computer-generated office visit that meets
everything that the government wants and care declines because
we don't have a consistent record, and then you spend twice as
much money on the patients, haven't we really shot ourselves in
the foot?
Mr. Hash. Dr. Coburn, what we are trying to do, as I said
in my opening statement, is to revise our evaluation and
management guidelines in cooperation with physicians across the
country.
We just had a town hall meeting about a week ago where we
rolled those out.
Mr. Coburn. But if you continue to use that as your
judgment, why don't you just say to the primary care doctors in
this country, do it in blocks of time. Quit wasting your time
and theirs. We know how to write a medical record. Every one of
us writes a little bit different based on our own personality
and what our training is.
But you are going to use your standard of judgment or your
carrier's standard of judgment that says I didn't do it right.
So, you have intimidated, especially the internal medicine
doctors in this country and the family practice doctors in this
country into writing a bunch of stuff in the chart that will
never be used, is of no value in the future except to the
government.
So why don't you just say we are stopping all this. Go in
blocks of 10 minutes and we will pay you by blocks of 10
minutes that will be reflective of your time. Medicare will
save money. You won't have to come in and audit it. And we can
save money in terms of following the response.
What is wrong with that approach?
Mr. Hash. Well, I think there are objectives here that
should be complimentary to the practicing physician as well as
to the program. That is, first, that we should have a standard
that is fair and simple and easy for everybody to understand so
that when their claims are, in fact, reviewed that they know
the standards against which they are going to be evaluated.
So, that has been the major purpose for trying----
Mr. Coburn. That is right. Your standards right here for
one office visit, here are six typewritten pages of the
standard that has to be met for one office visit.
Mr. Hash. That is no longer the guidelines that we are
working on now.
Mr. Coburn. That is the guidelines under which you were
judging whether somebody up coded and did not bill Medicare
correct today.
Mr. Hash. Currently, we are using two sets of guidelines,
ones we issued in 1995 and 1997, and we instructed our
contractors to use whichever set of guidelines was most
favorable for the physician.
Mr. Coburn. Let me ask you one question and then I will
yield.
Mr. Bilirakis. Yes, very quickly.
Mr. Coburn. If I went through a checklist in my chart and I
have a checklist for all the review systems and I have a
checklist for the chief complaint and then I have all the
scribblings and here is my physical findings and here is my
assessment and then there is a check list for when to follow
up.
That is the piece of paper. Yet, I spent an hour with the
patient taking a detailed history, looking at him and doing
everything. The paper would never say that. But the patient got
the care.
The thing that is so objectionable to physicians in this
country is that you are like the IRS. We are guilty until we
prove ourselves innocent. It should be about the patient, not
about the doctor and not about Medicare.
HCFA is no better than the health insurance industry in
terms of not caring about what really matters. That is the
patient.
I am sorry about the tirade, but I want to tell you, my
office is going nuts. We can't even tell from the records now
because I can't read my partner's writing and the one that is
typewritten certainly doesn't reflect what happened because it
is computer-generated to please you.
Mr. Whitfield. Mr. Chairman, I ask unanimous consent the
gentleman be given 1 additional minute.
Mr. Bilirakis. The gentleman has already taken, I think,
close to 2 additional minutes. But in any case, are you
finished, Tom?
Mr. Coburn. Are we going to have any additional
questioning?
Mr. Bilirakis. I have extended the time to 7 minutes. We
have another panel. That is my concern. Why don't we have Mr.
Hash respond to Tom's, as he described it, ``tirade?''
Mr. Hash. I don't view it as a tirade. I understand. I know
there is a high degree of frustration and I appreciate that.
What I am trying to say is we are trying to redouble our
efforts to work more collaboratively and cooperatively with the
physician community and my testimony lays out a number of steps
we have been trying to take, including the issue of
documentation of services.
We need the continued support and input of physicians to
get it right. As I was trying to say a moment ago, I think the
balance we are trying to strike here is something that is
useful to physicians because it compliments whatever they would
ordinarily do as good practice and good documentation and
provides us a basis for meeting our fiduciary responsibilities
that we are paying for covered services that are billed at the
appropriate level.
Trying to figure out how we meet both those goals, to have
guidelines that are not intrusive and burdensome on physicians
but have some degree of accountability for what we are paying
for is what we are trying to do.
The problem with only time is that you lose in time the
richness of the kinds of things that you just described that
are actually going on and for which you should be compensated
under our program.
Mr. Hash, if I don't document it, you are assuming I didn't
do it.
Mr. Hash. But there should be a way in which that
documentation guideline allows you to display whatever----
Mr. Coburn. There is an easy way for Medicare to solve this
problem. You pay doctors in terms of office visits on time and
you put undercover patients out there.
It is not the internists in this country. There are certain
subspecialties like cardiology where we have way too many
echocardiograms, you all know that. We know it. You can't
filter it out because they are great at documenting it.
Until you put undercover patients out there to get the real
bad actors out of Medicare, you can't write enough rules to
require us to document. You will never catch them. People that
went to medical school made it out of high school. Their IQs
are generally above a lot of other people's. Therefore, they
know how to get around the corner.
Mr. Bilirakis. Mr. Greenwood to inquire.
Mr. Greenwood. Thank you, Mr. Chairman. Mr. Hash, a few
years ago this committee spent a lot of time and effort to
reform the Food and Drug Administration. One of the reasons we
did is because as we looked at the pipeline between the
laboratory and the patient trying to move medical devices and
pharmaceutical products, we saw FDA as a bit of a bottleneck.
Obviously, they have a function that they have to perform.
But we thought that this tremendous promise that continues to
mount that is developed in the laboratory and the biologics and
pharmaceuticals really need to get to the patient as
expeditiously as possible.
We are now in the throes of trying to figure out how to add
a prescription drug benefit to Medicare. It has the
potentiality of the creation of another bottleneck. That is,
once FDA approves the product, somebody under some model has to
decide whether the patient is going to get reimbursed for that.
Would you describe for me how, under the President's
proposal, when the FDA approves a product, what will happen
prior to that product being available to a Medicare beneficiary
and reimbursed.
Mr. Hash. Under the President's proposal, Mr. Greenwood,
the agency would contract with private pharmacy benefit
management organizations who are providing prescription drug
coverage for privately insured people and that those
organizations under our contract would be required to cover all
therapeutic classes of drugs and all drugs for which the
prescribing physician had requested as medically necessary for
their patients. Those are the terms of the contracts that would
be written with those organizations.
Then they would in fact administer the program, pay the
claims, check on drug interactions and drug utilization and
provide the services that they are typically providing for
private health plans today.
Mr. Greenwood. So, there is no function that HCFA would
play in that?
Mr. Hash. There is no function that HCFA would play in that
process.
Mr. Greenwood. And how would you compare and contrast that
to the legislation that the House is going to consider tomorrow
in terms of those issues, in terms of the ability to get that
product approved for reimbursement?
Mr. Hash. My understanding is that there would be
specifications in the law that would be proposed here for the
bill that is coming before the House for private insurance
companies to offer policies that cover drugs only and that they
would be required, if they were going to offer such a policy,
to meet a certain actuarial standard for that policy.
But beyond that, they would be largely free to design their
own formularies, to decide on issues between generic and brand
name and how those substitutions would or would not----
Mr. Greenwood. Except that our legislation requires that
all therapeutic categories be covered as well; does it not?
Mr. Hash. But essentially, the private insurance company
that is offering the drug-only plan would be subject to
whatever requirements you put into the law.
Mr. Greenwood. Under the President's proposal, the coverage
decision is completely contracted out by headquarters. As we
said earlier, HCFA needs to make-HCFA doesn't need to put a
finger on the decisionmaking process.
Mr. Hash. There would clearly be an oversight
responsibility in terms of ensuring that the organization was
adhering to its contractual obligations.
Mr. Greenwood. But you would argue, not one that would
delay the----
Mr. Hash. No.
Mr. Greenwood. I assume that you think that is a pretty
efficient model.
Mr. Hash. Our reason for selecting that model is that we
believe the vast majority of Americans who are fortunate enough
to have prescription drug coverage, that is how they are
getting their coverage today. We think that system is working
for those Americans and we would like to make it work for
Medicare beneficiaries.
Mr. Greenwood. Now let's turn our attention to medical
devices. Why not apply that model to coverage decisions for
medical devices?
Mr. Hash. Well, as I mentioned earlier, we put into place a
coverage process for Medicare that includes devices, as well as
new procedures, which is an evidence-based system, a 90-day
cycle. We borrowed very heavily in designing this system from
the FDA system where there are set timeframes, where there is
an established outside advisory body that opines on proposals
to add new devices or new procedures to Medicare.
We think that that is a transparent, publicly----
Mr. Greenwood. What value does that process add to what FDA
has already set forth in its approval of product?
Mr. Hash. My understanding is the FDA assignment or
responsibility is to determine the safety and efficacy of drugs
before they go to market.
In the case of Medicare, we are applying a slightly
different standard. We are taking the safety and efficacy
information from FDA, but we are making a decision about
whether or not under the Medicare statute the device or the
procedure is reasonable and necessary which is the standard the
statute sets forth for Medicare-covered services.
That is not the same standard of safety and efficacy that
the FDA has.
Mr. Greenwood. Earlier on you were responding to a
question, I think, from Mr. Brown about time sequences and you
talked about how long it takes to evaluate the comments that
come in sometimes, sometimes a hundred and sometimes tens of
thousands.
If you had to reinvent that whole process, that is a very
time-consuming process and obviously many of those comments are
redundant.
Let me ask you, to what extent is HCFA actually thinking
way outside the box in trying to reinvent that process so that
you don't have these tortuous time delays in implementation
that are caused, at least the extent to which those delays are
caused by the tedious nature of evaluating, soliciting,
collecting and evaluating those comments?
Mr. Hash. First, I would say we actually believe that what
sets Medicare apart, what distinguishes it from private health
plans is the fact that its policies are subject to public
participation and accountability, both through the rulemaking
process, through oversight by the Congress, through judicial
oversight----
Mr. Greenwood. But that is a mixed blessing. What we have
said is that you are erring on the side of all of that input,
but there is a price to pay for all of that and that price is
time.
Mr. Hash. In some degree that is true. But I think in terms
of beneficiary involvement and provider involvement in
formulating our policies that to not allow that to go forward
would be a great loss to the program and would erode, I think,
what is broad and deep public support for the public Medicare
Program.
Mr. Bilirakis. The gentleman's time has expired. I have
increased the time from 5 to 7 minutes. We have managed to run
well over the 7 minutes.
Mr. Norwood. Mr. Chairman, that is an indication of how
important this hearing is. Thank you for having it.
Mr. Bilirakis. I thank you for you. Mr. Bryant.
Mr. Bryant. Thank you, Mr. Chairman. Welcome. I apologize
for my absence.
I want to ask you, in your testimony you list an impressive
array of activities going on at HCFA to educate providers on
how to work within the maze of Medicare requirements.
A senior official at HCFA a week or so ago on June 18 in a
New York Times article was quoted about Medicare beneficiaries
not being able to handle too many choices because they find
them confusing.
I would think that the beneficiaries find the paperwork
that they receive and have to manage with HCFA also extremely
confusing. Is HCFA concerned about that?
Mr. Hash. Yes, sir. One of the things we have been trying
to do is to simplify and put into plain language our
communications with beneficiaries. We are doing that in several
different places.
One is there is a series of notices that beneficiaries get,
things like an advanced notice of coverage that we are trying
to simplify so that they are plainly written and easy to
understand.
Second, we have completely revamped the notices that we
send to beneficiaries, which we call the explanation of
benefits. This is essentially an accounting of what services
they were provided and when those services were provided.
We have revamped that into something that is going to be a
monthly notice called a Medicare Summary Notice that would look
very much like a credit card bill. For each month, if there was
activity in the sense of services covered by Medicare for an
individual, they would get an aggregated monthly notice that
would itemize the items, services, or visits that they
received, indicate from whom and for what purpose, so that they
could have a record of their own encounters and help them to
navigate more easily the Medicare systems.
Last, we spent a considerable effort in launching a
national Medicare Education Program last year which will
continue hopefully into the future if we continue to get
resources for it.
That consists of sending every beneficiary a handbook
called ``Medicare and You,'' which is mailed to their home each
fall. We have a 1-800 Medicare telephone number that has
individuals who are trained on Medicare policy and procedures
to answer questions of our beneficiaries.
Also, we have a web site with a lot of comparative
information about the health care choices that Medicare
beneficiaries have, including quality and satisfaction data
about health plans that is now readily available to Medicare
beneficiaries to support their decisions and choices.
All of this material is now focus group tested. It is
reviewed for purposes of understandability and comprehension
and when you consider that, on average, the comprehension and
educational level of many of our beneficiaries is still eighth
grade education or lower, it is very important that we
communicate in the most clear and simple manner possible so
that beneficiaries are aware of their opportunities in
Medicare.
Mr. Bryant. Let me ask you a couple of follow up questions.
On your Item 2, EOB, the Explanation of Benefits form, you said
it would be an itemization. For those people who can review
this document, would there be sufficient data on that document
for them to continue as a check and balance in terms of making
sure services were rendered and so forth?
Mr. Hash. That is correct. There is also a 1-800 number on
that summary notice that tells them if this isn't clear, if you
think there is an error here, or if you want to make a
correction, call this number.
Mr. Bryant. Let me jump over to telemedicine if I could,
very briefly. HCFA's final rule implementing the Balanced
Budget Act of 1997 denies payment for telemedicine store and
forward application, which is widely accepted as a cost
effective way to transmit an image to a remote specialist to be
reviewed at a later time.
Ignoring the development of technology, HCFA has, we
believe, arbitrarily ruled that in order to qualify as a
consultation, all practitioner/provider encounters has to occur
in real time.
Why is HCFA preventing the growth of this technology of
telemedicine at a time when Congress is working to increase
access to health care at all levels of society and particularly
in some of the rural areas that I represent in Tennessee?
Mr. Hash. Well, I think we need to work on that together,
Mr. Bryant. I think that telemedicine does offer real valuable
opportunities for access to health care services by people who
live in more isolated areas.
I think the problem in a nutshell is that the statutory and
regulatory provisions for the codes that we recognize for
billing purposes don't yet include that kind of encounter. They
are all based on some kind of physical encounter between a
patient and a provider of health care services.
I think we need to look and see how we can change that to
make those services more available to the individuals because I
agree with you. It does represent an important opportunity to
deal with access questions for isolated populations.
Mr. Bryant. I would like to follow up with you on that
point. I know you will be back up here probably within the
week. I would like to give you a little bit more time and maybe
after our third or fourth encounter after we go through this
year or next year, I want to follow up and ask you about that,
if you could have some optimistic and favorable----
Mr. Hash. Yes.
Mr. Bryant. I will yield back the balance of my time.
Mr. Bilirakis. Mr. Burr to inquire. I understand Mr.
Strickland has no questions at this time.
Mr. Burr?
Mr. Burr. Thank you, Mr. Chairman.
Welcome, Mike.
Mr. Hash. Thank you, Mr. Burr.
Mr. Burr. Let me just start with one glaring thing that I
have. That is a response to a letter I wrote in November, the
response I got from Robert Berenson, M.D., Director, Center for
Health Plans and Providers, dated June 9, 2000; 7 months after
I made a request on clarification on three issues. I won't get
into the issues. I will take them up later with you.
I would only say that for all the claims that you make and
that the agency makes about the ability to stay on top of
things, clearly I would hope that coverage determinations that
were inquiries from Members of Congress either receive a better
response than 7 months or that I haven't stumped you to the
degree that it took 7 months to figure out the answer that you
wanted to share with me.
I will highlight just one of the responses. It was to a
reclassification of a particular procedure. The answer that I
got was disturbing because it gets into an issue that you and I
have dealt with at another time.
The answer basically was that we looked back at the claims
that we paid. Most of them were reclassified anyway to the tune
of 88 percent of the claims.
Therefore, we don't feel like we need to make a decision to
change it from the lower reimbursement to the higher
reimbursement because in 88 percent of the cases we already
paid the higher reimbursement. I would tell you that that is
not necessarily the best policy that we can adopt. I will
revisit that one with you.
Mr. Hash. I apologize for the response or failure to
respond. I can assure you that we are trying to work on our
correspondence. It is not an acceptable excuse to say that we
get literally thousands of Congressional letters a month, but
we do.
They deserve and merit prompt and clear responses and we
are trying to improve that.
Mr. Burr. I am just fortunate that you are able to come to
this subcommittee where I can ask you in person and all the
other 500 can't.
Do you plan to continue to use contractors in Medicare?
Mr. Hash. Yes, sir, we do.
Mr. Burr. You defined contractors earlier as private
insurance companies. What is the different between that and
what we propose to do in H.R. 4680 as it relates to private
entities to administer our drug plan?
Mr. Hash. Well, in the case of what the Medicare Program
does under the statute, it is that it is obligated to have the
claims processing and review functions done through contracts
with specified organizations which by and large are insurance
companies of one kind or another.
Their scope of work, what their responsibilities are, what
the policies are that they apply are ones that we include in
their contracts.
Mr. Burr. You said to Mr. Whitfield and Dr. Coburn that the
contractors have the latitude to address the individual needs
of individual markets.
Mr. Hash. They have some latitude.
Mr. Burr. Some latitude. So, as long as the drug bill
prescribed a general outline like actuarial value and some
degree of certainty in the scope of drugs covered, it is not
private insurers that you are worried about, it is how
prescriptive we are in the legislation to make sure that this
benefit is provided to everybody; right?
Mr. Hash. No, sir. I would phrase it a little differently.
I would say what we are worried about, with respect to that
proposal, is the fact that there is no guarantee in there that
there will be prescription drug benefits that are affordable
and accessible to all 39 million beneficiaries.
Mr. Burr. But the reason is not the private insurance
companies.
Mr. Hash. Unless the provision is to require that private
insurance companies offer prescription drug benefits to
Medicare beneficiaries.
Mr. Burr. My interpretation of entitlement and specifically
stating it is part of Medicare implies that it has the same
rights as other Medicare services.
Mr. Hash. But it doesn't require any insurance company to
actually offer such a policy; does it?
Mr. Burr. Nor does what you just described to us about your
contractors because they have the latitude on some services
either to cover or not to cover; am I correct? Is it in some
cases and not others?
Mr. Hash. In some cases and not in others. There is a
balance between----
Mr. Burr. So, it is okay for you. It is okay for HCFA, okay
for Medicare in general, but it is not okay for us under a new
plan when the only difference is we use a private entity to
administer it and not HCFA.
Mr. Hash. No, sir. I disagree with that. There is a
fundamental difference here and that is, that for our
contractors who are processing claims, they process and pay
claims and are required to do so for all covered services under
Medicare. They are there for certain----
Mr. Burr. But do they have the latitude to determine what
those covered services are?
Mr. Hash. Only in some circumstances that are not spoken
to. But it doesn't mean that they are not there doing our work
under contract. It is very, very different to talk about
whether or not a private insurance company might decide to open
up a line of business to offer a private drug insurance policy,
under what terms they would offer that, whether it would be
open enrollment, community rated, all of those are issues that
would be left to the marketplace.
In the case of the Medicare Program and its relationship
with contractors, there is no doubt about the coverage that is
there for the Medicare beneficiary.
Mr. Burr. It is a great try, but you know we are talking
apples and apples. You said earlier that the goal of HCFA is
for quality care provided by properly qualified and properly
supervised individuals.
You are aware, I know, that there is a study, a peer review
article that is ready to be published, I believe, this week or
next week, as it relates to the anesthesiologists question.
Share with me, if you will, why there was such a hurry to
propose a final rule and to get a sign-off on that, given that
you knew that there was a very in-depth peer reviewed article
that addresses this issue that was going to come out very soon.
Mr. Hash. I don't believe we have been rushing, Mr. Burr.
We published the proposed rule in December 1997, so we are
coming up on 3 years since the proposed rule was actually
published.
Second, what I have seen, which is really an abstract of an
earlier draft of the study, so I don't speak with any authority
about what is actually in the study----
Mr. Burr. But you are aware of what it is.
Mr. Hash. I am aware that there is a study, but my
understanding of what the study is about is a comparison of the
supervision of certified nurse anesthetists by
anesthesiologists compared to their supervision by physicians.
The point that we are doing in our reg is not supervision
by other physicians, but independently practicing CRNA's who
are licensed to do so by the State in which they are
practicing.
Mr. Burr. This study suggests that your final rule was
incorrect. Is HCFA prepared to go back and pull that final rule
proposal?
Mr. Burr. We would always be open to review and adjustment
of any of our policies based on evidence like that, absolutely.
Mr. Bilirakis. The gentleman's time has expired. Well, a
very brief question and a very brief response.
Mr. Burr. Last question, if I could, Mr. Chairman. The
physician self-referral laws over which this community has
primary jurisdiction were passed by Congress 10 years ago.
Earlier you talked through this process that HCFA goes through
when implementing a statute.
Notice, common period, final rule and implementation. Could
you walk us through that process for self-referral laws
Congress passed?
Mr. Bilirakis. When you walk through, please do it very
briefly.
Mr. Hash. If I may, Mr. Burr, I would like to supply that
for the record. I don't have the timeframes at my fingertips.
But what I will say here is that clearly we have been delayed.
It has taken a very long period of time. We are in the final
stages of publishing the final stages of what is called STARK
II, which is the second iteration of those referral limitations
and we expect to have those out in the fall.
Mr. Burr. So, just for the purposes of all the Members, we
don't have any regs?
Mr. Hash. Well, there are regs on the first, but not on the
second, not on STARK II.
[The following was received for the record:]
The time line of the self-referral laws Congress passed is as
follows:
December 19, 1989: The Omnibus Budget Reconciliation Act of 1989
added section 1877 to the Social Security Act (commonly referred to as
Stark I). In general, this law provided that, if a physician (or an
immediate family member of a physician) has a financial relationship
with a clinical laboratory, unless an exception applies, that physician
could not make a referral to the laboratory for the furnishing of
clinical laboratory services for which Medicare might otherwise pay.
The law also provided that the laboratory could not present or cause to
be presented a Medicare claim or bill to any individual, third-party
payer, or other entity for clinical laboratory services furnished under
the prohibited referral. In addition, the law provided for reporting
requirements.
November 5, 1990: The Omnibus Budget Reconciliation Act of 1990
(OBRA 1990) amended certain provisions of section 1877 to clarify
definitions and reporting requirements and created one additional
exception.
December 3, 1991: We issued an interim final rule with comment
period setting forth the reporting requirements.
March 11, 1992: We published a proposed rule setting forth the
self-referral prohibition and exceptions, as amended by OBRA 1990
(Stark I) and as they related to referrals for clinical laboratory
services.
August 10, 1993: Section 1877 was extensively revised by the
Omnibus Budget Reconciliation Act of 1993 (OBRA 1993) (commonly known
as Stark II) to apply to referrals for 10 additional designated health
services. Exceptions were modified and new exceptions were added.
Aspects of the referral prohibition were extended to the Medicaid
program.
October 23, 1993: The HHS Office of Inspector General (OIG)
published a proposed rule that would set forth penalty provisions for
violations of the law.
October 31, 1994: The Social Security Act Amendments of 1994 (SSA
1994) amended the list of designated health services and changed the
reporting requirements and amended some of the effective dates of the
OBRA 1993 provisions.
March 31, 1995: OIG published a final rule with comment period
implementing the penalty provisions.
August 14, 1995: We published a final rule with comment period that
incorporated into regulations the provisions that relate to the
prohibition on physician referrals for clinical laboratory services
(Stark I). We incorporated the amendments and exceptions created by
OBRA 1993 and the amendments in SSA 1994 that related to clinical
laboratory services.
August 5, 1997: The Balanced Budget Act of 1997 (BBA 1997) amended
section 1877 to require that the Secretary issue written advisory
opinions for the purpose of providing additional formal guidance to
outside parties regarding the application of the physician referral
provisions. These provisions apply to requests submitted after November
3, 1997 and before August 21, 2000.
January 9, 1998: (1) We published a proposed rule incorporating the
statutory provisions enacted through 1994 (Stark II). We also published
a final rule with comment period incorporating into regulations
specific procedures for issuing advisory opinions, as required by BBA
1997.
We were careful in our proposed regulations to clarify the law and
create appropriate flexibility. One of the most important provisions
establishes that referrals to an entity with which a physician has a
compensation arrangement are generally permissible as long as the
compensation is at ``fair market value,'' furthers a legitimate
business purpose, and is not tied to the volume or value of physician
referrals. This exception goes a long way in simplifying the policy
under the law.
We have carefully evaluated the 12,800 comments we received on the
proposed regulations and are now working to resolve remaining issues in
ways that simplify the regulations while not undermining the law's
intent to prevent arrangements that would increase costs to taxpayers
and subject beneficiaries to possible harm from unnecessary tests and
procedures. We must take great care in translating this important
legislation into policy. Important exceptions are needed to protect
beneficiaries' access to care, and we must take into account the many
detailed financial arrangements in today's health care delivery system.
In the meantime, physicians and other health care entities have by
and large made a good faith effort to comply with the law, which is
generally self-enforcing. The simple existence of an improper financial
relationship is subject to loss of Medicare payment or a civil fine.
This creates a powerful incentive to proactively comply with the law
through due diligence efforts to avoid financial arrangements that may
unethically lead to substantial increases in use of services. The law's
preventive nature makes a highly effective contribution to our
increasingly successful efforts to protect Medicare and Medicaid
program integrity.
Mr. Bilirakis. Mr. Strickland, I understand you have a
question or two?
Mr. Strickland. Yes, sir. Thank you.
Mr. Hash, I am sitting here feeling almost amazed at myself
that I might be saying something positive or defensive about
HCFA because you and I have had lots of talks about some of my
concerns.
But sometimes I think those of us who sit up here don't
accept a reasonable share of the responsibility for the
problems that you and others in governmental agencies have.
I just wanted to ask you this question. The proposed budget
mark for HCFA is about $220 million, I think, below that
requested by the President.
Some of the initiatives or programs that will suffer as a
result, I understand, is the nursing home initiative, a
reduction of about $35.8 million; Medicare contractor oversight
initiative, $42.5 million; Medicare customer service, $143
million; legislative implementation, which enables you to carry
out the responsibilities that we gave you under the Balanced
Budget Act and so on.
So, given the fact that you do get thousands of letters,
and I think everyone on this panel understands what it is like
to keep up with correspondence; it is the major headache in my
office. Some of my constituents get very frustrated, although
we do the best we can answering thousands of letters that are
technical in nature and require research, I mean, that is an
understandable difficulty that you face.
Would you just take a moment and speak about the lack of
resources and whether or not you can do a better job if you
have greater resources?
Mr. Hash. Well, I appreciate that question, Mr. Strickland,
because resources are an important issue. We are quite
distressed about the House mark for the Labor HHS Appropriation
for our administrative budget.
It is $220 million below the request of the President and
it would eliminate or seriously curtail our initiatives in the
nursing home reform area, and our oversight of the Medicare
contractors that we have definitely tried to step up.
As you point out, many of our customer service initiatives
that we have are at risk, and we are hopeful that as this
process moves forward in the Congress that that money will be
restored.
Medicare has an administrative budget that is about 2
percent of the money that we actually spend on behalf of
beneficiaries. There is no program anywhere like the scope of
Medicare that has administrative costs of 2 percent or less.
I don't say that with the sense that that is where it ought
to be. I think given the scope of responsibilities that
Medicare has, the administrative budget should be significantly
larger as a percent of its overall responsibilities.
Just in closing on that point, what people fail to, I
think, appreciate often about Medicare is that it is not just
about processing claims and paying bills. It is about ensuring
the integrity of the process. It is about reviewing the
credentials of providers who provide services.
It is about assuring quality of care, not just for Medicare
beneficiaries, but for all Americans who use our health care
facilities because a Medicare certification of a provider is
not just an ``it's okay for Medicare.'' It means it is okay for
all Americans.
That is a responsibility that no other health program has
and on the kind of budget that we have, I think our ability to
do that in an effective and efficient manner is hampered by the
lack of resources.
Mr. Strickland. Thank you. I would like to yield to my
friend from Ohio my remaining time.
Mr. Brown. Thank you, Mr. Strickland. Just for
clarification, from some of the questions and the comparisons
of the HCFA-administered benefit compared with the GOP-
insurance based prescription drug plan, just if you would
clarify, now my understanding is that Medicare has a single
beneficiaries package, a single risk pool, predictable cost-
sharing, availability everywhere in the country, no possibility
of terminating or changing the plan overnight. Enrollees are
not subject to that kind of behavior by the administrator and
predictable premiums and all that; is that right?
Mr. Hash. That is absolutely correct.
Mr. Brown. With an insurance-based prescription drug plan,
you can't necessarily count on all those elements; correct?
Mr. Hash. You cannot. We are very concerned about any
potential for Medicare beneficiaries not to be able to access
affordable prescription drug benefits. Under other plans that
do not integrate the prescription drug benefit fully into the
Medicare Program, that guarantee is not there, Mr. Brown.
Mr. Brown. In light of some things also that were said, if
we were to privatize Medicare, there were criticism of you from
several people, not you personally, but of HCFA in terms of the
lack of uniformity because of using different administrators in
different regions and different states of the country.
If we were to privatize Medicare or pass a private
insurance company-based prescription drug benefit, what are the
chances that coverage decisions would be uniform across the
country then?
Mr. Hash. Well, I think they would, as they do today in the
private sector, they would vary according to the decisions of
individual plans. Therefore, there would not be uniformity or
consistency with what the benefit package would be, what the
premiums would be, what the coinsurance or cost sharing would
be. All of those are specified as part of the basic Medicare
Program and they are guarantees that our beneficiaries can rely
on.
Mr. Brown. So, again, a Medicare-based plan, whether it is
prescription drugs or whether it is the Medicare fee-for-
service or Medicare as we know it even with the +Choice and all
that, in terms of benefit package, the cost-sharing, the
availability everywhere in the country, there is a huge
contrast between what Medicare offers with prescription drugs
if we were to do that and what we would see if we saw an
insurance based plan.
Mr. Hash. I agree with that, Mr. Brown.
Mr. Norwood. Mr. Strickland, would you yield for just a
quick question?
Mr. Strickland. If I have any time, sir.
Mr. Bilirakis. You have 44 seconds.
Mr. Norwood. Mr. Hash, I was curious about the 1,000
letters a month you receive from Congress. That implies we each
write you twice a month or half of us write you four times a
month. Is that true?
Mr. Hash. I may have overstated it, but it is in the
several hundred a month, I know, and maybe----
Mr. Norwood. Mr. Burr, who waited 7 months for a reply
surely didn't write every other 6 months waiting for another.
If you would check on that I am real curious.
Mr. Hash. Yes, sir, I will.
[The following was received for the record:]
In 1998, we received a total of 12,591 pieces of Congressional
correspondence, for an average of more than 1,000 letters per month. In
1999, we received a total of 6,140 pieces of Congressional
correspondence, for an average of more than 510 per month. Also, from
January 2000 to date, we have been averaging about 510 per month.
Mr. Brown. Would Mr. Strickland yield to me?
Mr. Strickland. Yes, sir, I will.
Mr. Brown. My understanding is we all have caseworkers in
our districts that write you time after time after time that we
don't even necessarily know about. It is not necessarily always
a letter that is a policy question. It is more, ``can you help
us clarify some point'' or ``would you help our constituents''?
Mr. Hash. That is correct.
Mr. Bilirakis. Mr. Upton?
Mr. Upton. Thank you, Mr. Chairman. Mr. Hash, it is good to
see you again. As I have been listening to a number of the
questions and the testimony, I wanted to share with you two
very frustrating cases that have come across my desk and I
think are really indicative of the frustration that my
physicians back home who I meet with fairly often would cite as
fairly routine.
One of the examples that my staff and I have been working
on for a month now, a physician's office manager in our
district called and is trying to figure out what was happening.
It seems that they have been receiving scores of requests
for additional information about claims that they had submitted
electronically. When they called the carrier they were told
that this was a prepayment audit that HCFA had directed the
carriers to undertake.
When they asked how long the claim would remain pending,
the carrier could give them no estimate. When they asked if
interest might be paid on the claim beyond a certain period,
60, 90, who knows how long, days, the carrier told them that
HCFA directed them to treat the claims as if they were a claim
category in which interest is not paid.
When they checked with the regional HCFA office, that
office denied any knowledge of what was going on. This
particular office has about 40 percent of their claims being
held by the carrier. Despite our efforts to try and get a
straight answer, including my staff which had been working on
HCFA claims, really, for 20 years, we have been unable to get
any type of response at all.
The other sort of normal thing that we have seen, I have
spent, earlier this month, a number of hours at one of my
physician's clinic and walked through a number of examples that
they go through.
Jane, if you could just share a letter. I am going to read
parts of it into the record. Actually when I saw down and
looked at this case, this is 78 pages long in terms of what
they submitted.
They have actually now done what my 7th grade daughter does
quite a bit on the computer. She likes to put letters in
different colors, yellow, red, and black, to try and highlight.
It starts off by saying that ``This claim is now being
submitted to you for the ninth time. Six times you have
requested a prepayment review on portions. This goes back a
good number of months.''
In fact, as I indicated, 78 pages of the information that
they have submitted, they did receive a letter back since I was
there earlier this month, and they asked again for more
information, which means now that this is going to be the tenth
time in the payment they are trying to seek and trying to
clarify the particular procedures that were done.
Now, this clinic is actually pretty familiar to me because
this is where I take my kids. I know these physicians. They
want to practice medicine. They don't want to go into all the
paperwork and everything else and they just want to get paid
for a decent day's work. It is unbelievable looking at these
types of claims that they are submitting and the rejections
back and forth. They really don't seem to be getting anywhere.
I know as I have talked to you in previous years you all
process literally 1 billion claims a year. But there is a
tremendous frustration with our physician community and with
the patients as well, in terms of whether they are covered or
not and what goes on, particularly if you deal with Medicare
individuals over 65 years old. They just want to get treatment.
They want the bills to be paid. It is a very frustrating number
of days in their lives as they try and deal with this.
Going back to Dr. Coburn's questions, Dr. Ganske and Dr.
Norwood, somehow we have to come up with a better system than
is out there right now because it is just not working.
Our physicians are frustrated beyond belief in terms of the
work that they have to do. I wanted to share, particularly,
this claim here with you. At the time that I met with Mike I
was not aware of this hearing taking place and it was something
that we went back and retrieved from my office down the hall
this morning.
Mr. Hash. You know, again, I cannot defend this. I think
this should have been resolved much earlier. I don't know,
obviously, what the facts are here. No matter what the facts
are, it shouldn't have gone on for this long.
I can assure you, at least in this particular one and the
other one that you mentioned, I am happy to get to the bottom
of it quickly and get it resolved one way or another.
On the broader question, you are absolutely right. It is a
difficult system, a fee-for-service based system with seven to
ten thousand different codes in the physician procedural
terminology makes for an extremely difficult system to balance
the opportunity for the variation that is required in the care
of individual human beings versus the accountability of the
program.
In many cases, I think we have not struck the right
balance. We are trying to take a number of steps to actually
address the failure either of us or our contractors to properly
dispose of and dispense with controversies like this in a much
more efficient and short timeframe than this lays out here.
I agree with you that experiences like this are what the
face of the Medicare Program is to many providers and
practitioners.
One of our major goals here is to try to do something in
terms of our management and oversight of our contractors in the
way that they provide customer service for the provider
community as well as the beneficiary community and the way that
we invest in educating them to be partners with us rather than
adversaries in these matters.
There is no excuse, really for controversy like this to
have continued for this period of time.
Mr. Upton. I am just a layman. I am not a lawyer. I am not
a doctor. I dropped chemistry in college. I did very well in
high school, but that is a recurring nightmare that the drop
did not go into effect and all of a sudden my project is due at
the end of the semester.
But it doesn't take very much time to actually go through
some of these 78 pages to say, here is the service that was
provided. You ought to get paid. The realization by a number of
my physicians is that this is the way to delay payment and make
money off the interest that is not going to be made.
At the end of the day when in fact something does happen
that is positive and the claim is paid, it seems it is fairly
often a routine that a number of months later after the case is
being closed, it in fact opens up again and they have to go
back through the whole case again.
Mr. Bilirakis. The gentleman's time has expired. I would
love to hear an explanation as to why something like this
happens, but, I am going to yield to Mr. Stearns first.
Mr. Stearns. Thank you, Mr. Chairman.
Mr. Hash, in April 1999, HCFA published in the Federal
Register a notice announcing a new national coverage process
including procedures for seeking review by the new medical
coverage advisory community.
In that notice HCFA stated that after a coverage
determination was made, HCFA expected, and that is a quote,
``to make a payment change effective within 180 calendar days
of the first day of the next full calendar quarter that follows
the date we issue the national coverage decision.''
Help me understand that statement, specifically, tell me,
if we approve something today, take me through that statement
and see how many days, months, years----
Mr. Hash. What that describes is the process for
establishing the payment rate for the covered item or service
and the fact that we were committing ourselves to cover it
within 6 months after the period that the coverage decision was
actually announced.
I think that is intended to be an outside limit because in
many cases the payment policy may already be established and it
won't take any time to assign an appropriate payment level to
the new covered item.
In other cases, if it represents something for which we
have no analog, for which we have not paid for anything like it
before, we do need to go through a process to develop
information about what are other payers paying for this item of
service in the private market.
Mr. Stearns. But you see how complicated this is. It is not
just 6 months. There are 180 calendar days. ``Of the first day
of the next full calendar quarter.'' What does that mean? ``The
next full calendar quarters.'' Why can't you just--I mean once
the agency decides to issue a code and affirmatively decides to
cover it, why don't you just move quickly and why such
bureaucratic language?
But still, take me through the process. You have 180
calendar days of the first day of the next full calendar
quarter.
Mr. Hash. For example, if we made a decision today----
Mr. Stearns. Okay, just take me through that.
Mr. Hash. The next calendar quarter is July 1. I believe
that is Saturday. I think that is July 1. That would be the
first day of the next calendar quarter. That would be 6 months
from then which would be----
Mr. Stearns. That follows the date we issue the national
coverage decision?
Mr. Hash. Right. We issued it today. It would be 6 months
from July 1 which would be December 31 or January 1, 2001.
Mr. Stearns. Okay. Is there any reason why it takes that
long?
Mr. Hash. Because it depends on whether or not the item of
service that is covered is something that we are already
essentially paying for something like it, therefore we can
easily establish a payment amount.
If it is something for which we have not been paying for,
we have to establish some kind of basis for establishing the
price and we do that by collecting data about what it is being
paid for by other payers. Sometimes that takes a period of
time.
Mr. Stearns. Like, you talk about the quarters.
Mr. Coburn. Would the gentleman yield?
Mr. Stearns. Yes, just 1 second. Let's say it could be more
than 6 months. I mean even under your example it is more than 6
months.
But I mean let's say it was in the first quarter of
January, February, and March, let's say the first of April you
issued it or in the middle of April, then you go the next
quarter. That would be three-quarters of a year, right? You
would have April, May, and June and then the first of July
would start the next quarter.
So, in addition to 6 months, you add another almost 3
months. Then you are talking about 9 months. I mean, it just
seems like you wouldn't need that much time to go ahead.
Because you have already affirmatively decided to cover a
new technology procedure. So therefore, why can't you just go
with it?
Mr. Hash. There are two different questions. One is, is it
covered. If the answer to that is yes, how much do we pay for
it?
Mr. Stearns. But don't you decide that at the same time?
Mr. Hash. No. It is not a part of the coverage decision.
Mr. Stearns. Sure.
Mr. Coburn. If the gentleman would yield. I think there are
a couple of other issues. No. 1 is, you won't pay for anything
until a CPT code or ``J'' number has been assigned to it.
Mr. Hash. That is correct.
Mr. Coburn. That is ludicrous and I will give you an
example.
Mr. Stearns. How long does that take?
Mr. Coburn. It takes forever. Let me give you an example.
Pap smears that are questionable, a repeat Pap smear with a
thin prep pad, it took you all 18 months to approve payment for
a thin prep Pap smear, 18 months. They wouldn't pay for it.
So, what happens is, the patient pays for it because we
have them sign a deal, this is not a covered service. So the
patient has to pay for it.
The question I wanted to ask is: Do you have an incentive
system out there for your carriers to not pay or to delay
payment or to find more fraud?
Mr. Hash. No, sir, we do not.
Mr. Coburn. There is no incentive at all for a carrier to
lessen their payments or to find more fraud.
Mr. Hash. No, sir, they do not.
Mr. Stearns. Reclaiming my time, but you see what he is
saying, you are saying there are two things, you are
implementing the procedure and then determining the cost. Give
me an example. Are we talking about, as he says, 18 months or a
year? I think what you seem to understand here is that you have
bureaucratic language and you are not getting with it.
I don't think a corporation today that is trying to earn a
profit is going to do this. I am not saying you should make a
profit obviously, but I am saying you should expedite this
along.
Mr. Hash. The whole purpose of the coverage process that
you are referring to from that note was to bind ourselves to
specific timeframes because in the past the process, as Dr.
Coburn just pointed out, was very uncertain, took place over a
long period of time, and we would view these commitments as you
have just read to me, as improvements in the timeliness and
responsiveness of the process compared to what it had been in
the past.
Mr. Stearns. Based upon this new published notice in the
Federal Register, what have you seen out in the field now? What
is the average time?
Mr. Hash. We started using the 90-day process----
Mr. Stearns. 180?
Mr. Hash. No, no, no. I am back to the coverage process
itself. In that notice you are referring to, we said we would
do those reviews and make a decision within 90 days. We have
been doing that unless there was an issue about additional
evidence that had to be submitted. But generally, we have been
living up to that 90-day requirement.
With respect to the assignment of a payment or
reimbursement level, I don't know exactly what the timeframes
have been, but I would be happy to check on them.
Mr. Stearns. You should know, though. I mean that would be
something that----
Mr. Hash. Well, there are a lot of things I should know,
Mr. Stearns, but I just don't happen to have that one. But I
will try to get for you a list of all the ones we have approved
since July and when the payments were established for use by a
carrier.
[The following was received for the record:]
Since publishing Medicare's new coverage process in the Federal
Register on April 27, 1999, the following pending and completed
National Coverage Determinations have been posted on the HCFA web site
at http://www.hcfa.gov/quality/8b.htm. National Coverage Decisions
(NCDs) can take a number of forms. They can cover or not cover medical
items or services, leave coverage decisions of medical items and
services subject to regional practice variations to local carriers, or
make coverage decisions with limitations. It is just as important for
Medicare beneficiaries that NCDs made to not cover items are
implemented as swiftly as those made to cover items. Therefore, this
list includes all of the NCDs HCFA has published.
1) Augmentative and Alternative Communication (AAC) Devices--On April
26, 2000, HCFA published a NCD classifying AAC devices as
durable medical equipment (DME) and therefore eligible for
coverage by Medicare carriers. The non-coverage decision on
these devices could be found in the Coverage Issues Manual sec.
60-9, which was based on Section 1861(n) of the Social Security
Act (the Act) which defines DME. The longstanding policy was
based on a determination that AAC devices were ``convenience
items'' and therefore not DME. The Center for Health Plans and
Providers (CHPP) decided that AAC devices do fit within the
definition of DME. The Office of Clinical Standards and Quality
(OCSQ) decided that many factors may weigh into the decision of
whether this device would be medically reasonable and necessary
for an individual beneficiary. Therefore, effective January 1,
2001 coverage of this piece of DME is at carrier discretion.
2) Autologous Stem Cell Transplantation (AuSCT) for AL Amyloidosis--On
January 14, 2000 HCFA published a NCD to not cover AuSCT for AL
Amyloidosis because of a paucity of evidence on its
effectiveness. This decision is effective October 1, 2000. HCFA
received a formal request to examine this treatment for this
indication which had not previously been addressed at the
national level and was therefore at the discretion of local
contractors.
3) Autologous Stem Cell Transplantation (AuSCT) for Multiple Myeloma--
On May 31, 2000 HCFA decided to issue a NCD for AuSCT in the
treatment of multiple myeloma limited to patient populations
shown to derive benefits from the treatment. This NCD is also
effective October 1, 2000.
4) Breast Biopsy--On December 7, 1999 HCFA established a national
coverage policy for percutaneous image-guided breast biopsy for
some non-palpable lesions and left coverage of non-palpable
lesions to the discretion of individual carriers.
5) Continuous Subcutaneous Insulin Infusion Pump--On August 26, 1999
HCFA issued a NCD to cover continuous subcutaneous insulin
infusion pumps for type I diabetics. This decision was
effective for services furnished on or after April 1, 2000.
6) Electrical Stimulation for Fracture Healing--On November 9, 1999
HCFA issued a NCD maintaining a limitation on coverage of
electrical bone growth stimulators to long bones, but changes
it definition of nonunion fracture from a fracture in which
healing ceased for nine months to one where it ceased for three
or more months. Effective for services performed on after April
1, 2000.
7) External Counterpulsation Therapy--On November 22, 1999 HCFA amended
sec. 35-74 in the Coverage Issues Manual (CIM) to reinforce a
previous NCD effective on July 1, 1999. On July 1, 1999 HCFA
changed its non-coverage NCD by issuing a NCD to cover this
device for patients diagnosed with disabling angina (Class III
or Class IV, CCSF score or equivalent classification) and who,
in the opinion of a cardiologist or cardiothoracic surgeon, are
not readily amenable to surgical intervention. The November
decision, written in response to two separate formal requests
on this topic--one to broaden the terminology to include other
devices and the other to reconsider the coverage policy and
withdraw coverage of this service altogether, changed the
wording in the CIM from ``Enhanced External Counterpulsation
(EECP)'' to ``External Counterpulsation (ECP)''. While EECP was
commonly used in the medical field, EECP was a proprietary name
and therefore a revision to the original decision was needed to
clarify that equivalent devices produced by other manufacturers
were also covered.
8) Extracorporeal Immunoadsorption (ECI) Using Protein A Columns for
Treatment of Rheumatoid Arthritis--On April 27, 2000 HCFA
expanded its coverage of this treatment. Since 1991, the
treatment has been covered for only for idiopathic
thrombocytopenia purpura (ITP). Recently, the labeling
instructions including using this treatment for severe
rheumatoid arthritis sufferers. Effective on January 1, 2001,
Medicare will cover this treatment for rheumatoid arthritis
sufferers who have failed at least three disease-modifying
anti-rheumatic drugs.
9) Ferrlecit--On April 20, 2000 HCFA issued a NCD to cover this
intravenous iron therapy drug for end stage renal disease
(ESRD) patients. Since this is a new drug, no national policy
had been in place and therefore coverage of the drug was at the
discretion of local carriers. Effective thirty days following
issuance of instruction, which is currently in the clearance
process.
10) Helicobactor Pylori Testing or Fecal Antigen Assay for Diagnosis of
Helicobactor Pylori (H. pylori)--On November 8, 1999 HCFA
issued a NCD retaining contractor discretion of this test. The
test had been at contractor discretion before HCFA received the
formal request to review for national coverage by Meridian
Diagnostics, Inc. HCFA believes that leaving this diagnostic
test to contractor discretion will encourage technology
diffusion at the local level and create an opportunity for
stool antigen testing to obtain an appropriate diagnostic
foothold.
11) Liver Transplantation-- On December 2, 1999 HCFA issued a NCD to
remove the exclusion of patients with hepatitis B, but to
retain the exclusion of patients with liver cancer in CIM sec.
35-53. This decision was effective on December 10, 1999.
12) Pressure Reducing Therapy (Support Surfaces)--On June 12, 2000 HCFA
issued a NCD which modifying CIM sec. 60-19 entitled ``Air-
Fluidized Bed''. Air fluidized bed therapy had been covered
with some limitations including a requirement that conservative
treatment be used first. The modifying NCD defined conservative
treatment. Anticipated effective date is December 2000 when
instructions to Durable Medical Equipment Regional Carriers
(DMERCs) are issued in the next quarterly bulletin.
13) Prolotherapy for Chronic Low Back Pain--On September 27, 1999 HCFA
issued a NCD retaining its national non-coverage policy in CIM
sec. 35-13. Since no systems or coding changes were necessary,
the policy was effective immediately.
14) Re-Evaluation of Criteria for Medicare Approval of Transplant
Centers--On July 26, 2000 HCFA issued a NCD revising the
criteria for Medicare Transplant Center Medicare approval. The
NCD maintained existing standards for patient selection,
management and commitment. Also, the NCD kept the standards for
facility plans, survival rates, maintenance of data, organ
procurement, laboratory services, and billing. The NCD changed
volume criterion to require 12 transplants over a 12-month
period for heart and liver transplant centers, and 10
transplants over a 12-month period for lung transplants and
eliminated the 2-year minimum experience requirement.
Instructions making this policy effective have not yet been
issued.
15) Ultrasound Stimulation for Nonunion Fracture Healing--On July 31,
2000 HCFA issued a NCD rescinding its national noncoverage
policy on Ultrasonic Osteogenic Stimulators. CIM sec. 35-48 is
amended to define osteogenic stimulators and covered
indications. Instructions making this policy effective have not
yet been issued.
Mr. Stearns. Thank you, Mr. Chairman.
Mr. Bilirakis. All right. We have gone all the way through
here. The chair is going to claim the 2 additional minutes
because he gave it to the others and didn't take it for
himself.
Following up, Ms. Eshoo is not here, but the device
problem, I understand that the agency is continuing to insist
on a buy brand rather than the category approach to classified
devices.
There are numerous problems with the buy brand approach. I
think those have already been shared with you. Let me ask you,
Michael, is there any precedent in Medicare's history of
establishing a payment system based on a brand of technology?
Mr. Hash. Well, I don't think there is, but I think the way
we got there is by our reading of the Balanced Budget
Refinement Act last December when it was signed into law. It
says that, it refers to specific items that were in use after
1996, which is the base rate for the payments.
Mr. Chairman, I didn't get a chance to say this earlier,
but we have had long discussions with folks who are interested
in the category approach to reviewing and approving these
items. We have indicated that we would be willing to talk about
a categorization scheme. We think it has pluses and minuses.
But we couldn't implement it at the very outset here by August
first, which is the implementation date of the outpatient PPS.
But since we are going through, as I indicated earlier,
quarterly updates where new technologies are considered and
added every quarter, we would over time be able to think about
developing a categorization scheme and we are open to having
that discussion.
Mr. Bilirakis. I understand that industry has offered to
sit down with you since December of last year to do just that.
They say a system of 8 to 10 device types could be easily
developed; is that true?
Mr. Hash. I think they have indicated to us that they want
to have such a scheme. We don't actually have such a scheme and
in order to put one into place while we are, at the same time,
trying to review over 300 applications, we didn't feel that we
could do all that and have our payment system in place by this
summer, which was the goal which we had established through the
statute.
Furthermore, we do believe that our reading of the statute
does produce the kind of outcome that we have done. When we
were consulting with the Congress when the provision was
written, we indicated at that time this was exactly how we
would administer it.
Mr. Bilirakis. I think it is related to comments that I
have made previously and that is a willingness on our part, the
Congress. I know sometimes we draw these things up and there
are unexpected consequences. If you come back to us and
basically say to us, look we kind of agree with you on these
categories but we need some changes made.
You know, certainly we would address that. But it hasn't
taken place.
By the way, Mr. Oxley, who is not a member of this
subcommittee but is a member of the full committee, has two
concerns related to HCFA implementation of Section 401 of the
Balanced Budget Refinement Act. I am not going to read those to
you, but I am going to furnish them to you and request a
relative soon type of a response, not 7 months as Mr. Burr
experienced.
Mr. Hash. Yes, sir.
Mr. Bilirakis. There will be a number of questions in
writing which I know, as per usual, you will respond to,
hopefully within a short period of time.
I will yield the balance of my time approximately 1\1/2\
minutes, to Mr. Ganske.
Mr. Ganske. Thank you, Mr. Chairman. I want to follow up on
the issue of audits. Correct me if I am wrong, but when you do
audits of physicians or when you have done it at hospitals, you
have looked at a limited number and then when you find mistakes
where the coding has resulted in higher payment, you
extrapolate from that number to the total number of cases and
then you want a refund.
Am I not also correct that when you do those audits if you
find codes that have been coded lower than normal then you are
not taking that into consideration or are you taking that into
consideration to balance out the----
Mr. Hash. We are, Dr. Ganske.
Mr. Ganske. Were you doing that initially or has that been
a change?
Mr. Hash. I am not aware that that is a change, but I think
that there might have been inconsistent performance by the
contractors. We have indicated and redoubled our indications to
them that this is a requirement that any claims that are under-
coded, that those be adjusted properly to the right code and
reimbursement be made or netted out against any overpayments
that are determined.
Mr. Ganske. When did you send out that information to the
contractor?
Mr. Hash. I don't have that right at my fingertips but I
will get you something that will show you how we addressed
that.
Mr. Ganske. Will that be retroactive to the audits that
have been done before?
Mr. Hash. I don't know, Dr. Ganske. I don't know how it is
worded. But I do know that it has been our intention that
underpayments be netted out against overpayments. It is not
just overpayments.
Mr. Ganske. And that has been your policy all along?
Mr. Hash. I believe it has been our policy.
Mr. Ganske. So if the contractors were not doing that
initially, then the providers that were unfairly hit with not
having the positive part counted in should get a refund.
Mr. Hash. I think it should be netted against whatever
liability they might have.
Mr. Ganske. Have you actually put that in writing?
Mr. Hash. I need to review the documentation on that, Dr.
Ganske. I don't know right off the top of my head. But I will.
Mr. Ganske. It should be in writing; shouldn't it?
Mr. Bilirakis. Your office can follow up with something on
that.
Mr. Hash. I will get you whatever we have on that subject.
[The following was received for the record:]
First, it must be understood that, as a general matter, post-
payment audits are not performed randomly, but rather are data driven
and are performed when the contractor believes an overpayment exists.
In fact, in a recent Program Memorandum (Transmittal AB-0072), HCFA
reminded Medicare contractors of the steps that must be taken for the
efficient and effective use of medical review. For example, the
Memorandum stresses that the decision to conduct medical review should
be ``data-driven,'' and that potential problems should be validated by
conducting ``probe'' reviews (i.e., reviewing a limited number of
claims). Finally, post payment audits are only to be performed when
there is a major level of concern about overpayments. Thus, Medicare
contractors take into account whether a provider has been underpaid in
their initial decision regarding whether to conduct post-payment
audits.
Second, when contractors do perform post-payment audit, they take
into account both underpayment and overpayments. Written instructions
in March 1999 were issued stating that in calculating overpayment using
a statistically valid random sample, contractors should offset
underpayment against overpayments. Such instructions were not
retroactive; however, it has always been HCFA's policy to pay it right,
which has implications for overpayments as well as underpayment.
Mr. Bilirakis. Well, we are going to let you go now, Mr.
Hash. I honestly don't think that HCFA has been bashed. You
certainly haven't been bashed. You experience the frustration
that is felt and the reason why I wanted to extend the time is
because we have three medical providers on this committee and
they are the real world with the experiences out there. Ms.
Capps is a nurse. I certainly didn't mean to slight her. She is
a provider, too.
So, this is why I wanted to extend more time. It took a
little longer. I apologize to the second panel for their being
delayed as long as they have been, but it is important that we
go into this.
In the past we have met with you sort of sitting around a
table and giving people an opportunity to raise some of their
frustrations, some of their problems. You have responded and
hopefully, maybe we can do that again sometime.
I would have like to have seen this hearing devoted just to
you, quite frankly.
Mr. Hash. I want to say to you, Mr. Chairman, I do
appreciate the spirit in which people have entered into this
discussion. I do appreciate the frustrations that are expressed
here on behalf of others. I know they are real because I have
been out there myself.
I do think if we can command the proper amount of resources
that we can continue to work with the provider community and
with you all, that together we can continue to ensure that
Medicare serves the next generation of beneficiaries.
I appreciate the constructive way in which you have
conducted this hearing.
Mr. Bilirakis. Michael, you were a part of this community
for so many years as counsel. You know us and we know you.
There shouldn't be any hesitation on your part to say to the
committee, hey, we need some changes made in order to be able
to do a better job.
Mr. Hash. Yes, sir.
Mr. Bilirakis. Again, part of my frustration is that that
has not taken place.
Mr. Hash. I understand. Thank you, Mr. Chairman.
Mr. Bilirakis. Panel two consists of Dr. Robert R. Waller,
Chairman of the Healthcare Leadership Council; Mr. Dave
Fleming, Group Senior Vice President, Diagnostics Products and
Genetics, Genzyme Corporation on behalf of advaMED here in
Washington, DC; Mr. Michael F. Mangano, Principal Deputy
Inspector General, Office of the Inspector General, Department
of HHS; Dr. Yank Coble from Jacksonville, Florida, welcome to
Washington, Dr. Coble, a member of the Board of Directors of
the American Medical Association, and Ms. Vicki Gottlich,
attorney, Center for Medicare Advocacy.
Welcome. Ladies and Gentlemen, your written statements are
a part of the record. I will set the clock at 5 minutes.
Hopefully, you can stay within that period of time. Obviously,
if you go over a few seconds, no problem, but we would prefer
that you sort of complement and supplement your written
statement as much as possible, if you would do it.
Dr. Waller, we will start off with you, sir.
STATEMENTS OF ROBERT R. WALLER, CHAIRMAN, HEALTHCARE LEADERSHIP
COUNCIL; DAVE FLEMING, GROUP SENIOR VICE PRESIDENT, DIAGNOSTIC
PRODUCTS AND GENETICS, GENZYME CORPORATION ON BEHALF OF
ADVAMED; MICHAEL F. MANGANO, PRINCIPAL DEPUTY INSPECTOR
GENERAL, OFFICE OF INSPECTOR GENERAL, DEPARTMENT OF HEALTH AND
HUMAN SERVICES; YANK COBLE, BOARD OF DIRECTORS, AMERICAN
MEDICAL ASSOCIATION; AND VICKI GOTTLICH, CENTER FOR MEDICARE
ADVOCACY AND THE NATIONAL ACADEMY OF ELDER LAW ATTORNEYS
Mr. Waller. Thank you. Good afternoon, Mr. Bilirakis, Mr.
Brown and members of the committee. Thank you for this
opportunity.
As you have heard, Medicare is one of our great social
programs in this nation. I think our government deserves more
thanks than it often receives for its commitment to our
nation's health.
Those who administer Medicare, Nancy-Ann Min De Parle, Mike
Hash, Dr. Bob Berenson, and others are dedicated, talented
people. But the system is broken. All of us can share
responsibility for where we are today. Seven administrations,
18 Congresses, all of us in the health care sector and our
patients.
The bottom line for the Health Care Leadership Council is
that we just can't adequately manage our current system so we
need to change it. The drivers for change are overwhelming You
have heard them, issues of quality and cost and access and
solvency top everyone's list.
But complexity has to be added to the chief drivers.
Complexity is staggering. According to a recent survey that we
have done, complexity is a No. 1 issue for the beneficiaries. A
prime indicator of the complexity is the 110,000 pages of
Medicare rules and regulations.
This is 1 year's worth from the Federal Register on the
table. We are spending precious time counting the number of
pages of rules and regulations that we don't have or that we do
have and how many rules and regulations we have now has kind of
taken on a life of its own.
The consequences of complexity are enormous. Let me mention
three quickly. Complexity stifles innovation. The goal that we
all have is to constantly improve care and not to achieve a
defined regulatory standard.
Health care is constantly improving, such as the genome
project. If you place a regulatory stake in the ground and
define what quality is today, tomorrow that quality may be in
the wrong place.
Second, dealing with the labyrinth set of rules and
regulations does create honest differences of opinion in
interpretation of those regulations and breeds and stakes. I am
concerned that the public has been led to believe that the
Medicare system is riddled with fraud, when in reality
complexity so often is the root of the problem.
We have heard about the need to have zero tolerance for
real fraud, but differences in interpretation of rules and
honest mistakes are not fraud.
Third, complexity is stealing time from patient care. Dr.
Coburn is exactly right. A recent survey found that 22 percent
of our physician and office staff time is devoted to compliance
with Medicare regulations and it also noted that processing
costs with Medicare claims are about 26 percent higher than the
costs associated with private claims. We need less paper and
more care.
A few examples of complexity: Completing claim forms are
nightmarish for the physician and the patient. Denied claims
can take up to several years to complete, as you have heard.
Services covered in one location of care are not covered in
another location of care. The process for seeking new
treatments is extraordinarily lengthy. Insurance piecemeal with
multiple products.
This is difficult for patients, difficult for providers,
and it leaves the system vulnerable to honest errors and true
fraud.
At the top of our list, Dr. Coburn's concern, having to
document what patients don't have. I practiced medicine at the
Mayo Clinic for 30 years, was President of the Mayo Foundation
for 11 years up until last year. Our colleagues and the members
of the Healthcare Leadership Council will tell you that working
with private payers, we work with them as partners.
The private payer does not require us to document the
number of body systems that we must examine to bill for a visit
or whether the supervising physician must be in the same room
when a nurse tests a patient's pacemaker. The record has indeed
become less of a record of care and more of a legal and a
billing and a coding document, as Dr. Coburn said.
So, in short, Medicare in its current structure with
continued price controls, ratcheting down of payments to
providers and plans, yes, micromanagement and a piecemeal
approach to coverage just will not work.
We have noted the efforts to assist providers conducting
town meetings, providing toll-free lines, advisory committees
and yet developing more volumes of guidelines. These are
additional manifestations of a regulatory system with an
increasing number of negative consequences for patients.
There are 55 chief executives of the Healthcare Leadership
Council who represent all health care sectors and they believe
that the current system needs to be uprooted and replaced with
a system where there is more choice, similar to what Federal
employees, including Members of Congress, and many employed
Americans now have, more competition, more innovation and
shifting the private, public partnership that we now have more
toward the private sector.
I will just sum up by saying we know it is going to take
time to achieve comprehensive reform. We do have some interim
suggestions that I hope the committee will find helpful.
First, please stabilize the current Medicare Program. There
is a financial crisis for providers and plans and it must be
addressed.
Second, appoint a Medicare board external to the Health
Care Financing Administration. This will be a key element to
encourage competition, ensure more flexibility and less
regulation.
Third, improve the collaboration among the agencies
enforcing the Medicare regulations. The Office of the Inspector
General provides reduced penalties for voluntary disclosure of
billing errors. The Department of Justice does not. If it is an
error, why should there be any penalties at all?
Fourth, we need a better system to account for the costs
associated with more regulations. One example, HHS estimated
that costs to implement medical records privacy regulations
would cost $3.8 billion over 5 years.
An independent organization estimates costs to be over $40
billion over 5 years. Somehow we need to be on the same page.
Medicare is a great social program. It has been structured for
a different time and a different science.
The Healthcare Leadership Council looks forward to working
with the committee toward comprehensive reform, which we hope
will happen very, very soon. Thank you.
[The prepared statement of Robert R. Waller follows:]
Prepared Statement of Robert R. Waller, President Emeritus, Mayo
Foundation and Chairman, The Healthcare Leadership Council
INTRODUCTION
Good morning Mr. Bilirakis, Mr. Brown and members of the sub-
committee. I want to thank you for your invitation to appear here today
to convey the views of the Healthcare Leadership Council on the very
compelling issue of how the complexity of the Medicare program hinders
patient care. I would also like to thank this committee for the
extensive leadership and dedication to the Medicare program you have
provided over the past several years.
The Healthcare Leadership Council (HLC) represents a comprehensive
spectrum of innovators in the health care sector. Because of this broad
representation, what I convey to you today can be considered a unified
position of a variety of the nation's most respected leaders in the
delivery of health care services and products.
The HLC has been committed, since its inception, to advancing a
health care system that values innovation and provides affordable,
high-quality health care in a patient-centered environment.
Beneficiaries of the Medicare program deserve no less. We believe that
Medicare is a valuable social program. Medicare has broadly impacted
the health and financial security of all Americans, young and old. It
provides health coverage to almost one of every ten Americans. And it
relieves millions of the elderly's children from what could be
catastrophic medical expenses.
Today's Medicare, however, has some very real problems that must be
squarely faced. Under Medicare's current structure, the federal
government has been unable to manage Medicare efficiently. The program
is highly regulatory and inflexible, with over a hundred thousand pages
of regulations, rules, manuals, instructions, letters, alerts, notices,
etcetera. Carriers and intermediaries apply rules differently in
different locations. And there are often inconsistencies among these
many rules.
Of late, trust fund longevity has been the driving force behind
calls for Medicare reform. But Medicare insolvency, as critical as it
is, is not the most immediate danger facing Medicare beneficiaries.
While insolvency could rob beneficiaries of high quality, innovative
health care in the near future, the inefficiencies of the Medicare
program are robbing beneficiaries now.
No single source is to blame for the inefficiencies and complexity
of the current Medicare program. The massive amount of regulation for
this program has evolved at the hands of seven administrations, and 18
Congresses. And those of us in the health care system share
responsibility as well. I would even compliment those who regulate this
program--in both the Congress and in the Health Care Financing
Administration. They are good and talented people. But it is beyond the
power of the most powerful policy makers to make substantial
improvements to the existing Medicare program. The system as a whole
needs to be uprooted, and replaced with a private, value-based,
competitive system. Under such a system, plans and providers would
compete with one another to offer--not just the highest quality, most
innovative care--but also the most user-friendly delivery of care.
In my comments today I would like to discuss the patient
consequences of our complex Medicare program. I will provide some
examples of where the Medicare program is characteristically burdensome
for both consumers and providers. And I will outline HLC's vision for
an efficiently run Medicare program.
consequences of today's complex system
The inefficiencies within the Medicare program adversely affect its
beneficiaries on many fronts.
First, Medicare's complexity stifles innovation. Medicare cheats
beneficiaries from being able to receive the best care achievable when
its regulations set inflexible standards of care. On virtually a daily
basis, our nation's health system makes incredible advances in the
diagnosis and treatment of illnesses, and on new approaches to
optimizing good health. These advances are improving the quality of
health care at a pace far more rapid than the legislative or regulatory
process can maintain. Quality improvement is a continuous process that
must be woven into the fabric of how providers of care think, act, and
feel. The goal should be to constantly improve patient care, not to
achieve a defined regulatory standard. Regulating quality essentially
freezes in place today's best practice--which may be a mediocre
practice less than a year from now.
Second, complex Medicare regulations contribute greatly to a false
image of a system plagued with fraud and abuse. Let me begin this part
of the discussion by stating clearly that the Healthcare Leadership
Council has zero tolerance for true fraud and abuse. True fraud and
abuse in our health care system undermines quality, threatens patients'
trust, should not be tolerated, and must be eradicated.
But the public's confidence in the nation's health care system has
been eroded by headlines of health care fraud investigations that are
not always the result of true, intentional fraud. Many have been led to
believe that Medicare is riddled with fraud when, in actuality,
complexity is more often the root of fraud investigations. Accusations
of fraud are most frequently the result of honest mistakes and
differences in interpretation in dealing with a labyrinthian set of
confusing and conflicting regulations. This complexity actually
undermines compliance.
Most of those on this panel are probably aware that Medicare grew
by only 1.5 percent in 1998 and by a negative 1 percent in 1999--the
lowest rate of growth in Medicare's history. This reduced growth rate
has been attributed in part to cuts by the Balanced Budget Act of 1997,
and to reduced fraud and abuse. But do you know that this remarkably
slow grow is largely due--not to the actual reduction of fraud--but to
the tremendous fear of false accusations of fraud? Recent evidence
shows that health care organizations have been going to great expense
to avoid the Department of Justice's overzealous use of the False
Claims Act by undercoding for their service in order to avoid any
possibility of false accusations of fraud.
February, 2000 testimony from the Congressional Budget Office
included an analysis of changes in hospital billing patterns and their
impact--the analysis noted that, for example, hospitals have been down-
coding ``simple pneumonia'' to ``respiratory infection'' at a far
greater rate than ever before. However, the Medicare Payment Advisory
Commission pointed out in its 2000 annual report to Congress that CBO
did not analyze the clinical appropriateness of these coding decreases.
In fact, Gail Wilensky, Chairman of the Medicare Payment Advisory
Commission was recently quoted as saying that billing Medicare for less
than a provider is entitled is a serious problem. She added that ``You
don't hear the OIG or the Department of Justice worrying about whether
we are underpaying''.
Third, today's complex and burdensome Medicare system saps time and
financial resources. Time and money spent by providers on extensive
documentation, poring through compliance guidelines, and hiring
compliance experts, could be used more productively in providing
patient care or developing innovations to improve patient care. A more
efficiently run Medicare could perhaps even return to the beneficiary
some savings to offset certain medical expenses and other out-of-pocket
costs. A recent survey of the Association of American Physicians and
Surgeons revealed that 22 percent of physician and office staff time is
devoted to compliance with Medicare regulations. In addition, they
found that the processing costs associated with Medicare claims are 26
percent higher than the costs associated with private claims.
examples of complexity within the program
Features of the Medicare program that consume providers' time and
resources and cause confusion for Medicare beneficiaries include the
following:
Medicare's many complex coding and documentation rules make
completing the claim form and ensuring appropriate coding extremely
burdensome and time-consuming. For example, drugs must be coded with a
Medicare-specific code, and the provider must adjust billed quantities
to comply with the code description. Private health plans, on the other
hand, use national drug codes assigned to all drugs approved by the
FDA.
In addition, Medicare's documentation requirements lead to
redundant and inefficient documentation practices. For example,
physicians must write all notes regarding patient assessment,
regardless of whether a registered nurse under his supervision wrote
identical notes at an earlier point in the day that concur with the
physician's view.
As another example, I have attached to my testimony, a seven page
guideline describing the examination and documentation requirements for
billing under CPT code 99215--one of approximately 10,000 CPT codes.
You can see from this document how extensively the Medicare program
prescribes the activities that must take place within the patient
examining room in order to bill under just this one code. For example,
billing for a ``complete review of systems'' requires ``at least ten
organ systems to be reviewed''. Those systems with positive or
pertinent negative responses must be individually documented. For the
remaining systems, a notation indicating all other systems are negative
is permissible. In the absence of such a notation, at least ten systems
must be individually documented.
Medicare's extensive coverage process for new items and services
can leave beneficiaries behind the curve of advancements in health
technology. The administrative process used for modifying benefits and
for determining whether certain medical treatments or procedures merit
coverage under Medicare is extraordinally complex, lengthy, and
sometimes irrational--resulting in the delay or denial of lifesaving
treatments. For example, even though scientific evidence had shown for
sometime that the outcomes for Hepatitis B liver transplants were
comparable to the outcomes of liver transplants made necessary by other
primary indications, Medicare did not begin covering these transplants
until very recently. In 1999, before Medicare began covering Hepatitis
B liver transplants, a survey by the American Liver Foundation found
that 99 private insurance companies, as well as the Department of
Defense, reimbursed for Hepatitis B transplants. The survey also showed
that most of the largest liver transplant centers indicated that
Medicare was the only carrier that did not reimburse for these
transplants.
Medicare's standards of care prescribed in regulation are often
inflexible and often nonsensical. Efforts to protect the program from
fraud have led to tedious rules that reduce the quality of a patient's
interface with the medical system. For example, Medicare will not
reimburse for physician visits and/or diagnostic tests that occur more
than once per day per patient. As a result, patient care may be
compromised, patients are inconvenienced, providers are unable to run
confirming or clarifying diagnostic tests, and the course of care is
disrupted.
This is especially a concern of Medicare patients of the Mayo
clinic who often travel long distances to use our medical facilities
for a series of diagnostic tests and treatments during the minimum
number of days possible. Because of Medicare's prohibition against
payment for two separate evaluation and management services occurring
on the same day, we are faced with the choice of either not being paid
or requiring patients to prolong their stay and then incur unnecessary
hospital costs or costs for lodging, meals and other expenses. This
rule is also a problem for Medicare beneficiaries in rural areas who
must travel to a distant urban area for similar tests and treatment.
Medicare beneficiaries and providers constantly wrestle with a
piecemeal approach to insurance. Beneficiaries must piece together
multiple health insurance products--including Medicare, Medicaid wrap-
arounds, Medigap, and retirement wrap-arounds--like a jigsaw puzzle, in
order to be comprehensively covered. In addition, their providers must
deal with the multitude of instructions and claims paperwork associated
with this piecemeal coverage. This hybrid of uncoordinated care
increases the system's vulnerability to billing errors as well as true
fraud and abuse.
Medicare has inconsistent coverage policies based on the specific
site of care. For example, infusion services are covered in the
hospital, but not in the home setting. As another example, a rule
proposed in 1997--yet still not finalized--details physician
supervision requirements for numerous office procedures. The regulation
actually dictates during which procedures a physician must supervise
from within the examining room and which procedures the physician can
supervise from within the ``office suite'' but not necessarily within
the examining room.
Such site of care standards are unnecessary inconsistencies that
take discretion away from providers, reduce the quality of care for
beneficiaries, and simply lengthen the long check list of rules that
providers must remain wary of when treating beneficiaries.
Medicare's very lengthy appeals process can result in long waits
for needed care or for payments for services rendered long ago. When
Medicare carriers deny claims, there are several tiers of review, the
highest of which--review by an Administrative Law Judge--can take up to
four years to complete. In the meantime, either the beneficiary is
denied this care, or a provider is denied payment.
HLC'S VISION FOR EFFICIENCY
HLC's vision for administering Medicare in this century is a
management model that is lean, efficient, independent, and able to
adapt quickly to innovation. We see a Medicare program that will not
steal time from patient care, will not be a hybrid of uncoordinated
health care programs, and will not have inflated costs because of
burdensome micro-management and heavy government regulation. We believe
strongly in the need to provide seamless, integrated care for the total
care of the patient.
This model already is working well for some 59 million Americans in
large employer plans and the nine million people in the Federal
Employee Health Benefits Plan (FEHBP). Under FEHBP, the government's
micro-management and mandating of benefits is kept to a minimum,
consumers have better benefits, lower out-of-pocket costs, more choice,
and higher quality care. If used for Medicare, this model would allow
the market to respond to changing beneficiary needs with a variety of
products, keeping pace with advances in health care. Medicare
beneficiaries deserve these quality improvements.
The Mayo Clinic, like many members of the HLC, works with many
private insurance companies and payers. We deal with them as partners,
through a process of negotiations, establishing goals for quality,
cost, and patient satisfaction, and monitoring the results. These
insurance companies do not tell us how to document the number of body
systems we must examine to bill for a visit, or whether the supervising
physician must be in the same room when a nurse tests a patient's
pacemaker. The more efficient Medicare we envision would not try to
micromanage virtually every aspect of the care patients receive, but
would allow providers and plans to compete in a marketplace on the
basis of quality, cost, and efficiency, holding us accountable for the
care we provide.
Medicare must embrace the innovations in health care delivery,
benefit design, and cost management techniques that have occurred in
the private sector in order to best serve its beneficiaries. A Medicare
system that is run efficiently will be dedicating its time to patient
care, not to the administration of regulations. And such a system will
be free of the inflated costs that are associated with inflexibility
and burdensome micro-management.
THE INTERIM
As I said earlier in my testimony, I do not believe there is a way
to fix the existing Medicare program without starting completely from
scratch, not that there haven't been valiant efforts to do so. In fact
I would like specifically to complement Dr. Robert Berenson who has
traveled to the Mayo Clinic to listen to our concerns and to try to
correct some of the problems we face. And earlier in this hearing, we
heard from Mike Hash of HCFA about some impressive efforts underway to
try to help providers and plans navigate the complex maze of this
program.
But I believe that these efforts to assist and educate providers,
to provide toll free lines, to conduct town meetings, to develop more
volumes of guidelines are just additional manifestations of a
regulatory system gone awry. The additional resources required of HCFA
to develop these various guidance tools, and the resources required of
providers to take advantage of them are misdirected resources.
I do, however, recognize the realities of the time and political
process necessary to change a government program of this magnitude and
importance. So I would like to mention a few things that the HLC
believes would be helpful in the interim.
Our most urgent suggestion is for the Congress and the
Administration to work together to financially stabilize the existing
Medicare program. While the Medicare's complexity demands ever-
increasing resources of health care providers and plans, the overseers
of the program have carved away at Medicare reimbursements
substantially over the past several years. As a result of the Balanced
Budget Act cuts, virtually all Medicare providers groups-- Hospitals,
home health agencies, skilled nursing facilities, and Medicare+Choice
plans--are experiencing severe and ongoing funding shortages.
Decreasing payments in conjunction with increasing regulatory and other
administrative burden has to eventually prove to be a losing
combination for beneficiary care.
Second, we would propose the development of a Medicare management
board external to HCFA with authority to adapt to changing health care
practices without Congressional activity and HCFA micromanagement,
reducing the heavily regulated environment of the current Medicare
program.
Third, we suggest an improvement in the collaboration of the
agencies involved in the regulation and enforcement of the Medicare
program, namely the Health Care Financing Administration, the HHS
Office of Inspector General, and the Department of Justice, including
the U.S. Attorneys. There is a growing multi-layered network of
investigators and prosecutors working through all of these agencies who
have conflicting interpretations of Medicare regulations as well as
conflicting enforcement programs. For example, the Office of Inspector
General has notified Medicare providers that voluntarily disclosing
billing errors found within their organizations will result in reduced
penalties. However, many organizations are reluctant to come forward
with found billing errors because the Department of Justice treats such
disclosures the same as if the DOJ had discovered a truly fraudulent
cover-up.
To help facilitate better coordination and education among these
agencies and the provider community, in 1998, the Healthcare Leadership
Council formed our Industry and Government Partnership for
Accountability Task Force, which consists of organizations representing
every segment of the health care system. Sectors represented include:
hospitals, medical clinics, health maintenance organizations,
pharmaceutical companies and medical device manufacturers.
To date, we have had several dialogues with these agencies
regarding the intricacies of complying with Medicare regulations. The
Industry and Government Partnership for Accountability plans to
continue to undertake a significant effort to educate opinion leaders
and top government officials and to engage in a constructive efforts to
resolve this debate.
We believe that formalization of such a partnership to ensure
clarification and consistency in the enforcement of Medicare rules
would help to move the current system away from a model based on
confrontation and litigation and toward a model based on education and
remediation.
And finally, we believe that a more formalized system of regulatory
accountability within Medicare could help to decrease the growth of the
regulatory burden and compliance costs on providers and patients.
Currently, cost/benefit analyses of regulations are only loosely
required by an executive order that gives agencies great discretion in
determining whether a cost benefit analysis is necessary and how that
cost is estimated.
A recent example of controversy in this regard arose around the
DHHS's cost estimate for compliance with the recently issued rule on
medical records privacy.
While HHS estimated that complying with this new regulation would
cost the industry $3.8 billion over the next 5 years, a reputable
independent analysis determined that the cost would be over $40 billion
over the same period.
Possible alternatives to the existing informal requirements for
estimating compliance costs include (1) requiring that the cost of a
regulation be conducted by an entity other than the agency developing
the regulation, (2) legislating more formalized requirements and
guidelines for conducting the cost analysis, and/or (3) requiring the
inclusion of how the cost of compliance could materially impact patient
care. These alternatives could help to instill greater awareness of the
consequence of over-regulation.
conclusion
Today's Medicare was built for another science in another time. The
inefficiencies and complexities of this program are such that Medicare
beneficiaries are stuck in an outmoded health care program that is
capable of delivering, and needs to deliver, so much more. The
Healthcare Leadership Council stands ready to help this committee work
toward assuring that, in the near future, Medicare beneficiaries are
able to take advantage of the full potential of our health care system.
Mr. Bilirakis. Thank you, Doctor.
Mr. Fleming?
STATEMENT OF DAVE FLEMING
Mr. Fleming. Thank you, Mr. Chairman and other members of
the committee. I am Group Senior Vice President of Genzyme
Corporation and Chairman of the AdvaMED Board Committee on
Payment and Health Care Delivery. AdvaMED is the Advanced
Medical Technology Association, formerly known as HIMA.
The new name reflects more clearly the industry's central
role as a source of medical innovation, research and medical
technology.
Mr. Chairman, I am here today to talk about one subject,
which many of you on the subcommittee have raised this morning.
That is timely patient access to quality health care.
For the past 35 years, Medicare has provided life-saving
and life enhancing technologies to millions of Medicare
patients. In that sense, Medicare has been a blessing.
Today, though, Medicare processes for improving and paying
for new medical technologies are not keeping pace with
innovation.
I would like to answer the question asked by Mr. Stearns
and in fact, after FDA review, the approval process going
through HCFA takes another 4\1/2\ years or longer to go through
the process and reach the patients. So, again, 4\1/2\ years
after FDA review.
As you can see from the chart that would be to your right,
it lays out the process and again, if you start from the left
you have FDA approval. This is something that the Commerce
Committee helped reform in 1997, but the rest of the chart
refers to HCFA.
If you disentangle and lay the HCFA process end to end, you
go through coverage coding and payment process. Ms. Eshoo asked
this morning about the first part, the coverage part, where
HCFA decides whether to include a new technology in the
Medicare payments package.
I do compliment the agency on opening up the coverage
process, on making it more transparent, but to clarify, the
agency has 90 days to make an initial assessment, not the final
coverage decision.
After that time, after the first 90 days, there are no time
limits. HCFA can refer the decision to MCAC or to another
outside technical assessor which guarantees delays, as
mentioned earlier, of 6 months to several years.
So, the coverage decision process in my mind takes anywhere
from 12 to 36 months.
The next step is coding, as has been mentioned. New
technologies are given a 6 or 5-digit code which providers use
when they bill for the service. The coding process in itself
takes anywhere from 15 to 24 months. So that is added on to the
coverage. Again, payment is not made until you have a code, as
has been mentioned by the committee.
The final step involves determining the appropriate payment
level, which can take another 2 years on up. So, I want to make
the point that medical technologies have to go through this
complex, approximately 4\1/2\ year HCFA approval process and
they usually do not reach the Medicare patients until after the
process is done. This is why Medicare needs reform.
Let me cite one example which is on the chart to your left.
It involves coronary stents, also mentioned earlier by Ms.
Eshoo. This is a revolutionary device that is inserted into the
coronary artery during angioplasty to reduce the narrowing and
facilitate normal blood flow.
As the chart shows, the medical device manufacturer first
requested the unique code in 1990. But HCFA did not approve the
new code until 1995, 5 years later. Once the code was approved,
it took another 2 years from 1995 to 1997 to set direct
reimbursement levels for the stent.
Now, here is the ramifications of that: FDA had approved
the product in 1994, but through the time period until 1997,
hospitals received $3,000 to $5,000 below per procedure what it
cost them to provide the breakthrough technology, the therapy.
So, here is the impact on patient access. During that time
when HCFA reimbursed hospitals at the low level, only five to
25 percent of the eligible Medicare patients received the
technology. But once adequate payment was finally approved in
1997, patient access improved up to a level of 75 to 80 percent
of eligible patients.
So, stepping back a minute, Mr. Chairman, the case study
shows a 7-year process from the time the code was requested,
and that is, I believe, a virtual eternity in the life of
device innovation, which generally takes about 2 years.
More importantly, think of it from the patient perspective.
Imagine being that Medicare patient awaiting HCFA's action and
not having availability to this life sustaining technology.
So, I think Mr. Chairman, examples like the coronary stent
are examples that the system is in serious need of reform. I
have a couple of recommendations to provide in addition to
those.
Mr. Bilirakis. Do so very briefly, if you would.
Mr. Fleming. First, Medicare must place top priority on
streamlining its systems to dramatically shorten the overall
4\1/2\ year process.
Second, HCFA should institute reforms that encourage rapid
assimilation of new technologies into the Medicare beneficiary
plan.
Third, HCFA should update all of the payment systems more
frequently, at least annually, to reflect changes in medical
technology.
The last point is that we also urge the subcommittee to
throw its support behind H.R. 4935, the Medicare Patient Access
to Technology Act of 2000. This bill, of course, was introduced
by Representative Jim Ramstad and Representative Karen Thurman
and is co-sponsored in fact by several members of the
subcommittee. I think we view this legislation as critical to
digging into the nuts and bolts that we have been talking about
all morning.
It really represents a very important down payment on the
larger effort to modernize HCFA. Thank you very much, Mr.
Chairman.
[The prepared statement of Dave Fleming follows:]
Prepared Statement of Dave Fleming on Behalf of the Advanced Medical
Technology Association
INTRODUCTION
AdvaMed is pleased to submit this statement as the Subcommittee
examines HCFA's management of the Medicare program. AdvaMed, the
Advanced Medical Technology Association, was formerly known as HIMA,
the Health Industry Manufacturers Association.
Before we begin our remarks, we would like to provide some
background on our industry and whom AdvaMed represents.
AdvaMed is the largest medical technology trade association in the
world, representing more than 800 medical device, diagnostic products,
and health information systems manufacturers of all sizes. AdvaMed
member firms provide nearly 90 percent of the $68 billion of health
care technology products purchased annually in the U.S. and nearly 50
percent of the $159 billion purchased annually around the world.
This new name reflects our industry's central role as a source of
medical innovation, research, and advances in therapies, diagnostics,
and health information technology. This change does not represent a
change of role or mission; merely a clearer reflection of those
functions.
ROLE OF MEDICARE
Mr. Chairman, Medicare has accomplished a tremendous amount in
improving the quality of medical care for beneficiaries over the past
35 years. Medicare has been a blessing. Millions upon millions of
elderly and disabled Americans have regained their health, improved the
quality of their lives, and lived longer and more productive lives
thanks to Medicare.
We also believe we owe a debt of gratitude to the many individuals
who have served in the public sector, administering Medicare over that
period--and especially those who serve at HCFA today. These individuals
deserve special recognition as they are confronted with the infinitely
complex tasks of seeing to it that Medicare's 39 million beneficiaries
gain prompt access to the highest-quality care, at a time of severe
budget constraint.
Despite the hard work of these individuals and the continuing
efforts of this Committee and Congress to oversee the activities of the
agency, we see an agency unable to keep up with the pace of new medical
technology.
As a result, patients are not gaining prompt access to the medical
technologies they need and deserve--access that was the very purpose of
Medicare in the first place.
Today, we will outline some of the Medicare system's shortcomings.
Then we will turn to what we believe are some reasonable solutions in
addressing this problem.
COVERAGE, CODING, AND PAYMENT
Before we provide you with a review of recent key issues on how
HCFA deals with medical technology, we would like to define some of the
key terms that are used to describe Medicare policies on medical
technology. Specifically, we refer to ``coverage,'' ``coding,'' and
``payment.''
Coverage. As you know, Mr. Chairman, once products are reviewed and
cleared by the Food and Drug Administration, they must undergo Medicare
review to determine if they will be included in the portfolio of
services Medicare makes available to its beneficiaries. This is
commonly referred to as coverage. It usually occurs routinely as local
Medicare contractors process bills from doctors and other providers.
But some technologies undergo full-blown national coverage review,
which is a complex evaluation of the benefits of a technology--similar
to a pre-market evaluation done by the FDA.
Coding. As Members of this Subcommittee are aware, this is just one
step in obtaining reimbursement for a new technology. To be covered by
Medicare, either locally or nationally, new medical technologies must
be assigned what is known as a procedure code. These codes are
comprised usually of five or six digits, often a combination of letters
and numbers, and identify literally thousands of medical treatments and
procedures. Providers use these procedure codes when they submit bills
to Medicare and private insurance companies. Virtually all medical
products must either fit into existing codes or, if they are unique or
breakthrough products, they must have a new code of their own.
Payment. Once a new technology or medical procedure has a code,
then the final stage is to determine an appropriate payment level, or
Medicare price, for the product. As you are aware, this is accomplished
by folding the new technology or procedure into Medicare's various
payment systems, each of which has its own complex set of rules
governing how technology is treated. These systems range from the
Resource Based Relative Value Scale, which is a physician fee schedule,
to DRGs in the inpatient setting, to the new Ambulatory Payment
Classifications (APCs) for the soon-to-be-implemented outpatient
payment system.
This Subcommittee is well aware that each of these payment systems
is extremely complicated; each has many moving parts. If any one of
those parts is not working optimally, access to new technologies for
patients and medical professionals will be slowed or even stopped
outright. That's because coverage, coding, and payment systems interact
with one another. It's not enough to be just covered, or just coded, or
even just paid. You need all of these elements to be present and to be
operating properly to ensure a prompt and appropriate reimbursement
level that permits appropriate access.
Now we would like to introduce the reality that we, as
manufacturers, face--and that must ultimately be borne by patients and
providers as well. HCFA's systems of coverage, coding, and payment--the
systems we just described--are not working well. In many cases, they
are slow; they are inefficient; they contain inappropriate incentives;
and they are inordinately complex. That does not suggest they do not
work; it suggests that they simply do not work well.
For example, the entire process can take four years or more to
complete. That includes the one to three years it can take to obtain a
coverage decision; the 15 months to two years it may take to secure a
code; and the two years it can take to secure an appropriate payment
level for a technology. We have attached a chart with this statement
that illustrates the times associated with these review processes, as
well as several other charts and case studies focusing on particular
medical technologies.
Keep in mind that these HCFA processes take place after FDA review,
which itself might be a year or so. And that they take place after the
time it takes to develop a product, which can consume anywhere from two
to six years, prior to FDA review.
We offer this context, Mr. Chairman, because we believe it is
critical in understanding HCFA's current performance in reviewing and
adopting medical technology in Medicare. This Committee deserves
enormous credit for its leadership role in reforming the Food and Drug
Administration. But we want to stress that, as far as ensuring access
to new technology for Medicare beneficiaries, the goals of FDA reform
are often thwarted by HCFA's coverage, coding, and payment policies.
And the effects of this are clear: Patients, and the medical
professionals who treat them, will not gain access to available,
cutting-edge medical technologies for many years after they are cleared
for marketing in the United States. And if you add it all up, Mr.
Chairman, we are often talking about more than a four-year delay--as we
noted earlier. We need to ask ourselves what the value-added benefit of
this delay is for patients and medical professionals. We want to stress
that we do not see this as intentional on HCFA's part. These systems,
as we indicated, were put in place in a piecemeal fashion and were not
designed to work together.
Now, we would like to take a few moments to let you know about two
issues of significant importance to the industry, which bear on
Medicare coverage, coding , and payment policy.
Coverage Issues. A year ago, Mr. Chairman, HCFA instituted a new
process for making national coverage determinations on medical
technologies. This was a positive change. HCFA opened the process,
allowed the public to participate, and provided information on the
status of coverage through its web site. HCFA deserves clear credit for
these changes.
Yet recently, HCFA announced another policy that may entirely
overwhelm whatever progress it made in opening the process. We are
referring to the agency's Notice of intent to issue new criteria for
making Medicare coverage decisions. In essence, these are the standards
that products must meet in order to get covered. We believe that
several sections of the Notice of intent conflict with the agency's
overall goal of improved patient access.
First, in its Notice, HCFA raises the possibility of denying
Medicare coverage of certain technologies on the basis of their cost.
HIMA believes that economic factors such as cost properly are
considered in the context of payment, not coverage, decisions. In a
recent nationwide survey by polling firm Penn, Schoen & Berland, 67% of
Americans said they would oppose limiting availability of new
technologies on the basis of cost.
Second, we are concerned by the evidentiary burdens presented by
the Notice. As new requirements are put in place that define levels of
evidence required for device coverage decisions, HCFA must recognize
that new devices emanate from a dynamic, incremental innovation
process, and that they have very short life cycles. As a result, no one
type of information should be required for medical devices. Instead,
many different types of evidence must be used to guide clinical use of
new technologies, with the evidence tailored to the medical device that
is being considered.
Third, we are concerned that the Notice is overly prescriptive and
curtails physicians' and patients' ability to decide which medical
treatment option is best. Society has entered an era in which patients
are playing an increasingly important role in making decisions about
their health care. Patients and physicians have a unique role to play
in deciding whether, for example, the improved quality of life offered
by a new technology outweighs potential risks. Medicare should craft
coverage criteria that empower patients and physicians, rather than
unnecessarily restricting their ability to decide among different
treatment options.
Mr. Chairman, we will be filing comments on this Notice with the
agency later this week.
The next issue we would like to discuss relates to a new
prospective payment system that HCFA is implementing for hospital
outpatient services.
Hospital Outpatient Payment. When HCFA proposed its plan for an
outpatient payment system, it based the payment categories and payment
levels on data that would have been four years old by the time the
system was expected to go into effect. The data would have been seven
years old by the time the system would have been updated. This would
have left out literally hundreds of critical technologies.
By providing for two-to-three years of market-based pricing before
new technologies and devices are folded back into the APC groupings,
the Congress assured adequate access to these incredibly important
items for Medicare beneficiaries. While the list of eligible devices
released by HCFA to date has been inadequate, we are currently working
closely with the agency to ensure that the payment system implemented
on August 1 recognizes new technologies that were inadequately
represented in the data used to design the APC payment categories. We
believe this is a critical issue affecting patient access to medical
care, and we applaud the Congress for enacting these provisions.
CASE STUDY: THE CORONARY STENT
Mr. Chairman, we would like to present an example of how the
shortcomings in all these systems affect one technology, the coronary
stent. The coronary stent is a revolutionary device that is inserted
into the coronary arteries during angioplasty to reduce narrowing and
permit normal blood flow.
As the chart at the end of this statement shows, the device
manufacturer first requested a unique code for the device in 1990. But
HCFA did not assign the code until 1995--five years later. Once the
code was approved, it took the agency another two years--from 1995 to
1997--to gather and analyze data on the product's costs and charges
before it set the correct reimbursement level for the stent. Therefore,
from the time FDA approved the device in 1994 through the time that
HCFA actually arrived at the correct payment level in 1997, hospitals
received $3,000 to $5,000 below what it cost them to provide this
breakthrough therapy.
Now, consider the impact on patient access. During the time that
HCFA reimbursed hospitals at this low level, only between 5-25 percent
of eligible Medicare patients received the technology. But once
adequate payment was finally approved in 1997, patient access grew. And
today, some 70 to 80 percent of eligible patients receive the stent.
So, stepping back for just a moment, Mr. Chairman, this case study
shows a seven-year process from the time that the code was requested to
the time that adequate reimbursement was actually provided.
That can be an eternity in the world of device innovation--where
the average life cycle of a technology is often two years or less. And
if you are a Medicare patient, you don't want to wait for this kind of
technology, while HCFA's policy machinery churns. Please recognize that
this occurred at a time when other patients who had private insurance
did not have trouble getting access to the stent. In fact, coronary
stents became the standard of care long before Medicare got around to
paying for them adequately.
ADVAMED RECOMMENDATIONS
We do not come before you, Mr. Chairman, to say that fixing these
problems is easy. These problems are, in many cases, a result of years
of complex rules layered upon complex rules; problems that are as much
matters of perspective as they are problems of structure and
operations.
Nevertheless, there are a series of practical steps that can be
taken to address them. These steps should be helpful in guiding your
thinking as you contemplate HCFA's operations and management.
First, we believe that HCFA must place top priority on streamlining
its coverage, coding, and payment systems to dramatically shorten the
overall four and one-half year process.
Second, we believe that HCFA should institute reforms that
encourage the rapid assimilation of new technologies into the Medicare
beneficiary plan.
Third, we believe that HCFA should update all of its payment
systems more frequently--at least annually--to reflect changes in
medical technology.
What we are advocating, Mr. Chairman, is more timely beneficiary
access to new medical technologies.
CONCLUSION
In conclusion, Mr. Chairman, we want you to know that we appreciate
the important role this Committee played in improving FDA regulation of
medical technology. Unfortunately, the promise of FDA reform--that is,
prompt availability of technologies for patients' has not been
fulfilled because too many Medicare policies are not working. We look
forward to working with this and other committees in addressing these
problems.
Mr. Chairman, we also have a request. We want to make the Committee
aware of, and ask that it support, a recently introduced piece of
legislation that would begin addressing some of the issues we have
raised in this statement.
The legislation, H.R. 4935, is entitled ``The Medicare Patient
Access to Technology Act of 2000,'' and it was introduced by
Representatives Jim Ramstad and Karen Thurman. Several Members of this
Subcommittee have co-sponsored this legislation. This bill digs into
the nuts-and-bolts of HCFA policies that affect innovation--from coding
timetables, to the type of data that HCFA insists upon, to how
frequently payment systems should be updated--and it offers practical
solutions.
It also takes a holistic view of HCFA's performance regarding
medical technologies in that it would require the agency to report
annually on how long it took during the preceding year to make
coverage, coding, and payment policy determinations on a technology-
specific basis. Such a report would create useful benchmarks against
which HCFA's performance can be more easily measured, understood, and
reformed.
We view this legislation as a down payment in the larger effort to
modernize HCFA, and we ask your support for it, and we urge you to
consider including it in any appropriate Medicare bill you may take up
this year.
We at AdvaMed are currently studying the structure of the agency
and plan to have additional views on how HCFA can be more responsive to
beneficiary needs for timely access to new and innovative medical
technologies.
Thank you for permitting us to offer our views on this important
matter.
[GRAPHIC] [TIFF OMITTED] T5913.001
[GRAPHIC] [TIFF OMITTED] T5913.002
Mr. Bilirakis. Mr. Mangano, please proceed.
STATEMENT OF MICHAEL F. MANGANO
Mr. Mangano. Thank you, Mr. Chairman. I appreciate the
opportunity to be with you here today to give you an update on
the efforts and results of our continuing fight against fraud,
waste and abuse in the Medicare Program, as well as to address
the question of this hearing of Medicare's complexity as it
affects the patient's access to quality care.
At the outset, I want to make it clear that we believe the
overwhelming majority of health care providers in this country
are honest and provide high quality care. When we talk about
fraud, we are talking about those who would intentionally set
out to steal from the Medicare Program, act in reckless
disregard of its rules or deliberate ignorance of the truth.
Thanks to your leadership, Mr. Chairman, and this
committee, several years ago the Congress passed an Insurance
Portability and Accountability Act which required the
Secretary, working through the Inspector General, as well as
the Attorney General, to work together in a coordinated program
to address these problems in the Medicare Program.
The committee also provided the necessary resources to
enable us to mount a successful effort. We are grateful to the
Congress for that legislation. I can tell you today that it is
reaping a lot of results, very positive ones.
In the last 3 years we have produced savings of over $31
billion. That is comprised of $226 million in audit
disallowances, over $2 billion in investigative receivables,
and over $28 billion in terms of changes in law and regulations
recommended by our office.
Even more important, we helped HCFA reduce its error rate
from a level of $23 billion 4 years ago to $13.5 billion. That
is an annual savings of just under $10 billion. Every dollar of
that we can say was achieved without a single beneficiary
losing an eligible service or a health care provider being
denied a legitimate compensation, $13.5 billion in improper
claims is still too much.
According to the Congressional Budget Office and Medicare
trustees, our efforts have contributed to the lowest inflation
rate in Medicare's entire history and an extension of the
solvency of the trust fund after 2025, which is about a 26-year
extension just based on the work in the last 3 years.
But this is not a time to let our guard down. My testimony
presents numerous examples of fraud in the system that we still
need to pay attention to.
I next want to turn to the question of whether complexity
in the Medicare Program is threatening access to quality care.
We are well aware of the growing complexity of Medicare due to
its numerous amendments and regulations to put those amendments
into effect.
The methods of reimbursement changing in the Medicare
system, the cost base, the charge base, the prospective pay and
fee schedules, as well as the structure of the entire health
care delivery system today emphasizing managed care and
vertical and horizontal integration.
Periods of transition like we are going through right now
are always taxing and uncomfortable for those involved in that
system change. Are Medicare rules too complicated to
understand? On the basis of our work, sometimes they are.
When we find that to be the case, we recommend to HCFA that
they do simplify them. I also want to say that on the basis of
our annual review of the Medicare error rates, that 92 percent
of all the claims that we reviewed, the national statistical
sample, are free of errors, suggesting that most health care
providers are getting it right.
HCFA has placed some additional burdens on health care
providers, some of which we think are legitimate. Those
providers in that category are subject to some of the pre- and
post-payment edits that are designed around services that we
have been finding are particularly abusive. In fact we have
recommended some of those edits.
But very few health care claims in total actually go
through this more intensive scrutiny. One of the things that we
have tried to emphasize in the last 3 years is a operative
working relationship with the health care community in
developing voluntary guidance to help them avoid some of the
innocent billing mistakes, but also to help them discover more
abusive practices that may be occurring in the organizations
that they are not aware of.
All of these are paying handsome dividends like the drop in
the error rate, lowest inflation rate in years and the 26-year
extension of the trust fund.
I might add that these have also had a positive effect on
beneficiaries in that they are paying lower co-payments and are
actually receiving the service they are supposed to be
receiving because of this additional scrutiny. We think that is
possible because health care providers are generally doing a
much better job complying with the rules, and we are doing a
better job in catching the errors where they exist.
Finally, I do not believe this complexity has resulted in a
threat to patient access to quality care on the basis of the
reviews that we have done in the areas that we have looked.
Recent reviews that we have undertaken with hospital
discharge planners and nursing home administrators show that
beneficiaries are getting placed in nursing homes and home
health without serious problems. We will continue to watch
these closely, though, to see if changes occur over the years.
Mr. Chairman, this completes my testimony and I would be
happy to answer any questions.
[The prepared statement of Michael F. Magano follows:]
Prepared Statement of Michael F. Mangano, Principal Deputy Inspector
General, Department of Health and Human Services
Good morning Mr. Chairman. My name is Michael F. Mangano. I am
Principal Deputy Inspector General for the Department of Health and
Human Services (HHS). It is my pleasure to be here today to give you an
update on our efforts and accomplishments in our continuing fight
against waste, fraud and abuse in the Medicare program as well as
address the question of the complexity of the Health Care Financing
Administration (HCFA) as it affects potential access to quality of
care.
In summary, we are fully engaged and making good progress. We
continue to believe that most health care providers do their best to
provide high quality care and 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 to also 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 must be concerned about all errors, even those
which are totally innocent. The complexity of the program places an
obligation on health care providers, beneficiaries, fiscal
intermediaries, carriers, and 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. In addition, our reviews
show that Medicare complexity has not been an impediment to patient
access to care nor has it imposed unreasonable burdens on most health
care providers.
As a result of an unparalleled coordinated and cooperative response
to the problem of health care waste, fraud and abuse by the Congress
and the Administration, particularly through the landmark pieces of
legislation--the Health Insurance Portability and Accountability Act of
1996, we have been able to expose and measure the problem more
completely and accurately than ever before. It is bigger, more
sophisticated, and more formidable than many may have imagined. But we
are more fully armed, have better tools, and are better organized than
in the past. As a result, we have recently had some notable successes
and are confident of favorable outcomes on several fronts. And we feel
fully supported by allies in every branch and unit of government as
well as by the healthcare community and senior advocacy groups.
However, we must temper our optimism and remain vigilant. Due to
the complexity of the Medicare program and the tremendous number of
dollars flowing through the program, there will always be those who
will continue to seek loopholes and look for ways to siphon those
dollars earmarked for maintaining and improving the health of the
elderly and disabled in this country.
BACKGROUND
The Office of Inspector General (OIG) was created in 1976 and 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 statutory mandate through a
comprehensive program of audits, program evaluations, and
investigations designed to improve the management of the department and
to protect its programs and beneficiaries from fraud, waste and abuse.
Our role is to detect and prevent waste, fraud and abuse, and to ensure
that beneficiaries receive high quality, necessary services, at
appropriate payment levels.
The Health Care Financing Administration (HCFA) is the largest
single purchaser of health care in the world. With expenditures of
approximately $310 billion, assets of $181 billion, and liabilities of
$40 billion, HCFA is also the largest component of the Department.
Medicare and Medicaid outlays represent 34.2 cents of every dollar of
health care spent in the United States in 1998. The Medicare program is
inherently at high risk for payment errors due to its size as well as
its complex reimbursement rules, and decentralized operations (39
million beneficiaries and 860 million claims processed annually).
RECENT ACCOMPLISHMENTS
Many specific, positive changes have been made to shore up the over
$200 billion Medicare program and its payment methods. Thanks to
increased resources provided through recent legislation, our
Department, the Department of Justice (DoJ), and related agencies at
the State and Federal levels now have better authority and capacity to
fight fraud and to reduce waste in all federally-funded health care
programs. We have also strengthened our efforts to prevent fraud,
waste, and abuse from occurring in the first place.
HIPAA Accomplishments--Increased Recoveries, Exclusions, Convictions,
and Settlements
The Fraud and Abuse Control Program, a key part of the Health
Insurance Portability and Accountability Act of 1996, enabled us to
boost our efforts in identifying and preventing waste, fraud and abuse
in Medicare. This program provides much needed resources, stronger
enforcement tools, and a management structure to coordinate the efforts
of numerous fraud fighting units of Federal, State, and local
governments.
The program is under the joint direction of the Attorney General
and the Secretary of Health and Human Services, working through the
Inspector General. It mandates a comprehensive program of
investigations, audits, and evaluations of health care delivery;
authorizes new criminal, civil, and administrative remedies; requires
guidance to the health care industry about potentially fraudulent
health care practices; and establishes a national data bank to receive
and report final adverse actions imposed against health care providers.
The Act also provides an innovative mechanism to fund these new anti-
fraud efforts, thereby assuring that needed resources are always
available for the effort.
We are grateful to the Congress in passing this landmark
legislation and we are pleased to report that we are already reaping
substantial benefits of the additional resources and authorities. In
the past three under HIPAA (FY 1997 through FY 1999), we have reported
overall savings of $31.0 billion. This is comprised of $226 million in
audit disallowances, $2.1 billion in investigative receivables, and
$28.7 billion in savings from implemented legislative or regulatory
recommendations and actions to put funds to better use. The savings
that result from our recommendations that are implemented into law or
regulation, and independently scored by the Congressional Budget Office
or HCFA, represent taxpayer or Medicare Trust Fund dollars that will
not be spent.
During this same period, we excluded more than 8,697 abusive or
fraudulent individuals and entities from doing business with Medicare,
Medicaid, and other Federal and State health care programs. Additional
accomplishments include 1,085 convictions of individuals or entities
that engaged in crimes against departmental programs. We increased
convictions by nearly 20 percent in 1997, another 16 percent in 1998,
and by almost 54 percent in 1999.
Medicare Fee-For-Service Payment Error Rate
The OIG recently issued its fourth report on the Medicare fee-for
service payment error rate. Based on a statistically valid sample,
improper payments totaled an estimated $13.5 billion, or about 8.0
percent of the $169.5 billion in FY 1999 processed fee-for-service
payments. Improper payments include those for: unsupported services,
medically unnecessary services, errors due to incorrect coding, and
noncovered services. Over the four years we have conducted this review,
the improper payment rate declined by 42 percent, from a midpoint of
$23.2 billion (14 percent) in 1996, to $13.5 billion (8.0 percent) in
FY 1999--a drop of $9.7 billion. This represents a cut in Medicare
costs without a single beneficiary being denied a needed service or a
health care provider being denied legitimate compensation.
Many Medicare watchers attribute at least part of this downward
trend to the increased oversight and enforcement efforts of our office,
HCFA, DoJ and the FBI that were made possible by the steady funding
stream created by HIPAA. According to the Medicare Trustees and the
Congressional Budget Office, these waste, fraud and abuse efforts
contributed to Medicare's lowest inflation rate in history and the
extension of the viability of the Trust Fund until 2025--a 26 year
extension brought about over the last three years.
Waste, Fraud and Abuse Prevention
The OIG has continued to expand activities designed not just to
uncover existing waste, fraud and abuse, but to prevent it. A
cornerstone of our prevention efforts has been the development of
compliance program guidance to encourage and enlist the private health
care industry in the fight against waste, fraud and abuse. The guidance
is developed in cooperation with the provider community and identifies
steps that health care providers may voluntarily take to improve their
compliance with Medicare and Medicaid rules. We have published eight
compliance guidance documents covering hospitals, clinical
laboratories, home health agencies, third-party billing companies,
durable medical equipment, hospices, Medicare + Choice organizations,
and nursing facilities. We have recently invited comments on our draft
guidance related to individual physicians and small group practices.
OIG has also increased its activities with respect to monitoring
settlement agreements with integrity provisions and corporate integrity
agreements that have been entered into by health care providers as part
of a global settlement of OIG investigations and audits. The current
caseload of approximately 440 is expected in increase to over 475 by
the end of 2000. Our efforts to focus on preventing health care fraud
also includes guidance to the industry on the propriety of health care
transactions. OIG has published two significant final regulations
creating 10 new safe harbors to the Federal anti-kickback statute.
Finally, the OIG continues to promote beneficiary involvement in
identifying fraudulent activities. This includes operating our HHS
hotline which currently receives approximately 48,000 calls per month.
CONTINUING VULNERABILITIES
We in the Office of Inspector General are heartened by the support
we have received from the Congress, Administration, as well as by the
healthcare community and senior advocates in our fight against fraud,
waste, and abuse in the Medicare program. At the same time, our new
authorities and resources have enabled us to see more clearly just how
pervasive and overwhelming these problems are. While our recent error
estimates in the fee-for-service part of Medicare shows a general
decline, it is still too high; all money improperly paid is wasteful.
Additionally, these audits do not detect well known forms of fraud such
as kickbacks or deliberate forgery of bills or supporting documents.
Further, whatever the audits reveal or fail to reveal, we know from our
investigations and from complaints that we receive that waste, fraud
and abuse are still pervasive in the health care sector.
All of this is to say that we cannot take much time out of our
fight against fraud, waste, and abuse. We are still watching all areas
of Medicare through our audits, inspections, and investigations. And we
are continuing to encourage and receive support from industry and
beneficiary groups in our efforts. At this time, however, I would like
to single out some areas where we continue to have special concerns and
give some examples of the results of several significant audits and
investigations.
Partial Hospitalization and Community Mental Health Centers
In collaboration with the Department, we examined the growth of
Medicare expenditures to community mental health centers for partial
hospitalization services (highly intensive psychiatric services) and
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 Medicare
paid $229 million for unallowable and highly questionable services.
Ninety-one percent of the services reviewed did not meet Medicare
reimbursement requirements. Reviews of 20 individual centers by both
OIG and HCFA disclosed similar problems. In response to our
recommendations, HCFA instituted extensive corrective actions,
including terminating egregious centers, conducting intensified medical
reviews, and collecting overpayments.
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 program and other outpatient psychiatric claims at
acute care hospitals nationally. Our final report estimates that in the
ten States reviewed, about $225 million of $381.9 million (almost 60
percent) in 1997 outpatient psychiatric claims made by hospitals did
not meet Medicare's reimbursement requirements. These unallowable
services included: services not reasonable and necessary for the
patient's condition; services not authorized and/or supervised by a
physician; services not adequately documented or not documented at all;
and, services rendered by unlicenced personnel. Reviews at individual
acute care hospitals disclosed problems with unsupported and medically
unnecessary services and unallowable costs included on the hospital
cost reports.
Home Health
Looking behind the explosive growth in Medicare expenditures for
home health care since 1990, OIG, using claims 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 claims
data, noted that the payment error rate had fallen to 19 percent. Below
is an egregious example of misappropriation of Medicare funds and
potential abuse of Medicare patients by a home health agency which we
audited as part of our Operation Restore Trust effort.
St. John's Home Health Agency
In our audit of St. John's Home Health Agency, the highest paid
home health agency in South Florida, we found that St. John's billed
Medicare for non-rendered or upcoded home health services and that
nurses and home health aids permitted subcontracting groups to use
their name and/or create fraudulent documents to support nonrendered
services. We also found that some nursing visits were provided by
unlicenced persons. Further, we found that subcontractors paid
kickbacks to St. John's employees in order to do business with them.
Twenty-six people were indicted in December 1999 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 (one individual became a fugitive
and one was acquitted); all 24 guilty verdicts are in the process of
being excluded.
Medicare Contractors
The Medicare program is administered by the Health Care Financing
Administration (HCFA) with the help of 64 contractors that handle
claims processing and administration. The contractors are responsible
for paying health care providers for the services provided under
Medicare fee-for-service, providing a full accounting of funds, and
conducting activities designed to safeguard the program and its funds.
There are two types of contractors--fiscal intermediaries and carriers.
Intermediaries process claims filed under Part A of the Medicare
program from institutions, such as hospitals and skilled nursing
facilities; carriers process claims under Part B of the program from
other health care providers such as physicians and medical equipment
suppliers.
Of all the problems we have observed, perhaps the most troubling
has to do with contractors' own integrity--misusing government funds
and actively trying to conceal their actions, altering documents and
falsifying statements that specific work was performed. In some cases,
contractors prepared bogus documents to falsely demonstrate superior
performance for which Medicare rewarded them with bonuses and
additional contracts. In other examples, contractors adjusted their
claims processing so that system edits designed to prevent
inappropriate payments were turned off, resulting in misspent Medicare
Trust Fund dollars. We have also encountered problems associated with
financial management and accounting procedures and longstanding
weaknesses in internal controls, including deficiencies related to the
receivable amounts reported in HCFA's financial statements and
electronic data processing.
In addition, there have been numerous allegations that contractors
have falsified statements that specific work was performed, and
altered, removed, concealed, and destroyed documents to improve their
ratings on Medicare performance evaluations. Wrongdoing has been
identified and we have entered into civil settlements with 13 Medicare
contractors since 1993, with total settlements exceeding $350 million.
In addition, two contractors have entered into guilty pleas for
obstruction of a federal audit.
Fresenius Medical Care Holdings, Inc.
The government recently reached a record-breaking Medicare fraud
settlement with Fresenius Medical Care Holdings, Inc. (FMCH), the
Nation's largest provider of kidney dialysis products and services. As
a result of a joint investigation by OIG and multiple law enforcement
agencies and an OIG audit, FMCH agreed to a global resolution under
which three subsidiaries pled guilty, and the company agreed to pay
$486 million to resolve the criminal and civil aspects of the case. As
part of the civil settlement agreement for credit balances, the company
paid directly to HCFA $11 million for overpayments which 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. This misconduct was engaged in by National Medical
Care, a nationwide dialysis company, and various of its subsidiaries
prior to a 1996 merger with FMCH. As part of the settlement, the
company also entered into the most comprehensive corporate integrity
agreement ever imposed by OIG.
COMPLEXITY OF MEDICARE AND IMPACT ON PATIENT ACCESS
Increasing Complexity
Since the inception of Medicare, numerous legislative changes have
been made and amendments added to the Social Security Act which have
led to substantial changes to the Medicare program. With each addition,
HCFA is required to develop new regulations as well as update its
contractor and provider rules and guidelines. For example, the Balanced
Budget Act of 1997 contained 335 provisions related to Medicare
programs, including mandates for new prospective payment systems in
several programs, which required the development of a substantial
number of new regulations.
Much of the complexity in the Medicare program is not inherent in
the program itself, but rather it parallels the ever increasing
complexity of our health care system. For example, the development of
various forms of managed care and new kinds of vertical and horizontal
integration have led to the need for Medicare rules and regulations to
evolve along with them.
Additionally, the way Medicare pays for health care has changed
through time, from primarily cost/charge based payment systems to new
fee-schedule and prospective based arrangements. For example, hospital
inpatient, physician, then lab and durable medical equipment services
were the first areas of the program to switch to prospective payment or
fee schedule based payment systems. More recently, skilled nursing
facility, home health, and hospital outpatient services have moved or
are moving to prospective payment systems as well. This transitioning
from one payment system to another inevitably involves an intensive and
somewhat uncomfortable learning period. In the long run, it is hoped
that these new payment systems will simplify and reduce the
administrative burdens of providers.
Provider Burden
Is the Medicare payment system too difficult to understand? In some
cases our audits and evaluations do indicate that some rules are
unnecessarily complex and burdensome. In such cases, we make
recommendations for simplification. However, our recent error rate
review would indicate that providers are doing a very good job of
negotiating their way through Medicare payment systems--we found that
92 percent of all claims submitted by health care providers are free of
error. In the substantial majority of cases, legitimate providers are
billing for legitimate services.
We do recognize that HCFA has placed some additional burdens on the
health care providers. Many of these, however, we think are legitimate
and some have been instituted from IG recommendations based on past
abuses we have found in the system. For example, to sustain its
progress in reducing payment errors, we have recommended that HCFA:
<bullet> Enhance prepayment and postpayment controls by updating
computer systems and related software technology to better
detect improper Medicare payments;
<bullet> Expand provider training to further emphasize the need to
maintain medical records containing sufficient documentation,
as well as to use proper procedure codes when billing Medicare
for services provided;
<bullet> Direct its Peer Review Organizations to identify high-risk
areas and reinstate selected surveillance initiatives, such as
hospital readmission reviews and diagnosis related group (DRG)
coding reviews; and,
<bullet> Continue to refine Medicare regulations and guidelines to
provide the best possible assurance that medical procedures and
services are correctly coded and sufficiently documented.
It should be noted, however, that very few health care claims are
subjected to this more intense review. For example, while some 660,000
physicians receive Medicare payments each year, HCFA only reviews about
5 percent of physician claims. Additionally, we continue to work with
industry sectors to develop voluntary guidance to help them avoid
innocent billing errors as well as discover and/or prevent more abusive
practices within their organizations. This will help to ensure that
they can avoid any unnecessary scrutiny.
Prior to HIPAA, the efforts of HCFA, the OIG, and DoJ to identify
and prevent waste, fraud, and abuse in health care was far less than
adequate. With the new infusion of resources, we have been able to get
serious. Some of the impact has been greater scrutiny of certain types
of providers and more care by providers in general to bill properly.
For example, there has been more scrutiny by HCFA of home health and
intensive psychiatric services as a result of our identifying serious
abuse by some providers. As a result of these efforts we have realized:
<bullet> A 42 percent drop in the Medicare fee-for-service error rate;
<bullet> An extension of the solvency of the Medicare Trust fund by 26
years; and,
<bullet> The lowest inflation rate in Medicare history.
These results have had a positive effect on beneficiaries as well.
The lower inflation rate, and our greater scrutiny of claims, means
that beneficiaries pay lower copayments and receive the services they
really need. These have been possible because health care providers are
doing a better job of complying with Medicare rules and we are doing a
better job in catching the errors and more serious attempts to defraud
the Medicare program.
Patient Access to Quality Care
We do not believe that the complexity of the Medicare program has
resulted in a threat to patient access to quality of care in the areas
we have examined. For example, we studied the impact of the new nursing
home prospective payment system on access to care. We found that
Medicare patients are able to access care in skilled nursing
facilities, particularly therapy patients. In fact, we found that it is
easier to place Medicare therapy patients in nursing homes after the
new payment system went into effect than before. Further, in a recent
inspection looking at how the interim payment system for home health
agencies is affecting Medicare beneficiaries' access to home health
care for patients discharged from hospitals, we found that 85 percent
of discharge planners report that Medicare patients are able to obtain
home health care when they need it and three quarters said that they
need to only contact one home health care agency on average to arrange
for that care. We will continue to monitor access to these services as
well as other areas in the health care system.
In general, we see that the failure of enforcing provisions, rather
than the increased complexity of rules and regulations, has led to
improper and poor quality of care. For example, dollars spent on
psychiatric patients to watch television, could and should have been
put to better use in providing appropriate and high quality mental
health care for these beneficiaries.
CONCLUSION
As I stated at the beginning of my testimony, I believe a
concentrated effort by a large number of people has resulted in
tangible progress in combating fraud, waste, and abuse in recent years.
But as I have also discussed with you today, the problems that remain
are serious, complicated, and have profound consequences. I am
particularly concerned about the deliberate fraud which we cannot
always measure but that we know continues. We must never let down our
guard, and we must continue to dedicate the resources and make the
concerted effort to reduce these problems.
We in the Office of Inspector General will be actively overseeing
how the new resources and safeguards provided in the HIPAA are used to
determine their effectiveness in preventing and combating criminal
activities. For true criminals, the only effective safeguards are
tough-minded program measures to prevent fraud and a strong law
enforcement presence with equally strong penalties applied to
defrauders.
It must be recognized that some of these efforts have led to an
increased burden on some providers. Put into context however, it also
must be recognized that this is a small price to pay to extend the
viability of the Medicare Trust Fund and ensure health care for our
elderly and disabled for another 26 years. This concludes my testimony.
I greatly appreciate the opportunity you have given me today to
focus attention on the continuing problems and vulnerabilities that
confront the Medicare Program and to share with you our progress as the
result of some of our recent efforts and initiatives. I would be happy
to answer any questions.
Mr. Bilirakis. Thank you. I would like to ask, is anyone
from HCFA still here or have they all left? They have all left.
As Dr. Norwood commented, they certainly should be here to hear
this testimony, but we did not request that.
Mr. Coburn. They have to get back and answer all those
letters. Mr. Chairman, for the record to note, nobody is here
from HCFA hearing this testimony.
Mr. Bilirakis. That is right.
HCFA Representative. I am here as a note-taker.
Mr. Bilirakis. Then HCFA is represented. Okay, you will
share then some of this testimony with them.
Dr. Coble?
STATEMENT OF YANK COBLE
Mr. Coble. Thank you, Mr. Chairman and members of the
subcommittee. My name is Yank Coble. I am Secretary-Treasurer
of the American Medical Association Board of Trustees. I
practice endocrinology in Jacksonville, Florida.
We appreciate very much the opportunity to testify on the
complexity of Medicare regulations and how they adversely
affect patient care and physician's practices throughout the
country.
Physicians are now subject to over 100,000 pages of rules
and regulations as you have heard several times. They by far
exceed the IRS code. It has gotten to the point where Medicare
regulations are flooding physicians' offices. There is not a
month that goes by that HCFA or the OIG does not issue a
complex new Medicare regulations which impacts physicians and
their patients.
As a result, physicians have to devote many more hours each
week to comply with these ever changing Medicare rules and
regulations. These are hours that physicians cannot spend on
patient care.
Indeed, many physicians are now so frustrated with the
volume of regulations and how they are being vilified by HCFA
that they are less and less willing to see new Medicare
patients. In rural communities we are experiencing the effects
of this dissatisfaction with the program by seeing entire
practices pull out of the Medicare Program.
Even in Denver, Colorado, there is now a shortage of
physicians who will see Medicare patients. Even in my own case,
because of the regulations governing Medicare diabetes
patients, I have gradually over recent years stopped seeing
those patients in my practice.
Congress recognized that HCFA had to address those
regulatory hassles when it created the Practicing Physicians
Advisory Council, PPAC, nearly a decade ago. Unfortunately,
HCFA has never effectively used this valuable resource, despite
repeated promises to make PPAC more effective.
Instead, 3 years ago, HCFA created an internal task force,
the Physician Regulatory Initiative Team, PRIT, to examine the
regulatory burden on physicians. PRIT has yet to issue a final
report, eliminate a single regulation or simplify Medicare
rules and regulations.
To make matters worse, physicians have been unable to
obtain clear and consistent information on billing, coding and
documentation questions from their carriers because carriers
also generally refuse to answer physician's queries in writing,
physicians are unable to obtain a file copy if a question later
arises.
The communication process does not improve a great deal
during the post-payment audit process. The carrier simply mails
a letter to the physician requesting records and later informs
them of a projected over-payment.
In addition to written requests, carriers should telephone
physicians to request records and should maintain a dialog with
physicians prior to the onset of a formal audit and settlement
process.
These communications should specifically cite possible
improper billing, appending post-payment audit, the outcome of
the audit and the physician's appeal rights.
I have several broader examples that I would like to share
with the subcommittee explaining how HCFA's over zealousness
and refusal to abide by statutory mandates has either
compromised patient care or has limited patient access to
physicians.
The first example concerns hospice rules. The Wall Street
Journal recently reported that the government contracted with a
private company to notify hospice patients who exceeded their
6-month life expectancy that they were no longer entitled to
hospice benefits.
Hospice benefits should not be cutoff if a patient happens
to live longer than 6 months. The government contractor is
incorrectly interpreting the hospice statute which, of course,
is resulting in patient harm. HCFA should remedy this problem
immediately.
The second example concerns physician post-payment audits.
Medicare carriers can audit physician records many years after
claims have been paid by conducting post-payment audits.
Currently, unless a physician agrees to open her office to
additional audits on top of the original audit, the physician
has to waive all of her rights and agree to repay a projected
overpayment amount. These projected amounts can bankrupt
physician's practices.
We believe that HCFA should be required to institute due
process protections for physicians undergoing post-payment
audits which would allow an overpayment determination be
appealed to an administrative law judge.
Finally, the sustainable growth rate, SGR, which Congress
addressed in 1999 with the Balanced Budget Refinement Act, is
another area where HCFA is not adhering to its statutory
mandate.
As the committee knows, the SGR sets a target rate of
spending growth based on four factors, one of which applies to
legislative and regulatory changes affecting physician
expenditures. I emphasize ``regulatory.'' However, HCFA has not
factored in the new regulatory burdens for purposes of
calculating changes to the SGR.
We urge Congress to ensure that HCFA meets its statutory
obligations by considering both statutory and regulatory
changes before formulating the SGR.
The AMA has numerous concerns regarding recent HCFA and
carrier activities. We have included these additional issues in
our written testimony, which I would also be happy to discuss
here at a later time.
Thank you for the opportunity to share our concerns of how
HCFA regulations negatively impact patient care and their
access to physicians in the Medicare Program.
We urge Congress to undertake the HCFA reform effort as it
did with the IRS several years ago, removing some of these
regulatory burdens to allow physicians to redirect efforts
toward providing patient care.
We thank you.
[The prepared statement of Yank Coble follows:]
Prepared Statement of Yank D. Coble, Board of Directors, American
Medical Association
Mr. Chairman and members of the Subcommittee, my name is Dr. Yank
D. Coble, and I am a practicing endocrinologist from Jacksonville,
Florida, and the Secretary-Treasurer of the American Medical
Association (AMA) Board of Trustees. On behalf of the 300,000 physician
and medical student members of the AMA, I would like to thank you for
holding this extremely important hearing to examine the activities of
the Health Care Financing Administration (HCFA) and the negative impact
their policies have on patient care and physicians treating Medicare
patients. The AMA serves as an umbrella organization for over 90
medical specialty societies who also have numerous and extensive
concerns regarding different HCFA regulations, which are broader than
those mentioned in our statement. We appreciate this opportunity to
testify, and we urge the Subcommittee to continue these hearings to
explore the widespread concern across the entire physician community
with HCFA policies and those of its carriers.
America's physicians have reached a point where the volume of
Medicare regulations, combined with the fear that they may be
unnecessarily and unfairly audited, have prompted them to question
whether they should continue to accept new Medicare patients. America's
patients and their physicians are harmed by many of these unneeded
regulations, which cause physicians to spend far too much time on
paperwork and less time providing patient care. This seriously
diminishes patient access to care. For example, in the well-populated
city of Denver, Colorado, there is no longer a sufficient number of
physicians for the patient population willing to participate in the
Medicare program. In rural areas, such as Idaho, the impact of fewer
physicians involved in the Medicare program can be especially
devastating.
We hope this hearing will demonstrate that HCFA must recognize the
burdens placed on physicians and providers by its regulatory agenda.
The agency has issued volumes of regulations and policies that are
overly burdensome, confusing, conflicting and selectively enforced. The
AMA has vigorously contested many of the HCFA policies that negatively
impact physicians and the patients we serve, but to date, HCFA has not
been able to make serious progress in streamlining its regulations.
In fact, we believe HCFA has squandered its many opportunities to
streamline the process through the use of the Practicing Physician
Advisory Council (PPAC), a federal advisory committee, which Congress
established almost a decade ago with the AMA's support. PPAC is
comprised of fifteen private practice physicians and providers who meet
quarterly. It is supposed to advise the Secretary of the Department of
Health and Human Services and the HCFA Administrator on prospective
policy issues impacting the physician community and the Medicare/
Medicaid programs as a result of contemplated or current federal
rulemaking. The Congress enacted this legislation because of
physicians' concerns about the ``hassle factor'' involved in dealing
with the Medicare program. Unfortunately, the Administration has never
effectively used this potentially valuable resource despite repeated
promises to make it more effective.
Three years ago, HCFA engaged in a well-publicized campaign to
respond to the growing concern about regulatory burdens on physicians.
Unfortunately, HCFA again failed to seriously employ the expertise of
the practicing physicians on PPAC. Instead, the agency formed an
internal work group known as the Physician Regulatory Initiative Team
(PRIT). PRIT has never issued a final report, eliminated a single
regulation, or simplified the morass of rules, regulations, and
memorandums that govern the Medicare program. The AMA certainly
supports the worthwhile intent of both PPAC and the PRIT. After three
years, however, there is little evidence to indicate that HCFA will
successfully reduce the burden or hassles that confront physicians and
their patients.
For purposes of this hearing, we will focus on several specific,
yet illustrative, examples of regulations run amok, as well as
additional concerns related to the lack of a communication process
between HCFA, its carriers and physicians.
Regulations . . . and More Regulations
Health care is a highly regulated profession, and HCFA is
overzealous in its regulatory scope and enforcement activities.
Physicians are subject to over 100,000 pages of Medicare regulations
and policies, including the preambles and accompanying text to the
regulations, which attempt to explain the intent of the often
convoluted and ambiguous regulations. These materials, however, often
raise more questions than they answer. Further, in addition to new and
existing regulations, physicians must be familiar with the volumes of
ever-changing bulletins and carrier materials sent to their offices.
In fact, HCFA, the Office of the Inspector General (OIG), and other
federal agencies continuously issue new regulations that apply to
physicians, providers, and their patients. To truly understand these
regulations and policies and their impact on their practices,
physicians would have to hire scores of attorneys and consultants. In
his testimony to the House Budget Committee Health Task Force last
week, Dr. Robert Berenson, Director of the Center for Health Plans and
Providers at HCFA, tried to justify the vast number of HCFA regulations
during the past several years by stating that the agency has had to
respond to 335 statutory changes as a result of provisions in the
Balanced Budget Act of 1997 (BBA). Many of these statutory changes were
translated into new and extremely complex regulations for physicians
and other providers. These 335 statutory changes and their regulations
are in addition to the other regulations issued during this time by
other agencies and entities that regulate physicians. We have attached
a chart to our statement depicting the vast regulatory structure that
govern physicians and their practices.
We offer the following examples to illustrate the extent to which
several of the many HCFA regulations and policies place burdens on
physician practices and are increasingly out-of-touch with patients'
health care needs:
Hospice Rules--The Wall Street Journal reported on June 5, 2000,
that the government contracted with a private company to notify hospice
patients that their benefits expired because the patients had exceeded
their six-month life expectancy, which entitled them to hospice
benefits. The article recounted heart-wrenching stories of many
patients being forced into nursing homes as a result of the contractor
terminating their hospice benefits. In accordance with HCFA's hospice
policy, if a physician believes that a patient's life expectancy will
not exceed six months, then the patient can qualify for hospice
benefits. If a patient outlives this six-month limit, these patients'
hospice benefits should not be withdrawn. This is a further instance of
HCFA regulations and government contractor actions that contradict
congressional intent and directly cause patient harm. (Article
attached.)
Post-Payment Audits--Physicians should enjoy the same due process
rights as taxpayers undergoing IRS audits who can appeal IRS fines,
penalties, and findings. To the contrary, once a carrier conducts a
post-payment audit of a physician's practice, the carrier determines
the amount of projected Medicare overpayments through an extrapolation
process. Since the amount is determined through extrapolation, it can
easily rise to tens of thousands of dollars. Once carriers arrive at
this projected overpayment amount, carriers give physicians three
options: (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. HCFA's carrier manual options prevent
physicians from retaining their due process rights unless they agree to
open up their practices to a larger SVRS audit. This is patently
unfair, and many physicians feel compelled to agree to settlements to
avoid a burdensome, expensive, and protracted SVRS audit. Targeting
physicians in this manner will result in physicians restricting their
Medicare practices, thereby decreasing patient access to these
physicians.
HCFA should be required to alter its carrier manual instructions to
ensure that physicians undergoing post-payment audits are not forced to
waive their due process rights. Passage of H.R. 3300, introduced by
Representative Shelley Berkeley, would remedy the current post-payment
audit process and would address many of the broader Medicare education
issues for physicians that are addressed later in this statement.
Overpayment Audits--The AMA understands that HCFA has instructed
its carriers to begin auditing physicians who submit too large of an
overpayment remittance to HCFA. According to Part B News, HCFA has also
told carriers to launch an audit if the carrier suspects ``a pattern of
inappropriate payment.'' HCFA should encourage this voluntary refund of
overpayments, rather than target honest physicians who are attempting
to return overpayments to their carriers. As discussed with respect to
post-payment audits, targeting physicians in this manner will result in
physicians restricting their Medicare practices, thereby decreasing
patient access to these physicians. We therefore recommend that HCFA be
prohibited from targeting physicians for audits based solely on the
fact that they have voluntarily refunded overpayments.
Self-Referral--Physicians considering any type of an ownership
interest in any facility or thinking of providing additional services
within their own practice have to hire attorneys to advise them on how
to attempt to stay within the bounds of these regulations. Physicians
must also get legal advice before they receive anything of value from
any entity to which they refer patients.
The intent of the self-referral statutes was to prevent
overutilization of services due to physician ownership in facilities--
not to limit patient access to care and micromanage physician practices
and contracting arrangements. This regulation has transgressed well
beyond the intent of the statute. HCFA plans to release the final
regulations this year, and we anticipate they will create an extremely
high anxiety level among physicians regarding their contracting
arrangements and the internal workings of their practices. The AMA
supports H.R. 2651, the ``Physician Self Referral Amendments of 1999,''
which would streamline the self-referral laws for physicians, leading
to increased access for patients, particularly in rural areas.
Impact of Regulations on the Sustainable Growth Rate (SGR)
The SGR system is a further example of the need for Congress to
exercise diligent and ongoing oversight of HCFA. The SGR sets a target
rate of spending growth based on four factors: changes in payments for
physician services before legislative adjustments (essentially
inflation); changes in Medicare fee-for-service enrollment; changes in
real per capita gross domestic product (GDP); and an allowance for
legislative and regulatory factors affecting physician expenditures.
We appeared before this Subcommittee last year to discuss erroneous
projections by HCFA during the first two years of the SGR (1998 and
1999) and HCFA's decision to renege on its pledge to correct these
errors, despite the agency's decision having no statutory basis. These
errors shortchanged physician payments by more than $3 billion.
In response, Congress enacted provisions under the Balanced Budget
Refinement Act of 1999 (BBRA) to ensure that HCFA meets its statutory
obligation to correct its projection errors and appropriately pay
physicians for Medicare items and services furnished to patients.
The AMA appreciates the Subcommittee's responsiveness and strong
oversight of HCFA on this matter. While HCFA has begun to comply with
the SGR statutory provisions under the BBRA, the agency has
nevertheless determined that it will ignore another statutory mandate
established under the original SGR formula enacted under the BBA. That
is, for purposes of establishing the SGR, HCFA is not permitting the
proper allowance for changes in legislative and regulatory factors
affecting physician expenditures despite being required by statute to
do so.
In HCFA's April 10, 2000, Federal Register notice of the SGR for
calendar year 2000, the agency explained that only ``legislative
changes contained in the BBA and the BBRA will have an impact on
expenditures for physicians' services under the SGR in CY 2000.''
Although HCFA appears to have factored the impact of these statutory
changes into the CY 2000 SGR, it did not discuss factoring into the SGR
any impact resulting from regulatory changes. As we discussed earlier,
HCFA has been promulgating hundreds of regulations in response to the
BBA and other laws, many of which impact physician expenditures.
HCFA's disregard of this statutory mandate is further exemplified
by the fact that the agency regularly fails to develop appropriate and
accurate regulatory impact analyses with respect to the various
regulations promulgated by the agency. Although the law requires HCFA
to establish such analyses, the agency's estimates are light-years away
from representing the actual impact of the regulation on practicing
physicians and often do not even take into account any impact on
physicians.
For example, HCFA requires beneficiaries with diabetes to have
their prescriptions for diabetes test strips renewed by their physician
every 6 months. The rules that were developed by Medicare's durable
medical equipment carriers governing these test strips have imposed an
enormous burden on physicians, yet this burden has never been included
in any regulatory impact analysis under any HCFA rule. This burden, in
turn, adversely impacts patient access to care--the more physicians are
forced to focus on burdensome regulatory requirements, the less time
can be spent on patient care.
HCFA recently testified before Congress that the AMA is overstating
the size of the regulatory burden that Medicare imposes on physicians.
HCFA implied that most of the rules it issues do not have any effect on
physicians and that the number of pages of final regulations affecting
physicians is quite small. In fact, however, nearly every rule
published by HCFA imposes new burdens on physicians. These rules and
policies include not only the final regulations established by the
agency, but what has become a constant stream of Program Memorandums,
Operational Policy Letters, and carrier bulletins.
The result of HCFA's behavior is that physicians are forced to
invest an ever-increasing proportion of their resources on the heavy
paperwork burden. The resources could be better utilized on investment
in new medical technologies and expansion of patient care services. The
quality of our nation's health care system depends on physicians being
able to spend their time on patient care, not paperwork.
Accordingly, we urge the Subcommittee to ensure that HCFA meets the
statutory obligations mandated by Congress and prevent HCFA from
engaging in abusive tactics that exceed its discretionary authority.
Specifically, HCFA should be directed to conduct more accurate
regulatory impact analyses and to account for the regulatory burden on
all those affected by a regulation, physicians providers and patients.
Further, we urge Congress to direct HCFA to account accurately for the
cost of Medicare rules, policies, and regulations in the calculation of
each year's SGR.
Ineffective Communication with Carriers and Physicians
Increasingly, HCFA appears to be making decisions in a vacuum. Once
it was common practice for the agency to consult with medical
organizations prior to issuing rules expected to have a significant
impact on physician practices. At that time, practical considerations
as well as policy implications could be hashed out in advance of
publication and many problems were altogether avoided.
For a variety of reasons, including HCFA staff reductions,
reorganizations, and the burdens imposed by the BBA, this sort of
consultation is a rare occurrence today. Rather, communications in the
current environment are increasingly one-sided with edicts issued with
little attempt to determine whether the order is either reasonable or
necessary. Items that ought to be covered in a proposed rule instead
are released and implemented through directives to the contractors who
administer the Medicare program. Alternatively, they are placed in a
final rule, effectively side-stepping the requirement that major
changes in Medicare policy go through a public comment period. We urge
Congress to ensure that HCFA adheres to the strictures of the
Administrative Procedures Act in its issuance of new rules and
regulations.
Seclusion and Restraints
One of the most egregious examples of HCFA's propensity for making
arbitrary and unilateral decisions occurred last summer with the
release of an interim final rule on one section of a plan to modify
Medicare's conditions of participation. Included in the rule was a new
provision that would require a face-to-face evaluation by a physician
or licensed independent practitioner within one hour of the application
of seclusion or restraints to patients with behavioral health problems.
This rule, which went into effect just 30 days after it was issued,
constitutes a major change in clinical practice that was never tested
in the general population. Yet it was put into place without any prior
consultation with hospitals and physicians, and without clarifying
guidelines, which were not issued until ten months after the rule went
into effect. This rule has the potential to significantly increase
hospital costs, disrupt care of other patients and further jeopardize
the continued existence of some small rural hospitals.
The Joint Commission on Accreditation of Healthcare Organizations,
using a much more deliberative, patient-focused and scientifically-
based process, came up with a less stringent rule, but HCFA has refused
to modify the provision and, nearly a year later, still has not issued
a final rule acknowledging and responding to the thousands of negative
comments it received on the one-hour requirement.
Critical Care Codes
Another example of HCFA failing to consider advice from practicing
physicians, and thereby adversely impacting patient care, is the
development of policy concerning critical care codes. Due to
inconsistent interpretations by HCFA carriers, affected medical
specialties asked the CPT (Common Procedural Terminology) Panel of the
AMA which develops procedure codes, to redefine what constitutes
critical care services. Even though HCFA participated as a member of
this procedure coding committee, no strong objections were heard from
HCFA about the resulting definition. In the final fee schedule
regulation notice, HCFA indicated its disagreement with the CPT Panel,
and reduced the payment levels for these codes by 10 percent based on
the assumption that more services would be billed as critical care.
The effect of that decision is that Medicare pays substantially
lower payments to physicians who treat the most critically ill
patients. The consequences of this ill-conceived policy are obvious--
its creates perverse incentives and thus physicians will be forced to
spend less time with critically ill patients, who, ironically, are in
most need of a physician's time and care.
After repeated expressions of alarm from the medical profession
about the impact of the lower values on these essential services, HCFA
agreed to ask the CPT Panel to again revisit the definition of critical
care services. Both sides have now agreed on a mutually acceptable
definition of critical care, but HCFA has not yet restored the correct
payment levels for these codes.
Communication with Individual Physicians
Physicians must have the ability to contact HCFA or its carriers
and receive a reliable and consistent response to questions concerning
claims for patient services. Physicians are often a beneficiary's link
to Medicare with regard to the translation of Medicare coverage
decisions. Improved communication between carriers and physicians will
ultimately result in better informed patients.
HCFA and its carriers, however, do not adequately communicate with
and conduct educational initiatives for physicians. For example, in a
February 1999 Report entitled, ``Ordering Medicare Equipment and
Supplies--Physicians' Perspectives,'' the OIG confirmed that ``75
percent of physicians reported they have never received any educational
materials from their Medicare carrier concerning the equipment and
supply ordering process.''
Physicians document patient visits and submit hundreds of claims to
the program during every month. If these claims submitted to carriers
are not done correctly, physicians can be subjected to investigations,
audits, and penalties.
Use of a general website alone to educate physicians and inform
them of changes to coding, documentation and coverage policies is not
sufficient. Physicians have great difficulty in securing specific
answers from their carriers regarding these important coding,
documentation, and coverage policy questions. Carrier staff frequently
provide inconsistent answers to critical questions. In addition, most
carriers refuse to answer physicians' queries in writing, so the
physician can maintain a copy of the correspondence for his or her
records. After years of asking HCFA to reinstitute toll-free lines for
physicians, the AMA was pleased when HCFA agreed this spring to reopen
these lines. While these toll-free lines are not a cure-all, the AMA
hopes that these carrier lines will be adequately funded and will begin
to address physicians' questions regarding the Medicare program.
The processes that HCFA uses during post-payment audits are also
antiquated and ineffective. For instance, when carriers audit physician
practices, physicians receive a letter, which carries no special
designation or marking, requesting records via regular mail.
Physicians' offices receive lab reports, payments from government,
private, and individual payors in addition to other correspondence
related to practice management in their daily mail deliveries. The AMA
recommends that carriers orally communicate with physicians concerning
a records request and maintain a dialogue throughout the audit and
settlement processes concerning compliance activities with respect to
any alleged physician billing errors. Specifically, HCFA should require
its carriers to contact physicians orally and in writing to inform them
of: possible improper billing, a pending post-payment audit, the
outcome of the audit, and the physician's appeal rights.
As the foregoing discussion demonstrates, physicians have serious
concerns with HCFA's management of the Medicare fee-for-service
program, in which 85 percent of the Medicare population is enrolled.
These deficiencies demand Congress' serious and immediate attention.
While our testimony has attempted to cover several major areas where
HCFA oversight is desperately needed, we also have concerns with
numerous other policies, which we would pleased to discuss with the
Subcommittee at a later date or at a later hearing. We would be happy
to discuss any of these issues in more detail, and look forward to
working on these issues more extensively with the Subcommittee in the
months to come.
[GRAPHIC] [TIFF OMITTED] T5913.003
Mr. Bilirakis. Thank you very much, Dr. Coble.
Ms. Gottlich?
STATEMENT OF VICKI GOTTLICH
Ms. Gottlich. I am Vicki Gottlich. I am with the Center for
Medicare Advocacy. I am also representing the National Academy
of Elder Law Attorneys.
Center advocates and NAELA attorneys have direct experience
in counseling and representing older people, people with
disabilities and their families. The center responds to over
1500 calls about Medicare and other health issues each quarter
on a toll-free hotline.
As of last Friday, we have 13,342 open cases involving
access to Medicare benefits. We also work to assure access to
employer-sponsored health insurance and have been counsel and
provided technical assistance in litigation to secure health
care rights for participants in private health plans.
Our experience has given us the opportunity to compare the
difficulties of Medicare beneficiaries in obtaining necessary
health care with the difficulties of plan participants under
private health insurance.
Despite our past and ongoing differences with HCFA, and
these include several of the issues mentioned today such as
preauthorization, such as coverage determinations, we have
determined that HCFA does a much better job in administering
Medicare and in protecting beneficiary rights than private
insurance companies do in protecting the rights of private plan
participants.
The added protection comes from regulations and guidance
that implement Medicare from the accountability of HCFA as a
government agency and from increased participation of
beneficiaries and their advocates in HCFA processes.
Regulations are issued pursuant to directions from Congress
in order to protect Medicare beneficiary rights. Though there
are a lot of Medicare+Choice regulations, these really
implement a very detailed, complex program.
The best example we have is the rules promulgated to
implement the Nursing Home Reform Law. They were imposing
standards that were really best practices that very few nursing
homes were using.
But after they were implemented, the reduced use of
physical and chemical restraints improved quality for residents
and other savings resulted in annual estimated savings to the
Medicare Program of $2 billion in hospital costs in 1992
dollars.
Regulations set standards. When a client comes to us who is
a Medicare beneficiary and says ``I have been denied nursing
home care because I don't meet the definition of skilled
care,'' we know where to find it in the regulations and in the
manuals.
When the same client comes to us or a different client and
has the same issue in private health insurance, there are no
regulations. There are no standards and there are no easy ways
to get those regulations and the standards from the health
plans.
We end up with clients who have been denied care even
though they meet the Medicare regulations for the definition of
skilled care.
When HMOs terminate their coverage, they provide notices
that are readable, they provide people explanation of their
rights upon the termination of their HMO. This is all because
of regulations and HCFA's involvement in trying to protect
beneficiaries.
Private health insurance plans that terminate their
coverage do so without any notice to beneficiaries at all. The
four notices that HCFA is working to improve actually are being
improved. We have had lots of complaints about them over the
years. I think some of the efforts are due to some of our
litigation.
But the form notices that we see from private health
insurance many times do not even comply with the standards of
ERISA. I have never seen one that gave a good explanation of
why coverage had been terminated and what rights there are.
Medicare beneficiaries are protected by the accountability
of HCFA as a Federal Government agency. As an agency it must
promulgate regulations. It must have open meetings. It must
appoint advisory committees that comply with FACA.
Most importantly, it is subject to hearings such as this
one where, when people have problems with HCFA, we can rake
them over the coals or interrogate them. That is not true of
private health insurance plans. We have no opportunity as
beneficiary representatives to work with private health
insurance plans to deal with the systemic problems that we see
on behalf of our clients.
HCFA has also made a great effort in the past few years to
increase beneficiary access, so we can have the opportunity to
talk to HCFA about our problems, to discuss with HCFA some of
the changes that it is planning to make.
We are very concerned that some of the proposals under
consideration to change the way the Medicare Program is managed
would increase rather than decrease beneficiary vulnerability.
Privatization of management of the Medicare Program removes
the protections provided by government management of Federal
programs.
We are concerned that private entities don't operate as
efficiently as Medicare, raising the concern that more Medicare
dollars would be spent on administrative costs if programs are
managed by private entities.
We also are very fearful about the proposal to bifurcate
the administration of Medicare between two entities. We are
fearful this will cause confusion for Medicare beneficiaries.
We envision a bureaucratic nightmare of coordinating
information about one program between two agencies that will
exasperate duplicative administrative, unnecessary paperwork
and cost delays.
What we would like to see would be some efficiencies that
have already been discussed in terms of streamlining time
lines. We would like to see additional resources given to HCFA
so they could improve the work that they are doing.
We thank you for the opportunity to participate today.
[The prepared statement of Vicki Gottlich follows:]
Prepared Statement of Vicki Gottlich, Attorney, Center for Medicare
Advocacy, Inc.
Introduction
Good morning. I am Vicki Gottlich, a staff attorney with the
Healthcare Rights Project of the Center for Medicare Advocacy, Inc.,
(the Center) and chair of the Subcommittee on Managed Care, Public
Policy Committee of the National Academy of Elder Law Attorneys
(NAELA). I appreciate the opportunity to address the Subcommittee on
Health and Environment of the Commerce Committee on behalf of these two
organizations. We, like you, are concerned with the important issue of
HCFA's role in Medicare management.
Center advocates and NAELA attorneys have direct experience in
counseling and representing older people, people with disabilities, and
their families. The Center for Medicare Advocacy responds to over 1,500
calls about Medicare and other health issues each quarter on a toll
free telephone line in Connecticut. As of June 23, we have 13,342 open
cases involving access to Medicare benefits. Members of the Center's
legal staff have been leaders in advancing Medicare coverage and due
process rights and access to health care through class action
litigation and administrative advocacy.
Most recently, in Grijalva v. Shalala, a nationwide class action,
the Center was successful in obtaining a court order which established
due process rights for Medicare managed care enrollees throughout the
United States. In Healey v. Shalala, we represent a nationwide class
and have successfully challenged the manner in which Medicare
beneficiaries are denied home health benefits and services. Finally,
Center staff and NAELA members also work to assure access to employer-
sponsored health insurance, and have been counsel and provided
technical assistance in litigation to secure health care rights for
participants in private health plans.
Our experience has given us the opportunity to compare the
difficulties of Medicare beneficiaries in obtaining necessary health
care with the difficulties of plan participants under private health
plans. Despite our past and on-going differences with HCFA over the
administration of the Medicare program, we believe strongly that HCFA
does a better job in administering Medicare and in protecting
beneficiary rights than private insurance companies do in protecting
the rights of their participants. The added protection to beneficiaries
comes from the national regulations and guidance that define program
policy and standards in implementing the Medicare program, from the
accountability of HCFA as a government agency, and from the increased
participation of beneficiaries and their advocates in HCFA processes.
Regulations Are Issued Pursuant to Directions from Congress in Order to
Protect Medicare Beneficiary Rights
Some health care providers contend that the voluminous Medicare
regulations make it impossible to provide services under the program
and impede access to care. We disagree. Medicare regulations are issued
by HCFA to implement the changes in the laws passed by Congress, to
protect the rights of Medicare beneficiaries to receive medically
necessary services, and to assure accountability of providers and of
HCFA. For example:
<bullet> The Balanced Budget Act of 1997 included a specific statutory
section, 42 U.S.C. Sec. 1395w-26, that directed HCFA (a) to
establish standards for financial solvency of Medicare+Choice
plans, and (b) to establish other standards to carry out the
new Medicare Part C, the Medicare+Choice program. Other
statutory sections relating to Part C directed HCFA to address
specific substantive issues, for example, standards for
exercising choice and electing a Medicare+Choice plan,
guidelines for post-stabilization care, and time periods for
appeals of adverse determinations, and included details about
what should be included in the regulations. Thus, the nearly
100 pages of interim final regulations <SUP>1</SUP> added to
the Code of Federal Regulations to implement the
Medicare+Choice program were done so at the explicit direction
of Congress to help with the administration of this new and
very complex program.
---------------------------------------------------------------------------
\1\ Final regulations to implement the Medicare+Choice program have
been posted on the HCFA web page and are expected to be published in
the Federal Register this week.
---------------------------------------------------------------------------
<bullet> Federal Medicare and Medicaid rules promulgated by HCFA to
implement the Nursing Home Reform Law of 1987 have led to
reduced use of physical and chemical restraints in many skilled
nursing facilities nationwide, allowing facilities to provide
better care for residents at lower cost. They also led to a 30%
increase in the use of hearing aids; an increase in use of
toileting programs for incontinent residents; a 28% decrease in
the proportion of residents with little or no activity; and a
26% reduction in hospitalizations of residents (resulting in an
annual estimated savings to the Medicare program of $2 billion
in hospital costs in 1992 dollars) <SUP>2</SUP>.
---------------------------------------------------------------------------
\2\ Dr. Catherine Hawes, Assuring Nursing Home Quality: The History
and Impact of Federal Standards in OBRA-1987 (Commonwealth Fund,
December 1996).
---------------------------------------------------------------------------
Regulations, HCFA Manuals and Other Guidance, and Form Letters Provide
Standards That Help Beneficiaries Know Whether They Have
Received the Benefits to Which They Are Entitled.
Medicare regulations and other guidance developed by HCFA help
assure that beneficiaries receive the services they need. Private
insurance provides no similar protection for plan participants. For
example:
<bullet> We consistently are asked to assist Medicare beneficiaries and
private health plan participants who have been denied home
health or nursing home benefits on the grounds that the care
they need is not skilled care. While 42 C.F.R. Sections 409.32
and 409.33 (approximately three pages) define the criteria for
and give examples of skilled care for the Medicare program, no
similar standards exist under the Employee Retirement Income
Security Act (ERISA), which governs private employer and union-
sponsored insurance, or under the majority of private health
plans I have examined over the years. The lack of standards
leaves clients in private plans unsure about their coverage and
results in frequent benefit denials. In a case from
Indianapolis last year, the claims workers for a large
insurance company covering a large employer stated in
depositions that they were given different and inconsistent
information about what was skilled care, and ended up rejecting
virtually every claim. Had the client in that case been covered
under Medicare, his care needs would have met the regulatory
definition of skilled care.
<bullet> Medicare regulations and HCFA guidance require HMOs which
terminate their contracts with HCFA to give their enrollees
advance notice of the termination and to explain their rights
upon termination. The HMOs use model notices developed by HCFA
to help assure readability and understanding by the
beneficiaries. When private insurance companies terminate their
contracts with employers, they are not required to provide
advance notice to plan participants, or to inform them of the
other health plans in which they may enroll. Employers are not
required to maintain one consistent, standard plan, such as
traditional Medicare, to which their employees may return.
<bullet> Form notices developed by HCFA to explain what services have
been covered, what services have been denied, why they have
been denied, and what a beneficiary can do about a denied
service provide accurate information and
consistency.<SUP>3</SUP> There is no consistency in the form
notices provided by private insurers; each insurer has its own
forms. Many do not meet the notice requirements of ERISA.
---------------------------------------------------------------------------
\3\ Several of the revisions to forms and notices have come as a
direct result of litigation conducted by Center and NAELA attorneys.
See, for example, Grijalva v. Shalala, supra, (managed care appeals
notices); Healey v. Shalala, supra, (home health termination notices),
and Sarrassat v. Sullivan, (N.D. Cal. 1989) (nursing home discharge
notices).
---------------------------------------------------------------------------
<bullet> Beneficiaries are more vulnerable when HCFA does not mandate
forms. Last year, I served as a consumer representative to an
informal work group designed to assist HCFA in the development
of a standardized summary of benefits (SB) form for
Medicare+Choice HMOs. Most of the SB forms developed by the
private insurers offering Medicare+Choice plans that I reviewed
as a part of the process were not beneficiary friendly. The
form SB developed through HCFA contains accurate descriptions
of Medicare benefits and was focus group-tested to assure
comprehension and readability. As a result, the SB will be a
better education piece for beneficiaries and a better marketing
tool for Medicare+Choice plans.
Medicare Beneficiaries Are Protected by the Accountability of HCFA as a
Federal Government Agency.
Because HCFA is a federal government agency, it must meet the
requirements of all agencies to make public its meetings, to publish
its proposed standards and regulations, and to appoint advisory
committees that comply with the Federal Advisory Committee Act (FACA),
Pub. L. 92-463, 5 U.S.C. App. 2. The administration of its budget is
subject to oversight, as are the workings of the agency as a whole.
This very hearing is evidence of the high level of accountability to
which HCFA is held. As a result, beneficiaries have greater assurance
that the administration of the Medicare program is being monitored
closely and that they will have an opportunity to participate in
decisions that affect their program. For example:
<bullet> HCFA is revising the process for deciding the particular
services and technologies to be covered and paid for by
Medicare. We have been very visible in our complaints about the
coverage determination process, through litigation,
<SUP>4</SUP> through testimony before HCFA's Medicare Coverage
Advisory Committee (MCAC), and through testimony at
Congressional and other briefings. We intend to file comments
vigorously objecting to HCFA's proposed criteria for making
determinations, published in the Federal Register in
May.<SUP>5</SUP> We can only engage in such advocacy on behalf
of Medicare beneficiaries because of the openness of the
government process. There is no similar mechanism for
participation in or contesting the process for deciding what
services and technologies will be covered under private health
insurance plans, even those that are collectively bargained.
---------------------------------------------------------------------------
\4\ See, e.g., Jameson v. Bowen, C.A. No. CV-F-83-547-REC (E.D.
Cal.1987), and Richey v. Shalala, CV (W.D. Tex. Feb. 1, 2000)
\5\ 65 Fed. Reg. 31124 (May 16, 2000).
---------------------------------------------------------------------------
<bullet> When HCFA decides to change its regulations, it allows
beneficiaries and others to comment on the effect of the
changes on them and their ability to receive medically
necessary care. For example, as part of interim final
regulations published in 1998 to implement a prospective
payment system (PPS) for Medicare skilled nursing facility
benefits, HCFA deleted from the regulations sections which give
examples of certain nursing services that are considered
skilled care.<SUP>6</SUP> Because the sections and examples
also apply to skilled care in the context of home health
benefits, the deletion generated confusion about the scope of
the regulations. The Center filed comments on the regulations
and wrote to HCFA Administrator Nancy-Ann Min Deparle for
clarification of the extend of their applicability. Ms. Deparle
responded that others had also expressed confusion, and that
HCFA did not intend the deletion of regulatory sections to mean
that they ``. . . no longer regard these services as
appropriate examples of skilled care.'' <SUP>7</SUP> The final
PPS regulations, issued in July 1999, <SUP>8</SUP> responded to
the comments and reinserted the deleted sections. This process
of first proposing changes to standards and soliciting comments
is not available for private insurance.
---------------------------------------------------------------------------
\6\ 42 C.F.R. Sec. 409.33(a)(1)-(3).
\7\ Letter from HCFA Administrator Deparle, April 28, 1999,
www.medicareadvocacy.org.
\8\ 64 Fed. Reg. 41670, (July 30, 1999).
---------------------------------------------------------------------------
Increased Access to HCFA and its Processes Assures Greater Beneficiary
Participation and Protection.
In recent years, HCFA has come to understand the importance of
including beneficiaries and beneficiary concerns in its administration
of the Medicare program. In HCFA parlance, they have determined that
beneficiaries are their ``customer.'' Though we still question HCFA's
understanding of the importance of beneficiaries to the Medicare
program, we have seen improvements, especially in regards to
information and education.
<bullet> In response to complaints by beneficiary representatives, HCFA
several years ago changed the quarterly beneficiary meetings to
monthly meetings. These meetings have turned from ``show and
tell'' programs whose agendas were dictated by HCFA to meetings
in which beneficiaries have dialogues with HCFA staff
responsible for administering Medicare, Medicaid and the state
children's health initiative program.
<bullet> Because of their increased emphasis on beneficiaries, their
reaching out to beneficiary representatives, and their
responsibility as a public entity administering a public
program, HCFA's efforts are highly improved and more effective
for beneficiaries than the efforts we have seen from private
insurance. HCFA initially developed its managed care marketing
guidelines with in-put only from plan representatives. When
beneficiary and consumer organizations were asked to review the
final product HCFA and the plan representatives had developed,
they found that the guidelines contained information that was
inaccurate and confusing and that the guidelines did not
explain fully the rights of beneficiaries enrolled in managed
care.
<bullet> HCFA has established two separate entities to assist with
Medicare+Choice education and information. The National
Medicare Education Partnership (NMEP) coordinates with
organizations representing a variety of interests--
beneficiaries, plans, employers, unions, government--to assure
that beneficiaries receive accurate and adequate explanations
of their Medicare benefits and the choices available under the
Medicare+Choice program. The Center for Medicare Advocacy
serves as a member of the NMEP Coordinating Committee. The ten-
member Citizens Advisory Panel on Medicare Education (APME) is
a FACA authorized committee designed to assist HCFA with its
statutorily mandated Medicare+Choice education efforts.
HCFA Has Done a Gone Job Satisfying The Beneficiary Education
Obligations Imposed by the BBA.
Congress in the Balanced Budget Act imposed a very heavy burden
upon HCFA to provide beneficiary education. The BBA requires HCFA to
establish and maintain an Internet site to provide information, to
conduct annual information fairs, to maintain a toll-free hotline, and
to send out annual mailings to each Medicare beneficiary that not only
describe the Medicare program but that include the Medicare+Choice
options available in the different communities. The solution to
problems observed in the education component is not to take the
responsibility for education away from HCFA, but to assure that HCFA
has adequate funding and staff to do a good job.
<bullet> HCFA has done a remarkable job, given the financial
constraints imposed by Congress, the lack of staff, and the
complexity of the Medicare+Choice program. Thanks to comments
by NMEP members and others, the Medicare and You Handbook
improves each year. The information about plan choices on the
Internet is reasonably accurate, and HCFA continuously works to
make the site more useable. I have personally called the 1-800-
MEDICARE hotline number to test its accuracy, and I have been
given correct information even when I asked complex, difficult
questions. On the other hand, clients who have sought
information from their health plans directly have been given
incomplete or incorrect information, including being told that
they have no right to appeal an adverse determination.
<bullet> The problems with HCFA's education program stem from the
growing complexity of the Medicare+Choice program and not the
failure of HCFA's initiatives. The Center for Medicare Advocacy
requires three days to train volunteers for CHOICES, the
Connecticut state health insurance counseling program, about
Medicare and Medicare+Choice. When HCFA tried to describe the
new Private Fee For Service plan to the NMEP coordinating
committee, it quickly became apparent that even NMEP members
who are knowledgeable about Medicare needed more time to
understand the complexities of this option.
Proposals to Change the Way the Medicare Program is Managed Would
Increase, Rather Than Decrease, Beneficiary Vulnerability.
Current proposals to change the way the Medicare program is managed
would harm beneficiaries dramatically by reducing their access to the
administrators of the program, removing many of the protections
available to them, and causing confusion in management.
<bullet> Proposals to biforcate the administration of Medicare between
two entities, regardless of whether the second entity is a
federal government agency, will cause confusion for Medicare
beneficiaries. Beneficiaries will not know to which of the
entities to turn with their questions, particularly when
questions fall within the jurisdiction of both entities. Our
clients who are dually eligible for Medicare and Medicaid would
have to seek out information from both entities, since HCFA
will retain jurisdiction over Medicaid, and possibly from their
state Medicaid agency as well. Clients with functional
disabilities and mental impairments will be harder to reach and
serve. The bureaucratic nightmare of coordinating information
about one program between two agencies will exacerbate problems
of duplicative administration, unnecessary paperwork, and
delay. The costs of program administration will increase
unnecessarily.
<bullet> Privatization of the management of the Medicare program
removes the protections provided by government management of
federal programs. Private entities may not have to meet the
same requirements concerning open meetings, appointed advisory
committees that are representative of all interested parties,
promulgation of standards through a prescribed regulatory
process that allows for public comment.
<bullet> Private entities do not operate as efficiently as Medicare,
raising the concern that more Medicare dollars would be spent
on administrative costs if the program were managed by a
private entity. Data from 1997, the most recent year posted on
HCFA's web site, indicate that administrative expenses were
1.2% of benefit payments for Part A and 2.0% of benefit
payments for Part B.<SUP>9</SUP> The Office of Inspector
General (OIG) recently found, on the other hand, that from 1996
through 1999 the average amount allocated by a managed care
organization for administration ranged from 3% to 32%. The OIG
recommended that HCFA set a ceiling for administrative rates of
15%.<SUP>10</SUP> Since proposals calling for private
administration of Medicare would allow the private entity to
pay its chief administrators more than civil service rates,
there is no indication that current cost of administering
private entities would decrease. Medicare dollars would be
spent on administrative costs.
---------------------------------------------------------------------------
\9\ HCFA, Office of Strategic Planning: Data from the Division of
Medicare and Medicaid Cost Estimates; www.hcfa.gov/stats/hstats98/
blustat4.htm.
\10\ Office of Inspector General, Administrative Costs Reflected on
the Adjusted Community Rate Proposals Are Inconsistent Among Managed
Care Organizations (A-14-98-00210 January 2000).
---------------------------------------------------------------------------
Organizations that represent beneficiary and consumer interests
will have difficulty with whatever entity manages the Medicare program.
We push constantly to assure that our clients' rights to medically
necessary health care are protected in every way. The proposals under
consideration--to reduce regulations that set standards and protect
beneficiaries, to remove administration of the Medicare program to
private entities with fewer obligations to the public interest and the
public fisc, and to split the responsibilities for management of
Medicare--do nothing to meet the needs of the beneficiaries for whom
the program was established. Instead, they would reduce beneficiary
rights and their access to care.
Thank you for the opportunity to testify.
Mr. Bilirakis. Thank you, Ms. Gottlich.
We understand that the votes might be called about 1:30.
That is always a ``give or take.'' Hopefully, we can excuse
this panel by the time we have to run to vote. It is up to the
members here, I guess.
Dr. Waller, I understand that the Mayo Clinic was
approached by HCFA to become a Center of Excellence but
declined; is that correct?
Mr. Waller. That is correct.
Mr. Bilirakis. Can you tell us why?
Mr. Waller. Well, I think that first the regulatory burden
and the need to document what we would do in a center of
excellence was just far above what we could do. But I think the
bottom line to it was that HCFA came to us and said, if you
will be a center of excellence, we will name you a center of
excellence, if you will take a discount, a discount beyond the
price control environment that we have been in since 1984. But
we couldn't do that.
The patients who come to Mayo Clinic severity of illness is
extraordinarily high when you compare to other practices and
the resources needed to take care of patients with severe
illness are significant.
So, to be a center of excellence and take a discount for
the payments to us was beyond the price controlled environment
was not anything that we could do. I guess the bottom line is,
though, when we talk to private payers, Mr. Chairman, we can
negotiate with them as partners. What can we do to provide
quality? What will it cost? How can we work together?
Basically, with all due respect, HCFA said to us, ``Here
are the rules, take it or leave it.'' We decided to leave it.
Mr. Bilirakis. So, outside of the scope of being designated
as a center of excellence, Mayo accepts Medicare patients?
Mr. Waller. Oh, yes, we do. We take all patients, Medicare
patients, Medicaid patients, patients who have no money,
patients who have money. We take everybody who comes to our
doors.
Mr. Bilirakis. Thank you, sir.
Dr. Coble, I have a series of questions here which I am not
going to expect you to respond to now because it would take the
rest of the time. What are the unnecessary Medicare
regulations? What rules should be eliminated? What can we do to
fix the problems you have described?
In general, do you have a list, does the AMA have a list,
of what they consider unnecessary Medicare regulations?
Mr. Coble. Yes, indeed. I would be happy to provide those
to you, sir.
Mr. Bilirakis. Do they have a list of the rules that they
consider or recommend be eliminated?
Mr. Coble. Yes. Of course, some of these may be technically
rules, some regs, some guidelines and so forth.
Mr. Bilirakis. Well, can the AMA furnish that information
to this committee?
Mr. Coble. Yes. We would be delighted to do so.
Mr. Bilirakis. All right. Now, that will be in writing.
Now, you referred in your testimony to inquiries made, I
guess, regarding coding and the billing by the physicians or
providers to HCFA and their responses. Many of those responses,
and I believe it was Dr. Coburn who referred to this, that they
are quite often not in writing.
What is the significance of their being in writing?
Mr. Coble. Well, then you can always go back and say this
is documentation of what we have been advised and we have
complied. But it is very difficult to get that in writing or
impossible.
Mr. Bilirakis. They won't give it to you in writing, even
though you might require it?
Mr. Coburn. Would the chairman yield for just a second?
Mr. Bilirakis. Yes.
Mr. Coburn. Personal experience, they will not give you an
answer in writing.
Mr. Bilirakis. Is that something that the Congress should
mandate, Dr. Coble?
Mr. Coble. We would think that is highly appropriate. It
would be very desirable to always be able to identify the
person who was talking to you on the phone. Often you cannot
get an identification about that individual either.
Mr. Brown. Is that the carrier or HCFA?
Mr. Coburn. It is the carrier.
Mr. Coble. It is the carrier.
Mr. Coburn. But the carrier is function under the auspices
of HCFA.
Mr. Coble. They are chosen by HCFA, as I understand it, to
function that way.
Mr. Bilirakis. If the requirement was that they be in
writing, do you think that will slow down the process? Should
it slow down the process?
Mr. Coble. Well, with the availability of faxes and e-mails
now, that should be a fairly rapid process.
Mr. Bilirakis. So you don't think it should slow down the
process?
Mr. Coble. I certainly would hope not. Our intent is
certainly to decrease hassle factors.
Mr. Bilirakis. Ms. Gottlich, you refer to 13,000 open
cases. I suppose maybe others will get into that. My time is
about to expire. He is a good staffer. He shut the clock off at
4 seconds left. It is a long 4 seconds.
I would hope that you might go into some details regarding
that, but I would hope that some of the others will ask that
question of you.
I will go ahead and yield to Mr. Brown at this time.
Mr. Brown. Mr. Mangano, the managed care organizations
complain of not enough flexibility, of too much regulation, of
not enough reimbursement. I am looking at an IG report that you
furnished about administrative costs are not allowable.
Entertainment, gifts, employee morale costs, $69,000 for
holiday parties at three MCOs, $190,000 for one sales award
meeting in Puerto Rico for one MCO, $249,000 in meeting costs
including food, gifts, alcoholic beverages at one MCO. My
favorite, $157,000 for a party celebrating a managed care
organization's parent company's 150th anniversary. That is
taxpayer dollars. Fortunately, you disallowed it.
The MCO solution, when they complain of not enough
flexibility, too much regulation, and not enough reimbursement
is to minimize HCFA interference and to turn the program over
to the private sector. What happens then?
What do you think the result of lessening HCFA oversight on
Medicare+Choice plans would be? Would they have flexibility,
giving Medicare+Choice plans more flexibility in claiming
administrative costs? Talk to me about that.
Mr. Mangano. Well, I think I remember the report you are
talking about. Those costs were not disallowed. In the managed
care program HCFA pays a set price for every beneficiary each
month. The managed care organization puts a budget together
that includes their administrative costs as well as their
service delivery costs.
But because it is a Managed Care+Choice plan, the normal
rules of Medicare do not apply. In a fee-for-service program,
all costs must be reasonable and necessary for the provision of
care.
But in managed care, they don't have to apply those rules.
So, if a company wants to do those things with their
administrative costs, they can do that.
We have recommended to HCFA that they seek legislative
change that would apply that rule to the managed care plans as
well. That is, that the money should go for patient services
rather than some of these more frivolous costs that some of
these companies are incurring.
Mr. Brown. So, under this private part of Medicare that we
call Medicare+Choice, the taxpayers paid that $1.5 million that
could have gone to patient care.
Mr. Mangano. That is correct. In our review, looking at the
companies nationally, we found that 3 to 32 percent of the
money going to managed care plans was spent for administrative
costs.
One of the recommendations that we had made was to cap that
at 15 percent, which was about the average for the managed
care+choice plans. If they did that, that would save about $1
billion that could be used to reduce patient deductibles or to
increase services to those beneficiaries.
Mr. Brown. So it is 3 to 32 percent and you suggest a 15
percent cap. That saves $1 billion plus. Medicare's
administrative costs are one to 2 percent; correct?
Mr. Mangano. That is correct.
Mr. Brown. So much for the efficiency of the marketplace
sometimes.
Mr. Mangano. What is happening here is that private
companies spend money on things that you probably wouldn't want
Federal funds to be used for. So, companies do plan to buy sky
boxes at sports stadiums, do plan to sponsor golf tournaments
and do plan to take yacht trips out on the New York Harbor to
look at fireworks.
Mr. Brown. Not to jump to conclusions, but salaries at the
Healthcare Leadership Council members might actually be higher
than Mike Hash's salary, too?
Mr. Mangano. I would suspect that is the case, yes.
Mr. Brown. Dr. Coble, you mentioned that HCFA's excessive
paperwork is taking up valuable time, and I think you are
right, time the doctors could be spending with their patients.
Some doctors are questioning whether it is worth the effort to
see Medicare patients, as I have heard and as you have stated
also.
Do you have similar concerns with the private sector? Do
you worry the paperwork that the HMOs require is forcing you to
compromise on the time you spend with patients and are doctors
questioning whether it is worthwhile to practice within an HMO
structure also?
Mr. Coble. Well, there are obviously concerns throughout
the system and of course our focus today is on Medicare
regulations and that is why I limited my address to that
particular issue.
But the changes in regulations that are also somewhat
arbitrarily issued, I think, the restraint regulations, the 1-
hour rule is an excellent example of this work without any
evidence that that is the way in which a patient who in a
behavioral health center is placed in restraints for their own
safety and the safety of those around them.
We have suddenly the involvement in the medical process
that puts burdens and changes in the quality of care in a very
diverse country that has very different needs from one part of
the country to the other and takes medical decisionmaking away
from the patient and the providers and the physicians who are
caring for them.
Mr. Brown. I have admired the American Medical
Association's leadership on the Patient's Bill of Rights. Your
organization has been one of the major, one of the real
fighters for that legislation.
I would guess, if we had more time and if this hearing were
focused somewhere else, you would be able to delineate many of
those same concerns about private insurance and HMO treatment
of physicians that you laid out understanding you were here to
talk about HCFA, that you laid out for HCFA today, I assume.
Mr. Coble. We would certainly attempt to do that, yes.
There are opportunities to improve quality of care in every
venue imaginable.
Mr. Brown. Okay. I thank you.
Mr. Bilirakis. It looks like we have the bells ringing for
a vote.
Dr. Ganske.
Mr. Ganske. In light of the fact that we will have to leave
soon for voting, I am just going to ask one question. One of my
concerns with the Republican prescription drug bill is that it
really does not define a standard benefit.
I have concerns that it will be difficult for senior
citizens to be able to compare one plan to another based on
costs and service when there are differences in the underlying
benefit. So it is a problem of being able to compare an apple
to an apple.
I realize this is a little astray from the hearing, but Dr.
Waller, does the Healthcare Leadership Council have any opinion
on that particular issue?
Mr. Waller. Yes, they do. If you look at the Federal
Employee Health Benefits Plan, Dr. Ganske, and you look at the
plan that Members of Congress have and 59 million employed
American, many of them have, there is choice.
One can chose a plan that will provide drug benefits from
anywhere from aspirin to chemotherapy. There are other plans
that can provide no drug benefits. There are other plans that
can provide drug benefits somewhere in the middle.
I think our whole approach to life is providing the
Medicare recipients with choice so that they can elect which
plan would best suit their needs. So, I think we favor a drug
benefit within the framework of comprehensive reform amendment
in the nature of as we have spoken in our testimony.
Mr. Ganske. So you would like to see this issue addressed?
Mr. Waller. I think we would be concerned about having it
be addressed in a piecemeal fashion as an add-on to the current
Medicare system. But rather have it incorporated into
comprehensive reform according to the principles that we have
laid out in our written testimony.
Mr. Ganske. Dr. Coble, has the AMA taken a position on
whether to have a standard package of benefits as versus
whatever the insurer wants to offer with ``comparable value?''
Mr. Coble. We haven't taken a position. We have developed
some principles that we would like to see considered and not to
do something that will create further regulatory hassle and
inadequate access and unfair system. We will be happy to
provide those principles to the committee.
But we have not looked at the pending bills or the
development of bills to have a position on these at this time.
Mr. Ganske. Mr. Mangano, from the IG's perspective, when
you start looking at whether plans are fulfilling their
promises, do you have an opinion on whether it would be easier
or harder for your office to determine whether in fact a plan
is keeping its promises if there are 500 plans out there as
versus a requirement that a prescription basically be offered
if the physician prescribes it?
Mr. Mangano. Actually, you know, we haven't taken any
position on this issue at all. I know there is wide divergence
of views here.
I think that we would be interested in seeing what controls
are built into the process to ensure the beneficiaries get what
they are supposed to get and that people are not overcharged
for, be it the government or the beneficiaries themselves, for
the particular drugs that they need to have.
So, we would be looking for any enforcement mechanism that
could be put into place to ensure that that happened.
Mr. Ganske. Do you think it would be useful to look at the
President's bill, the administration bill, and the Republican
bill in more detail in order to address that issue in the form
of some additional hearings?
Mr. Mangano. For those particular issues, it is certainly
something that we would be happy to give our point of view on.
But it is really a policy issue, the direction you want to go
on.
Mr. Ganske. I thank you, Mr. Chairman.
Ms. Gottlich. Dr. Ganske, I would like to just add to the
question you asked. You asked how beneficiaries can chose.
Last year when I was on the subcommittee that worked with
plans and HCFA and consumer groups about designing the summary
of benefits form, the hardest part to design was the
prescription drug section. That is because HMOs do so many
different ways of designing the benefit. It was very hard to
design language that would help people compare and make a
choice.
We know that our beneficiaries chose managed care plans
often very much based on the prescription drug benefit that the
plan offers.
Because of the confusion, that was the one are of the
summary of benefits form where the group could not come to as
much consensus as we did in other areas. I think the education
and information aspect of having so many different plans is
really going to be very difficult for Medicare beneficiaries.
Mr. Ganske. I thank you.
Mr. Bilirakis. Dr. Norwood.
Mr. Norwood. Thank you, Mr. Chairman. My observation is,
ladies and gentleman, that this hearing is about HCFA, but
there have been a lot of shots at the private health care
industry which I certainly do agree with.
But I don't want anyone to leave here without understanding
the difference. In private health care insurance today there is
not public policy. They determine how they operate their plans.
Congress gave them that privilege.
Because they are doing bad and HCFA is just doing a little
better doesn't mean that HCFA isn't in a great deal of trouble.
The difference is HCFA does have public policy. It does have
Congressional oversight. It does have people watching what they
are doing. And they are still taking 4\1/2\ years for an
approval process.
So don't leave here thinking because HCFA is only doing
better than what we are seeing in the private insurance agency
that we don't have a very serious problem going on in this
country with health care.
Dr. Coble, I can only speak for the 10th District of
Georgia where the Medical College of Georgia is, but the
question was asked earlier, are physicians leaving the system?
The answer is: Absolutely. Those in my district over 50, if
it isn't Medicare and HCFA driving them crazy, they are trying
to get out of it as fast as they can. That is bad for this
nation and bad for patients, because you are losing some of
your most experienced physicians in America because of what
HCFA is doing to them and because of what managed care is doing
to them.
Let me say again, I want to make this clear for the record
that the people who need to be in this room the most, Mr. Hash
and his team, have decided no matter what we hear or learn to
date, they don't need to learn it. That is no way we will ever
be able to reform HCFA in this country.
Mr. Mangano, let me ask you a question just out of
curiosity. You took a great deal of pride, it seems to me, or
it was in your voice about the dollars that you saved in waste,
fraud and abuse. All of us certainly want that eliminated.
I would appreciate it very much if you would tell me, not
now, but in writing, exactly where those dollars come from. I
need to understand how many of those dollars have you actually
saved, for example, with the subcontractors of HCFA that are
terribly inefficient?
How many of those dollars have you saved from physician
community and how many of those dollars come from the hospital
community?
Explain to me in writing where this money comes from
because you implied because of the good work in waste, fraud,
and abuse, that our trust fund is now solvent. I have forgotten
the year that you said.
Mr. Mangano. 2025.
Mr. Norwood. Because of all this money. I want to
understand that better because it is my impression that a great
deal of that insolvency came when we transferred home health
payments from Part A to Part B.
I'll bet you if we take a close look at that, that is where
the biggest savings actually has come. Go ahead and respond.
Mr. Mangano. The Congressional Budget Office has attributed
the solvency extension to three factors: One the lower rate of
inflation in the country in general; two, was the Balanced
Budget Act provisions; and three was the fraud, waste and abuse
efforts.
Mr. Norwood. Well, the Balanced Budget Act included the
part of home care being transferred from the trust fund to the
everyday taxpayer.
Dr. Waller, do you want to comment?
Mr. Waller. I would just add that we are concerned about
the solvency issue. Extending Part A to 2023 is really a
misleading statement. It ignores the huge increases in Part B
to outpatient services. It ignores the movement, as you have
just said, Dr. Norwood, of home health care to Part B.
And it ignores that the way to get to solvency is continued
price controls and continued reduction of payments to providers
and plans.
The inflation rate also ignores the fact, as Dr. Coburn
said earlier, that physicians are constantly over-documenting
and under-coding because they are threatened with fraud and
abuse.
I think we have to add all those things to the equation
when we talk about solvency.
Mr. Norwood. I am glad you put that on the record because
that should follow behind, well, we are nice and solvent to
2025.
Dr. Coble, would you explain to me, if you can, why it is
that HCFA refused to give any consideration to PPAC? Why is it
that they don't use that expertise in their effort to work out
the payment system?
Mr. Coble. I can't, firsthand, answer that. I have talked
to the past members of it. They indicate that the agendas are
not formed by them, that they have very little input into the
agendas. The agendas that are provided to them are often not
germane to the real concerns of practicing physicians.
Of course, PPAC is made up by a large percentage, almost
the total group are practicing physicians. We understand there
has been some attempt to enhance the process in the two most
recent meetings, March and June. But I cannot speak
specifically to those yet.
Mr. Norwood. Well, time is up.
Mr. Bilirakis. Time is long up, yes.
Dr. Coburn.
Mr. Coburn. Thank you. I want to share a story. My wife and
I were driving down the road 1 day and I just about ran into
the back of a truck. She got after me for not paying attention.
I had had a couple of wrecks in my 52 years. She said, ``you
know, I have never had a wreck.''
I said, ``Yes, but you are forgetting one thing. You have
caused hundreds.''
To claim that HCFA is efficient and is a great organization
is ludicrous. The 2 percent overhead that they have is because
they have shifted 10 percent to the providers. We do all the
work for HCFA now. All that work is done by the providers
through layers and layers of regulation and rules and
paperwork.
Every Medicare patient who walks into my office today is
asked by the nurse beforehand, ``The doctor may want to do
something that is not a covered benefit. Here is a sheet. You
can't sign this yet. He has to make sure he remembers to ask
you to sign this if he does anything to you. So, will you help
the doctor remember?''
We have another piece of paper that goes with every
Medicare patient now, so that in case I order an EKG that they
may not think was indicated, I have a patient sign it so that
if Medicare doesn't pay for it, they can be responsible for it.
The whole idea to say that HCFA has any resemblance-Mr.
Hash could not even answer the questions about his own
organization. Nobody in HCFA knows all the rules, and they will
all readily admit it, including the administrator.
So, to claim that we have this wonderfully efficient
organization, that it is administering Medicare, to me is
absurd. They are not efficient. They create inefficiency. They
have raised costs. I want to make one other point. There is no
question that a large portion of the solvency, and remember,
when we say ``solvency,'' we are talking about the time when
the Medicare part of the trust fund runs out of money.
In 2012, it starts paying out more than comes in. One of
the major reasons it is doing this is because we are collecting
a whole lot more Medicare money because a whole lot more people
are working at a whole lot higher salaries. It never goes away.
It doesn't matter how much you make in this country, you are
still going to pay 2.8 or 2.9 percent of what you earn.
So, as we get all hot and bothered about how well we have
done, what we have really done is what Dr. Waller said. My
partners are scared to death. They never code adequately on
Medicare because they never want to be accused that they over
billed Medicare because they don't want to go through all their
charts for an audit and lose their Constitutional rights to a
government which I consider an agency that is worse than the
IRS ever thought about being in terms of the way they treat
physician-providers and hospitals.
If you don't think that is true, go to a hospital and ask
them to show you how many people are there to provide the
record documents for Medicare. In my hospital that has 1,000
employees, 130 employees are there because Medicare has made
them be there to document what they are doing.
The assumption is that you are doing it wrong and you have
got to be able to prove it right, rather than you are innocent
and we are going to prove that you did it wrong.
Until we change that philosophy at HCFA, until we assume
that people are going to do the right thing, and catch the ones
who are doing it wrong, we are going to continue to have people
running away from Medicare.
In my community alone, today, Medicare patients can't find
a physician to care for them. They cannot. It is not money.
They don't want the hassle any more.
You know, I don't want this hearing to end with anybody
thinking HCFA is doing a great job. Because the job they are
doing is gumming up the works in terms of health care.
Are we doing great for patients on Medicare? Are we doing
better? Yeah, but HCFA isn't doing any better. We are doing
better because physicians and providers out there are
sacrificing their own income to make sure people are careful.
People aren't getting stents-the other point, Mr. Fleming,
and the point that wasn't made is we had a whole lot of people
who ended up having ``cabbages,'' coronary artery bypass
grafts, had their chest opened, of which about 5 percent die,
because the government wouldn't approve a stent. So they are
having an invasive procedure that cost Medicare a ton more than
having the stent put in.
So to say that HCFA is doing a great job, it fits with what
goes on in Washington. It tells you that we have no connection
with reality, the real world.
I want to ask one other question. If the error rate allows
$13 billion in errors now, and we are proud of that, we are
down to 7.9 percent, what is going to happen to get it down the
rest of the way.
Mr. Mangano. One of the things that we have encouraged HCFA
to do is far more education, providing more services to the
Medicare community to help them work their way through the
process. They need to do a better job explaining what the
regulation are.
Mr. Coburn. Okay. Let me ask you a question. Did you hear
my comment to Mr. Hash about why don't we just change it and
just go by blocks of time?
Mr. Mangano. Yes, I did hear that.
Mr. Coburn. What is wrong with that?
Mr. Mangano. You know, when you ask an Inspector General
what you would like to have, we would like to have as simple a
process as possible because it is real easy to enforce the law.
I think it is a novel approach.
Mr. Coburn. You know, I can only work 24 hours a day. If I
am billing Medicare for more than 24 hours, there is something
wrong there.
Mr. Mangano. Now, you would be surprised, but we have had
physicians who billed more than 24 hours in a day.
Mr. Coburn. I understand that, but I would also contend
with you that the vast majority of physicians in this country
sacrifice their family, sacrifice their social life, sacrifice
most of the things because they are seeing patients 12 to 15
hours a day.
The fact is that the last thing you want to do is cheat
Medicare. What they want to do is dedicate their lives to
taking care of folks.
The assumption that has come about is that physicians are
at a higher rate of defrauding the government in terms of
Medicare. Mr. Norwood and I had a conversation and the fact is
that I will bet on physicians as compared to the Members of the
Congress any day in terms of integrity, honesty and work ethic.
For us to allow them to be painted as something less than
working and caring for their patients I believe is wrong.
So, why hadn't that come back from the Inspector General
saying change this stupid system where it is something
manageable and measurable?
Mr. Mangano. We have on a number of occasions recommended
to HCFA areas where they could simply any number of different
kinds of----
Mr. Coburn. What has been their response?
Mr. Mangano. One of the areas that we were particularly
strong on was laboratory services. For example, back a number
of years ago we found it difficult to understand why some
laboratory tests would be covered in one part of the country
and not in other parts.
You already had that discussion so I won't go into that. We
recommended that they try to create more of a uniform policy
across the United States so people knew what was going to be
covered.
I know they did make some changes but I don't think they
went as far as they could have gone.
Mr. Coburn. Would you be so kind as to give us other
recommendations that you have made that they have not done?
Mr. Bilirakis. Well, I don't know that we should. Can you
respond to that in writing, sir?
Mr. Mangano. Sure. We will go back and look through it.
Mr. Bilirakis. You are very helpful here. But in a 5-minute
questioning and your 5-minute opening statement, that is just
scratching the surface, barely.
So, we would very much appreciate information from you that
might be helpful as we take a look at the overall picture. I
have already mentioned a number of areas to Dr. Coble.
How much time, sir, do you think it will take for you to
respond regarding my questions?
Mr. Coble. A week.
Mr. Bilirakis. Mr. Mangano, Dr. Coburn's question?
Mr. Mangano. I think we could probably do that in a week.
Mr. Bilirakis. Let me just ask Mr. Fleming. Mr. Fleming, it
may not be a bad idea if, rather than do it now, if you can
respond in writing to the problems that HCFA seems to be having
with your category approach.
Mr. Fleming. Yes.
Mr. Bilirakis. From what I understand, you all have done
everything you possibly can to get their attention regarding
recommendations that you have made.
Mr. Fleming. Mr. Chairman, there is nothing in the statute
that says you cannot use categories.
Mr. Bilirakis. But they insinuated that that was the case,
if you will recall. So, please respond in writing to us.
Mr. Fleming. I will do that.
Mr. Bilirakis. Ms. Gottlich, I don't know if you had
anything you wanted to offer, but by all means, please feel
free to do so.
Dr. Waller, I know you put up your hand. Did you want to
make a statement?
Mr. Waller. Just to comment on Dr. Coburn's questions and
throughout the hearing, the hearing is all about the patient.
Quality of care if the problem, not managed care. We have
overuse and misuse and under use of services and we need to put
a system together that will allow quality to improve.
I just will make one final comment about the private
marketplace. We don't have one. We don't have a truly
competitive marketplace and the reason we don't is because
fully a third or more of the payments for medical services
which come from our government, and we appreciate those, have
been under price control since 1984, and in a true competitive
marketplace, you can't have one when price controls are present
at that level.
So, I think that what we need is a system where the
entitled consumer of health care is the valued conscious
consumer of health care. When that occurs, we won't need to
mandate all the rights that we are trying to mandate.
Thank you very much.
Mr. Bilirakis. Before I yield to Mr. Brown, Dr. Coburn made
the statement comparing, I guess, the integrity of the members
of the medical profession and Members of Congress.
Well, I think the integrity of the medical profession is
really up there. There is no question about it. My son is one
of them and he is a primary care physician, not a specialist.
But, I sort of disagree in a sense. I think Members of
Congress in general are the most intelligent, basically one of
the most ethical people I have ever seen. There are rotten
apples in every bushel. God knows the medical profession has
its share, too. I have experienced it.
Having said that, Mr. Brown.
Mr. Brown. None of them are on this committee, Mr.
Chairman.
Mr. Bilirakis. No, not a member of this committee.
I just have one quick question for Ms. Gottlich, if I could
ask her a question. One advantage of Medicare is the rules of
the program are set out in statutes and regulations and they
are the same for all patients.
Patients in the private sector, as you know from them
calling you, have different rules depending on their health
plan and equally important, these rules are not always
disclosed by the health insurers.
What difference does that make if the patient knows what to
expect from a health plan? Do patients expect, do they think
Medicare will treat them more fairly than private insurance?
Ms. Gottlich. It makes a very big difference. And it makes
a very big different for those of us who represent them. If
someone comes to me and they say, ``I was denied by Medicare
for dental coverage'' I can say, ``Medicare doesn't cover
dental coverage except in limited circumstances'' because I
know what the rules are.
If they come to me in a private health insurance plan, I
have to get the plan, which is first a very big hassle and
delaying technique. Then I have to figure out where it is in
the plan. Then I have to figure out where the appeals procedure
is. That varies with each plan.
Under Medicare there is a set appeals procedure. So, the
process takes a lot longer for private insurance to try to
figure out where you are and what you get covered when you have
terms like skilled nursing care and they are not defined
anywhere in the private health plan.
Then you have to go look at State law and you have to make
arguments relating to Medicare. It is really very difficult and
you also get in the same context, different interpretations as
you do with different carriers.
At least in the Medicare regulations you have a definition
of what skilled nursing care is.
Mr. Brown. Do patients expect that Medicare will treat them
more fairly than private insurance?
Ms. Gottlich. Yes, I think that they do. I think for the
most part they think that things will be done in a routine way.
They will get the certain kind of same standard notices that
they see from time to time. If you are on a private health
insurance plan it is going to differ from each, insurer to
insurer.
Mr. Coburn. Would the gentleman yield?
Mr. Brown. Sure, I will yield.
Mr. Coburn. I just wondered, Ms. Gottlich, would it be your
opinion that the government ought to run all health care that
way?
Ms. Gottlich. I would like to see certainly Dr. Norwood's
Patient Bill of Rights.
Mr. Coburn. But that is not what this hearing is about.
Ms. Gottlich. No, it is not what this hearing is about.
Mr. Brown. I asked her that question, in her defense.
Mr. Bilirakis. Why don't we get into those better than
13,000 claims. What are those?
Ms. Gottlich. They run the gamut from every kind of
Medicare case that you can think of. The majority of them are
denials or terminations of home health care, skilled nursing
care and hospital care under Part A. But they will also be for
devices and technologies and services under Part B as well. The
issue would be whether the service is necessary.
Ms. Gottlich. We wouldn't take them if they were not
meritorious. Let me explain what that 13,000 means. The 13,000
is cases at a variety of different levels in the appeals
system. The claim comes to us. We do an initial analysis of
whether or not we are going to take the case.
If we decide we are going to take the case, it then goes
through reconsideration. Once it goes through reconsideration,
we decide again whether we are going to appeal to the
administrative law judge. If it gets to the administrative law
judge and we lose, we make this winnowing out.
We are not going to pursue a case that is not worthwhile
for a number of reasons. One, it is fraud on the system, and
No. 2, we have limited resources as well.
Mr. Bilirakis. Well, I appreciate that. Are these all fee-
for-service type cases, would you say?
Ms. Gottlich. No. They are fee-for-service and managed
care.
Mr. Bilirakis. What would you say is the percentage?
Ms. Gottlich. The overwhelming majority of our cases are
fee-for-service cases because a lot of our clients are duelly
eligible for Medicare and Medicaid so there are situations
where the Medicaid has paid first and we are trying, because
Medicaid is the payer of last resort and we are trying to get
Medicare payments where it is appropriate to do so.
Mr. Bilirakis. Is there anything further from the
subcommittee?
Mr. Brown. Thank you everyone.
Mr. Bilirakis. Yes, we appreciate your patience sitting
through the very lengthy first panel. You know, you have been
an awful lot of help. You will be even that much more of
benefit to what we do here if in fact you will submit, even if
you haven't received a particular question, to us any
suggestions you may have regarding the ``onerousness of HCFA,''
if you will.
I don't think anybody has thrown stones at HCFA in terms of
their lack of wanting to do the job well. But we also have
heard these horror stories of the paperwork and the over-
regulations. So we need your help in that regard.
Thank you very much.
The hearing is adjourned.
[Whereupon, at 1:40 p.m., the subcommittee was adjourned.]
[Additional material submitted for the record follows:]
Prepared Statement of the American Association of Orthopaedic Surgeons
The American Association of Orthopaedic Surgeons (AAOS),
representing 16,000 Board certified orthopaedic surgeons, appreciates
the Subcommittee on Health and Environment of the Committee on Commerce
for holding hearings to address Medicare's regulatory burden on
physicians. We would like to offer our perspective on this issue and
welcome the opportunity to work with the Subcommittee as you examine
the management of the Medicare program and the levels of burdens placed
on physicians through Federal regulations.
The AAOS shares the Federal government's concern about intentional
acts to defraud the Medicare program. There is no question that every
reasonable effort needs to be made to eliminate true waste, fraud and
abuse from the Medicare program. However, fraud and abuse regulations
should not be so complex and so difficult to follow that the honest,
vast majority of physicians wind-up making unintentional errors. We
also do not believe that these regulations should be so burdensome that
physicians and their staff end up spending more time trying to comply
with them and less time taking care of patients.
Navigating the complex maze of fraud and abuse regulations has
become a nightmare for physicians, burying them in an unprecedented sea
of ``red tape'' and administrative hurdles. More importantly, these
regulations are threatening access to quality health care services for
Medicare beneficiaries because physicians have less time to spend with
patients.
Federal regulatory requirements and their enforcement frustrate
physicians on a daily basis. Time once spent treating patients is now
being spent completing mandatory documentation and billing
requirements, as well as other regulatory obligations. Not only are
physicians spending more time away from treating patients, but also,
the Health Care Financing Administration's (HCFA's) burdensome and
complex requirements are making it difficult and sometimes impossible
for doctors to accept new Medicare patients. In some cases, physicians
are leaving the medical profession altogether. Moreover, physicians are
spending more time second-guessing the regulators and the enforcers
about whether they should be providing a particular service, instead
of--and without hesitation--doing what is in the best interest of the
patient.
The biggest problem in this area of Federal regulation is that
there is no ``bright line'' as to what constitutes ``illegal'' or
improper conduct. The presumption running though these regulations is
that physicians are violating the law and are guilty of defrauding the
government, unless they can document otherwise. We need rules and
regulations that are understandable, fair and, most importantly,
provide clear guidance about what constitutes proper and improper
conduct. Instead, we find the current environment to be confusing and
ambiguous--where law-abiding doctors are placed in an increasingly
hostile and adversarial relationship with the government.
In an effort to ensure that the regulatory requirements placed on
physicians do not adversely affect access to quality patient care, the
AAOS supports remedies that are consistent, predictable and clearly
understood by physicians. It is our hope that through oversight
hearings, we will be able to:
<bullet> Simplify and clarify the regulatory requirements placed on
physicians;
<bullet> Address the broad latitude HCFA has taken in interpreting its
regulatory authority;
<bullet> Examine the documentation requirements placed on physicians to
determine if they are achieving their intended goals;
<bullet> Examine HCFA's medical review process and explore how the
current process places the onus on physicians to show that they
are complying with HCFA's requirements without adequate due
process protections;
<bullet> Restore the physician-patient relationship to one where there
is trust between parties;
<bullet> Encourage cooperation between the government and physicians
rather than continue the current adversarial relationship; and,
<bullet> Apply regulations in a consistent, clear and understandable
manner.
As Congress tackled the enormous task of reforming the Internal
Revenue Service, these hearings begin the effort to improve HCFA and
its administration of the Medicare program. By taking this step we will
ensure that a reasoned approach emerges that will reduce the incidence
of real fraud and unintentional errors while freeing up physicians to
do more of what they were originally trained to do--take care of
patients.
The AAOS has identified a number of specific issues where
congressional oversight is necessary.
Aggressive and Overreaching Authority by Federal Agencies
We believe HCFA and the Department of Health and Human Services has
overstepped their authority in their efforts to eliminate Medicare
fraud and abuse by using aggressive, overzealous enforcement techniques
against physicians without sufficient evidence of intentional
wrongdoing.
For example, the Anti-Kickback Statute was, in theory, intended to
promote the integrity of the health care system. While it has achieved
this goal, in practice, the statute also has stifled innovative
business practices that could have saved the government money. The 1972
statute was originally enacted to address bribes and kickback
arrangements in the health care arena. Congress broadened its scope in
1977 to address ``any remuneration'' giving the Office of Inspector
General of the Department of Health and Human Services (OIG) great
latitude in interpreting its mandate and applying this law to business
arrangements far beyond kickback and bribes. While Congressional intent
was to prevent unscrupulous behavior, the statute has allowed the OIG
to develop a confusing patchwork of complex regulations and advisory
opinions concerning, joint ventures, leases, discounted services,
personal service contracts, that significantly limit innovation in the
integrated health care delivery marketplace.
HCFA also has taken broad latitude in interpreting its authority by
implementing initiatives such as the ``Who Pays? You Pay.'' campaign.
This initiative attempts to enlist Medicare beneficiaries to inform on
their physicians if they suspect their Medicare bill is fraudulent.
Unfortunately, it has the serious potential to damage the physician/
patient relationship by creating an atmosphere of distrust between the
doctor and patient when an open and honest relationship is essential to
effective care.
The OIG also recently unveiled its ``Compliance Program Guidance
for Individual and Small Group Physician Practices.'' This compliance
program significantly raises the stakes for hardworking and honest
physicians who currently make every attempt to comply with the law. Not
only is the creation of a plan extremely labor intensive and expensive,
it has the potential to shift the burden of proof to the physician.
The OIG has stated that it only prosecutes offenses that are
committed with actual knowledge of the falsity of a claim, reckless
disregard or deliberate ignorance of the truth or falsity of a claim.
But by having an effective plan in place, virtually any innocent
billing error or mistake could trigger OIG action or prosecution since
a compliance plan in place will indicate that the physician knew or
should have known that a certain activity violated the law. While OIG
officials may claim that the presence of an effective compliance plan
will be taken into consideration if punitive action is necessary due to
alleged billing errors, evidence of a compliance plan could be
interpreted to transform the knowingly and willfully standards of law
into per se violations.
Complex and Contradictory Regulations and Increased Documentation
Requirements
Many rules promulgated by HCFA are so confusing that they convey no
clear indication of how the agency will deal with a particular practice
leading physicians to be unsure about their duties and liabilities. We
need better guidance to negotiate the complex maze of regulatory
requirements.
For example, orthopaedic surgeons in the AAOS have been perplexed
about the in-office ancillary services provisions of ``Stark II'' and
HCFA's proposed rule requiring suppliers of durable medical equipment
(DME) to obtain a surety bond. The proposed rule to ``Stark II''
excludes DME from the in-office ancillary service exemption, thus
prohibiting the disbursement of DME in-office. Yet, under the surety
bond proposed rule, HCFA states that physicians will not have to meet
the DME surety bond requirement--if they are providing these items
incident to patient care. It seems that HCFA is recognizing that DME is
distributed by physicians in-office, even though the proposed rule to
``Stark II'' seems to prohibits it.
Thus, it appears to the AAOS that HCFA has two proposed rules that
have contradictory statements. Are physicians in the various practice
arrangements allowed to disburse DME incident to patient care without
violating the "Stark II?" Do physicians need a surety bond to disburse
these items in office? If they have a surety bond, and are designated
as suppliers by HCFA, then how is ``Stark II'' applicable?
Since DME is such an integral, customary, and appropriate part of
patient care, commonly provided to patients as an in-office ancillary
service, the blanket prohibition in ``Stark II'' makes little sense,
and the AAOS would strongly urge both HCFA and Congress to revisit this
issue, so physicians have clear guidance about the disbursement of DME.
In addition to this DME issue, the AAOS is greatly concerned about
the enormous complexity of the proposed rule related to the physician
ownership and self-referral statute known as ``Stark II.'' The AAOS
maintains that HCFA's proposed rule issued in January 1998 does not
provide clear, unambiguous guidance for compliance. Instead, it has
added even more confusion to what activities are permissible with
regard to the ban on physician self-referral. While the AAOS is hopeful
that the final rule for ``Stark II'' will address many of these
concerns, Congressional oversight is necessary and legislative remedies
may be appropriate to achieve Congress' intent and to provide clear
guidance to physicians.
The AAOS also is concerned with HCFA's increased documentation
requirements for physicians when they perform and bill for evaluation
and management (E&M) services. There seems to be a presumption that
physicians who make errors in coding these services on Medicare claim
forms are ``guilty'' of defrauding the system--unless they can prove
otherwise. Even though HCFA has attempted to ease these documentation
requirements, physicians still can run afoul of the rules and
regulations.
For example, when coding modifier-25 is used with CPT codes for E&M
services, they may trigger an audit even though their usage is
perfectly legitimate and saves on paperwork and reduces the
administrative burden for both physicians and claims reviewers.
Modifier-25 is used in billing when additional services are provided to
beneficiaries beyond the services described by E&M codes. This modifier
was intended to reduce the documentation requirements imposed on
physicians. However, because their usage may trigger an audit,
physicians are forced to submit claims for each additional service
supported by separate documentation for each service in order to avoid
triggering audits.
In sum, confusing, complex regulations and documentation
requirements present the physician with a maze of nearly
incomprehensible rules for which non-compliance may be inevitable even
for those with the best of intentions of filing appropriate claims for
services provided under the Medicare program.
Limited Due Process
Through pre-payment reviews and post-payment audits conducted by
carriers, HCFA engages in audits of physicians on a random basis
without probable cause. Even while HCFA acknowledges that much of what
is uncovered in these reviews and audits are simple billing mistakes,
lack of documentation or disagreement on treatment procedures, claims
submission has become legally treacherous for physicians. Fear of
triggering an audit has actually led to ``downcoding''--a practice of
underbilling Medicare for services provided to Medicare beneficiaries--
in order to reduce the chance of triggering an audit.
Under the current scheme, physicians are exposed to purely random
audits without probable cause and without knowing of the criteria used
by HCFA or its carriers to make its determinations. And once an audit
is triggered, physicians are subject to recoupment of alleged
overpayment, penalties and interest through the use of extrapolation
techniques. The only remedy for physicians once they receive an
overpayment notice is to open their practice to a statistically valid
random sampling of claims to contest HCFA's findings, which, by HCFA's
own admission, is very disruptive to a health care practice. Physicians
would like the government to define the rules, parameters and standards
that outline the scope of these audits as well as clearly identify the
criteria used to trigger audits.
Conclusion
The vast majority of physicians are honest and dedicated
individuals who make every attempt to comply with Medicare's complex
requirements. Their primary goal is to provide the highest quality care
to their patients. Physicians understand the need for regulations in
the health care system. However, the rules that they are being asked to
comply with and support should be presented in a clear and precise
manner so that they can practice their profession without fear of
punishment because they could understand what was expected of them.
The AAOS is very pleased that the Congress is taking an active role
to ensure the Medicare program functions efficiently for all
stakeholders. Through Congressional oversight hearings, we will be able
to examine what is working and what is not working in the current
system.
As Congress moves forward, the AAOS has several recommendations
that would address many of physicians' concerns:
<bullet> Simplify and clarify HCFA regulations related to the Medicare
program so that they are less burdensome and more easily
understood by physicians;
<bullet> Promote a more accommodating environment between physicians
and Federal agencies through more collaborative education
efforts;
<bullet> Establish adequate due process protections and a threshold
requirement of probable cause when investigating health care
professionals providing services under the Medicare program;
<bullet> Develop mechanisms to hold HCFA and other government agencies
accountable for oversight and review activities;
<bullet> Delay when a law goes into effect, as well as all enforcement
activities, until final regulations are issued;
<bullet> Eliminate the prohibition of administrative or judicial review
of Medicare payment and review methodology; and,
<bullet> Eliminate the ``scoring'' of budget savings as a result of
fraud and abuse activities. As long as the pursuit of fraud is
viewed as a ``bounty'' or revenue raising activity, cost-
containment measure, or a way to expand program benefits,
overzealous investigations of physician coding and billing
activities will continue.
Again, we appreciate the opportunity to share with the Subcommittee
our concerns about the unnecessary burdens currently placed on
physicians by the activities of HCFA and the OIG, and we look forward
to working with you to ensure quality patient care under the Medicare
program.
______
Prepared Statement of Steven M. Mirin, Medical Director, American
Psychiatric Association
The American Psychiatric Association (APA), the medical specialty
society representing more than 42,000 psychiatric physicians
nationwide, is pleased to submit this statement to the Subcommittee on
Health and Environment at its hearing on the management of the Medicare
program by the Health Care Financing Administration (HCFA). First and
foremost, Mr. Chairman, the APA commends you and the Subcommittee on
Health and Environment for your concern about our patients and
profession by conducting today's hearing.
We acknowledge at the outset that the task of day-to-day
operational management of Medicare must be daunting. By its own
statement, HCFA--through Medicare, Medicaid, and the new children's
health insurance program (SCHIP)--is the largest health insurance
administrative entity in the nation. It will process almost a billion
claims submitted by some three-quarters of a million physicians, non-
physician health professionals, hospitals, and other health providers
and suppliers. On the Medicare side alone, HCFA is the insurance
company for 39 million elderly and disabled beneficiaries.
The sheer size of the Medicare program alone is staggering. Nor is
Medicare a static target. As you know, the program is subject almost
every year to numerous legislated changes (335 in the Balanced Budget
Act of 1997, according to HCFA), including in recent years the
development of extraordinarily complex system for paying physicians
(i.e., the RBRVS-based fee schedule). Budget-driven priorities have led
successive Administrations and Congresses to farm the statute for
short-term savings necessitating complex changes in payment rules, or
for longer-term changes in program administration (i.e., stepped-up
efforts to target program fraud and abuse).
Each of these developments requires the promulgation through public
process of new regulations and the development of a variety of complex
instructions to HCFA contractors (i.e., Medicare carriers and fiscal
intermediaries) on how to administer claims on a day-to-day basis.
Thus, it is small wonder that as the covered population and covered
services have grown, and as the various mandates passed on to HCFA by
successive Congresses and Administrations have also grown, the Medicare
program itself has become extremely complex and, from the perspective
of the physicians represented by the American Psychiatric Association,
increasingly unwieldy, unresponsive, and in many cases apparently
hostile to the physicians who provide medically necessary care to our
patients who are Medicare's beneficiaries.
APA would like to associate itself with the excellent remarks
presented to the Subcommittee by Yank D. Coble, M.D., on behalf of the
American Medical Association. We also believe that the Subcommittee
would be interested in the specific problems APA members--and their
patients--are now experiencing with the Medicare program. This
statement will focus on these issues.
On a general basis, APA as the national medical specialty for
psychiatrists is increasingly hearing grave concerns from our
physicians in the field that they and the patients they serve feel
under siege by a Medicare administrative operation that is too-often
unresponsive, insensitive, and hostile. We believe that much of the
problem stems from the autonomous nature of HCFA carrier operations.
As you know, Medicare covers services that are medically reasonable
and necessary, entitles beneficiaries to these services, and requires
appropriate documentation for claims filed. Medicare uses roughly
twenty-four private contractors (the carriers) to administer claims
filed under Part B of the program.
As contractors, carriers are subject to specific contractual
requirements from HCFA that govern their responsibilities. Despite the
fact that Medicare is a federal program with supposedly uniform
national coverage and payment criteria, carriers in fact are given
considerable autonomy and flexibility in their administration of Part
B. For example, carriers are left to develop their own local medical
review policies (LMRPs). The LMRPs are primarily a program integrity
tool to specify criteria to determine whether a service is covered and
to set standards for determining whether a covered service is
reasonable, necessary, appropriate. The LMRP is not supposed to
restrict or conflict with national coverage policy.
Too often, however, the LMRPs provide the means for widespread
variation between carriers in the treatment of claims common to all
carriers. This is particularly true of psychiatric services, where
services defined as reasonable and necessary for beneficiaries in one
carrier jurisdiction are denied as not being reasonable and necessary
in another. This results in two major distortions of what should be a
national program. First, patient access to identical services varies
from carrier to carrier. Second, documentation requirements imposed on
physicians for identical services vary from carrier to carrier. Taken
together, these two important problems can and do result in reduced
access to care for our patients and increased hassles for
psychiatrists.
General carrier-related problems and anomalies associated with
psychiatric services include the following:
<bullet> Alzheimer's Disease Coverage: The Medicare Carrier Manual
stipulates that Alzheimer's patients are entitled to
psychiatric services. A number of carriers, however, have been
routinely denying any psychotherapy services for patients with
a primary diagnosis of Alzheimer's disease, no matter what
stage of the progressively degenerative disease the individual
patient is in or how minimal their cognitive impairment may
actually be.
<bullet> Drug Management: Pharmacologic management (CPT-90862) is a
service clearly covered by Medicare. APA review of carrier
LMRPs shows widespread variation from the AMA's CPT manual that
serves as the descriptor for the service.
<bullet> Family Therapy: This is another service clearly covered by
Medicare, but APA members report that some carriers routinely
deny all claims for the service, even when full documentation
is provided.
<bullet> Review Triggers: Medicare's coverage of outpatient
psychotherapy services is not subject to annual visit limits.
Increasingly, however, carriers are developing LMRPs that
subject all claims above a certain number (typically 20) to
intensive review (in some cases 100% review). This creates a
major administrative hardship for psychiatric physicians who
often practice in a solo office environment and is a
significant detriment to quality patient care.
Real-world examples of carrier specific issues include the
following:
<bullet> In New York, the carrier, Empire, is routinely subjecting 100%
of claims for CPT codes 90846 and 90847 (family therapy with
and without the patient present) to prepayment reviews. This
occurs every time these codes are submitted, even when Empire
has approved the same service for the same patient by the same
psychiatrist the month before.
<bullet> In Massachusetts, Maine, New Hampshire, and Vermont the
carrier, NHIC, has been routinely denying medical family
therapy claims, even though family therapy is clearly a benefit
covered under Medicare. I note that psychiatrist appeals of the
denials are usually decided in favor of the psychiatrists.
<bullet> In Arkansas, one of our members reported that his hospital had
started a partial hospitalization program (PHP) at the urging
of managed care organizations who told them frequently that
patients were not critical enough for acute hospitalization but
would be appropriate for partial hospitalization care if the
hospital would establish a PHP. Less than a year after the
hospital instituted its partial hospitalization program they
were forced to shut it down because the Arkansas carrier
decided to restrict all PHP care in response to fraud committed
by a single mental health center in Arkansas that had
contracted with an out-of-state company to manage their partial
hospitalization program. While it certainly may have been
appropriate to shut down the offending operation, it should not
have resulted in the effective shutting down of every
legitimate partial hospitalization program in the state as
well.
In addition to the carrier-specific anomalies cited above, there
appear to be general problems in the ways in which HCFA identifies
potential problems within the Medicare program that adversely affect
psychiatric services to patients. For example, we understand that HCFA
uses ``BESS'' data (Part B Extract and Summary System data) to flag
anomalous code usage and notify carriers that code usage within their
charge locality is at variance with national averages, and to instruct
carriers to develop LMRPs to respond to the variance.
Yet there seems to be no effort made to determine why the variance
exists. It may well be that physicians in one state are encouraged by
the carrier to use one code, while those in another are encouraged by
their carrier to use a different code. Or it may be that a few
individual physicians or other health professionals are outliers, using
a disproportionately large share of the codes within a carrier's
locality. Thus, coverage policies affecting thousands of physicians and
the patients they serve seem to be made on the basis of abstract
statistical data analysis, not on the basis of a determination that a
specific problem exists.
Psychiatrists' problems with Medicare are not confined to carrier
interface. Under current law, Medicare beneficiaries are required to
pay a discriminatory 50% copayment for outpatient psychotherapy
services. As a result of the 1990 budget law, Medigap insurance
policies are supposed to cover the 50% copayment, but 10 years later,
we continue to hear from psychiatrists who are having difficulty in
persuading Medigap insurers that they are in fact liable for coverage
of the 50% copayment.
In another example of how HCFA policy-making can have a sweeping
impact on physicians, in July 1999, HCFA released an unannounced and
complex new rule establishing a new ``Patients Rights'' condition of
participation for Medicare and Medicaid hospitals. Included within the
patient's rights is a series of provisions governing the use of
seclusion and restraint of patients in acute medical and psychiatric
settings. These sweeping standards amount to the imposition of untested
standards of clinical care by federal regulatory fiat.
Issued as an interim final rule, the seclusion and restraint
standards were put in force on 30 days notice (i.e., they were
enforceable as of August, 1999) without benefit of prior public comment
or field testing. A year later HCFA has still not issued a final rule,
nor has it responded to the thousands of comments from psychiatrists,
other physicians, and hospitals, all of whom have pointed out major
clinical problems with the interim final rule.
Despite the fact that the rule affects every Medicare/Medicaid
hospital and imposes burdensome and sweeping patient care requirements
that invariably will affect hospital staffing and require more
intensive patient interaction per capita, the interim final rule
asserts that costs associated with compliance will be minimal. This is
palpably untrue, but HCFA has failed to respond to our requests for
substantiation of its cost analysis.
APA, AMA, and the hospital community have exhausted all efforts to
engage HCFA in a meaningful dialogue that might result in the
development of clinical consensus. Yet the standards remain in force,
despite widespread and thoughtful disagreement from expert clinicians,
and despite compelling evidence that some hospitals may not be able to
comply with the standards, thus risking decertification. At a minimum,
the rules represent a substitution of the inflexible judgment of a
bureaucrat for the independent clinical judgment of the physician
responding to the needs of his or her patient.
Ironically, we believe that the rule will result in reduced access
to needed inpatient psychiatric care, as hospitals may screen out
patients with a track record that suggests the likelihood of restraint
and or seclusion. Such patients will more than likely end up in the
forensic system where they are much less likely to receive the care
their mental disorders require. This will be the unhappy result of the
establishment of clinical practice standards by bureaucratic fiat, and
furthers HCFA's image as unthinking, unresponsive, and capricious.
Finally, our members in the field tell us that a major problem with
Medicare is a lack of responsiveness and accountability throughout the
system. For example, carriers have told our members that Carrier
Advisory Committee meetings are not subject to federal sunshine
requirements, and thus that the CACs are under no specific obligation
to open up their meetings to the concerned physicians and their
representatives who are directly affected by CAC deliberations. In
addition, there is widespread reluctance throughout the system to put
information and interpretations about claims, particularly about denial
policies, in writing. Thus, physicians are forced to rely on oral
statements from carriers which cannot subsequently be used to justify
future claims.
Mr. Chairman, to sum up, we believe that HCFA has an unenviable and
complex job of administering the largest health insurance program in
the United State. Psychiatrists, as any group of physicians, are
interested only in the provision of medically necessary care to our
patients. We would welcome the opportunity to work in partnership with
Congress and HCFA to craft common sense solutions to Medicare's myriad
operational problems with the object of improving patient access to
care.
To that end, we make the following recommendations on behalf of our
patients and our profession:
1. HCFA should conduct a systematic review of carrier operations with
an eye to removing widespread variations in coverage and review
practices by carriers. There is no justification for one
carrier to routinely reject services that another carrier
routinely covers.
2. 100% claims review practices effectively constitute carrier
harassment of physicians and should be halted. If there is a
specific problem with a specific code, HCFA and the carriers
should work with local and national physician organizations to
understand first if there is in fact a problem and second to
craft a solution to the identified problem.
3. HCFA should follow administrative procedures. We echo the AMA's
recommendation that HCFA should be required to conduct accurate
regulatory impact and cost analyses and to fully account for
the burden of complying with a proposed regulation before
putting them in force.
4. HCFA should conduct nationwide physician education workshops. If, as
HCFA suggests, there are widespread inadvertent claims
submission errors, then it is logical that the errors stem from
program complexity and lack of clear direction on how to
properly file claims. Rather than assuming criminal intent,
HCFA should acknowledge the necessity for widespread
cooperative education of physicians and other providers.
5. Carriers should be required to provide explanations of coverage
decisions and interpretations in writing in an understandable
form. If physicians request guidance from carriers on how to
file claims and which codes to use, the information should be
provided in writing when requested. Carriers should not be
allowed to avoid responsibility for the advice that they give
to physicians, nor should physicians be subject to sanctions
and penalties for following carrier guidance.
6. HCFA and the carriers should be instructed to reduce the adversarial
nature of communications with physicians. Too often carrier
communication with individual physicians is predicated on the
assumption that the physician is trying to defraud the Medicare
program. To the contrary, the overwhelming majority of
physicians are simply trying to render medically necessary care
to their patients and to be paid with a minimum amount of
bureaucratic hassle for the services rendered.
Thank you for the opportunity to testify.
______
Additional Comments for the Record of Robert R. Waller, M.D., President
Emeritus, Mayo Foundation and Chairman, The Healthcare Leadership
Council
I would like to thank you for inviting me to appear before your
Subcommittee on Health and Environment to convey the views of the
Healthcare Leadership Council on the negative effects that Medicare's
complexity has on patient care. In addition, I would like to take this
opportunity to comment further on some of the issues outlined in my
testimony as well as some other related matters.
Mr. Chairman, many of the problems with the Medicare program, which
were raised by members and witnesses alike during the hearing on June
27th, would be eliminated if the program was replaced with a private,
value-based, competitive system. Under such a system, plans and
providers would compete with one another to offer--not just the highest
quality, most innovative care--but also the most user-friendly delivery
of care. Competition between plans would ensure that the current
Medicare program, which, as we heard during the hearing, has resulted
in thousands of outstanding claims being reviewed by the Center for
Medicare Advocacy, would be replaced by a program that offered a higher
quality of care and more efficient coverage, in a less administratively
complex program.
The current system has no incentives for efficiency. In the
marketplace, competition is the mechanism by which we assure that
prices are fair and that services are provided with maximum efficiency.
Competition rewards informed consumers with lower prices and better
quality of care, and punishes producers who are inefficient.
Competition also rewards innovation and resourcefulness. Under the
current Medicare program, price controls prevent prices from varying;
thus, no incentive exists for either innovation by physicians or price-
comparison by beneficiaries. By allowing providers to participate in a
market reflecting actual economic conditions, they can distinguish
themselves by competing for patients based on quality and value.
No one benefits--not the government, not the provider, and
certainly not the patient--when providers must make the hard choice of
whether to reduce their services to beneficiaries in the face of
Medicare's misguided payment policies. Furthermore, beneficiaries would
rather be welcomed by health care providers as valued patients and
customers than be viewed as wards of a flawed and poorly conceived
public program. Beneficiaries under a competitive value-based system
would be rewarded tangibly for seeking value. The result of such a
program will be a health care delivery system that is patient centered,
not one that simply achieves a regulatory standard.
In sum, price controls don't save, they cost--they cost us in lower
quality, less innovation, and wasted energy. Patients, providers and
taxpayers all suffer because the distortions have become so great as to
become the central features of the system.
False positive projections of a healthy trust fund reduce the
incentive for reform. Unfortunately, estimates regarding the integrity
of the Medicare program, provided in annual updates on the program's
date of insolvency, are not only delaying these much needed fundamental
reforms, but do not accurately reflect Medicare's financial health.
Without reform, the program is expected to face mounting pressures in
coming years, arising not only from the rapid growth in the number of
eligible people but also from increases in the cost of care per patient
as medical technology advances and longevity of life increases.
Medicare trustees noted in their 2000 report of the Hospital
Insurance (HI) trust fund that under a less promising, higher cost
economy, Medicare bankruptcy could occur as early as 2012. By the
trustees' own admission, projecting the health of the trust fund, even
a short time into the future, can yield precarious estimates. The
following are quotes from the 2000 trustees' report:
``Without corrective legislation, the assets of the HI trust
fund would be exhausted within the next 12 to 23 years under
the high cost and intermediate assumptions. The fact that
exhaustion would occur under a fairly broad range of future
economic conditions, and is expected to occur in the not-
distant future (under most scenarios) indicates the importance
of addressing the HI trust fund's financial imbalance.
Today's booming economy means higher wages and more employment. For
Medicare, this means that the 2.9% Medicare tax has applied to a much
larger base of payroll in recent years. Employment taxes flowing into
the HI trust fund dramatically increased by 19% over the past 2 years
(from $112.7 billion in 1997 to $134.4 billion in 1999). These revenues
cannot be depended on in the coming years. Besides the possibility of
the economy slowing down, the number of people working and paying the
Medicare tax will soon begin declining as baby boomers begin retiring
in 2010. Once the baby boom generation has fully entered retirement by
2030, workers per beneficiary will decrease from the current 4.0 to
2.3. While the baby boom population currently pays 57.7% of all payroll
taxes, in thirty years, that number will drop to less than 2%.
Growth in Medicare spending since the BBA passed has slowed
dramatically--much more so than was projected at the time of passage.
Medicare spending increased by only 1.5% in 1998, compared with a
projected 5.7% by the CBO when the BBA was enacted. And in 1999, for
the first time in history, Medicare spending actually declined,
dropping by about 1% instead of increasing by 5% as CBO projected. The
substantial documented hardship these reductions have created
demonstrate that continuing provider cuts in the current Medicare
program cannot be depended on to sustain Medicare in the long run.
Just before the Balanced Budget Act of 1997 was passed, the
Medicare trust fund was projected to run out of money in 2001.
Immediately upon passage of the BBA, the Medicare bankruptcy projection
was shifted from 2001 to 2007. What many do not realize is that barely
two of these additional years were attributed to provider cuts. The
majority of this trust fund solvency extension was due to the law's
requirement that $174 billion in home health spending during the
ensuing 10 years become a new responsibility of the Medicare Part B
trust fund instead of the Medicare Part A trust fund as it had
traditionally been.
While growth in home health spending has slowed dramatically since
passage of the BBA--even more than was intended by the provisions
therein (it grew on average by 21.9% a year from 1992 to 1997, and has
slowed to -26.9% since the BBA)--relieving the Part A trust fund of
this high-cost item has contributed significantly to the healthy
appearance of the Hospital Insurance trust fund. However, transferring
the responsibilities of the Part A trust fund to the mostly taxpayer-
funded Part B trust fund is not an option for ensuring that the
Medicare program can continue to provide high quality health care
benefits into the future.
I emphasize these facts because, despite the trustees' warnings, I
believe that these false positive reports of the HI trust fund's safety
and soundness have indeed created a sense of complacency among
policymakers. Indicative of this is the fact that earlier this year
there was a marked change of course in the Medicare debate. While the
year began with momentum to fundamentally reform Medicare, it is ending
with the lesser goal of creating a Medicare prescription drug benefit,
without comprehensively reforming the program. While we believe
strongly in the need to provide seniors increased access to
prescription drugs, the absence of reform, along with expanded
benefits, will only serve to perpetuate the inefficiencies and
complexities of the current program.
Since it appears that comprehensive Medicare reform will not occur
in the immediate future, I will elaborate on a few areas that I believe
could be addressed now.
The complications involved in the seemingly simple matter of
Medicare payments has devolved billing errors into a morass of health
care fraud. With no unity among the Department of Justice (DOJ), the
Health Care Financing Administration (HCFA), and the Office of the
Inspector General (OIG) in their approach to fraud prevention and
investigation, voluntary disclosure among providers is not possible.
Because there is a lack of clarity and understanding as to how the
government will respond to entities who willingly come forward to
report billing errors, any effort on behalf of providers to self-police
is difficult, if not impossible.
For more than a year now, the Administration on Aging (AOA), HCFA,
and the OIG, together with AARP and the DOJ, have been working to
develop a nationwide outreach campaign to educate seniors on how to
recognize and report Medicare fraud. However, no similar coordinated
effort has been formalized by the government to help providers combat
fraud and abuse.
As I mentioned in my testimony, the Healthcare Leadership Council
(HLC) has formed an Industry and Government Partnership for
Accountability Task Force, which consists of organizations representing
every segment of the health care system. To date we have had several
dialogues with these agencies regarding the intricacies of complying
with Medicare regulations. The Industry and Government Partnership for
Accountability plans to continue to undertake a significant effort to
educate opinion leaders and top government officials and engage in a
constructive effort to resolve this issue. The HLC believes that
formalization of such a partnership, with specific responsibilities to
Congress to ensure clarification and consistency in the enforcement of
Medicare rules, would help move the current system closer toward a
model based on education and remediation.
The uncertainty of agency actions raises another concern that I
believe deserves considerable attention. In my testimony I referred to
the dramatic difference in the cost of compliance that HCFA and an
outside organization estimated for the recently issued medical records
privacy rule. A formalized approach in preparing cost-benefit analyses
would not only minimize the uncertainty that is associated with these
rulemakings, but would also ensure that only those rules that maximize
net benefits would be finalized.
As you know, under Executive Order 12866, covered agencies are
required to submit their ``significant'' rules to the Office of
Management and Budget (OMB) before publishing them in the Federal
Register. Agencies are also required to prepare a detailed economic
analysis for any regulatory actions that are ``economically
significant.'' This economic analysis is to include an assessment of
the costs and benefits anticipated from the action as well as the costs
and benefits of ``potentially effective and reasonably feasible
alternatives to the planned regulation.''
In January 1996, the Office of Management and Budget (OMB) issued
``best practices'' guidance on preparing cost-benefit analyses under
the order. The guidance gives agencies substantial flexibility
regarding how the analyses should be prepared, but also indicates that
the analyses should contain certain basic elements and should be
``transparent''--disclosing how the study was conducted, what
assumptions were used, and the implications of plausible alternative
assumptions.
However, GAO testimony submitted in June, 2000, ``Procedural and
Analytical Requirements in Federal Rulemaking'', found that many
agencies were not incorporating the best practices set forth in the
OMB's guidance, including the failure to discuss alternatives to
proposed regulatory action and assess the uncertainty associated with
the agencies' estimates of benefits and/or costs. The GAO has
recommended that the OMB's best practices guidance be amended to
provide that economic analyses should (1) address all the best
practices or state the agency's reason for not doing so (2) contain an
executive summary, and (3) undergo an appropriate level of internal or
external peer review by independent experts. Formally implementing
these guidelines would create a critical threshold that would have to
be met before potentially damaging changes are made to the Medicare
program.
As long as the viability of a provider's business is subject to our
ability to analyze and correct any ``rosy scenario'' assumptions used
in government cost-benefit analyses, we have no choice but to divert
our attention, energy and resources at the expense of patients.
Finally, the sacrifice in innovation spills over into the non-
profit health care sector. That is why, Mr. Chairman, it is important
to note that non-profit organizations--not just the for-profit
community--support changes to the Medicare program that would rely on
competition. These organizations, including the Mayo Clinic, treat
patients who come from widely varying socioeconomic backgrounds and who
are represented by private and public health plans. We all believe that
fundamental changes are the only way to ensure that Medicare
participants are not left behind the medical technology curve, but,
rather, are beneficiaries of high quality, innovative, and patient-
centered health care delivery system.
______
Department of Health & Human Services
Office of Inspector General
July 6, 2000
The Honorable Tom Coburn
House of Representatives
Washington, D.C. 20515
Dear Mr. Coburn: In my testimony on June 27 before the House
Committee on Commerce, Subcommittee on Health and Environment, you
asked me to provide you with some examples of recommendations that the
Office of Inspector General has made to reduce the complexity of, or
simplify the Medicare program.
Over the years, we have addressed the problem of complexity in our
reports and in testimony before the Congress. Examples include our
recommendations to:
<bullet> Require that all Medicare carriers use uniform prices when
reimbursing outpatient prescription drugs.
<bullet> Equalize payments for ambulatory surgical centers and hospital
outpatient departments when the same service is provided.
<bullet> Replace Medicare's complex and vulnerable cost-based
reimbursement systems for nursing homes and home health, which
tend to be very cumbersome and complex and include cost
reports, with prospective payment systems.
<bullet> Eliminate differences in payments to physician offices when
hospitals purchase physician practices.
<bullet> Develop product classification lists for orthotics not only to
ensure that Medicare carriers can effectively verify that the
correct amount is being billed for each item, but also to
reduce the confusion suppliers may face in applying current
orthotics codes.
In addition to our formal studies, we are sometimes called upon to
provide advice during the course of day to day discussions about
current Medicare payment, coverage, or administrative issues. In this
context we also make recommendations to simplify Medicare rules. One
good example is our advice to make Medicare coverage of laboratory
services uniform among the Medicare contractors, recognizing that
laboratory companies often operate across State and Medicare contractor
boundaries.
Not only do Medicare policies need to be as simple as possible, but
so do the systems used to submit bills and service beneficiaries and
health care providers. The program needs to be understandable and easy
to use by both. While adequate controls must be in place to ensure that
only legitimate entities are paid for covered services, the program
cannot be so complex and cumbersome that the deliverance of timely,
quality care is hindered.
Therefore, in addition to making recommendations to simplify the
program, we have conducted studies to obtain feedback from
beneficiaries and health care providers regarding Medicare operations
and program requirements. For example, we have conducted satisfaction
surveys of:
<bullet> both fee-for-service and managed care beneficiaries;
<bullet> beneficiaries whose health maintenance organizations withdrew
from the program;
<bullet> physicians regarding their use of and satisfaction with
certifications of medical necessity for medical equipment and
supplies; and
<bullet> physicians regarding their experiences with managed care.
In the same vein, we have conducted studies of the
understandability of marketing materials for Medicare+Choice programs.
I hope these examples give you a flavor for the kind of work we do
to help the Medicare program operate as smoothly as possible. It is
sometimes difficult to balance the need for program controls with the
need for simplicity, but we try our best to find ways to do so.
I hope this letter is responsive to your questions. Please feel
free to contact me, or your staff may contact Helen Albert, Director
for External Affairs at (202) 260-8610 if we can be of any assistance.
Sincerely,
Michael F. Mangano
Principal Deputy Inspector General
cc: The Honorable Michael Bilirakis, House of Representatives
The Honorable Sherrod Brown, House of Representatives
______
Department of Health & Human Services
Office of Inspector General
July 6, 2000
The Honorable Charles Norwood
House of Representatives
Washington, D.C. 20515
Dear Mr. Norwood: Enclosed is our response to the question you
posed during the June 27th hearing about the composition of the savings
the Office of Inspector General (OIG) reports to the Congress. Also
enclosed is a chart by provider of the health care savings that OIG
reported in Fiscal Year 1999.
If you have any additional questions, please call me or have your
staff contact Helen Albert, Director of External Affairs, at (202) 260-
8610.
Sincerely,
Michael F. Mangano
Principal Deputy Inspector General
Enclosures
cc: The Honorable Michael Bilirakis
The Honorable Sherrod Brown
Savings Reported by the Office of Inspector General
Question: You have reported savings resulting from OIG work of
$12.6 billion in Fiscal Year 1999. What are these savings exactly and
how are they realized?
Answer: The OIG measures its goal of having a positive impact on
HHS programs in part by the savings that result from its work. These
savings are categorized into three major types: (1) investigative
receivables, (2) audit disallowances, and (3) funds put to better use.
Investigative Receivables--This category contains the monetary
receivables attributable to our investigative activities. This category
represents all fines, restitutions, settlements and recoveries
generated by judicial or administrative action resulting from OIG
investigations. Thus, criminal fines and civil judgements (whether
levied by a Federal or State judge, or an Administrative Law Judge) are
included in investigative receivables, as are voluntary settlement
amounts and restitution orders. Total investigative receivables for FY
1999 were $407.7 million. Following is an example of this type of
savings resulting from our work:
<bullet> A major provider of home health services and one of its
subsidiaries entered into a $61 million global settlement,
including approximately $10 million in criminal fines, related
to, among other things, a series of transactions that the
corporation made to disguise non-reimbursable acquisition costs
as Medicare-reimbursable management services.
Audit Disallowances--In conducting audits, OIG routinely identifies
improper expenditures and recommends that these ``questioned costs'' be
recovered or redirected by agency management. Costs may be questioned
because of an alleged violation of a provision of law, rule, contract,
grant or other document governing the expenditure of funds; a finding
that the costs were not supported by adequate documentation; or a
finding that the expenditure was unnecessary or unreasonable.
After HHS management concurs with the OIG assessment that certain
costs are questionable, those costs are disallowed, and the funds are
recovered through direct repayment, offset or withholding. For FY 1999,
a total of $251.5 million was identified for disallowance or
redirection by agency management in response to OIG recommendations. As
an example:
<bullet> The OIG reported to the Administration for Children and
Families (ACF) that a State's retroactive claim improperly
shifted juvenile justice costs to the Federal Emergency
Assistance program (a former AFDC program that offered
temporary financial assistance to eligible families
experiencing an emergency) that ACF administered. The ACF
agreed and notified the State that those costs were unallowable
and requested repayment. The Department recently received a
$17.3 million check from the State as repayment of the
disallowed costs.
Funds Put to Better Use--The role of OIG is not limited to after-
the-fact detection of fraud, waste and abuse; equally important is
OIG's role in preventing such inappropriate expenditures. As a result
of OIG audits and evaluations, recommendations are reported to
management that frequently specify legislative, regulatory or
administrative action. When implemented, they result in overall program
savings. Management actions that could give rise to ``reportable''
savings include: direct reduction in budget outlays; deobligation of
funds from agency programs or operations; avoidance of unnecessary
expenditures identified in preaward reviews of contracts or grants; and
costs not incurred as a result of implementing recommended improvements
related to agency, contractor or grantee operations.
In calculating the amount of cost savings attributable to
implementation of its recommendations to put funds to better use, OIG
considers ``implementation'' to have occurred when the corrective
action is actually accomplished. Thus, for example, savings will accrue
only after the legislation is actually passed, when final rules are
promulgated or when final action is taken by agency management. It is
important to note that these savings are not calculated by OIG--instead
the fiscal impact of legislative actions, for example, is estimated by
the Congressional Budget Office in terms of annualized amounts that
will likely be saved over a 5-year budget cycle. These CBO estimates
serve as a neutral third-party valuation of actions corresponding to
OIG work and are reported in Appendix A of the Inspector General's
Semiannual Report to the Congress. Similarly, OIG reports regulatory
and operational savings estimates as stated by the involved HHS agency
(e.g., HCFA). In FY 1999, ``funds put to better use'' savings resulting
from OIG recommendations totaled $11.9 billion. Following is an example
of such recommendations implemented through legislative action:
<bullet> Medicare Secondary Payer Extensions--legislative provisions
enacted as part of the Balanced Budget Act (BBA) of 1997--FY
1999 savings estimated by CBO totaled $1,700 million.
In a body of work of approximately of 40 separate audits and
evaluations issued since 1984 and in a number of testimonies before the
Congress, OIG recommended that legislation be enacted to (i) establish
a centralized database of information about private insurance coverage
of Medicare beneficiaries and (ii) extend the Medicare secondary payer
(MSP) provision to include end stage renal disease (ESRD) beneficiaries
as long as the individual has employer based coverage available.
Section 4631 of the Balanced Budget Act (BBA) of 1997 permanently
provided into law that Medicare was the secondary payer for disabled
beneficiaries in large group health plans and made permanent and
extended Medicare as the secondary payer for ESRD from 18 to 30 months.
It also made permanent the HCFA/IRS/SSA data match program.
[GRAPHIC] [TIFF OMITTED] T5913.004
Responses for the Record of Michael Hash, Deputy Administrator, Health
Care Financing Administration
Congressman Bliley's Questions and Answers for the Record
1. Software has been developed that can enable a physician
to use a hand-held computer to prescribe medication wherever he
or she sees a patient. This software is capable of instantly
alerting the prescribing physician to possible adverse
reactions to other medication that a patient may be taking. In
addition, this software enables physicians to electronically
prescribe and transmit prescriptions to the staff in his office
or to other pharmacies.
Q1a: Would you agree that the federal government should
encourage the use of computerized prescribing and dispensing
systems? If so, what steps can the Department take to take
advantage of these systems?
A1a: We will publish regulations this year requiring the
over 6,000 hospitals participating in the Medicare program to
have ongoing medical error reduction programs that would
include, among other interventions, mechanisms to reduce
medication errors. In order to comply with this new regulation,
hospitals may choose to implement automated pharmacy order
entry systems, include automatic safeguards against harmful
drug interactions and other adverse side effects built into the
treatment process, or institute decision-support systems. We
will not be mandating computerized prescribing and dispensing
systems as the rule will allow providers the flexibility to
determine how best to meet the requirements.
The Administration's Quality Interagency Coordination Task
Force has addressed the use of decision-support systems and
information technologies, such as the use of computerized
prescribing and dispensing systems, as additional strategies to
promote patient safety. The Task Force's report entitled:
``Doing What Counts for Patient Safety,'' notes that,
``although the success of health care informatics models is
well documented and their applicability to patient safety is
clear, they have not been widely adopted.'' To address this,
the Agency for Healthcare Research and Quality (AHRQ) and the
Center for Disease Control and Prevention will expand research
efforts in the area of informatics to identify initiatives
aimed at developing and evaluating electronic systems to
identify, track, and address patient safety concerns. In
addition, AHRQ, along with the Veterans' Administration,
Department of Defense, the Food and Drug Administration and
other members of the Quality Interagency Coordination Task
Force will evaluate the effectiveness of automated physician
order-entry systems in hospitals.
Q1b: While new technologies have tremendous potential for
reducing medial errors, I am sensitive to the added costs
associated with purchasing these products. Does current law
provide a way for the federal government to help providers with
the cost of acquiring this new technology?
A1b: Yes. Most Medicare payment systems are already updated
annually to reflect changes in practice and new technology. We
annually update payment systems for hospital inpatient,
hospital outpatient, physician fee schedule, ambulatory
surgical centers, and durable medical equipment. These payment
system updates consider internal, external, and alternative
sources of data in the decision making process. For example, we
have an annual process for the physician fee schedule that
relies on public input through the Federal Register comments
and through the AMA Practice Expense Advisory Council and the
Relative Value Update committees. These committees make
recommendations to us on the appropriate inputs used in
providing new medical services, in addition to making
recommendations on refinements of inputs for existing physician
services.
By considering the input of these outside sources, in
combination with our own medical judgement, we adjust payment
rates to reflect the cost of new medical services that may
require the use of state of the art technology, such as that to
reduce medical errors. For example, for inpatient hospitals,
through an annual adjustment in the productivity factors in the
operating and capital update frameworks, HCFA considers the
cost increases and decreases associated with the employment of
new technologies. Furthermore, HCFA recalculates the diagnosis
related group (DRG) relative weights annually to reflect
changes in treatment patterns, technology, and any other
factors that may change the relative use of hospital resources.
Q1c: There are concerns that elderly and low-income
patients in government health insurance programs may be less
able to benefit from this new technology unless there are
appropriate incentives to encourage physicians to bear the cost
of investing in them. What thoughts have you given to the issue
of providing appropriate incentives to assure that these
computer systems are adopted?
A1c: As discussed above, most Medicare payment systems have
a process to consider payment adjustments to reflect changes in
practice resulting from new technology. The Department of HHS
and other organizations such as the Medicare Payment Advisory
Commission identify and monitor new advances and trends to be
considered in the update process. Whether specific incentives
for adoption of technology to reduce medical errors are needed
is not yet clear, and there is evidence that providers,
particularly physicians, are adopting this technology as part
of their office practices without specific Federal incentives.
There is a Secretarial initiative to improve quality of health
care and reduce medical errors. At this time we are undertaking
a number of activities in this area, and the best options for
reducing medical errors are still being explored. We expect
that the States also have similar goals for medical error
reduction for the Medicare population. We have a great interest
in reducing medical errors, and we look forward to working with
you to examine this issue further as we continue to monitor the
situation.
Q1d: My understanding is that state Medicaid programs pay
dispensing fees to retail, mail order, or Internet pharmacies
for filling prescriptions. Is the same fee paid for dispensing
pre-packaged medication as for those that require special
preparation or dosing?
A1d: We do not keep a data base on State drug dispensing
fees. However, States have the flexibility to pay different
``reasonable'' dispensing fees based on the complexity of
dispensing activity, such as compounding. In the State plan
amendment approval process, we require States to explain and
document the basis for such ``reasonable'' fees.
2. I have long been concerned that Medicare beneficiaries
are not getting access to the best and most appropriate
technologies and procedures. I understand that there are
several processes that new technologies and procedures must go
through in order to be made available to beneficiaries. The
first process involves making specific coverage determinations
about which medical procedures and products to make available
to Medicare beneficiaries. However, I understand that simply
covering a product or procedure doesn't mean that beneficiaries
will actually have access to it, but that two other processes
exist to establish a ``procedure code'' and then the
appropriate payment category or level for the product. And even
after coverage, coding and payment issues have been resolved,
there still remain the basic mechanics of notifying fiscal
intermediaries and carriers to go ahead and make payment.
Q2: Please explain how coverage, payment, coding, and
intermediary/carrier operations are currently organized in
HCFA. Please explain how HCFA ensures that patients get timely
access to appropriate technologies, and how management
coordinates the various offices at HCFA, as well as the central
and the local carriers who are also involved in many of these
processes.
A2: There are three levels of coverage and payment
determination, each serving important functions in assuring
that beneficiaries have access to appropriate technology. The
vast majority of determinations are made on a case-by-case
basis by our local contractors. Because most new technology
involves only minor modifications to existing technology, these
determinations are usually straight forward and rolled into
existing coding and payment mechanisms. For new technology that
is significantly different, our coding system includes generic
``99'' codes in each benefit category which providers can use
to file claims. Claims with these codes are manually reviewed
and priced. For new diagnostic and surgical procedures provided
by hospitals and other facilities paid through prospective
payment systems (PPS), no coverage determination is generally
necessary as new technology is automatically folded into the
appropriate diagnostic related group (DRG) payment category.
(There is one exception; the new hospital outpatient PPS system
includes a pass through for new technology.) Under the hospital
inpatient PPS system, the actual impact of innovations on costs
are reflected through charges that the facility includes on its
Medicare claims that drive future classification
recalibrations. These charges often show that new innovations
lower overall charges by, for example, decreasing the number of
days patients must remain in the hospital, even if the new
technology itself costs more than what it replaced.
A second, formal level of coverage and payment
determination is also carried out by local contractors when
they develop ``local medical review policy.'' These policies,
developed by contractor medical directors, outline how
contractors will review claims to ensure that they meet
Medicare coverage requirements. We require that local policies
be consistent with national guidance (although they can be more
detailed or specific), developed with input from medical
professionals (through advisory committees), and consistent
with scientific evidence and clinical practice. The use of
local medical review policy helps avoid situations in which
claims are paid or denied without a full understanding of why.
This resource-intensive process is typically reserved for high
volume/high dollar items or services, and is generally
conducted quarterly to facilitate orderly changes in systems.
We expect to soon release guidance to the contractors designed
to make development of local medical review policy parallel our
new national coverage determination process, providing more
notice and opportunity for providers and the public to have
input and request policies on specific matters. Copies of every
contractor's local medical review policy can be found at
www.lmrp.net.
We substantially improved the National Coverage
Determinations (NCD) process last year to be much more open,
accountable, and explicit in every respect, including the right
of beneficiaries and other members of the public to request
reconsideration of decisions. The new process establishes clear
procedures for how national coverage policy decisions are made,
allows any individual to submit a formal request for a national
coverage decision or reconsideration, institutes timeliness
standards and mechanisms for keeping the public informed about
the status of national coverage issues, and guarantees
beneficiary input through the open meetings of a new Medicare
Coverage Advisory Committee. When an NCD is made, the decision
is immediately posted on our web site and local contractors
generally can immediately begin payment through mechanisms
described above. In rare instances, when an NCD reverses an
earlier national noncoverage policy and requires changes to
claims processing computer systems, additional time may be
necessary before payment can begin. We establish an effective
date by which contractors must provide coverage. Time between
an NCD and an effective date is used to establish new codes and
national payment rates, make changes to claims processing
computer systems, and provide explicit, written instructions on
how the new policy is to be implemented. We have up to 180 days
(tied to the next closest quarterly systems update) to complete
systems changes from the time that instructions are generated,
which can take up to an additional 60 days. However, we have
completed this in less than 180 days for all NCDs under the new
process, and we are continually working to further streamline
this process. This 180 day time frame compares favorably to
other businesses making orderly and efficient changes in
electronic systems like our claims processing systems.
Within HCFA, NCDs are under the purview of the Office of
Clinical Standards and Quality. Payment and coding operations
are the responsibility of the Center for Health Plans and
Providers. Development of local medical review policy is under
the direction of the Program Integrity Group in the Office of
Financial Management. Intermediary and Carrier operations are
overseen by the Center for Beneficiary Services. These offices
work together through the Medicare Contractor Oversight Board
to coordinate coverage and payment for new technologies and to
ensure clear communication of policies to the contractors.
3. I understand it can take up to two years for HCFA to
change payment amounts or categories to a more appropriate
reimbursement for a new technology. Apparently the first year
is to evaluate a full year's worth of HCFA's internal data
set--the Medicare Provider Analysis and Review (MedPAR) file
and the second year, to finally implement the change.
Q: Is there any reason in this modern year why HCFA can't
accept or extrapolate from partial year MedPAR data or accept
statistically valid, verifiable external data form willing
companies?
A: Partial year MedPAR data or external data (used in
setting inpatient hospital payments) do not take into account
the impact of total costs on a treatment episode, which is how
care is paid for under Medicare's prospective payment systems.
New technologies that in and of themselves may be more
expensive than what they replace often lower total costs once
fully implemented into patient care. For example, laparoscopic
surgical equipment for gall bladder surgery is more expensive
than the traditional surgical equipment it replaced, but it
substantially reduced the number of days patients were required
to remain in the hospital, and thus lowered total costs for
gall bladder surgery. An accurate assessment of the total
impact would not have been feasible with only limited data on
costs of the equipment itself.
4. There was much discussion about HCFA's current thinking
on using a ``brand name'' approach rather than a ``category''
approach for the devices and technologies eligible for the pass
through in the new outpatient prospective payment system. The
industry has expressed a willingness to sit down with you to
work out a way to devise a category approach.
Q: Are you willing to sit down with them and Congress to
devise a system which encourages competition rather than have
HCFA determine the winners and losers under a brand name
approach?
A: We are always willing to sit down and discuss issues
with providers, Congress, and other key stakeholders, and we
have been engaged in discussions about the OPD pass-through
issue with device manufacturers. However, as we have explained
to them, there are significant problems with the category
approach they have proposed. To be eligible for a pass-through
payment, the law requires that, ``payment for the device, drug,
or biological, as an outpatient hospital service under this
part was not being made as of December 31, 1996.'' As a result,
many of the devices we have approved would likely not have
qualified under the category approach. That is because, under a
category approach, if any device in the category was being
reimbursed by Medicare as of December 31, 1996, the entire
category of devices would not be eligible for pass-through
payments. I do not believe that this is the result Congress
intended (nor a result device manufacturers would desire).
Nevertheless, we have indicated many times our willingness to
continue to work with device manufacturers and with the
Congress to address your concerns and to provide technical
assistance should Congress decide to make revisions to the
statute.
5. HCFA's final rule implementing the BBA denies payment
for telemedicine store and forward applications, which are
widely accepted as a cost effective way to transmit an image to
a remote specialist to be reviewed at a later time. Ignoring
the development of this technology, HCFA arbitrarily ruled that
in order to qualify as a ``consultation,'' all practitioner/
provider encounters had to occur in real time.
Q: Why is HCFA preventing the growth of this technology at
a time when Congress is working to increase access to health
care at all levels of society?
A: We are eager to expand the use of telemedicine and want
to explore in demonstration projects the best way to do so.
However, the BBA currently limits overall telemedicine coverage
to consultations for which payment currently may be made under
Medicare. The American Medical Association's Physicians'
Current Procedure Terminology defines a consultation as an
interactive patient encounter. Therefore, for telemedicine
coverage under current law, the patient must be present at the
time of the consultation, and a medical examination of the
patient under the control of the consulting practitioner must
take place via an interactive audio-video telecommunications
system.
We do recognize the potential benefits that additional
technologies, such as store and forward applications, can have
on the delivery of health care for beneficiaries in rural
areas. However, Medicare does not make a separate payment for
the review of a previous medical examination. Because of the
importance of this issue, we are examining in a demonstration
project the effectiveness of store and forward technology as an
appropriate alternative to an interactive patient encounter. We
also are looking into whether store and forward technology
warrants a separate and distinct payment beyond Medicare's
current scope of services and what kind of legislative
adjustment would be necessary to authorize such payment.
6. HCFA has interpreted that BBA telemedicine provisions to
require the presence of a ``presenting practitioner'' in order
for the encounter to qualify for telemedicine reimbursement.
The presenting practitioner must be a health care provider
eligible for Medicare reimbursement such as a physician, a
nurse practitioner, or a physician assistant. Registered and
licensed practical nurses are not permitted to serve as
presenters. I think this HCFA interpretation is an unfair
burden on rural areas that would like to use telemedicine to
expand health care access; the HCFA interpretation artificially
inflates the cost of telemedicine services.
Q: Are you planning to change this interpretation?
A: The BBA states that only physicians or practitioners
described in section 1842(b)(18)(C) of the Social Security Act
are permitted to provide teleconsultations. Therefore,
registered nurses and other medical professionals who are not
recognized as practitioners under this section of the Medicare
statute are not authorized by law to receive payment for a
teleconsultation. We share your concern that this may create an
additional barrier to specialty services for beneficiaries in
rural areas. We are currently developing recommendations on
this issue, and look forward to working with you to address it.
7. HCFA has interpreted the BBA telemedicine provisions to
authorize Medicare payments only for those CPT codes which
include the word ``consultation.'' This interpretation
eliminates the market for many services that can be provided by
telemedicine that are not consultative in nature, but rather
are direct care, such as the important care provided by
clinical psychologists, clinical social workers, and physical,
occupational, and speech therapists.
Q: Why did HCFA interpret this provision so narrowly?
A: Clinical psychologists, clinical social workers, and
physical, occupational, or speech therapists are able to
receive some Medicare payments, but are not specifically listed
in section 1842(b)(18)(C) of the Social Security Act as
Medicare providers, and the BBA specifically limits
teleconsultation payments to providers listed in that section
of the Medicare statute.
Congressman Bilirakis' Questions and Answers for the Record
1. In order to provide an incentive to drug manufacturers
to invest in the development of drugs for rare diseases and
conditions, the Orphan Drug Act provides that a specific
product designated by the FDA as an orphan drug and approved
before other designees for the same indication is entitled to
seven years of market exclusivity. However, when a patient
suffers from an orphan indication, it may occur that the
physician, instead of prescribing the orphan drug, prescribes a
competing drug (i.e. the same drug labeled for a non-orphan
indication) off-label for that patient. This could erode the
incentive value of the seven year orphan drug exclusivity where
Medicare is a major payor for the drug (for example, with end
stage renal disease).
Q1a: If a Medicare beneficiary has a condition for which an
orphan drug is approved, but the patient's physician prescribes
a competing drug (as defined above) off-label in place of the
orphan drug, does Medicare policy permit payment for the
competing drug (assuming that the drugs are otherwise covered
under Medicare and that the orphan drug's seven-year period of
exclusivity has not expired)?
A1a: Like any other drug, an orphan drug must be eligible
for coverage under the Medicare program. Current law severely
limits drug coverage; nonetheless, for the handful of drugs
that are now covered, coverage for off-label use is generally
determined by the Medicare contractors based on guidance in our
Medicare Carriers Manuel, which states that:
``FDA approved drugs used for indications other than what is
indicated on the official label may be covered under Medicare
if the carrier determines the use to be medically accepted,
taking into consideration the major drug compendia,
authoritative medical literature and/or accepted standards of
medical practice.''
We are not aware of restrictions in the law or regulations
which would require local carriers to deviate from this
standard process to account for orphan drug status. If a
generic equivalent of a drug labeled for an orphan indication
exists, currently, a local carrier would only need to determine
if it was reasonable and necessary to cover the generic drug
for the orphan condition. Or, alternatively, the local carrier
would need to determine whether it was medically reasonable and
necessary to cover only the trade name drug labeled for the
orphan indication.
Q1b: If so, what changes (if any) could be made in Medicare
claims procedures and systems to implement a prohibition
against payment for such a competing drug used off-label in
place of the orphan drug?
A1b: Under the current law, there is no authority for us or
our contractors to exclude coverage on this basis. Our coverage
criteria for an item and service, including drugs is (1) does
it fall into an explicit benefit category, and (2) is it
medically reasonable and necessary for the diagnosis or
treatment in the specific case for which a claim is submitted.
2. Generally, under HCFA's proposal, Medicare would
classify virtually all diagnostic imaging procedures based on
modality. Thus, the same APC amount would be paid regardless of
whether a contrast agent is used. This payment policy on its
face will dissuade hospitals from utilizing contrast agents
even when their use is medically appropriate. HCFA's proposal
is based on the assumption that cost of the contrast agents
used in conjunction with various procedures are reflected in
the proposed APC amounts. However, HCFA appears to have
sufficiently reliable payment data to estimate the cost and
utilization of drugs and biologicals for each APC. Rather,
aggregate drug data were used for calculating APC rates,
resulting in APC amounts that do not adequately reflect the
cost of providing contrast-enhanced procedures. Moreover, the
aggregate drug data utilized by HCFA systematically excluded
the cost data for the codes that hospitals were directed to use
for contrast agents. The impact of these data problems were
compounded by uncertainty among hospitals regarding the codes
to be used for contrast agents. For example, consider low
osmolar contrast agents (LOCM), which may be used in
conjunction with a number of diagnostic imaging services. In
July 1997, because of significant confusion among hospitals and
Medicare intermediaries relating to billing and payment for
LOCM in hospital settings, HCFA issued specific instructions in
the Hospital Manual (Transmittal 718). However, it is clear
that 1996 claims--the period that serves as the basis for APC
calculations--reflect hospital billing for LOCM that was uneven
and often incorrect. The exclusion of contrast agent cost data
from the APC calculations has serious financial implications
for hospitals that provide diagnostic imaging services and has
serious patient care implications for Medicare beneficiaries
who require such hospital outpatient services. Congress
directed the Secretary to develop a classification system and
establish groups of covered hospital outpatient department
services so that services classified within each group are
comparable clinically and with respect to the use of resources
(BBA 4523, 42 U.S.C. 13951(t)(2)(B)). The final APCs do not
properly categorize MRI and CT services and procedures into
groupings that are comparable clinically and with respect to
resources.
Q2a: Please explain what data HCFA collected and used to
develop the APCs for MRI, CT, and ultrasound procedures, which
use contrast. Specifically, was aggregate drug data used and
did this aggregate drug data exclude the cost data for the
codes that hospitals were directed to use for contrast agents?
A2a: We used more than nine million radiology claims,
matched to the radiology cost-to-charge ratios of the hospitals
which submitted each claim, to determine the median costs of
the radiology APCs. More than two million of the claims were
for MRI, CT, and ultrasound procedures. We took great care to
ensure that all related drug costs were captured regardless of
where and how the hospital billed for them. For example, while
our instructions call for the codes for low-osmolar contrast
media to be shown in revenue center 636, which is not one that
is packaged with radiology APCs, we made sure to include
charges related to those codes in that revenue center in
determination of the APC rates. We are confident that we have
captured all drug costs related to radiology procedures,
including the cost of contrast media, whether they were coded
separately or as part of the procedure.
Q2b: On what basis does HCFA classify contrast agents as
supplies rather than drugs? Does this determination not ignore
the fact that most of these agents are approved as drugs by the
FDA, that some are currently listed in the USP, and that a
significant number of these agents have been approved by the
pharmacy and drug therapeutics committees of many hospitals?
Should HCFA consider reviewing its current treatment of
contrast agents?
A2b: Our payment is not affected by the use of the word
``supply'' nor by the fact that the FDA, U.S.P., and
formularies identify these products as drugs. Our physician fee
schedule describes these media as supplies, and we merely
continued using the same terminology in the development of
APCs. We would capture and package the same costs whether they
were called drugs or supplies.
Q2c: In light of the fact that hospitals get paid the same
amount for MRI and CT and ultrasound procedures regardless of
whether contrast was used, how will HCFA ensure that Medicare
patients are not denied access to diagnostic imaging services
utilizing contrast agents?
A2c: We do not believe that hospitals would neglect to
perform medically appropriate procedures which require the use
of contrast because of the outpatient prospective payment
system, any more than they would neglect to perform medically
appropriate procedures under the inpatient prospective payment
system that has been in place and well accepted for more than
15 years.
In both settings, contrast agents are bundled with these
imaging procedures and the cost of contrast material is
captured in an average price. For example, payment for CT scans
on average was $190 for a scan without contrast media, $236 for
a scan with contrast media, and $283 for a scan without
contrast followed by one with contrast and additional films.
These are all captured in APC 0283, for which payment will be
$237. Thus, on average, $47 has been captured to represent the
cost of contrast media. Bundled payment provides an incentive
to use only those resources reflected in the payment if they
are medically necessary in each particular case. Over a number
of cases--only some of which involve using contrast agents--a
provider's costs for the contrast agent is covered.
We will, of course, closely monitor the new system as it is
implemented and make adjustments as necessary to ensure
appropriate payment and continued beneficiary access to quality
care. But, based on extensive experience with the hospital
inpatient prospective payment system, we believe that hospitals
and physicians will make judicious, medically appropriate use
of contrast media and other supplies. If we become aware of
instances in which pressure is being brought to bear to limit
appropriate use of this or any other service to Medicare
beneficiaries, we will initiate medical review and take
corrective action as required.
3. There are two concerns related to HCFA implementation of
BBRA Section 401. (1) HCFA's suggestion that it may not permit
hospitals which redesignate under section 401 to seek
geographic reclassification through the Medicare Geographic
Classification Review Board; and (2) the Agency's failure to
implement this provision and process requests from hospitals
for the redesignation permitted under the statute. The BBRA
conference report accompanying Section 401 says, ``Qualifying
hospitals shall be eligible to apply to the Medicare Geographic
Reclassification Review Board for geographic reclassifications
to another area.'' Congress clearly defined its intent in the
conference report which accompanied the bill. And the President
signed the bill into law.
Q3a: Why is HCFA going against Congressional intent and the
Administration?
A3a: We resolved these issues in a final regulation, which
was published on August 1. We expressed concern in the proposed
rule about the prospect of hospitals who were seeking rural
designation under Section 401 in order to receive the benefits
afforded to rural hospitals, and who might also seek
reclassification through the Medicare Geographic Classification
Review Board (MGCRB) back to their urban area. We do not
believe that it was Congressional intent that hospitals be
allowed to game the system in this way; therefore, in the final
rule, we precluded hospitals from being able to additionally
seek reclassification under the MGCRB in order to receive a
higher wage index or standardized amount, or both.
Q3b: How many hospitals have sought redesignation under
Section 401?
A3b: Before we issued instructions to our regional offices
to postpone reclassification decisions, we received notices
from four facilities that were applying for reclassification to
a rural area under section 401 in order to become critical
access hospitals.
With regard to the implementation date, Section 401(c)
clearly provides that the amendments made by this section
``shall become effective on January 1, 2000.'' Moreover section
401(a) requires the Secretary to treat a hospital meeting the
eligibility criteria as being located in a rural area, within
60 days after receipt of a request for such redesignation.
MedCentral Health System of Mansfield, Ohio in Rep. Oxley's
district submitted a letter to HCFA's regional office in
Chicago on February 9, 2000 requesting, and demonstrating its
eligibility for geographic redesignation under Section 401. The
hospital received a response from the Regional Administrator on
March 28, 2000 informing them that the regional office will be
unable to review the request until HCFA publishes final
implementing instructions. HCFA has processed at least one
request for urban-to-rural redesignation, and it is my
understanding that HCFA approved a request from Pawhuska
Hospital in Osage County, Oklahoma.
Q3c: Why was HCFA able to take action on the Pawhuska
request, but not on MedCentral Health System of Mansfield,
Ohio?
A3c: We published our final rule on this subject on August
1. Our final rule provides that if a hospital submits an
application by September 1, 2000, and qualifies to become rural
under section 401 of the BBRA, we will deem their application
to have been filed on January 1, 2000.
In the case of MedCentral Health System, the hospital is
seeking both reclassification and rural referral status. Rural
referral status requires a separate and distinct application
process from the application for rural designation under
section 401. If MedCentral is approved for rural referral
status, their rural designation under Section 401 will be
effective as of January 1, 2000.
Pawhuska Hospital was applying to become a critical access
hospital (CAH), which makes the question of reclassification
under the MGCRB moot. That is because CAHs are paid based on
reasonable costs, and are not subject to the hospital inpatient
and outpatient prospective payment systems (PPS). Thus, CAHs
would not benefit from receiving a higher standardized rate or
wage index, as would a PPS hospital, through reclassification.
Additionally, Pawhuska qualified separately for rural
designation under the Goldsmith Modification, which defines a
hospital as rural if it is specifically located in an
identified census tract. Since we determined that the specific
nature of Pawhuska's situation precluded them from
reclassifying under the MGCRB, we were able to process
Pawhuska's application during our initial stages of
implementing section 401.
Q3d: When does HCFA intend to finalize and publish a
regulation?
A3d: Regulations implementing section 401 of the BBRA will
be included in our interim final rule, and our specific policy
regarding the interactions between section 401 and the MGCRB
process are included in our final rule. The final rule was
published on August 1. The interim final rule is scheduled to
be published later in August.
4. A critical component of immunosuppression to prevent
transplant rejection is the ability of the physician to
determine, with the patient, a particular medication regimen.
Switching this kind of medication without the knowledge of the
physician or patient could result in a transplant rejection or
even the death of the recipient. Often such substitutions are
contrary to the physician's choice of treatment or prevents
provision of the treatment deemed medically necessary by the
physician in providing the best possible care to his or her
patients.
Q: What measures or mechanisms of protection has HCFA
established to overcome automatic substitution of transplant
drugs, based solely on the cost of these drugs?
A: Medicare+Choice plans do sometimes limit covered drugs
to those on a formulary, or list of preferred drugs, and make
changes to the formulary over time. We share your concern, and
on June 8, 2000 issued revised marketing guidelines about this
issue. They require every plan that covers outpatient
prescription drug benefits to provide notice in pre-enrollment
marketing materials that it uses a formulary, that the
formulary can change during the contract year, and a number to
call for more information. Plans that use formularies must also
disclose this fact in their Evidence of Coverage statement,
which details plan benefits and restrictions, including:
<bullet> an explanation of what a formulary is and that it may change
during the contract year;
<bullet> an estimate of how often the plan reviews the contents of the
formulary and makes changes based upon that review;
<bullet> a description of any process by which a prescribing provider
may obtain authorization for a nonformulary or non-preferred
list drug to be furnished under the same terms and conditions
as drugs on the formulary or preferred list; and
<bullet> a statement that members may use grievance and complaint
processes if they have complaints about the formulary or its
administration.
In addition, plans that use formularies must disclose
whether specific drugs are on the formularies when enrollees or
potential enrollees make telephone or other inquiries. The
guideline is effective for contracts beginning in 2001.
5. HCFA's April 27, 1999 notice on Procedures for Making
National Coverage Determinations states that HCFA will make a
decision on a request for a national coverage decision within
90 days. However, it appears that this time frame applies to
only a subset of coverage determinations--only those requiring
the most simple of reviews or which are clear up or down
decisions. HCFA states in the notice that ``most national
coverage issues . . . require a referral to MCAC or an outside
assessment of the service.'' The notice goes on to set no time
cap on items referred to the MCAC or for an assessment.
Finally, once the MCAC makes a recommendation, the notice says
it will take an additional 60 days for HCFA to either adopt the
MCAC recommendation or disagree with it. After a positive
coverage determination is made, the notice indicates it will
then take another ``180 days of the first day of the next full
calendar quarter that follows the date we issue the national
coverage determination'' to make a payment change.
Q5b: Please provide a time line delineating both the
expected minimum and maximum time frames involved for a product
or procedure which goes through the entire process (i.e. HCFA,
MCAC/outside technology assessment, coding, and payment
processes).
A5b: The process for a national coverage determination
(NCD) could take less than 90 days when evidence is clear and
compelling. More complex determinations referred to MCAC or
outside technology assessment bodies can take longer, depending
on the amount of research and deliberation these outside
experts feel is appropriate to accurately assess whether the
new product or procedure in fact meets the statutory
requirement of being ``reasonable and necessary.'' Our limited
experience to date suggests that the independent experts who,
with industry and consumer representatives, make MCAC
assessments, can take up to several months to make these
determinations.
However, it is important to stress that local claims
processing contractors can generally make payment for newly
approved products or procedures immediately after an NCD is
announced, either through an existing code that may apply or
through a miscellaneous code that can be used when no existing
code is appropriate. Payment amounts for claims filed under the
miscellaneous code are determined by these contractors until a
new code and any necessary systems changes are implemented and
a national payment rate is established. In rare instances, when
an NCD reverses an earlier national noncoverage policy and
requires changes to claims processing computer systems,
additional time may be necessary before payment can begin. We
establish an effective date by which contractors must provide
coverage. Time between an NCD and an effective date is used to
establish new codes and national payment rates, make changes to
claims processing computer systems, and provide explicit,
written instructions on how the new policy is to be
implemented. We have up to 180 days (tied to the next closest
quarterly systems update) to complete systems changes from the
time that instructions are generated, which can take up to an
additional 60 days. However, we have completed this in less
than 180 days for all NCDs under the new process, and we are
continually working to further streamline this process. This
180 day time frame compares favorably to other businesses
making orderly and efficient changes in electronic systems like
our claims processing systems.
It also is important to note that the vast majority of
determinations are made by our local contractors. There have
only been approximately three hundred NCDs over the life of the
Medicare program; 15 in the past 12 months. And we have
substantially improved the NCD process to be more open,
accountable, and explicit in every respect.
6. Rep. Stearns raised concerns that the notice on the new
coverage process allows HCFA an additional 180 days to
reimburse for a product or procedure after a favorable coverage
decision.
Q6a: Is it true that in the intervening 6 to 9 months,
beneficiaries will be denied access to the covered product or
procedure?
A6a: Local contractors can generally begin payment
immediately after a national coverage determination (NCD) is
made, either through existing coding and payment mechanisms, or
through generic ``99'' codes in each benefit category which
providers can use to file claims that are then manually
reviewed and priced. In rare instances, when an NCD reverses an
earlier national noncoverage policy and requires changes to
claims processing computer systems, additional time may be
necessary before payment can begin. We establish an effective
date by which contractors must provide coverage. Time between
an NCD and an effective date is used to establish new codes and
national payment rates, make changes to claims processing
computer systems, and provide explicit, written instructions on
how the new policy is to be implemented. We have up to 180 days
(tied to the next closest quarterly systems update) to complete
systems changes from the time that instructions are generated,
which can take up to an additional 60 days. However, we have
completed this in less than 180 days for all NCDs under the new
process, and we are continually working to further streamline
this process. This 180 day time frame compares favorably to
other businesses making orderly and efficient changes in
electronic systems like our claims processing systems.
Q6b: In order to assure beneficiary access to the highest
quality care, please explain why the covered product or
procedure could not be made immediately available and
reimbursed retrospectively or why, during the coverage
determination process, needed coding and reimbursement data
could not be gathered?
A6b: The covered product generally can be made immediately
available. As mentioned above, in rare instances, when an NCD
reverses an earlier national noncoverage policy and requires
changes to claims processing computer systems, additional time
may be necessary before payment can begin. We have completed
necessary work in such cases in less than 180 days for all NCDs
under the new process, and we are continually working to
further streamline this process. However, retrospective
reimbursement is problematic in three ways. First, the
effective dates on NCDs reflect when electronic systems will be
ready to accurately process claims for the NCDs. As a general
policy, we do not make retroactive adjustments for claims
submitted before the effective dates of our policies, as it is
not fiscally prudent. Second, it also raises questions of
fairness regarding retrospective denial of payment when NCDs
end coverage for items or services that had been covered.
Third, this is a resource intensive process and a burden to
claims processing contractors. Gathering of coding and
reimbursement data requires a systematic approach to be done
effectively. This also is a very resource intensive process
that, given limited resources, is difficult to justify before
it is known whether an NCD will be favorable.
7. This Committee worked long and hard debating,
developing, and passing legislation to modernize the FDA. As a
result of the legislative emphasis on collaboration, there is
now much better communication and dialogue between the FDA and
its stakeholders. I am aware of numerous problems with the
introduction of new technologies into Medicare, including
problems with the new OPD PPS. I understand numerous meetings
have occurred between HCFA and representatives from the medical
technology industry to try to resolve implementation problems.
I applaud the Agency for their openness and willingness to meet
in OPD PPS.
Q7: Yet I wonder if many of these and other problems could
have been avoided by a more collaborative effort up front. I
understand that the hospital industry and HCFA may meet
regularly. In your view, are there any impediments to extending
similar meetings to others, such as manufacturers?
A7: We have and will continue to meet with the medical
technology industry to resolve implementation issues regarding
the OPD PPS and other payment issues. The treatment of medical
devices under OPD PPS--particularly the pass-through provisions
under BBRA--have been particularly challenging for HCFA, the
medical devices industry and hospitals. And it is unlikely that
a new and complex payment system, such as the OPD PPS, could be
developed and implemented without encountering difficulties
along the way. Through continued discussions with these groups,
new methods for resolving outstanding issues and implementing
these provisions are evolving. We will continue to work with
these groups to assure that these provisions are implemented in
a manner that recognizes the competitive nature of the medical
devices industry and assures access to effective new technology
for Medicare beneficiaries.
Congresswoman DeGette's Questions and Answers for the Record
1. As the Agency continues to work on this rule,
beneficiaries with diabetes continue to be denied the services
that would prove so valuable to them.
Q1a: When can we expect HCFA to finalize the rule it issued
February 11, 1999 to implement the Medicare Outpatient Diabetes
Self-management section of the BBA? Why is it taking so long
for the Agency to finalize these rules?
A1a: We've been doing everything possible to publish this
regulation in a timely manner. However, with the large number
of regulations currently under review due to BBA mandates and
other factors, the process has not moved as quickly as we would
have liked. We still expect to publish the final regulation
late this summer and will keep you advised on our progress.
Q1b: Also, I understand that the Interim regulation expired
on June 1, 2000. What steps is HCFA taking to ensure that
beneficiaries continue to receive these services?
A1b: We have focused all of our resources on publishing the
final rule, which will give the greatest relief to the greatest
number of people. Our operations staff have been monitoring our
contractors to make sure they still honor the rights of
providers to bill under the expired program memoranda. However,
in response to your inquiry, we are reissuing the original
program memoranda that expired June 1, 2000, to assure that
beneficiaries continue to receive these services until the
final rule takes effect. We will also publish new program
instructions to fully implement the benefit immediately after
the final rule is published to assure full compliance by
contractors by the effective date of the final rule.
Q1c: HCFA has indicated a need to revise the original
language in the BBA. Can HCFA provide the revised legislative
language necessary to promulgate a final rule?
A1c: HCFA's Office of Legislation received a request from
Representative Nethercutt's office for technical assistance in
drafting this legislative change. We submitted draft language
to Rep. Nethercutt's staff on July 14 and asked them to share
it with Rep. DeGette and other members of the Congressional
Diabetes Caucus, as appropriate. A copy of the draft language
follows:
Section 1861(qq)(2) of the Social Security Act (42 U.S.C.
1395xx(qq)(2)) is amended--
(1) in subparagraph (A)--
(A) by striking ``a 'certified provider''' and inserting
``A `certified provider' ''; and
(B) by striking ``; and'' and inserting a period; and
(2) in subparagraph (B)--
(A) by striking ``a physician, or such other individual''
and inserting ``(i) A physician, or such other individual'';
(B) by inserting ``, or by a program described in clause
(ii),'' after ``recognized by an organization that represents
individuals (including individuals under this title) with
diabetes''; and
(C) by adding at the end the following:
``(ii) Notwithstanding any references to 'a national
accreditation body' in section 1865(b), for purposes of clause
(i), a program described in this clause is a program operated
by a State for the purposes of accrediting diabetes self-
management training programs, if the Secretary determines that
such State program has established quality standards that meet
or exceed the standards established by the Secretary under this
section or the standards originally established by the National
Diabetes Advisory Board and subsequently revised as described
in clause (i).''.
2. The proposed regulation for Medicare outpatient diabetes
self-management would place significant barriers on community
retail pharmacy participation as providers of this important
benefit. For example, the rule would require these same
pharmacies to employ a certified diabetes educator or nurse
practitioner to provide covered benefits. Evidence suggests
that quality pharmacy-based diabetes programs are operating
without these additional personnel.
Q2: What steps is HCFA taking to ensure pharmacies that
provide diabetes self-management services will be able to
participate in this new benefit?
A2: We met with representatives of the pharmacy and
pharmacist industry on March 27. They informed us that the
proposed requirement to employ dietitians and certified
diabetic educators or registered nurses could be a significant
barrier to their qualification as certified providers,
especially in rural areas. The provision regarding reassignment
of benefits from the proposed rule would have required that
educators be employed by a certified provider (including a
pharmacist) unless the certified provider was on site
supervising the educators. In response to this concern, we are
considering whether to make an exception to this requirement
for rural areas in the final rule.
3. The Conference Committee Report language to the FY 2000
federal budget requested that ``the Administrator be prepared
to testify at the fiscal year 2001 appropriations hearing on
the steps that have been taken to promote access to'' diabetes
self management services ``in a variety of settings, including
those provided by State licensed health care professionals or
nationally certified nutrition or diabetes educators, as well
as community retail pharmacies.''
Q3: Please describe the steps that you are taking to assure
that Medicare beneficiaries will have maximum access to these
services in a variety of settings.
A3: As noted previously, we are drafting the final rule to
expand the range of providers who will qualify for payment for
the service. We've also included different ways that certified
providers can meet the quality standards to better suit
different settings. One example is the ability to contract with
(rather than directly employ) diabetes educators in rural
settings. Other examples would allow a single individual to
provide the training in rural areas instead of a team, and
allow the use of locations such as senior citizen centers that
are approved under local fire protection and safety codes
instead of limiting services to sites maintained by the
certified provider. We believe these and other points of
flexibility in the final regulation will address most access
concerns. Further flexibility could be provided by a
legislative change to allow State accredited organizations to
participate (as discussed above).
CONGRESSWOMAN CUBIN'S QUESTIONS AND ANSWERS FOR THE RECORD
1. I am concerned about HCFA's Medicare reimbursement
policies and how they impact rural areas of the country. The
Medicare reimbursement rates for hospital services and
physician services are based on certain components, and an
adjustment factor is applied to each of these.
Q: What are the indexes you use to develop the geographic
adjuster for hospital services and physician services, as they
relate to fee-for-service, and what are the components of these
indexes and how do they apply nationwide?
A: As required by law, payments to hospitals under the
prospective payment system are adjusted by a wage index to
reflect regional differences in the costs of labor. Hospitals
are grouped into labor market areas based on whether the county
in which they are located in is part of a metropolitan
statistical area (MSA). A wage index is then calculated for
each MSA. All of the counties of a state that are not located
in a MSA are grouped into a statewide rural labor market area,
and a separate wage index is calculated for those areas. The
wage index is based on hospitals' labor costs as reported to
HCFA by hospitals on their Medicare cost reports. The data
reflect all of the labor categories employed by hospitals that
are paid for under the inpatient prospective payment system
(excluding physicians' patient care services). The wage index,
which is updated every year, is calculated by dividing the
average hourly wage across all the hospitals of a particular
labor market area by the national average hourly wage. We
publish the wage indices for each MSA and rural area as part of
our regulation for hospital inpatient prospective payment
rates.
As required by law, physician services paid under the
physician fee schedule are divided into three components: 1)
physician work, 2) practice expense (such as employee wages,
rents, and medical equipment and supplies), and 3) malpractice
insurance. On average, physician work represents 54.5 percent
of the total relative value, practice expenses represent 42.3
percent, and malpractice represents 3.2 percent. Payments for a
particular service vary among 89 geographic fee schedule
payment areas only to the extent that the resource costs of
providing such services varies. This variation is measured by
geographic practice cost indices (GPCIs) which, by law,
compares the local costs in each of the 89 areas to the
national average for each of the three components.
CONGRESSMAN STEARNS' QUESTIONS AND ANSWERS FOR THE RECORD
1. I am troubled that the decision to remove the
requirement that nurse anesthetists be supervised by a
physician was made without the necessary data to substantiate
that this will not put patients at risk. Please provide:
--A complete list of studies and literature reviewed by you and your
staff in this regard;
--All analyses of those studies and literature that your staff may have
produced summarizing or qualifying those studies;
--A copy of any report or memorandum associated with HCFA's survey of
the literature;
--A copy of each of the studies and literature that assisted you in
reaching your decision.
A: First, I want to put in context the overall issue of the
Federal requirement for physician supervision of CRNAs and
other non-physician health professionals. Congress has
specified which non-physician health professionals may receive
separate payment for their professional services (such as
CRNAs, nurse practitioners, clinical nurse specialists and
social workers). Congress left the function of licensing these
health professionals to the States. Medicare recognizes the
scope of practice established by the States for these health
professionals. Medicare's current hospital conditions of
participation do not have Federal requirements for physicians
to supervise the practice of a State-licensed health
professional where there is a statutory provision authorizing
direct Medicare payment for the services of that professional,
with the sole exception of the current Federal requirement for
physician supervision of CRNAs that we have proposed to
eliminate.
The December 1997 proposed rule was developed in an effort
to restructure and focus Medicare's conditions of participation
for hospitals so that they focus on outcomes rather than on
process-oriented requirements. We proposed eliminating many
outdated Federal requirements. Unless there was compelling and
sound evidence in support of an across-the-board Federal
requirement for the supervision of one-State licensed health
professional by another, we proposed to defer to States. We do
not believe that there is such evidence to necessitate
maintaining a special requirement for a single national
standard of physician supervision of CRNAs in every situation.
Nor is there evidence that States have been negligent in their
duty to regulate health professional practice or have failed to
protect the safety of their citizens through that regulation.
Therefore, we proposed to change Medicare's conditions of
participation to allow CRNAs to practice without physician
supervision if allowed by State law, and to practice with
physician supervision if required by State law.
We reviewed the literature and found three major
conclusions. First, there have been significant improvements in
anesthesia mortality, the anesthesia-related death rate is
extremely low, and the administration of anesthesia in the
United States is safe relative to surgical risk. According to
the 1999 Institute of Medicine Report on medical errors, ``To
Err Is Human,'' the number of deaths from errors in
administering anesthesia has dropped from two deaths per 10,000
anesthetics in the 1980s to about one death per 200,000-300,000
patients today, a 40 to 60 fold improvement.
Second, there are no studies published within the last 10
years that are specific to the issue of the final rule, namely
provision of anesthesia care by CRNAs practicing without
physician supervision. The studies we reviewed had significant
limitations. We found no evidence that an across-the-board
Federal requirement for physician supervision for CRNAs leads
to better outcomes.
Third, there is no evidence that there would be adverse
outcomes by relying on States and hospitals to regulate the
appropriate supervision and scope of practice of health
professionals administering anesthesia. Nor was there evidence
that States do a poor job in their traditional domain of
regulating and overseeing health care professional practice or
that States are not capable of making decisions regarding
requirements for supervision of one State-licensed independent
practitioner by another.
We also reviewed the recently published article by Dr.
Silber, et al. at the University of Pennsylvania. We do not
view this article as relevant to the issue of whether Medicare
should require hospitals to perform anesthesia only under the
supervision of a physician, because it did not study CRNA
practice with and without physician supervision. Moreover, it
does not present evidence of any inadequacy of State oversight
of health professional practice law, and does not provide sound
and compelling evidence to maintain the current Federal
preemption of State law whereby one State-licensed physician
specialty supervises the practice of another State-licensed
independent practitioner. In short, there is nothing in this
study that persuades us to change our decision to move forward
with the final rule.
We disagree with the apparent policy conclusion of the
Silber study that an anesthesiologist should be involved in
every case, either personally performing anesthesia or
providing medical direction of CRNAs. Such a policy is much
more restrictive than current Medicare policy because it would
prohibit non-anesthesiologist physicians from supervising
CRNAs. This would make it difficult to perform surgeries in
many small and rural hospitals because anesthesiologists
generally do not practice in these hospitals. The result would
be that many small and rural hospitals could not participate in
the Medicare program.
As part of our decision to move forward to finalize the
proposed rule, we considered the feasibility of conducting a
study comparing the mortality and adverse outcomes of Medicare
patients for anesthesia care furnished by CRNAs with and
without physician supervision. However, we concluded that it
was not feasible to conduct such a retrospective study. Not
only would the low overall anesthesia mortality make it
difficult to develop a sufficient sample, but because of the
current Medicare rules, there are no cases where CRNAs practice
without supervision and thus there would be no data for the key
comparison. We also considered the feasibility of conducting a
study using data from non-Medicare patients. However, because
Medicare's current hospital conditions of participation apply
to all patients, here too there would be no data for the key
comparison. Because CRNAs practice without physician
supervision in certain circumstances in Department of Defense
hospitals, we considered a study using such data, but concluded
that sample sizes would be too small because of low anesthesia
mortality, and it would be difficult to establish appropriate
comparison groups. Finally, we do not believe that it would be
wise to conduct a prospective demonstration that would waive
State law and prospectively randomly assign patients to study
and control groups because it would remove patient choice of
anesthesia professional. For these reasons, we do not believe
it is feasible to conduct a study such as would be required in
several bills that have been introduced.
Attached is a list of the articles (Attachment A), a review
and analysis of them (Attachment B) that we considered in
making our decision for the final rule, and a copy of each
article (Attachment C).
Attachment A
LIST OF STUDIES REVIEWED
We reviewed the following seven studies that were published
within the last 10 years and we reviewed the abstract of
another study.
(1) Abenstein, J.P., & Warner, M.A. (1996). Anesthesia
providers, patient outcomes, and costs. Anesth. Analg. 62.
1273-1283.
(2) Chassin, Mark R. Is Health Care Ready for Six Sigma
Quality? Milbank Quarterly 764:565-591, 1998
(3) Kohn, L.T., Corrigan, J., and Donaldson, M., To Err is
Human. Institute of Medicine. National Academy Press,
Washington, DC 1999
(4) Lagasse, R.S., Steinberg, E.S., Katz, R.I., &
Saubermann, A.J. (1995). Defining quality of perioperative care
by statistical process control of adverse outcomes.
Anesthesiology, 82, 1181-1188
(5) Silber, J.H., Williams, S,.V., Krakauer, H., &
Schwartz, S. (1992). Hospital and patient characteristics
associated with death after surgery: a study of adverse
occurrence and failure to rescue. Medical Care, 30, 615-627
(6) Silber, J.H., Rosenbaum, P.R., & Ross, R.N. (1995).
Comparing the contributions of groups of predictors: which
outcomes vary with hospital rather than patient
characteristics? Journal of the American Statistical
Association, 90 (429): 7-18
(7) Silber, J.H., Rosenbaum, P.R., Williams, S.V., Ross,
R.N., & Schwartz, J.S. (1997). The relationship between choice
of outcome measure and hospital rank in general surgical
procedures: implications for quality assessment. International
Journal for Quality in Health Care, 9(3): 193-200
(8) Silber, J.H., Kennedy, S.K., Koziol, L.F., Showan,
A.M., & Longnecker, D.E. (1998). Do nurse anesthetists need
medical direction by anesthesiologists? Anesthesiology, 89:
A1184)
Attachment B
REVIEW OF LITERATURE
Summary: We surveyed the literature for studies relating to the
provision of anesthesia care by certified registered nurse anesthetists
(CRNAs) and anesthesiologists. We reviewed seven articles that were
published in the past 10 years. We also reviewed the abstract of
another study. Of the seven articles, four looked at aspects of
anesthesia care and one reviewed the literature on a number of aspects
of anesthesia care. We also reviewed the 1999 Institute of Medicine
(IOM) Report on medical errors, ``To Err is Human,'' and a study cited
in that report.
There are three major conclusions from the literature:
(1) There have been significant improvements in anesthesia mortality,
the anesthesia-related death rate is extremely low, and the
administration of anesthesia in the United States is safe
relative to surgical risk. According to the 1999 Institute of
Medicine Report on medical errors, ``To Err Is Human,'' the
number of deaths from errors in administering anesthesia has
dropped from two deaths per 10,000 anesthetics in the 1980s to
about one death per 200,000-300,000 patients today, a 40 to 60
fold improvement.
(2) There are no studies published within the last 10 years that are
specific to the issue of the final rule, namely provision of
anesthesia care by CRNAs practicing without physician
supervision. None of the studies we reviewed showed a causal
relationship between outcomes and type of professional who
furnished anesthesia care. All the studies we reviewed had
significant limitations. We found no evidence that an across-
the-board Federal requirement for physician supervision for
CRNAs leads to better outcomes.
(3) There is no evidence that there would be adverse outcomes by
relying on States and hospitals to regulate the appropriate
supervision and scope of practice of health professionals
administering anesthesia. Nor was there evidence that States do
a poor job in their traditional domain of regulating and
overseeing health care professional practice or that States are
not capable of making decisions regarding requirements for
supervision of one State-licensed independent practitioner by
another.
Following is a detailed review of the studies.
Abenstein, J.P., & Warner, M.A. (1996). Anesthesia providers, patient
outcomes, and costs. Anesth. Analg, 62, 1273-1283.
This paper describes a number of aspects of anesthesia care and
reviews studies in several areas. The paper points out that it is
difficult to attribute an adverse outcome to the three broad categories
of factors that could be associated with patient death--patient
disease, surgery and anesthesia--because the factors are interrelated.
The paper gives the example of a patient who has heart disease and
while undergoing by-pass surgery their heart becomes ischemic and they
die on the operating table, despite the medical intervention. The issue
here is whether the death is most attributable to the patient's
underlying disease, the surgery or the anesthetic. The paper further
notes that there is a problem using death as a measure of adverse
outcome because the most important factor that predicts death is the
severity of disease comorbidity.
The paper notes that there has been a dramatic improvement in
anesthetic deaths in the last 15 years: ``Since 1979, five studies have
documented a remarkably abrupt decrease in anesthetic-related death
rates, morbidity, and risk of perioperative deaths.'' The paper
concludes that: ``For many patients, it is now as safe to be
anesthetized as to be a passenger in an automobile.''
The paper notes that ``identifying the cause for the improvement in
anesthetic outcome is as problematic as determining the cause of
perioperative death''. The paper indicates that ``huge numbers of
surgical patients (e.g., >1,000,000) must be enrolled in studies to
provide the statistical power needed to determine whether these are
associations between perioperative disability or death and various
anesthetic techniques, technologies, and practice models.'' The paper
notes that studies of this size are expensive and may be ethically
questionable. None of the studies reviewed for this paper meet this
standard.
The paper reviewed two studies that compared mortality for
anesthesia care furnished by anesthesiologists, an anesthesia care team
and nurse anesthetists supervised by a physician. Both studies are
flawed. Neither meets the criteria for an adequate study identified in
the paper. As the authors note, the first study did not provide
statistical analysis of the data. The second study used data now 25
years old and found no statistically significant difference between the
groups. Neither study examined the provision of anesthesia furnished
independently by CRNAs, the issue of this rule. The paper also reviewed
the 1992 study by Silber et al. discussed below.
The paper suggested a number of reasons for improved anesthesia
care including ``new and improved patient monitoring techniques''. The
paper also notes that the ``decline in adverse outcomes occurred at the
same time that the number of American trained physicians entering and
graduating from anesthesiology residency programs more than doubled
(1975-1985).'' The paper suggests that ``the increase in the number of
physicians engaged in the practice of anesthesiology is primarily
responsible for the dramatic improvement in perioperative outcomes''.
However, the paper also notes that during roughly the same period of
time, 1970-1985, the number of active nurse anesthetists doubled.
On the basis of studies which are flawed methodologically, which do
not prove causality, and which do not meet the authors own criteria for
rigorous study, the authors nevertheless conclude that ``the presence
of board-certified anesthesiologists has been associated with the
decline in death and disability commonly attributed to adverse
perioperative events.'' The author's conclusion is not substantiated by
their own review and analysis of the literature. Finally, the paper
presents no information regarding the issue in the rule or that States
are not capable of making decisions regarding requirements for
supervision of one State-licensed independent practitioner by another.
Silber, J.H., Williams, S.V., Krakauer, H. & Schwartz, S. (1992),
Medical Care, 30, 615-627.
This study examined predictors of three outcomes for age 65 & older
hospitalized patients for two surgeries (cholecystectomy and
prostatectomy). Data were obtained on 5,972 cases in 531 hospitals in 7
states. Patient characteristics used included admission severity of
illness, age, sex, and history of illnesses such as congestive heart
failure, diabetes, or COPD. Hospital characteristics used were whether
the hospitals were low or high technology, number of beds, and percent
of anesthesiologists who are board certified.
The outcome measures were: death rate, adverse occurrence rate, and
failure rate. Death rate was defined as the ratio of the number of
deaths divided by the number of patients. Adverse occurrence rate was
the number of patients who developed an adverse occurrence divided by
the number of patients. Failure rate was the number of deaths in those
patients who developed an adverse occurrence divided by the total
number of patients who developed an adverse occurrence. The following
were considered adverse occurrences: cardiac arrhythmia, congestive
heart failure, cardiac arrest, pneumonia, pulmonary embolus,
pneumothorax, renal dysfunction, stroke, would infection, and unplanned
return to surgery. Multiple logistic regression was used to determine
the association between the patient and hospital characteristics and
the three patient outcomes.
The study found that both hospital and patient characteristics were
associated with death rates for gall bladder and prostatectomy surgery.
The study found that higher death rates were associated with low
technology hospitals and lower rates of board certified physicians
practicing in the hospital. The study also found that patient
characteristics such as age, severity of illness and history of
congestive heart failure primarily were associated with adverse
occurrence rates. Finally, the study found an association between
failure rates and two hospital characteristics: the percent of
anesthesiologists who were board certified (lower failure rates) and
the presence of surgical house staff (higher failure rates).
The authors identify several limitations of the study and indicate
that these limitations need to be recognized. The limitations include:
there were relatively few deaths, adverse outcomes and failures, and
relatively few patients per hospital so the rates could only be
compared for groups of hospitals, not specific facilities. The authors
indicate that their exclusion of patients admitted through the
emergency department could have biased their results
In addition, the study did not address the issue of whether there
is an association between the patient outcomes and the type of
professional who furnished the anesthesia care. The study did not
address the issue of provision of anesthesia care by CRNAs supervised
and not supervised by physicians, the issue in the rule. The anesthesia
variable used in the study was not specific to the patient, rather it
was a variable at the hospital level (i.e., percent of
anesthesiologists who are board-certified). The anesthesia variable may
have been a proxy indicator of quality of the hospital: thus, there
would be lower mortality in the higher quality hospitals and if a
complication occurred the patient would more likely be rescued. The
study reports associations, not cause-effect relationships. Finally,
the paper presents no information that States are not capable of making
decisions regarding requirements for supervision of one State-licensed
independent practitioner by another.
Silber, J.H., Rosenbaum, P.R., & Ross, R.N. (1995). Comparing the
contributions of groups of predictors: which outcomes vary with
hospital rather than patient characteristics? Journal of the
American Statistical Association, 90 (429): 7-18
In a subsequent article to the one summarized above, Silber and
colleagues found that ``most of the predictable variation in outcome
rates among hospitals appears to be predicted by differing patient
characteristics rather than by differing hospital characteristics, that
is, by who is treated rather than by the resources available for
treatment.'' The authors found higher proportions of board-certified
anesthesiologists to be associated with lower death and failure rates,
but also with higher adverse occurrence rates. The study did not
address the relationship between the patient outcomes and the type of
professional who furnished the anesthesia care. The study did not
address the issue of provision of anesthesia care by CRNAs supervised
and not supervised by physicians, the issue in the rule. The article
presents no information that States are not capable of making decisions
regarding requirements for supervision of one State-licensed
independent practitioner by another.
Silber, J.H., Rosenbaum, P.R., Williams, S.V., Ross, R.N., & Schwartz,
J.S. (1997). The relationship between choice of outcome measure
and hospital rank in general surgical procedures: implications
for quality assessment. International Journal for Quality in
Health Care, 9(3): 193-200
Silber and his colleagues compared mortality, complication and
failure-to-rescue rates. They concluded that for the general surgical
procedures studied, the complication rate is poorly correlated with the
death and failure rate. The authors suggest that great caution be taken
when using complication rates and that they should not be used in
isolation when assessing hospital quality of care. The study did not
address the relationship between the patient outcomes and the type of
professional who furnished the anesthesia care. Nor did the study
address the issue of provision of anesthesia care by CRNAs supervised
and not supervised by physicians, the issue in the rule. The article
presents no information that States are not capable of making decisions
regarding requirements for supervision of one State-licensed
independent practitioner by another
Silber., J.H., Kennedy, S.K., Koziol, L.F., Showan, A.M., & Longnecker,
D.E. (1998). Do nurse anesthetists need medical direction by
anesthesiologists? Anesthesiology, 89: A1184
This is the abstract for a study by Jeffrey Silber et al. Based on
information in the abstract, the study does not appear to control for
other relevant factors, such as hospital characteristics. The
concluding line of the abstract indicates: ``Whether this is a
caregiver or hospital effect remains to be determined.'' This is an
important shortcoming since it is not possible to conclude that
anesthesiologist supervision of the care team caused better outcomes.
As indicated in the above analysis of prior Silber studies, a
correlation does not imply causality. It is plausible that hospital
characteristics caused the better outcome and the observation in the
abstract maybe incorrect.
In addition, the abstract provides no evidence that deaths and
complications that occurred were associated with the competence, skill,
or performance of the person who actually furnished the anesthesia.
Information provided in the abstract indicates that the credentials of
the person actually administering the anesthesia was not studied, but
rather the credentials of the person doing the supervising was studied.
Also, it is not clear from the abstract whether like things are
being compared. For example, it is not clear whether the supervision of
the anesthesia team applies to anesthesiologist vs. non-
anesthesiologist physician direction of a team of CRNAs (that is,
medical direction of two, three or four cases concurrently) or if a
single CRNA was supervised by an anesthesiologist vs. a non-
anesthesiologist physician. If like things are not being compared, then
it is difficult to draw scientific conclusions about an observed
effect.
Moreover, the abstract does not indicate that the study compared
outcomes where CRNAs were supervised and not supervised by physicians,
the issue in the rule. Results cannot be inferred to CRNA performance
without supervision from a study examining supervision by
anesthesiologists vs. non-anesthesiologists physicians. Finally, the
abstract contains no information that States are not capable of making
decisions regarding requirements for supervision of one health care
professional by another.
Lagasse, R.S., Steinberg, E.S., Katz, R.I., & Sauberman, A.J. (1995).
Defining quality or perioperative care by statistical process
control or adverse outcomes. Anesthesiology, 82. 1181-1188.
This study describes the number and type of anesthesia errors
attributable to system and human factors, when the data base consists
of cases that were referred to a quality assurance (QA) team. All
referred cases for peer review at a university hospital in 1992 were
analyzed. A total of 13,389 anesthetics were performed and the QA team
reviewed 110 cases. Cases were reviewed if they met at least one of the
13 criteria recommended by Joint Commission on Accreditation of Health
Care Organizations (JCAHO), at the time the study was done (e.g.,
cardiac arrest during or within I post procedure day). Approximately 90
percent of the errors were attributable to the system of care and
approximately 10 percent were attributable to human error. System error
included accidental occurrences resulting from performing a technique
correctly, equipment failure (despite proper use), missed communication
while following established protocol, inability to correct a disease
process with current standards of care, inability to detect a disease
process with current screening and monitoring standards, and inability
to meet the demand for resources of equipment or personnel. Human error
included failing to perform a technique properly, misuse of equipment,
disregarding available data, failing to seek appropriate data and
responding incorrectly to the data because of a lack of knowledge. The
findings suggest that there are very few anesthesia errors but this is
biased by the fact that cases were not reviewed unless a staff member
reported it as a possible error. Of the cases that were reviewed very
few were due to human error, such as lack of knowledge. Not only was
the sample size for this study very small, but also it did not examine
errors and the type of professional, or arrangement, in which
anesthesia care was furnished. The study did not examine the issue of
physician supervision of CRNAs.
Kohn, L.T., Corrigan, J., and Donaldson, M., To Err is Human. Institute
of Medicine. National Academy Press, Washington, DC 1999
The IOM report presents a discussion on various types of medical
errors, the importance of tracking and reporting on adverse events, and
recommendations for effective approaches to making improvements in
health care systems in order to reduce the number of errors. In a
specific discussion of adverse events (Chapter 2) the report notes
``anesthesia is an area in which very impressive improvements in safety
have been made . . . as more and more attention has been focused on
understanding the factors that contribute to error and on the design of
safer systems, preventable mishaps have declined.'' The report goes on
to note that ``today . . . the anesthesia mortality rates are about one
death per 200,000 to 300,000 anesthetics administered, compared with
two deaths per 10,000 in the early 1980s. ``The particular example of
anesthesia adverse events is used to support the notion, contained
throughout the IOM report, that examining all the processes involved in
delivering medical care would allow hospitals to begin to make
significant improvements in quality, better patient outcomes, and fewer
mistakes. The report cites anesthesia care as an example where focusing
on the many processes that take place during anesthesia administration
creates opportunities for multiple interventions aimed at improving
overall anesthesia quality. There is no specific discussion of the
issue of physician supervision of CRNAs.
Chassin, Mark R. Is Health Care Ready for Six Sigma Quality? Milbank
Quarterly 764: 565-591, 1998
This article, cited in the IOM report on medical errors, examines
causes of quality problems and strategies for improving the quality of
health care delivery systems. The author poses a challenge for the
health care system to strive for the level of reduction in errors--
``defect rate''--that compares to results achieved in other industries.
While noting that health care barely stacks up, the one health care
specialty that has reduced serious defects to rates that are close to
3.4 per million is surgical anesthesia''. The author does not attribute
this degree of overall anesthesia safety to any provider type or model
of care but rather to ``. . . a variety of mechanisms, including
improved monitoring techniques, the development and widespread adoption
of practice guidelines, and other systematic approaches to reducing
errors.'' Adopting such practice standards and systematic approaches is
fostered by the type of flexibility granted to hospitals as a result of
this rule change.