<DOC> [106 Senate Hearings] [From the U.S. Government Printing Office via GPO Access] [DOCID: f:59580.wais] S. Hrg. 106-197 HOME HEALTH CARE: WILL THE NEW PAYMENT SYSTEM AND REGULATORY OVERKILL HURT OUR SENIORS? ======================================================================= HEARING before the PERMANENT SUBCOMMITTEE ON INVESTIGATIONS of the COMMITTEE ON GOVERNMENTAL AFFAIRS UNITED STATES SENATE ONE HUNDRED SIXTH CONGRESS FIRST SESSION __________ JUNE 10, 1999 __________ Printed for the use of the Committee on Governmental Affairs <snowflake> U.S. GOVERNMENT PRINTING OFFICE 59-580 cc WASHINGTON : 1999 _______________________________________________________________________ For sale by the Superintendent of Documents, Congressional Sales Office U.S. Government Printing Office, Washington, DC 20402 COMMITTEE ON GOVERNMENTAL AFFAIRS FRED THOMPSON, Tennessee, Chairman WILLIAM V. ROTH, Jr., Delaware JOSEPH I. LIEBERMAN, Connecticut TED STEVENS, Alaska CARL LEVIN, Michigan SUSAN M. COLLINS, Maine DANIEL K. AKAKA, Hawaii GEORGE V. VOINOVICH, Ohio RICHARD J. DURBIN, Illinois PETE V. DOMENICI, New Mexico ROBERT G. TORRICELLI, New Jersey THAD COCHRAN, Mississippi MAX CLELAND, Georgia ARLEN SPECTER, Pennsylvania JOHN EDWARDS, North Carolina JUDD GREGG, New Hampshire Hannah S. Sistare, Staff Director and Counsel Joyce A. Rechtschaffen, Minority Staff Director and Counsel Darla D. Cassell, Administrative Clerk ------ PERMANENT SUBCOMMITTEE ON INVESTIGATIONS SUSAN M. COLLINS, Maine, Chairman WILLIAM V. ROTH, Jr., Delaware CARL LEVIN, Michigan TED STEVENS, Alaska DANIEL K. AKAKA, Hawaii GEORGE V. VOINOVICH, Ohio RICHARD J. DURBIN, Illinois PETE V. DOMENICI, New Mexico MAX CLELAND, Georgia THAD COCHRAN, Mississippi JOHN EDWARDS, North Carolina ARLEN SPECTER, Pennsylvania K. Lee Blalack, II, Chief Counsel and Staff Director Linda J. Gustitus, Minority Chief Counsel and Staff Director Mary D. Robertson, Chief Clerk C O N T E N T S ------ Opening statements: Page Senator Collins.............................................. 1 Senator Cleland.............................................. 4 Senator Domenici............................................. 6 Senator Levin................................................ 7 Senator Edwards.............................................. 27 Prepared statement: Senator Torricelli........................................... 45 WITNESSES Thursday, June 10, 1999 Maryanna Arsenault, Chief Executive Officer, Visiting Nurse Service, Saco, Maine, representing the Visiting Nurse Association of America......................................... 11 Mary Suther, Chairman of the Board, National Association of Home Care, Washington, DC, and President and Chief Executive Officer, Visisting Nurse Association of Texas, Dallas, Texas... 13 Rosalind L. Stock, Vice President, Home Health Services, Home Health Outreach, Rochester Hills, Michigan..................... 16 Barbara Markham Smith, Senior Researcher, Center for Health Services Research and Policy, The George Washington University, Washington, DC................................................. 18 Kathleen A. Buto, Deputy Director, Center for Health Plans and Providers, Health Care Financing Administration, Washington, DC, accompanied by Mary R. Vienna, Director, Clinical Standards Group, Health Care Financing Administration, Washington, DC.... 33 Alphabetical List of Witnesses Arsenault, Maryanna: Testimony.................................................... 11 Prepared statement........................................... 46 Buto, Kathleen A.: Testimony.................................................... 33 Prepared statement........................................... 148 Smith, Barbara Markham: Testimony.................................................... 18 Prepared statement w/attachments............................. 132 Stock, Rosalind L.: Testimony.................................................... 16 Prepared statement........................................... 88 Suther, Mary: Testimony.................................................... 13 Prepared statement w/attachments............................. 52 Exhibits * May Be Found In The Files of the Subcommittee 1. Memoranda prepared by Priscilla Hanley, Office of Senator Susan M. Collins and Karina V. Lynch, Counsel, Permanent Subcommittee on Investigations, dated June 8, 1999, to Permanent Subcommittee on Investigations' Membership Liaisons, regarding June 10, 1999 hearing: Home Health Care: Will the New Payment System and Regulatory Overkill Hurt Our Seniors?....... 159 2. Excerpt of Medicare Payment Advisory Commission's (MedPAC) Report To The Congress: Selected Medicare Issues, Chapter 6-- Access To Home Health Services, dated June 1999................ 162 3. Statement of Rosalind L. Stock, RN, BSN, CHCE, Vice President, Home Health Services, Home Health Outreach, with attachments. (Statement reprinted in this hearing record with numerous attachments. Remaining attachments to submission retained in the files of the Subcommittee as Exhibit No. 3).... * 4. Statement for the Record of the Home Health Services and Staffing Association........................................... 174 5. Statement for the Record of the Home Care Coalition......... 181 6. Submission for the Record of the Center for Medicare Advocacy, Inc. entitle The Faces of the Medicare Home Care Benefit........................................................ * 7. Supplemental Questions and Answers for the Record of Maryanna Arsenault, Chief Executive Officer, Visiting Nurse Service, Saco, Maine, on behalf of the Visiting Nurse Association of America......................................... 186 8. Supplemental Questions and Answers for the Record of Mary Suther, Chairman and Chief Executive Office, Visiting Nurse Association of Texas, Inc., Dallas, Texas, on behalf of the National Association for Home Care............................. 188 9. Supplemental Questions and Answers for the Record of Rosalind L. Stock, Vice President, Home Health Services, Home Health Outreach, Rochester Hills, Micigan...................... 191 10. Supplemental Questions and Answers for the Record of Kathleen A. Buto, Deputy Director, Center for Health Plans and Providers, Health Care Financing Administration, Department of Health and Human Services...................................... 197 HOME HEALTH CARE: WILL THE NEW PAYMENT SYSTEM AND REGULATORY OVERKILL HURT OUR SENIORS? ---------- THURSDAY, JUNE 10, 1999 U.S. Senate, Permanent Subcommittee on Investigations, of the Committee on Governmental Affairs, Washington, DC. The Subcommittee met, pursuant to notice, at 2:05 p.m., in room SD-342, Dirksen Senate Office Building, Hon. Susan M. Collins (Chairman of the Subcommittee) presiding. Present: Senators Collins, Domenici, Levin, Cleland, and Edwards. Staff Present: K. Lee Blalack, Chief Counsel and Staff Director; Mary D. Robertson, Chief Clerk; Glynna Parde, Chief Investigator and Senior Counsel; Karina Lynch, Counsel; Priscilla Hanley and Felicia Knight, (Senator Collins); Linda Gustitus, Minority Chief Counsel; Michael Loesch (Senator Cochran); Ed Hild (Senator Domenici); Andrea Haer and Nicole Quon (Senator Specter); Laura Stuber (Senator Levin); Marianne Upton, Annamarie Murphy, and Angela Benander (Senator Durbin); Lynn Kimmerly, Jane Greares, and Donna Turner (Senator Cleland); and Lori Armstrong (Senator Edwards). OPENING STATEMENT OF SENATOR COLLINS Senator Collins. The Subcommittee will please come to order. Good afternoon. We thank all of you for being here with us today. America's home health agencies provide an invaluable service that has enabled a growing number of our most frail and vulnerable Medicare beneficiaries to avoid hospitals and nursing homes and stay just where they want to be--in the comfort and security of their own homes. In 1996, home health was the fastest-growing component of Medicare spending, consuming 1 out of every 11 Medicare dollars, compared with 1 out of every 40 in 1989. The program grew at an average annual rate of more than 25 percent from 1990 to 1997. As a consequences, the number of home health beneficiaries more than doubled, and Medicare home health spending soared from $2.5 billion in 1989 to $18.1 billion in 1996. This rapid growth in home health care spending understandably prompted Congress and the administration as part of the Balanced Budget Act of 1997 to initiate changes that were intended to make the program more cost-effective and efficient. There was widespread support for the provision in the Balanced Budget Act of 1997 which called for the implementation of a prospective payment system for home health care. Until this system can be implemented, home health agencies are being paid according to an interim payment system, or IPS. In trying to get a handle on costs, however, Congress and the administration created a system that penalizes lower-cost, efficient agencies and that may be restricting access for the very Medicare beneficiaries who need care the most--the sicker patients with complex chronic care needs, like diabetic wound patients or I.V. therapy patients who require multiple visits. I accompanied a home health care nurse on a home visit once when I was in northern Maine, and we visited an elderly couple who were living in their very modest home, both of whom were in their eighties. The woman was being treated for a surgical wound that was not healing well as a result of her diabetes. She was confined to a wheelchair. I could see what a difference home health care made in their lives. For one thing, it allowed them to stay together rather than having this woman be in a nursing home. I was offered by the nurse to observe her cleaning the wound, but I passed up that part of the visit. That visit brought home first-hand to me what an essential service good home health care is for our Nation's elderly. Unfortunately, the interim payment system is critically flawed. It effectively rewards the agencies that provide the most visits and spent the most Medicare dollars in 1994, the base year, while it penalizes low-cost, more efficient providers and, I fear, their patients. None of us should tolerate wasteful or fraudulent expenditures, but neither should we impede the delivery of necessary services by low-cost providers. Home health care agencies in the Northeast and the Midwest have been among those particularly hard-hit by the interim payment system. As The Wall Street Journal observed last year, ``If New England had just been a little greedier, its home health industry would be a lot better off now. Ironically, the region is getting clobbered by the system because of its tradition of nonprofit community service and efficiency.'' Even more troubling, this flawed system may force our most cost-efficient providers to stop accepting Medicare patients with the most serious and complex health care needs. According to a recent survey by the Medicare Payment Advisory Commission, almost 40 percent of the home health agencies surveyed indicated that there were patients whom they previously would have accepted whom they no longer accept due to the IPS. Thirty-one percent of the agencies surveyed admitted that they had discharged patients due to the IPS. According to these agencies, the discharged patients tended to be those very patients with chronic care needs who required a large number of visits and were expensive to serve. As a consequence, these patients caused the agencies to exceed their aggregate per-beneficiary caps under the very complex formula in the law. I simply do not believe that Congress intended to construct a payment system that inevitably discourages home health agencies from caring for those seniors who most need the care. Last year's omnibus appropriations bill did provide a small measure of relief for home health agencies. While I am pleased that we were able to take some initial steps to address this issue, I am very concerned that the proposal did not go far enough to relieve the financial distress that cost-effective agencies are experiencing. As a result, I will soon join with my colleagues in introducing legislation in the hope of remedying the remaining problems. These problems are all the more pressing given the fact that the Health Care Financing Administration was unable to meet the initial deadline for implementing a prospective payment system. As a result, home health care agencies will struggle under the IPS for far longer than Congress envisioned when it enacted the Balanced Budget Act. Moreover, it now appears that Congress greatly underestimated the savings stemming from the BBA. Medicare spending for home health fell by nearly 15 percent last year, and the Congressional Budget Office now projects post-BBA reductions in home care spending at $48 billion in fiscal year 98-02. This is a whopping three time greater than the $16 billion CBO originally estimated for that time period. As a consequence, cost-efficient home health agencies across the country are experiencing acute financial difficulties and cash flow problems which will inhibit eventually, if not already, their ability to deliver much needed care, particularly to chronically ill patients with complex needs who need home health care the most. Some agencies have closed because the reimbursement levels under Medicare fall so short of their actual operating costs. Others are laying off staff or are declining to accept new patients with more serious health problems. This points to the most central and critical issue, and that is that cuts of this magnitude simply cannot be sustained without ultimately affecting care for our most vulnerable seniors. Moreover, these payment problems have been exacerbated by a number of new regulatory requirements imposed by HCFA, including the implementation of OASIS, the new Outcome and Assessment Data Set, sequential billing, IPS overpayment recoupment, and the new 15-minute increment home health reporting requirement. One home health nurse told me she felt more like a lawyer billing by the hour than a nurse taking care of essential health care needs because of that new requirement. Today's hearing will examine how payment reductions under the IPS, coupled with these new regulatory requirements, are affecting home health agencies' ability to meet their patients' needs, because that is the bottom line. I think the following quote which was provided to me by the director of a New York home health agency summarizes the problems faced by many providers. She wrote: ``I have to prepare for Y2K and have everything ready by August 1. That has cost me $100,000. My accounts receivable are now tied up for 4 months due to sequential billing. HCFA has called a halt to sequential billing as of July 1, which is great. But I need 2 months' notice to change my computer system, and the vendors are not responding. I implemented OASIS. The first year cost $100,000, and now it is $50,000 a year maintenance. I spent time trying to get a surety bond. The time and effort cost me $8,000 to $9,000. Had I been able to get one, it would have cost $216,000. I just spent $300,000 toward the payback of my recoupment of overcharges, which is $1 million. My rates have been cut by IPS by 30 percent, and my per-beneficiary cap is $2,200. And last but not least, the 15-minute increment will cost $20,000 to $30,000 to implement, and worst of all, I will probably lose all my good nurses.'' This comment aptly reflects the concerns that I have heard from many home health agencies in my State as they struggle to cope with an onerous payment and regulatory system. I look forward to hearing the testimony of all of our witnesses today in our quest to better understand and then solve this problem which threatens the care that we provide to many of our elderly citizens. I would now like to call on Senator Cleland for any comments that he might have. OPENING STATEMENT OF SENATOR CLELAND Senator Cleland. Thank you very much, Madam Chairman. I cannot tell you how much I appreciate your having this hearing to flesh out some of the challenges that we in the Congress and HCFA and those involved in caring for our elderly citizens and our disabled have under the current system and under the current law. We have all read the stories about the toll that the Balanced Budget Act has taken on patients across the country, headlines like ``Medicare Cutbacks Prove Painful,'' ``Nursing Homes Shun Some Medicare Patients,'' ``Patients Face a Limit on Benefits for Therapy,'' and so on. Let me just say that the Balanced Budget Act of 1997 has produced some positive results. We do have a balanced budget, and Medicare's fiscal health has been extended for many years-- but at a cost. BBA has brought with it unintended consequences, and these consequences have a decidedly human face, as our distinguished panelists well know. It is the face of the Nation's most vulnerable elderly citizens, Madam Chairman, as you point out, and their caregivers. It is the face of the 73- year-old cancer patient who relies on a feeding tube and I.V.s and who cannot find a nursing home that will accept her because her medical needs are too costly. It is the face of the 67- year-old woman who lost her leg to diabetes complications and received an artificial limb but was stopped short of her goal of walking with only one cane, because she hit her $1,500 a year physical therapy limit. And as someone who spent a lot of time in physical therapy, I am a cosponsor with Senator Grassley to lift this limit, because I happen to believe not only in home health care but in physical therapy and rehabilitation as well. It is the face of children and parents of patients who must make the difficult choice of whether to care for their loved ones at home or seek care in a nursing home. It is the face of some of you in this room, the nurses and other dedicated employees of home health care agencies, who have devoted your lives literally to caring for the sick. I think many of you are really unsung heroes who serve in some of the most rural areas of the country--a place like my State, the State of Georgia, has so many rural areas in need of your care. Many of you manage the sickest and most frail patients with no means of payment other than Medicare. Last July, the Small Business Committee on which I serve held a hearing on home health care and whether it can survive the new BBA regulations. At that time, I stated that the government should allow us to make every effort to allow Medicare recipients to live in their own homes. I can remember after being wounded in Vietnam, I spent a year and a half in military and VA hospitals and rehabilitation facilities, but ultimately, I wanted to be in my own home. I guess that is what has made me a passionate devotee of home health care. However, despite good intentions, those of us in government can sometimes become part of the problem we seek to correct. I think the interim payment system is such an example. Congress enacted the IPS to encourage providers to cut costs while becoming more efficient--a very laudable goal. In practice, however, we are seeing efficient agencies being driven out of business while some less well-managed agencies have been able to survive. Many of you know that story. Last summer, we heard that 800 small and medium-sized home care agencies had been forced out of business by BBA regulations--that was just last summer. That number has now jumped to more than 2,000 agencies driven out of business. How many patients are being denied services now? How many patients are being forced into nursing homes, at a higher cost, I might add, to our government, because 2,000 of America's home health care agencies have been forced to close their doors? All of us--the Congress, agency owners and employees and HCFA--must work together on this critical issue. We all have the same objectives--to keep Medicare solvent, to weed out fraud and abuse in the system, and more importantly, to carry out Medicare's mandate to ensure that our most vulnerable citizens have access to the health care they need. Madam Chairman, I welcome this hearing, and I look forward to the information that will be provided today by the distinguished panelists, and I hope we can come to some kind of consensus here about the answers that are needed in the best interest of America's senior citizens. Thank you. [The prepared statement of Senator Cleland follows:] PREPARED STATEMENT OF SENATOR CLELAND I want to thank the Chair and state how important this hearing is. All of us have read front page stories about the toll the Balanced Budget Act is taking on patients across the country. The headlines say it all: ``Medicare Cutbacks Prove Painful,'' ``Nursing Homes Shun Some Medicare Patients,'' ``Patients Face a Limit on Benefits for Therapy.'' Let me say that the Balanced Budget Act of 1997 has produced some positive results--we have a balanced budget, and Medicare's fiscal health has been extended by many years. But the BBA has brought with it unintended consequences--and these consequences have a decidedly human face. It is the face of the Nation's most vulnerable elderly citizens and their caregivers. It is the face of the 73-year-old cancer patient who relies on a feeding tube and I.V.'s--and who cannot find a nursing home that will accept her because her medical needs are too costly. It is the face of the 67-year-old woman who lost her leg to diabetes complications--who received an artificial limb, but was stopped short of her goal of walking with only one cane because she hit her $1,500 a year physical therapy limit. It is the face of the children and parents of patients who must make the difficult choice of whether to care for their loved ones at home or seek care in a nursing home. It is the face of some of you in this room today--the nurses and other dedicated employees of home health care agencies who have devoted your lives to caring for the sick. Many of you are unsung heroes, who serve in some of the most rural areas of the country, who manage the sickest, most frail patients, with no means of payment other than Medicare. Last July the Small Business Committee, on which I serve, held a hearing on home health care and whether it can survive the new BBA regulations. At that time, I stated that the government should make every effort to allow Medicare recipients to live in their own homes for as long as possible. However, despite good intentions, those of us in government can sometimes become part of the problem we seek to correct. The Interim Payment System is such an example. Congress enacted the IPS to encourage providers to cut costs by becoming more efficient--a laudable goal. In practice, however, we are seeing efficient agencies being driven out of business, while some less well managed agencies have been able to survive. Last summer we heard that 800 small- and medium-sized home care agencies had been forced out of business by BBA regulations. That number has now jumped to more than 2,000 agencies. How many patients are being denied service--how many patients are being forced into nursing homes--because 2,000 of America's home health agencies have been forced to close their doors? All of us--the Congress, agency owners and employees, and HCFA-- must work together on this critically important issue. We all have the same objectives: To keep Medicare solvent, to weed out fraud and abuse from the system, and most importantly, to carry our Medicare's mandate to ensure that our most vulnerable citizens have access to the health care they need. I welcome this hearing. I look forward to the information that will be shared today, and hope that we will get answers that are in the best interests of America's senior citizens. Senator Collins. Thank you very much, Senator Cleland. I am now pleased to yield to the Senator from New Mexico, Senator Domenici. OPENING STATEMENT OF SENATOR DOMENICI Senator Domenici. Thank you very much, Madam Chairman, for conducting this hearing. I wish I could stay longer, but I will just be able to be here for half an hour or so. I heard your opening remarks, and I would like to say that I think you have covered almost every issue that I would have covered, and I commend you for raising those and laying them on the table. Some of those issues must be resolved. Some involve overregulation by HCFA. I hope this hearing will send a signal to them that where changes can be made, they ought to do so. It is patent and obvious in my State, where I have a task force on health issues, that home health care, in an effort to save money, has become entangled in a web of new rules and regulations that for some who have spoken with me, it is almost impossible to deliver the kind of care that they want to deliver. In addition, costs are not coming down. As you place all those burdens on, the costs of keeping businesses going, whether they are nonprofits or profit-making, are going up, and payments are coming down. Obviously, in a State like mine and perhaps yours, Madam Chairperson, we have a lot of rural areas, and rural areas have a very difficult problem not only because there are so few patients and such big distances, but also payment was presumed to be an average of the high costs and the low costs, and essentially, most of the rural ones are high-cost and long-term need patients, so the rural home health care facilities, if they are isolated and have just rural areas, cannot make it because what we figured as a cost is just out of kilter with the reality of the abundance of high-cost patients. Obviously, we are going to have to resolve some of these things, and I look forward to working with you on that. Some, I think can be solved with this Subcommittee and others just telling HCFA in no uncertain terms that overregulation is not necessarily synonymous with better care or with lower cost. Quite to the contrary--in this industry, it is proving to be very, very much the opposite. Madam Chairman, I would ask that you put my remarks, which go into more detail, in the record. Senator Collins. We would be happy to. Without objection, they will be entered in full in the record. Senator Domenici. Thank you very much. [The prepared opening statement of Senator Domenici follows:] PREPARED OPENING STATEMENT OF SENATOR DOMENICI It is a pleasure to be here this afternoon and I want to start by commending the Chairwoman, Senator Collins for holding a hearing on this very important issue. I too have been working on the problems facing home health for some time now. I would also note that when I attended a recent meeting of my New Mexico Health Care Task Force, the concerns raised by home health care providers were identical to those being raised today. While the Balanced Budget Act of 1997 (BBA) has produced a number of positive results, I am concerned about the impact of the Interim Payment System (IPS) on seniors living in rural areas. More to the point, I am unsure whether the IPS adequately takes into account the unique needs of our rural areas. I would submit the premise of the IPS was sound: Home health agencies would have a blend of short term and long term patients whose costs would average out to the per beneficiary limit. However, home health agencies in rural areas often do not have a choice because these areas tend to have low volume and mostly high cost patients. For instance in New Medico, Catron County is almost 7,000 square miles in size, but has a population of less than 3,000 people. There is not even a home health agency in Catron County and for people living in Datil the nearest agency is 164 miles away in Silver City. Let's say this agency must see a patient in Glenwood, Datil, and Salt Lake that is a round trip of almost 400 miles that the IPS does not take into account. Moreover, with roughly less than one-half of a person per square mile, I would submit that a home health agency will have a hard time because they will have very few patients and no control over their condition. I think a recent GAO report reinforces this point: ``Low-volume agencies may have less ability to stay below their caps: A few high- cost patients can affect them more because they have a smaller pool of beneficiaries over which to average their costs.'' Again thank you, Madame Chairwoman, for holding this hearing and I look forward to participating. Senator Collins. I would now like to yield to the Ranking Minority Member of the Subcommittee, Senator Levin. OPENING STATEMENT OF SENATOR LEVIN Senator Levin. Thank you, Madam Chairman, for convening these hearings and for your continued leadership in a very critical area. Our constituents, American citizens, are very much looking to us for leadership in helping to make sure that they are provided with an essential service, and that is what home health care is. You again are playing a critical role in making sure that that happens, and I want to commend you for that. Today we are looking at how the home health care industry is surviving the so-called ``reforms'' of the Balanced Budget Act (BBA) of 1997. Having received some 1,500 letters in 1998 from both providers and beneficiaries concerning problems the home health care industry is facing, I think the answer to that question is: ``Not well.'' Not only is the Interim Payment System harming home health agencies in Michigan and other cost-efficient areas, but additional regulatory hurdles have been put in the way of agencies, making it difficult for these agencies to continue providing quality care. Home health agencies provide a critical service for our Medicare beneficiaries. According to the General Accounting Office, there are over 1.3 million Medicare beneficiaries in my State of Michigan alone. Well over 100,000 of those beneficiaries use the services of Michigan's 220 home health agencies. These beneficiaries receive much-needed services within the comfort and security of their own homes. It is common knowledge that most people prefer recuperating from an illness in their own home rather than in a nursing home and that the overall cost savings of home health care compared to nursing home care are dramatic. I think that probably each of us has had instances in our own families where this need, this very human need, to have care at home if possible has been proven. I know I have had such instances in my own family. In February 1998, I sat down with representatives from the home health agencies in Michigan to discuss the interim payment system, and the health care leaders, including one whom we have with us today, Linda Stock, voiced serious concerns about the interim payment system which penalizes cost-efficient home health providers while rewarding the higher-cost agencies. Let me just give you one example. In Michigan, the 1998 average cost of receiving home health care services per patient was about $3,300, while the national average was about $4,000. Ms. Stock's agency, Home Health Outreach in Rochester Hills, Michigan, is operating under a per-beneficiary limit of about $2,500. This is more than $1,000 below the national average, and her agency is essentially being penalized for having been cost-efficient for the Medicare program in 1994. So we have that plus many other areas that we want to explore here today, including some of the new regulations which have been imposed by HCFA which are extremely burdensome. The Outcome and Assessment Information Set, OASIS, sequential billing, overpayment recoupment, and the 15-minute increment home health reporting requirement are simply too burdensome. I know that some of these regulations have been disbanded or suspended, but they have not all been, and in the process of preparing for the implementation of the ones that I have just described, a huge amount of time and effort has been wasted. So in our battle to protect Medicare from waste, fraud and abuse, we have to ensure that the great benefits of home health care are not lost. Yes, we need to have reasonable controls in place to avoid abuses, but at the same time, we have to make sure these critical services remain available to those who need them. I hope today's hearing will help to bring HCFA and the industry together to work on a payment system and on regulations that make sense for the people of the United States, for whom home health care is so important. Thank you. [The prepared statement of Senator Levin follows:] PREPARED STATEMENT OF SENATOR LEVIN Today we are looking at how the home health industry is surviving the so-called ``reforms'' of the Balanced Budget Act (BBA) of 1997. Having received some 1,500 letters in 1998 from both providers and beneficiaries concerning problems the home health care industry is facing, I think the answer to that question is, ``not well.'' Not only is the Interim Payment System (IPS) harming home health agencies in Michigan and other cost efficient regions, but additional regulatory hurdles have been put in the way of the agencies, making it difficult for these agencies to continue providing quality care. Home health agencies provide a critical service for our Medicare beneficiaries. According to the GAO, there are over 1.3 million Medicare beneficiaries in my State of Michigan. Well over 100,000 of those beneficiaries use the services of Michigan's 223 home health agencies. These beneficiaries receive much needed services within the comfort and security of their own homes. It is common knowledge that people prefer recuperating from an illness in their own home rather than in a nursing home and that the overall cost savings of home health care compared to nursing home care are dramatic. Some changes certainly needed to be made in the home health industry. From 1989 to 1996 Medicare home health payments grew at an average rate of 33 percent, while the number of home health agencies swelled from about 5,700 in 1989 to more than 10,000 in 1997. During this time, home health care was also one of Medicare's fastest growing benefits. Medicare spent $3.7 billion to pay for home health visits in 1990 compared to $17.8 billion in 1997 according to the GAO. In response to this rapid cost growth and some concerns about alleged abuses, the Balanced Budget Act included a number of changes in home health payment policies. One significant change we made in that Act was requiring HCFA to move to a different payment mechanism, a prospective payment system (PPS), which under the Balanced Budget Act was supposed to have been in place by October 1, 1999. In the meantime, the Balanced Budget Act provided for a temporary payment mechanism, or interim payment system, which has turned out to be quite problematic. In February of 1998 I sat down with representatives from the home health industry in Michigan to discuss the interim payment system. These health care leaders voiced serious concerns about the interim payment system, which, they said, penalizes cost-efficient home health providers while rewarding higher-cost agencies. Michigan providers, on average, have lower per-patient costs than their counterparts in other regions. By paying home health agencies at rates calculated from 1994 cost reports, the interim payment system penalizes those agencies that attempted to keep their costs down in 1994. The formula is regional as well as agency specific which penalizes those regions, like the Northeast and the Midwest, who were historically more efficient with their Medicare dollars in 1994. Let me give you an example. In Michigan the 1998 average cost of receiving home health care services per patient was $3,285 while the national average was $3,987. Linda Stock's agency, Home Health Outreach in Rochester Hills, Michigan, is operating under a per beneficiary limit of $2,531. This is more than $1,000 below the national average. Ms. Stock's agency is essentially being penalized for having been cost efficient for the Medicare program in 1994. With unfair reimbursement gaps such as that experienced by Ms. Stock's agency, no wonder the Medicare home health benefit has already experienced significant cost savings well beyond the amount anticipated. The original projected savings in 1998 to Medicare as a result of the changes in home health care was $16 billion over 5 years. Yet in March of this year, CBO baseline figures for home health projected a five-year savings of $48 billion. That's $32 billion in unexpected savings. While GAO says its review doesn't show that persons who deserve home health care services aren't getting them because of the Balanced Budget Act changes, that $32 billion is pretty good evidence that that may be the case. It is very possible that such savings are coming from people like Ms. Stock, at the expense of both Medicare beneficiaries and providers. On top of the severe reduction in payments, I am concerned that some of the new regulations being imposed by HCFA are too burdensome. Michigan agencies have been critical of the Outcome and Assessment Information Set (OASIS), sequential billing, overpayment recoupment, and a 15-minute increment home health reporting requirement. Some of these regulations have been disbanded or suspended, but in the process of preparing for their impolementaiton, time and effort has been wasted. In our battle to protect Medicare from waste, fraud and abuse, we have to ensure that the great benefits of home health care aren't lost. Yes, we need to place reasonable controls to avoid abuses, but at the same time, we have to make sure that these important services remain available to those who need them. I hope today's hearing can help bring HCFA and the industry together to work on a payment system and regulations that make sense for the people of the United States for whom home health care is so important. Senator Collins. Thank you very much, Senator Levin. Due to time constraints, the Subcommittee was unable to invite everyone who wanted to testify at this hearing. As you can imagine, we were beseeched with many requests. We will, therefore, leave the hearing record open for 30 days for anyone who wishes to submit a written statement. In that regard, we have already received a written statement from the Home Health Services and Staffing Association, and without objection, that statement will be included in the printed hearing record.\1\ --------------------------------------------------------------------------- \1\ The prepared statement of the Home Health Services and Staffing Association appears in the Appendix as Exhibit No. 4 on page 174. --------------------------------------------------------------------------- I am now pleased to welcome our first panel of witnesses this afternoon. I am particularly pleased to welcome a constituent of mine, Maryanna Arsenault, who is the CEO of the Visiting Nurse Service in Saco, Maine, and who is also testifying today on behalf of the Visiting Nurse Associations of America. We are also pleased to have Mary Suther, who is both chairman of the board of the National Association of Home Care as well as president and CEO of the Visiting Nurse Association of Dallas, Texas. Also with us is Linda Stock, Senator Levin's constituent, who is executive director of Home Health Outreach of Rochester Hills, Michigan. Finally, we would like to express our appreciation to Barbara Markham Smith who is here with us today. Ms. Smith is a senior research staff scientist with the Center for Health Services Research and Policy at George Washington University, which is part of the School of Public Health at George Washington University Medical Center. I want to acknowledge that the Subcommittee is aware that Ms. Smith's testimony today is based on the findings of a study that she is conducting that has not yet been completed, so her findings are preliminary. It is not her usual practice to discuss her findings at this stage of her research, so I want to acknowledge that fact and express our appreciation to Ms. Smith's agreeing to share her very important preliminary finding with the Subcommittee today. It is my understanding that this will be the first public discussion of Ms. Smith's results. Pursuant to Rule 6 of the Subcommittee, all witnesses who testify are required to be sworn in, so at this time, I will ask that you all rise and raise your right hand. Do you swear that the testimony you are about to give to the Subcommittee will be the truth, the whole truth, and nothing but the truth, so help you, God? Ms. Arsenault. I do. Ms. Suther. I do. Ms. Stock. I do. Ms. Smith. I do. Senator Collins. Thank you. I am going to ask that each of you try to limit your oral testimony to about 5 minutes each. If you need to go a little beyond that, feel free to do so, but we want to make sure we have plenty of time for questions. We will be using a timing system this afternoon, so be aware that approximately 1 minute before the red light comes on, you will see the lights change from green to orange, and that will give you the opportunity to conclude your testimony. Your written testimony, however, will be included in the printed record in its entirety. Ms. Arsenault, we are going to start with you. TESTIMONY OF MARYANNA ARSENAULT,\1\ CHIEF EXECUTIVE OFFICER, VISITING NURSE SERVICE, SACO, MAINE, REPRESENTING THE VISITING NURSE ASSOCIATION OF AMERICA Ms. Arsenault. Thank you, Madam Chairwoman and Members of the Subcommittee. My name is Maryanna Arsenault, and I am chief executive officer of the Visiting Nurse Service which is located in Saco, Maine. The Visiting Nurse Service is an independent, Medicare-certified home health agency serving southern Maine and seacoast New Hampshire. --------------------------------------------------------------------------- \1\ The prepared statement of Ms. Arsenault appears in the Appendix on page 46. --------------------------------------------------------------------------- I am pleased to be here today to present the views of the Visiting Nurse Associations of America (VNAA), regarding the difficulties that VNAA members, including the VNS, are currently experiencing in meeting the health care needs of patients within the current Federal regulatory environment. We are grateful to you, Madam Chairwoman and Subcommittee Members, for your interest in determining how the Medicare home health Interim Payment System, IPS, and several new regulatory requirements are making it difficult for the VNS and other VNAs to meet our patients' health care needs. We believe that this hearing is being held at a critical time, because evidence of harmful effects on Medicare beneficiaries is beginning to emerge, particularly involving those with chronic health and disability conditions. VNAA believes that it is essential to look at the combined effect of IPS and regulatory requirements such as OASIS on providers and their patients. IPS alone has forced VNAs to cut costs by an average 20 percent to stay under the IPS per- beneficiary and per-visit cost limits. On top of these cuts, new regulations have increased home health providers' costs significantly. For example, OASIS implementation has cost our agency more than $300,000. The combined effect of IPS cost limits and OASIS implementation has caused the VNS to exceed its per-visit cost limit for the first time ever. While the VNS had consistently maintained per-visit costs 25 percent less than our per-visit cost limits, we are now over the limits by 3 percent in the aggregate. Our skilled nursing per-visit cost increased from $79 in 1998 to $91 in 1999 because (1) IPS decreased the per-visit cost limit by 16.5 percent; (2) OASIS increased our nursing per-visit cost by $7; (3) the IPS decreased our average per patient reimbursement by $600 in 1 year, causing utilization to drop and costs per visit to increase; and (4) because other time-consuming and costly regulations, including fraud and abuse initiatives, have added to overall costs. How has patient care been affected by the budget cuts at VNS? During this past year, the decreased number of staff has meant a decrease in staff continuity for patients because staff must now cover a greater geographic area. Elderly patients have had to adjust to new staff more frequently, which has jeopardized the establishment of a trusting relationship. Our monthly patient satisfaction surveys show a decreased level of patient satisfaction. This problem will be exacerbated in July when we close a branch office. In addition, four surrounding agencies have closed, affecting access and requiring further expansion and dilution of our services and discretionary moneys to meet community needs--once again increasing staff travel time and costs. In order to manage the per-beneficiary cost limit, our average number of visits per VNS patient has decreased from 56 to 45 in 1 year. This reduction has been compounded by two significant recent changes in Medicare coverage which have severely curtailed access for patients with medically complex conditions. First, the criteria for whether Medicare will cover a skilled nurse's management and evaluation of a patient's plan of care are now being more stringently interpreted by the fiscal intermediaries. Medicare must approve a skilled nurse's coordination of extended interdisciplinary care in order for individuals with a multiplicity of functional needs to receive such care. Such coverage has increasingly been denied. Second, the Balanced Budget Act reduced the ``part-time or intermittent skilled nursing care'' eligibility criteria from 56 to 35 hours per week, which has curtailed our ability to meet the needs of this patient population. The following two case examples provide a closer look at the access to care issue: Doris is an 85-year-old woman who lives alone in rural Maine with no indoor plumbing and no telephone. Her two living family members live outside the State. Doris is unable to manage her medications independently. However, her need for medication management no longer qualifies her for coordinated services by a registered nurse. The weekly service of an RN to assess Doris and assist with medication management had previously enabled Doris to live at home free of hospital admissions. Marjorie is also 85 and has received VNS services since 1996. She has brittle chronic obstructive pulmonary disease, an anxiety disorder, and cardiac arrhythmia requiring regular venipuncture for coumadin management. Marjorie is homebound. We are planning to discharge her because she no longer qualifies for skilled RN services. Marjorie has also avoided hospitalization for several years. She does not qualify for Medicaid services and will lose her home health aide. Marjorie will be at high risk for continuous hospital admissions. As the costs to VNS increased due to IPS and new regulatory changes and interpretations, we were forced to curtail non- Medicare services to patients. Discretionary moneys previously used to meet patient needs not covered by Medicare are now being used to subsidize Medicare. The VNS closed a much-needed personal care service that had been subsidized by discretionary funds. Family members of 100 patients receiving care were forced to provide personal care to elderly patients and very sick children, which in turn affected their work schedules and job security. On July 1, home health agencies will have to comply with another costly and burdensome regulation mandated by the BBA-- the 15-minute increment recording requirement. The changes to billing forms and software will be costly, and the information collected may not be useful in terms of correlating clinical time with patient assessment and outcome information. VNAA believes that it is important to have standardized accountability of processes, but we feel that this information would only be meaningful if it captures total patient care time in relation to patient results. HCFA's proposed 15-minute requirement will not provide this information because it is encumbered by a stop-watch recording method and does not account for a clinician's activities outside the home that are directly related to patient care, and it ignores any travel time. It is my understanding that this provision will be implemented because OASIS has been suspended and may be used as a method to assess reimbursement. The home health industry cannot withstand one more change where the information may or may not be needed. Senator Collins. If you could conclude your statement in the next few minutes, that would be great. Thank you. Ms. Arsenault. Very quickly--I will not read the rest of my statement--we need relief regarding the cost limits, both the per-beneficiary and the per-visit. The 15-minute increment is going to be a terrible burden for home health agencies. That is about it. I thank you very much. Senator Collins. Thank you very much. Ms. Suther. TESTIMONY OF MARY SUTHER,\1\ CHAIRMAN OF THE BOARD, NATIONAL ASSOCIATION OF HOME CARE, WASHINGTON, DC, AND PRESIDENT AND CEO, VISITING NURSE ASSOCIATION OF TEXAS, DALLAS TEXAS Ms. Suther. Thank you very much for this opportunity to appear before you today to testify. --------------------------------------------------------------------------- \1\ The prepared statement of Ms. Suther with attachments appears in the Appendix on page 52. --------------------------------------------------------------------------- My name is Mary Suther. I am president and CEO of the Visiting Nurse Association of Texas, which is a 65-year-old charitable organization serving people in rural and urban areas. We serve about 50 counties, and that changes daily because we have had to close offices. In the past year, we eliminated one branch that served eight counties that we can no longer serve. I am also chairman of the board of the National Association for Home Care. We are deeply appreciative of the attention the Members of this Subcommittee have shown to the problems created by the home health provisions of the Balanced Budget Act and the regulatory burdens imposed by HCFA. The CBO originally reported that the effect of the BBA would be to reduce home health care expenditures by $16.1 billion over 5 years. Revised projections indicate that reductions will exceed $47 billion. I am sure you remember that one reason Congress directed that the reductions had to be so great was because a two-thirds behavioral adjustment was made to the projection, and therefore required greater cuts than would normally be necessary. We look back now, and we think we were right to begin with, because the expenditure is along the lines had there been no behavioral adjustments. I am confident that Congress will restore home care for their constituents. The financial viability of home health agencies is now being threatened by the cost of legislative and regulatory changes, as you have heard. The access to beneficiaries is being greatly reduced. These changes include the line-item billings, increased medical review, itemized bills to patients on demand, billing in 15-minute increments, sequential billing, OASIS. You may have heard that sequential billing has been suspended. It is and it is not. You can still send the bills in, but they will not be paid until the claim in question has cleared medical review. Also, for the 15-minute increment, you may hear that that has been suspended, too, but only temporarily. These items have all increased costs due to increased staff requirements; computer programming; printing; upgrading computer hardware capacity; increased postage and shipping; increase in data line costs; and coupled with that, all of the Y2K compliance that we have to do in home care. HCFA got extra budget for their Y2K compliance, but we have had no additional add-ons for our Y2K compliance, and we do have to comply with Y2K. For my own agency, it cost $1.5 million for that compliance. Increased cost is only one aspect. Nurses have to complete on the average an additional 45 pages of paperwork per patient. I have copies of admission folders here if any of you would like to look at those. OASIS questions number more than the questions asked of a quadruple bypass patient being served by a hospital. Patients are angry that we are asking them these questions, especially some of the very personal information, and often, they are too sick to go through this entire questionnaire and assessment process. That is not to say that I do not believe, nor does our association, that we should be gathering unified data and certainly, data elements upon which we do base costs or should base costs in the future. An even more devastating effect of the increased administrative burden--and this is a recent finding--is that nurses are leaving nursing, but nurses are leaving home health at a greater rate because they say they did not go into nursing to be clerks or secretaries but to provide nursing care to patients. We are now experiencing nursing shortages. The weekend before last, our agency, which is the largest home health agency in the area, had to close admissions because we did not have staff. Baylor Health Care is the second-largest serving our area, and they had to close admissions. I spoke with someone at Johns Hopkins, and she said that several hospital home health agencies in the Baltimore area also had to close admissions because of lack of staff in that area. This is not in my written testimony, because I just found this out. Sequential billing has caused severe cash flow problems and duplicative handling of claims. Billing in 15-minute increments not only increases costs, but beneficiaries are going to be extremely angry if a nurse comes in, and after she has been there for 8 minutes, pulls her stopwatch out and starts turning it off and on if the patient gets a phone call during that time period--off; if the patient goes to the bathroom during that time period--off. Patients are going to be extremely angry with us because we will not be able to adequately explain to them-- think about trying to explain this to your grandmother. These changes coupled with IPS, which produced for most home health agencies a 14 to 22 percent decrease in the per-visit reimbursement--and in my own agency, that was 27 percent--at a time when costs are increasing--you heard the previous witness talk about the increase, and the costs in our agency have increased proportionately to those in hers--the low aggregate beneficiary limit with no provision for increased limits for medically complex, high-cost patients, and also the elimination of venipuncture as a qualifying benefit. In one county that our agency services, of all the patients discharged as a result of the elimination of this benefit, one-third were admitted directly into a nursing home on the day of discharge. Venipuncture patients were included in the base year for cost analysis; however, it changes the cost analysis when you take those patients out of the base year cost materials, which I do not think anyone has thought of. There are threatening letters going to physicians which cause them to decrease or eliminate referrals for patients. In our area, several doctors have sent a blanket letter to all home health agencies and to their patients, saying we will no longer admit you to a home health agency because it may subject us to criminal charges, and therefore, we cannot take that liability on. Alarming letters go to patients about their Medicare bills regarding fraud and abuse. In many areas, the Health Care Financing Administration's regional determinations regarding strict, archaic rules for branch offices, which increase costs and cause offices to close. In our area, we have had to eliminate one office already that served eight counties because of this rule, and we are threatened with having to close another one that serves 15 counties because of this. They do not understand that we have telephones and fax machines and computers to assist in running those offices. I would like to give you an example of some access problems--and I will submit this testimony for the record, because I did not have this information earlier. I found out that in Texas prior to BBA, there were 15 counties with no home health agency. Now, as of April 1, we have 40 counties with no home health agency in Texas. Two of those counties have areas greater than 4,500 square miles, and each of those is bordered by another county that has no home health agency. So, access is being severely affected in Texas. My time is up, so I will just conclude by saying that in many instances, the Balanced Budget Act has certainly lengthened the life of Medicare, but sometimes, the cure is worse than the disease. The effects of the BBA have produced many unintentional consequences. We are relying on your interest in this problem to help repair that damage. Thank you. Senator Collins. Thank you very much. Ms. Stock. TESTIMONY OF ROSALIND L. STOCK,\1\ VICE PRESIDENT, HOME HEALTH SERVICES, HOME HEALTH OUTREACH, ROCHESTER HILLS, MICHIGAN Ms. Stock. Chairman Collins, Senator Levin and Senator Edwards and the staff, thank you for this opportunity to discuss the effects of the 11 mandates of BBA on home health patients and their providers since October 1, 1997. --------------------------------------------------------------------------- \1\ The prepared statement of Ms. Stock appears in the Appendix on page 88. --------------------------------------------------------------------------- I am Linda Stock, vice president of Home Health Services and a director of the Michigan Home Health Association, and I speak for the majority of providers who want to be part of the solution and not part of the problem. Each mandate is unfunded if the provider is at, or above, their per beneficiary cost limits. Home health is the only Medicare benefit for which patients pay all the costs at the site of care. So any recurrent calls for copayments are unconscionable. As a home care provider for over 18 years, I am saddened to see peers close their doors or eliminate Center of Excellence programs for wounds, strokes, and diabetes in response to the severe cutbacks. Home Health Outreach is a system-affiliated home care agency, serving urban and rural areas. In 1998, we admitted 934 Medicare patients. Because our per beneficiary limit is so low, we depleted our expenses and cut anything that was deemed nonessential to short-term survival. Staffing expenses were reduced by 19 percent. Our Y2K budget was cut to two PCs and their software, one fully dedicated to OASIS. Y2K has made that a very short-term decision. Just one of our home care patients with complex wound care costs us over $25,000 a year. Balancing these costs and patient service is next to impossible. I have personally seen the anxiety of an elderly patient being taught how to give their own intravenous care. Access to care is becoming a greater issue for Michigan. Over 10 percent of our agencies have closed, and others are limiting their admission criteria. We have case managers who will confirm that they are prolonging discharges from hospitals because they cannot find care for complex cases. Please eliminate the 15 percent additional reduction due in October of this year and mandate a rational PPS by October 1, 2000. Hastily enacted surety bonds, sequential billing and OASIS mandates created serious operational and financial problems and then were suspended. What a waste of time and resources for the Federal Government and for providers. In April, HCFA implemented OASIS, and the 79 OASIS admission questions added 17 pages to our assessment. Separate data is also required on readmission, change of patient condition, recertification, transfer, discharge, and death. Protection of clients' right to confidentiality and participation in their care decisions has not been adequately addressed by OASIS. The benefits should not be denied if the patient refuses to answer the questions. Non-Medicare patients show greater resistance to the personal aspects of the questions. HCFA should not have the authority to mandate data collection for services they do not pay for. Here are some examples of OASIS-related situations. A patient with severe lung disease develops such shortness of breath during the OASIS assessment that the interview had to be suspended so the nurse could intervene. A confused elderly man was also unable to answer for himself, and his caregiver, a neighbor, knew nothing about him, so the assessment is meaningless. An elderly female patient hospitalized twice in the first 2 weeks of OASIS was being subjected to her third OASIS interview. Weak and tired, she voiced her frustration by saying she would not go back in the hospital if she had to answer those questions again. During the nurse's first contact with the patient, asking, ``Are you having thoughts of suicide?'' is a totally unacceptable entry into the psychological assessment of a patient. Will it be perceived as a suggestion? Will it trigger anger or rejection of service? Providers do not oppose collection of outcome measurements. We oppose inefficient data collection which jeopardizes patient rights and implements a system without adequate provider input or funding. For OASIS, HCFA prepared three manuals of instructions coming to 512 pages--just for OASIS. Our agency's projected OASIS cost for the first year is $126,000. In the last week before OASIS was suspended, our HCFA OASIS software froze, and all the data to date was lost. We recommend delaying the OASIS implementation until patient rights, funding, and data volume and frequency issues are addressed, and we also ask that OASIS not apply to non- Medicare patients. The new 15-minute increment reporting mandate on home health care claims becomes effective in just 20 days. Providers anticipated a simpler formula, and we knew we had to report visit time, but now our staff will need stopwatches to delete the items that HCFA arbitrarily determined do not constitute allowable time, such as charting and dishwashing by an aide. Now, the HIM 11 says both of these items are allowable in the content of a visit, but they are being eliminated. Even OASIS is being eliminated. Agencies will need to run concurrent time studies, one for payroll and one for the new mandate. They must revise their software and establish a new tracking system. Was it Congress' intent that the 15-minute increment be labor-intensive and micromanaged? I do not think so. Because of Y2K complications, we recommend delayed implementation of the 15-minute reporting until a simpler, less costly formula can be designed. In conclusion, I believe that mandates have already impacted patients by diverting limited resources away from direct care. Congress did not mandate this minutiae. There is provider support for practical, effective regulations for each of these mandates. My hope is that together we can replace reactive fixes for current problems with a more efficiently designed home care benefit. My thanks to those who helped me prepare for today's session and to this Subcommittee for addressing this critical issue. Senator Collins. Thank you very much. Ms. Smith. TESTIMONY OF BARBARA MARKHAM SMITH,\1\ SENIOR RESEARCHER, CENTER FOR HEALTH SERVICES RESEARCH AND POLICY, THE GEORGE WASHINGTON UNIVERSITY, WASHINGTON, DC Ms. Smith. Good afternoon, Madam Chairman, and Senators. Thank you for inviting me here today to testify on a matter that affects not only Medicare beneficiaries who may need home health services now and in the future but indeed affects the coherence and viability of the Medicare program itself. --------------------------------------------------------------------------- \1\ The prepared statement of Ms. Smith with attachments appears in the Appendix on page 132. --------------------------------------------------------------------------- My testimony, based on the preliminary findings of our study, will suggest today that as a result of the Balanced Budget Act of 1997, home health agencies in general are driven to change the case mix of their patients and alter the patterns of practice of the care they deliver to conform to reimbursement constraints. These constraints appear to be creating substantial tension with meeting the clinical needs of some patients. As a result, many seriously ill patients, especially diabetics, appear to have been displaced from Medicare home care. Other patients are experiencing significant changes in services, with effects on health status that are unknown, but suggest greater risk as a result of greater fragmentation of services. I am going to flip through my testimony in order to expedite it, but I think it is important to recognize that even though we are in the midst of this study now, I would say that the biggest methodological problem that we have is that it is still too early to fully assess all of the impact, so that these findings should be regarded as signals of greater effects yet to come. I want to put the findings in some context. We do have outcome studies that have been funded by HCFA recently, very large, that I would regard as flagship studies, on the effects of home care on patient health status. Basically, these studies show that patients with more home health care have better outcomes both in terms of improved functioning and reduced hospitalizations. These studies specifically warn that an attempt to force patients into a short-term care model could have very adverse consequences on the health status of beneficiaries. In addition, the studies show that the regional variation in home health utilization correlates to the health status of beneficiaries in home health care in those regions. For example, the mortality rates among beneficiaries in high- utilization regions are 34 percent higher 30 days after discharge from home care than patients in low-utilization regions. This is not a reflection of the quality of care, because it happens 30 days after discharge; it is a reflection of the fragility of the patient's health status in the system. With those outcomes studies in mind, I would like to go straight to my specific findings. First, just to backtrack, what that means is that it is very important not to confuse low cost with efficiency. An agency can be low-cost and be inefficient because it has a very healthy patient mix, or it can be high-cost and be very efficient because it is taking care of critically ill patients. So I think it is important to bear that in mind throughout an analysis of this problem. The key preliminary findings of our studies suggest significant potential effects on beneficiaries, particularly those with unstable chronic illness or who have even short-term intensive needs. It appears that these patients are being displaced from home care or are experiencing significant changes in services. These changes appear to be driven by reimbursement policies and intermediary scrutiny, rather than clinical considerations. And let me just state the findings for you one by one. Home health agencies in general are moving fairly aggressively to adjust their case mixes and/or their practice patterns to conform utilization to reimbursement. While intermediary practices have also clearly had an effect on both utilization and case mix, reimbursement changes appear to be the dominant driver of practice in case mix changes. A number of agencies have achieved virtual reversals in their short stay/long stay ratios through changes in their patient mix. Other agencies with very sick patient mixes have significantly reduced visits and clinical staffing levels even as they dramatically increase their patient census, raising serious quality concerns. These significant reductions in care in agencies with very adverse patient mixes are driven almost exclusively by reimbursement considerations and are most notable among agencies operating under national median limits in traditionally high-cost areas. Both the interim payment system and fiscal intermediary policies have created a stratification of beneficiary desirability among providers. Orthopedic rehabilitation patients, particularly joint replacements, coronary artery bypass graft, also known as CABG patients, nondiabetic post- operative wound care, pneumonia-type infectious disease patients have become the ``Brahmins'' of desirable patients and are the focus of competition among agencies. Diabetics, particularly brittle diabetics, appear to have experienced the most displacement from home care. The extent to which complex diabetics are even being admitted to home care has declined significantly among the study agencies. Among diabetics already in care, agencies report very aggressive efforts to discharge them. The extent of the decline in the home care diabetic census among the study agencies, as well as the reductions in care, raise concerns about the long-term health status and outcomes of this population. Similar patterns of aggressively seeking discharge or avoidance of congestive heart failure patients and chronic obstructive pulmonary disease also appear, although to a lesser extent. Patients who require two visits daily or even one visit daily, even for very short periods of time, seem to be experiencing significant displacement from home care. This was a surprising finding, and it has affected short-term I.V. therapy patients in particular, who need care for only 3 to 6 weeks and whose care is unquestionably post-hospitalization and very acute. A number of agencies report overt screening to exclude or time-limit these patients specifically. Mental health services are also experiencing some exclusion and decline in services, either because they do not want to keep the patients in long enough to--I see my time has expired; I have a few more findings and some implications. Should I go ahead and proceed? Senator Collins. If you could summarize those quickly, that would be great. Ms. Smith. OK. Foley catheter patients do not appear to be experiencing displacement because while they are very long- term, they are also low-intensity. Home care's perception of their mission has changed dramatically from preventing hospitalization and preventing acute exacerbation to discharging people as quickly as possible. Agencies appear to be applying eligibility standards in a manner to exclude patients rather than to include them, bending over backwards to exclude them from Medicare rather than bending over backwards to qualify them for Medicare. And a lot more patients are paying 100 percent out of pocket for services they previously received in Medicare as a result. The findings are listed in my testimony, and I am going to quickly flip to some myths and implications. One of the myths that I think is important to dispel is that these patients cannot go right into Medicaid and receive Medicaid services. The functional and financial qualification standards are very stringent, and even dually-eligible beneficiaries frequently do not qualify for these programs. For the home and community-based waiver programs, they do not often provide skilled services, and their limited services are provided on a queued basis, so that patients do not make a straight walk from Medicare home care into Medicaid services. The implications of this are profound, looking at the big picture. Among the study agencies, the number of Medicare beneficiaries in home care has declined 20 percent since 1997, but the number of Medicare beneficiaries since 1994 has expanded by 2 million beneficiaries. Those numbers alone should tell us that something is seriously wrong here. My main concern is that we are carving out a wedge of people who are chronically ill and have intensive service needs services who are not going to have a reliable source of care in any sector. They are becoming the health care system's untouchables. The other important consideration is that it should be clearly understood that many of the sickest patients may already be out of the system, and therefore, any PPS system which is based on the utilization data from 1998, I think, would be seriously flawed because I believe that that utilization data will not adequately express the needs of the population. I'll stop there and take questions. I appreciate your time and consideration. Senator Collins. Thank you very much, Ms. Smith. We now will start a 10-minute round of questions, but I want to start by thanking you all very much for your very insightful and illuminating testimony. As I mentioned in my opening statement, my primary concern is to evaluate what impact the changes in the payment system and in the regulatory system are having on our most vulnerable senior citizens. In that regard, your testimony is very interesting because it seems to contrast greatly with the testimony that we are going to hear later this afternoon from HCFA. I want to read you three statements from the written testimony that is going to be presented by HCFA later today. The first statement is: ``We are diligently monitoring the impact of these changes and thus far do not have evidence that access to care has been compromised.'' The second statement is: ``Again, we have not seen objective evidence that closures have affected access.'' And the third statement is: ``We to date do not have objective evidence that beneficiary access to care has been compromised.'' In other words, three times in the testimony, HCFA officials are maintaining that our seniors are not experiencing any problems getting access to home care. That does not seem to be what I am hearing from any of you, nor is it what I am hearing from my home health agencies throughout the State of Maine. So to set the record straight on that issue, since you are out there on the front lines, I would like to hear your reaction to the three statements that I have just read, and I will start with Ms. Arsenault. Ms. Arsenault. From where my agency sits providing care, we are basically one of the only organizations providing care in a very large geographic area, and I would have to say that we do admit patients if we find them to be eligible, but interpretations have become much more stringent. So today, we are admitting fewer patients because we are willing to take the risk. We have already been under 50 percent review by Medicare. So whereas a year ago, we would have said yes, let us admit this patient; we believe we can fight and win, today we know that we cannot win, so we are indeed seeing patients with access problems. Senator Collins. So you would disagree with HCFA officials, and you believe that care and access have already been compromised. Would it be fair to say that you believe it will become worse if, for example, the 15 percent payment cut goes into effect? Ms. Arsenault. If the 15 percent payment cut goes into effect, it will definitely get worse. Senator Collins. Ms. Suther. Ms. Suther. In the area that I serve, access has been impaired in several ways. Many agencies in our area, rural and urban, have closed. It is not the agencies that have caused the access as much as other things. Base year, we provided over 450,000 visits for Medicare clients. This year, we will provide under 200,000 visits at a time when other agencies are closing. The difference is that the patients we serve are getting and receiving care. We are not turning anyone away. Our agency has used donations to offset our losses and has subsidized the Medicare program, and even though Dallas and its surrounding counties are a very generous community, they said enough is enough, that they cannot continue to do this. So I do not know what we are going to do after this year. We are having to cut back on specialty care. For instance, we had seven enterostomal therapists who take care of very severe wound care patients, and it has been our experience that a wound care specialist can treat a patient for a shorter period of time, get out of the home, and the patient will have the same results as having a generalist treat the patient for a longer period of time. But we cannot do that under IPS because the per-visit limit is exceeded. We are over the per-visit limit, but we are $3 million under the per-beneficiary limit, but we cannot use our judgment in using a specialist--we have to use generalists in order to get reimbursed. So patients are not getting the best care. There are many agencies in our area that are asking us to see their long-term patients, and we are admitting them because we had a very low utilization rate before, and the way the formula is, we got a little piece of the State rate which had a high beneficiary limit, so therefore we can admit some of their patients. But this is all going to go away, and in fact, our board of trustees met yesterday, and if there is a 15 percent cut, we will probably go out of business--and we have been doing this for 65 years. Senator Collins. I think you have raised a very important point, because I am hearing from home health care agencies in my State, as well, that are turning to private fundraising to subsidize Medicare. Prior to that, the fundraising efforts were used to provide non-Medicare service to elderly people, but now we have a situation where private fundraising is being used to make up the deficit because of the problems with the regulatory rates and with the cost of regulation. So I think that is a good point. Ms. Suther. One more remark. I don't know the specifics of this case, but I believe there was a case in North Carolina in which HCFA even said they would pay for the care, but they could not find an agency that would provide it. And I cannot give the specifics, but I will get the specifics for you, because the patient was such a high utilizer. Senator Collins. Ms. Stock. Ms. Stock. I see the access issue in three areas that I know of in our State, and I think we are just at the tip of the iceberg, Senator, because the majority of the State is on the December 31 year-end for their cost reporting period and are just finishing their cost reports now, and when they see their bottom lines, they will be closing their doors in much, much higher numbers than we saw before. But I see access being affected in three ways. There are patients who are not being admitted to care. We are seeing that, and we can validate that with case managers at hospitals. There are also patients who are being discharged earlier and end up rehospitalized, end up in the emergency room, end up going to a nursing home. The third thing we are seeing is underutilization. We are skimping on the visits so much that patients are having to subsidize that with their own funds or private community resources to pay for services that they are entitled to by the Medicare benefit. Senator Collins. Ms. Smith? Ms. Smith. I think the evidence that contradicts that first and foremost is the fact that we have seen a negative growth rate of 15 percent in the claims in this industry. You really do not need to know anything else to know that you probably have an access problem when you see negative growth of 15 percent in 1 year. It is unprecedented in recent health care history. The other evidence of course would come from the fact that agencies are overtly screening patients and admit to very early discharge of patients whom they would previously keep, describing this as discharging them at the first signs of stabilization, often precipitating readmissions to hospitals, readmissions to emergency rooms, and also applying these eligibility standards quite strictly. I think also the number of people who need skilled care and are being discharged into basically nonskilled environments would also tell you that there is a significant access problem. Senator Collins. Ms. Smith, I want to follow up on that point, because in your written testimony you mentioned that diabetics, particularly brittle diabetics, appear to be experiencing considerable displacement from home care. Ms. Smith. Right. Senator Collins. What do you think is happening to those patients? One of the issues here is that home care is a much more cost-effective way to care for people than hospitalization or nursing home care. Do you think that a lot of these people are going to get sicker because of the lack of home care and will end up having to be admitted into hospitals or nursing homes, ironically, costing the Medicare system far more than if we had cared for them adequately through the home care system? Ms. Smith. The short answer is that we do not know where these people are. I said to one person that if I were going to put this testimony to music, it would be, ``Where Have All the Diabetics Gone?'' My suspicion is that what we are seeing is much more fragmentation of care, that they are basically bouncing between different types of health care providers and experiencing more periods of deterioration between getting care from those different types of health care providers. Senator Collins. Is there any tracking of patients who have been discharged from the system? Ms. Smith. I am not aware of any tracking, and I know that the GAO study specifically did not track specific patients. Senator Collins. My concern, for example, is the two 85- year-old women who have been receiving services in Maine. What is going to happen to them? It seems to me that they are at risk of getting sicker, of being hospitalized. It is just of tremendous concern to me. I want to ask one final question on this round about the OASIS issue. Ms. Arsenault, I am going to direct this to you. In HCFA's prepared testimony, they state that once providers learn to use OASIS, it actually ``slightly reduces the total time it takes to conduct and document a thorough patient assessment.'' In your testimony, however, you state that OASIS has actually increased your agency's per-visit nursing cost by, I believe, an additional $7. Is that correct? Ms. Arsenault. That is correct. Senator Collins. That seems inconsistent with HCFA's statement that OASIS actually saves time--and maybe I will quickly go across the three home health agency representatives that we have here. Time is obviously money. You have actually quantified it in your agency. Do you disagree with HCFA's assessment? Ms. Arsenault. I disagree with the fact that it will take us less time to do an assessment with--and I can never remember if it is 92 or 102 extra data elements. But we already have an assessment, and we added data elements to that assessment. Some of them were the same questions, but most of them were not. No, I do not agree with that at all. As an example, for our organization, on the first visit, which is the visit when we admit a patient, we have always done an assessment and we begin our teaching. When patients began to fall asleep, we had to divide that and do the assessment on visit one and the teaching on visit two. Senator Collins. Very quickly, because my time has expired--Ms. Suther, do you agree with HCFA that once you get used to the system, it is going to actually save you money? Ms. Suther. I do not know what they mean by getting used to it. We were a test agency, and we were involved in the research on this, and we have been completing it for a long time, and time required has never decreased beyond about 10 minutes. Senator Collins. Ms. Stock. Ms. Stock. The only other thing I would like to add is that since you have to do it so many times in the intervention with the patient, it adds enormous volume. You cannot add 79 questions and not take more time. Senator Collins. Thank you very much. Senator Levin. Senator Levin. Thank you, Madam Chairman. Ms. Stock, you said in response to the question about access being reduced, that you can demonstrate through experience that patients are not getting the benefits that they are entitled to under the Medicare system, that you can actually demonstrate that to HCFA. Are you saying that Medicare is refusing to pay for benefits that are rightfully covered by Medicare, or are you saying that even though Medicare will pay, nobody is willing to provide the service--or both? Ms. Stock. The latter, Senator. I think what we are saying is that we are more than willing to do what we have commissioned ourselves over the years to do. We cannot afford to do it for the money that we are being paid. We cannot offer the services. We cannot admit a patient unless we have adequate resources to provide that care, so that is deterring us from accepting or continuing needed care that is covered by Medicare. Senator Levin. Each of you, in response to the Chairman's question, indicated that access is indeed being impaired by the recent Balanced Budget Amendment changes, and the regulatory changes. The General Accounting Office and HCFA have said that the opposite has occurred. The headline of the GAO report is: ``Closures Continue with Little Evidence Beneficiary Access is Impaired.'' Some of their findings are, for instance, that ``The decline in visits per user between 1996 and 1998 is consistent with IPS incentives and does not necessarily imply a beneficiary access problem.'' And then, a few lines later, they say that ``Certain patterns are consistent with the IPS incentives to constrain the costs of care for each beneficiary but not necessarily the number of users.'' There seems to be a real gap between your experience in the real world and what HCFA interprets is going on or what the GAO is interpreting is going on, because I have no doubt that you know what is going on. These studies are fine, and they are useful, but they have certain limits, and one of the limits is that if folks who are out there delivering services have a real world experience that is as yours has been, and where we have people who are entitled to benefits and need benefits and we want to have benefits for human reasons as well as for financial reasons so we can save the costs of having them in the hospital or in a nursing home, that we are not somehow or other connecting your experience with HCFA's, or with the GAO for that matter. What is your experience in dealing with HCFA? Why is there this apparent gap between what they see and transmit to us and what you know and transmit to us? Ms. Arsenault, maybe we could start with you. Ms. Arsenault. It is my understanding that the particular study that you are referring to was done early on when IPS was first implemented. I think a lot of what we are telling you today is the experience that we have out in the field in our home States, and I think it is too early to truly quantity in a study format what the two effects are going to be. Senator Levin. It is more than ``are going to be''; it is ``already have been.'' That is my point. Ms. Arsenault. You cannot study only the first 3 months of IPS and project for the future or even know truly what is going on right now. We have a lot of experience with studies coming out that either used false methodology or concentrated in areas--for example, the fraud and abuse study, I think it was the GAO. They concentrated their assessment in a number of States that were known to have fraudulent providers and then extrapolated that to the entire Nation. Senator Levin. Ms. Suther. Ms. Suther. I think she is on the right track. I think it is that we are talking in real time, and the study was done right at the beginning of IPS. It was January 1, 1998, before you even knew what your cost caps were going to be, even though it was implemented October 1, 1997. Second, providers did not know what their per-beneficiary caps were. HCFA was not even directed that they had to do it before April 1. Many people were already into that year. And then, many agencies did not get their per-beneficiary limits for over a year after they were on IPS, so they did not know where they stood during that time period, and they are just now finding out where they stand, and they are just now beginning to turn patients way. I think there is a definite access problem, and all you have to do is be in the churches and the clubs and the community to see exactly what that access problem is. People who really need it are not being served. Senator Levin. And if you invited HCFA to come out and sit with you for a day and talk to people who are providing services, would their response be positive? Would they come out and sit with you and join you in the real world or not? Ms. Suther. I do not know, but I would love for them to come. We have a State senator who has been out doing visits because he is very concerned about this, and he looked at patients who were high-utilization patients to see what would happen to them over time, he has been following these patients over time, and we have been documenting for him the amount of care we are giving beyond what normally we could afford if we were not being subsidized by the community. Senator Levin. Thank you. Ms. Stock. Ms. Stock. Senator, your question regarding HCFA's willingness to work with the industry is really tantamount to the heart of the issue. They have waived the requirements for comment periods on some of these mandates. They have also underestimated the costs, especially of OASIS, and also, the Paperwork Reduction Act issues. They have had some meetings with us, Senator, but I do not think it is a two-way communication, and we have been working on PPS either through the work group or our State and national associations since 1993, always willing to give our input--you know how talkative we are--but it is not always a two-way conversation. We would be glad to fix the problems. We think there are some solutions. Senator Levin. For instance, Ms. Suther gave us the statistic that one-third of the people, as I wrote it down, after they are discharged from home health care are going to nursing homes within a matter of days, I think you said. Ms. Suther. This was a specific instance with venipuncture alone, and this is in one county in which we discharged the patients who no longer qualified for service because venipuncture was the sole qualifying service, and we discharged those patients specifically directly into nursing homes. That is not the case in every county, and that is not the case with all discharges from home care. Senator Levin. In that specific case, we surely lost a lot of money, I assume. Ms. Suther. Right. Senator Levin. Ms. Stock, let me ask you a question about the regional disparities that exist here. In your prepared testimony, and I think in your oral testimony as well, you indicated that your agency's per-beneficiary limit was $2,531 for 1998, which is more than $1,000 below the national average of $3,987. The agency limits are based on 1994 cost reports, so I have two parts to my question. How did you keep costs low in 1994, because that now is causing you a big loss; and how much have your actual costs increased since 1994? Basically, are you being punished for being efficient in 1994, and if so, how did you do it in 1994, and what has gone on since then? Ms. Stock. Am I taking it personally? Yes. Because we have been involved in the PPS project since 1993, we have been planning for managed care, planning for PPS, and trying to limit our cost. It was intentional to be below the cost limits all along. We did not max our caps as some of the people in the industry went to seminars about, and I think very few providers try to do that. Actually, what we try to do is use good resources. We are business people, and we are trying to provide good care. What has happened since that reduction is that our resources are limited, and we now have less than we had in 1994. We are treating more highly technical patients than we did in 1994. We are seeing more early discharges from the hospitals, and those patients are intense and complex. The diabetics are an issue for us, wound care is an issue for us. So a lot of creative and really dedicated people have tried to cut what we really need. Senator Levin. But those who limited costs in effect really worked at it back in 1994 compared to those who did not, as you put it, maximize their caps in 1994. The ones who were careful to limit their costs are now in effect being punished for that. Is that accurate? Ms. Stock. That is correct, and eventually, we will be out of business. If we do not have relief, we will not survive to the year 2000. Senator Levin. And does HCFA understand, then, the negative incentive that that created, in effect, the reward for inefficiency or lack of constraints back in 1994? Is that something you have raised with HCFA, and if so, what is their response? Ms. Stock. I believe the issue has been raised. I do not know the conscience of HCFA about their response to that, but I would say that they think that because we are going to PPS, this is a temporary solution, but some of us will not make it to PPS. Senator Levin. I am reminded that that is a statutory matter, but if they agreed with you, HCFA could of course, make a recommendation to us for a statutory change. Ms. Stock. For which we would have been grateful. Senator Levin. My time is up. Thank you. Senator Collins. Thank you, Senator Levin. Senator Edwards, welcome. We are glad to have you with us. OPENING STATEMENT OF SENATOR EDWARDS Senator Edwards. Thank you, Madam Chairman. I am glad to be here. Ms. Stock, if I could just follow up on that last question, and then I have some general questions I want to ask. If I understand this correctly--and I have talked with a lot of folks about it--the bottom line is if you were efficient in 1994, you are punished for that now--this is what Senator Levin just asked about. If you were inefficient, you are rewarded for it. Isn't that the bottom line? Ms. Stock. That is, as long as you make the distinction, Senator, that many agencies that had high costs per patient were treating a very complex population or were in rural areas where their expenses were higher. But yes, there were people who got more money. Senator Edwards. And that is the point Ms. Smith was making when she said low cost does not indicate efficiency. It depends on your patient. Ms. Stock. Right. Efficiency is efficiency. It may be high or low cost. Senator Edwards. I have three concerns, and I will address questions to a number of you. One is my concern about unnecessary and inefficient bureaucracy, and I have this OASIS questionnaire in front of me right now which I want to ask you some questions about. The second is loss of service--people who do not have access to home health care and so desperately need it, particularly diabetic patients, as Ms. Smith keeps making reference to. The third thing--and Senator Collins made reference to this--is when we are trying to be efficient in the spending of our Medicare dollars, which I think all of us are concerned about whether we are doing that or not, and particularly whether we are doing it when often prevention is in the long term the lowest-cost thing we can do, and home health care is the most efficient means of prevention. I presume most of you would agree with that; is that true? [Panel members nodding.] Senator Edwards. OK. Let me start with this OASIS form and ask a simple question first--and maybe this is too simple, but I feel like I need to establish it. Ms. Suther, I will start with you. Do you all need to fill out this big, long form in order to treat the patient? Ms. Suther. That is just part of it. That is the OASIS part. But there are other questions---- Senator Edwards. Oh, there is more to it than this? Ms. Suther. There are other questions and information that must be collected in addition to that, plus information that you must share on advance directives and all sorts of other things with patients. No, you do not need all the information. Yes, we do need a data set that collects information that is relative to cost and can predict cost, but we do not need all of that information. That questionnaire had to be integrated into your regular assessment methodology, and that is what I was referring to when I said 45 additional pages, because 17 were on admission, and then there was readmission, and when I looked at the length of time in the program for the average patient, the average number of times that one had to complete that set, that is where I came up with the 45. And in our agency, that equates to over $1 per visit. The larger the agency, the less it costs per visit to do it because of the start-up costs in the first year. Senator Edwards. I understand. Ms. Stock, did I understand you to say that big notebook that you have in front of you is all of the manual, or is there more to it than that? Ms. Stock. Our agency has three manuals, 512 pages, and this is just the instructions. But HCFA did allow us $170 per patient to in-service our staff on it, so reading it would not cover $170. Senator Edwards. I presume all three of you would agree that all this information that you are gathering for purposes of OASIS is not all medically necessary for the treatment of your patients; is that true? Ms. Stock. That is correct. Senator Edwards. Now let me ask you a different question. Looking through this form, I see some things--for example, there is a question about life expectancy. Is life expectancy generally considered a medical diagnosis, and is that something that nurses are normally trained to offer medical opinions about? Any of you can answer that. Ms. Arsenault. That would be a question if someone had a terminal illness, and we were looking at them for hospice benefits, but not for normal treatment. Senator Edwards. How about you, Ms. Suther? Ms Suther. I do not have any nurses who are actuaries, nor do any of them pretend to be. [Laughter.] Senator Edwards. That is what I thought. Ms. Stock. Ms. Stock. We are often accused of practicing medicine without a license when we make recommendations to physicians, but that is not one I would make. Senator Edwards. In reading through some of these questions and forms and knowing less than you do, but knowing the real world and some of the concerns that I have had expressed to me by people in North Carolina--what do you do when patients either cannot or will not answer these questions? And I guess I will ask you a very practical question, do you find that sometimes your caregiver is put in the position of trying to figure out the answer themselves, even though they cannot get the patient to respond directly? Ms. Arsenault. No. We would document that the patient refused to answer the question. Senator Edwards. Do you know whether that occurs, Ms. Arsenault, what I just described? Ms. Arsenault. It does occur. I could not give you any data on that, though. Senator Edwards. Ms. Suther, how about you? Ms. Suther. I think it probably does occur. Our staff has been instructed that if patients refuse to answer the information, they must document that, and that if they do not document that and attempt to fill in the blanks, they will be fired on the spot, and we will turn them in to the Board of Nursing. Senator Edwards. Ms. Stock. Ms. Stock. I think the instructions say that you can answer some questions by observation, but I would hesitate to have my staff do that if they can get direct information from the patient. Senator Edwards. I am told that when HCFA did their study and demonstration on the answers to these questions on the OASIS form, they had folks out in the field with a laptop computer in place, answering the questions. Would I be correct in presuming that you all are not able to send out laptop computers with all of your health care providers when they go out to see their patients? Ms. Stock. Ms. Stock. I cannot afford that. Senator Edwards. How about you, Ms. Arsenault? Ms. Arsenault. We cannot afford to implement laptop computers. Senator Edwards. Ms. Suther. Ms. Suther. We do not have laptop computers. However, I had not heard that HCFA was doing that. I know some agencies do have laptop computers and do complete the forms that way, but I had not heard that HCFA had done that. Senator Edwards. I do not know whether it is accurate or not; it is just some information that I had. Let me go to another question, and Ms. Smith, this is an issue which is of tremendous concern to me, and I wish I could find the quote. You said that the home health care industry's perception of its mission has changed so that it is now discharging people as quickly as possible. Ms. Smith. Right. Senator Edwards. That is of tremendous concern to me, particularly if they are discharging folks who need ongoing home health care. I wish you would elaborate on that. Ms. Smith. Part of the study that we conducted--in addition to the survey, we do about an hour and a half telephone interview with the agencies--and they indicated that they no longer consider it part of their mission to provide preventive care or try to keep the patient out of the hospital; that their job is now an immediate, short-term perspective which is to stabilize for the condition at hand for which they were admitted at that moment, and then to get out. So I would describe the mission as one of getting patients out of home care as quickly as possible, as opposed to keeping them out of other sources of care. Senator Edwards. Ms. Stock, is that healthy? Ms. Stock. It is not healthy, but one more thing that impacts on that which we did not address in our testimony is that each patient is only counted once a year in aggregate, and if they are admitted 25 times a year, you still have to provide service. So to your issue, we close them if we can as precipitously as we can that is safe, so the next time they come that year, we have some resources to use for them on the aggregate. HCFA will say that that is not true for each patient, but you do have to take that into consideration when you are admitting a patient--if they are chronically unstable, they will be with you many times. Ms. Smith. If I could just respond to that. Senator Edwards. Absolutely. Ms. Smith. A couple of agencies have indicated that one of the things that they are doing in marketing for their referrals is to try to figure out a way to avoid readmission of patients to home care because they regard readmission as a marker, obviously, for more complex patients. So they are trying to direct their marketing to referring providers in a way that avoids their getting patients back. Senator Edwards. Let me ask this question--and I presume I know the answer to this question. It sounds like all of you believe that there are people who do not have access to home health care now who need it. is that a fair statement? [Panel members nodding.] Senator Edwards. And I also presume that if this 15 percent cut goes into effect in the fall, that would be dramatically increased; is that a fair statement? Ms. Smith. I think so, unquestionably. Senator Edwards. Ms. Stock. Ms. Stock. No question. Senator Edwards. And Ms. Suther? Ms. Suther. No question. Senator Edwards. Ms. Arsenault, do you agree with that also? Ms. Arsenault. I do. Senator Edwards. And finally, if I can ask a general question for each one of you to comment on, if I could get you to talk from your perspective about knowing that one of our responsibilities is to be efficient with taxpayer money and making sure that these Medicare dollars are being spent in the best way they can be, from your perspective, the way the system operates now and particularly if folks are not getting the kind of home health care that they need, how that impacts the long- term Medicare/health care costs associated with that patient-- i.e., how can we most efficiently spend our Medicare health dollars? Ms. Smith, I want to start with you. Ms. Smith. I think the risk of creating greatly exacerbated costs in other sectors, particularly hospitals and skilled nursing facilities, is substantial. I would also point out that the Federal Government pays a very large share of Medicaid costs as well. So I think the attempted--and I think largely unsuccessful--cost-shift to Medicaid will have a similar effect. The other point I would like to make is that one of Medicare's missions is to assure a reliable source of care to sick people. If we are not doing that, then it seems to me we have failed in our essential mission. Senator Edwards. Thank you. Ms. Stock. Ms. Stock. I think I would limit it to two suggestions-- first, to try to direct HCFA to limit the scope of their regulations for your mandates to your intent; and second, to include providers in the development and implementation phases of those requirements to preclude some of the problems that we have seen, and then they got suspended, and we all paid the money. Senator Edwards. Those are very good suggestions. Ms. Suther. Ms. Suther. I have 35 years' experience in home care, and I feel like I know a little about this. I think there is a short- term solution, and that is to make some corrections in the IPS. And then I think there is a long-term solution, and that is to make certain that PPS is properly done. Thus far, the providers have not had an opportunity to look at the provisions for implementing PPS to assure that appropriate information for making the decisions as to what the cost therefore reimbursement should be for the future. Senator Edwards. Thank you. Ms. Arsenault. Ms. Arsenault. I would say that it is foolish to skimp on home care. It is very foolish to eliminate seeing an 85-year- old woman one time a week to manage her medications. That individual's health will deteriorate, and we have talked a lot about inpatient care, but none of us talked about how many times that 85-year-old woman will see someone in an emergency room--probably more frequently than the inpatient admissions. And we all know that emergency room care is very, very expensive. The accelerated rate that regulations are coming forward from HCFA has placed tremendous burdens on home health agencies. We could reduce the number of regulations, and we have all talked about them. Regulations come forward, then are suspended. This 15-minute increment--we have not even received regulations, and we have to implement that on July 1. We are working in a crazy world. Home health care can be very cost- effective and can save the Nation tremendous amounts of money. Senator Edwards. I see my time is up. Let me just say that you all being willing to come here and tell us these stories is critically important so that the country and the Congress can hear what basically all of us have been hearing back home when we move across our States and talk to folks. What you have said today is completely consistent with what I have been hearing from people who are on the front line back in North Carolina. So I thank you very much for taking the time to be here. Thank you, Madam Chairman. Senator Collins. Thank you, Senator Edwards. I want to thank the panel also for your very valuable testimony. Both your written and your oral testimony it seems to me have suggested three very important issues for us to pursue. The first is the issue of the impact on our senior citizens, and the evidence you have given us suggests that Medicare beneficiaries with chronic conditions--those most in need of care--are going to be most hurt by this system, that they are already starting to feel the impact, and that is only going to get worse unless the administration and Congress step in and rectify the situation. Second, the current IPS system is clearly unfair to those historically low-cost agencies. In Maine, I am particularly sensitive to this issue because 85 percent of our home health agencies in Maine are below the national medium costs. So we have been hit very hard, and as with Ms. Stock's agency, and I am sure Ms. Suther's as well, we are penalizing those agencies which have been most prudent in their use of Medicare resources, so the system is truly perverse when that is the result. And third, it seems to me that we have a state of regulatory chaos at HCFA. Ms. Arsenault in her written testimony described a system of ``implement and suspend,'' a costly system where regulations are implemented by agencies, and the costs are somehow taken care of, only to be suspended later when the problems become evident. I think part of the reason for that is HCFA's failure to fully consult with the industry in developing these regulations. Those are three issues that I have taken from your testimony today, and I want to thank you very much for sharing your direct, front-line experience with us. And Ms. Smith, thank you again for sharing the preliminary results of your study. We hope that you will share your final findings with us as well. Ms. Smith. I look forward to that. Thank you, Senator. Senator Collins. Thank you very much. I would like to call up our second panel of witnesses this afternoon. Representing the Health Care Financing Administration are Kathleen A. Buto, who is deputy director of the Center for Health Plans and Providers, and Mary R. Vienna, the director of the Clinical Standards Group. I look forward to your testimony and your recommendations on how we can solve some of the problems that we have just heard described. Before you get too comfortable, I am going to ask that you stand, since I do need to swear you in. Do you swear that the testimony that you are about to give to the Subcommittee will be the truth, the whole truth, and nothing but the truth, so help you, God? Ms. Buto. I do. Ms. Vienna. I do. Senator Collins. Thank you. As you know, I had asked the previous witnesses to limit their testimony to 5 minutes, but I am going to give you additional time since a lot of issues have been raised. I would ask, Ms. Buto, that you limit your oral testimony to no more than 15 minutes--we are giving you three times as much--and we will be using the timing system, which I believe you are familiar with. It is my understanding, Ms. Buto, that you are going to be presenting the testimony, and that Ms. Vienna is available for questions but will not be presenting a formal statement. Is that correct? Ms. Buto. That is correct. Senator Collins. Please proceed. TESTIMONY OF KATHLEEN A. BUTO,\1\ DEPUTY DIRECTOR, CENTER FOR HEALTH PLANS AND PROVIDERS, HEALTH CARE FINANCING ADMINISTRATION, U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES, WASHINGTON, DC, ACCOMPANIED BY MARY R. VIENNA, DIRECTOR, CLINICAL STANDARDS GROUP, HEALTH CARE FINANCING ADMINISTRATION Ms. Buto. Thank you. I hope I can complete my oral statement in less than 15 minutes so we can get to the questions, because I sense that there are a lot of questions waiting to be asked. --------------------------------------------------------------------------- \1\ The prepared statement of Ms. Buto appears in the Appendix on page 148. --------------------------------------------------------------------------- Chairperson Collins, Senator Levin, and distinguished Subcommittee Members who have asked a number of questions that I hope we will get a chance to respond to, thank you for inviting us to discuss the impact of home health care payment reforms. I am accompanied this afternoon by Mary Vienna, from our Office of Clinical Standards and Quality. She is both a registered nurse and an expert in the new OASIS home health patient assessment system which will help us to improve the quality of care and pay for it accurately. Home health is an essential benefit for millions of beneficiaries. Unfortunately, as you have already pointed out, Madam Chairperson, the expenditures have been growing at an unsustainable rate, and several studies have documented widespread fraud, abuse and waste. Between 1990 and 1997 when the Balanced Budget Act was enacted, the number of beneficiaries receiving home care doubled from 2 to 4 million while expenditures more than tripled, from $4.7 billion to $17.8 billion. This is something that you have already pointed out. The Balanced Budget Act addressed these concerns by closing loopholes, raising standards and creating incentives to deliver care efficiently. The payment reforms require agencies to change past behavior and eliminate unnecessary and uncovered services. The incentive to supply virtually unlimited visits is gone. This should not mean that care is compromised for any patient. Home health spending is down for other reasons as well. Home health is one of the initial targets in our aggressive and highly successful fight against fraud, waste and abuse, and these efforts have had an enormous impact. We have focused on reducing erroneous Medicare payments and bringing down the error rate in this area of home health spending. Also, some apparent home health savings are temporary effects of slower claims processing. A September 1998 CBO report concludes that program integrity efforts, demographic changes, lower than expected inflation and other factors, not related to the BBA, account for the difference between savings projections when the BBA was enacted and the total spending since then. I understand that in testimony this morning before the Senate Finance Committee, the Congressional Budget Office projected annual increases of 7\1/2\ percent for home health agencies once the new prospective payment system is implemented on October 1, 2000. There has been an expected market correction in the total number of home health agencies serving Medicare, along with an increase in mergers among agencies. Most closures were in areas that had the sharpest growth in the number of providers and many areas where there were questionable billings before the Balanced Budget Act. Importantly, monitoring by us and by the General Accounting Office has not found that beneficiary access to care has been compromised, and I would also say, just to correct an impression, that the GAO report actually goes up through the beginning of 1999, so it covers most of 1998. It was not just the first couple of months of 1998. We are continuing to proactively monitor the BBA's impact on access. We have instructed our regional offices to gather extensive information. We are tracking the Bureau of Labor Statistics data on home health employment trends, and the Inspector General of the Department of HHS will survey hospital discharge planners to determine whether there are problems in finding home health placements. Last year, Congress raised the limits on costs somewhat in an effort to help agencies, and we are on a schedule to implement the prospective payment system in October 2000. But given the magnitude of the changes, it is understandable that concerns remain. We are committed to giving providers as much flexibility as our authority and responsibility allow. We are giving agencies up to a year to repay overpayments resulting from the interim payment system, interest-free. We have limited pre-payment medical reviews where appropriate, and we are ending a sequential billing policy which had raised cash flow concerns for some agencies. This is the policy, by the way, that was necessitated by the A/B shift in home health spending so that we could account for some of the BBA changes in home health. At the same time, we are implementing the Outcome and Assessment Information Set, now known as OASIS. We are required by law to monitor the quality of home care with a ``standardized, reproducible assessment instrument.'' OASIS will help home health agencies determine what patients need. It will help improve the quality of care, and it is essential for accurate payment under prospective payment. Our entire payment system for PPS is really built on the OASIS system. We are committed to continuing our efforts to monitor access to care and to taking administrative steps to help agencies adjust to the BBA reforms and other changes. We appreciate this Subcommittee's attention to the issue, and we look forward to continuing to work with you to ensure that beneficiaries who qualify for Medicare's home care benefit receive efficient, high-quality care. I will stop there and take questions. Senator Collins. Thank you very much for your testimony. I want to start by actually commending, believe it or not, HCFA on its increased efforts to combat fraud in the Medicare program, particularly in the home health care area. As you are well aware, this Subcommittee has held several hearings on fraud in the Medicare program, and indeed next week, Senator Durbin and I are going to be introducing legislation that comes from the hearings we held last year on this area. I mention this because I think it is very important as we talk about this to distinguish between legitimate efforts to squeeze fraud, waste and abuse out of the program versus regulations and cutbacks that have the result of impeding the delivery of necessary services to our elderly by completely honest providers. And we know that the vast majority of health care providers in this country are honest and ethical and committed to serving the needs of their patients. In your written testimony, you said that a lot of the regulations that you have implemented come from the fraud effort, but unfortunately in the attempt, perhaps, to crack down on inappropriate payments, I think you have implemented regulations that are doing what none of us wants--which is making it very difficult for home health care agencies to deliver services and driving up their costs in complying with regulations at the very time that their reimbursement levels are being curtailed. One of the ways that could have been avoided is through more consultation with the industry. We have heard the example of numerous regulations that have been implemented and then suspended, creating, as I said, an environment of regulatory chaos. Why didn't HCFA spend more time consulting with the industry on how to do this job more effectively? Ms. Buto. Well, it is hard--and I do not want to sound defensive about this--but if you think back to the Balanced Budget Act, it was really enacted in August 1997. The interim payment system actually went into effect in October 1997, even though we were not required to issue regulations until January for the per-visit limits and then April for the per-beneficiary limits. The law actually did some things that we were not prepared for, to be quite honest. For example, it is very prescriptive about the blend in the per-beneficiary cap between the per-agency amounts back to 1994, and with the regional amount. We did not have regional amounts. We had to gather the data and move very quickly in that respect. I can only say, having been at HCFA for a long time and working on most of the major changes in statute over the years, that the Balanced Budget Act presented the greatest challenge we have ever had to face, and particularly in home health, we had a very short turnaround time between August and April to get a lot of the rules written. And a lot of it was driven by a formula that said you had to come up with the 75 percent agency-specific and then 25 percent regional aggregate per beneficiary limit. We had to gather the data and synthesize it. On things like the home health agency bond issue, again a statutory requirement, there was a lot of pressure coming from the Operation Restore Trust effort to get a bond requirement out there. And I agree with you that it would have been better to take more time. We certainly recognize that now. The administrator, Nancy-Ann Min DeParle, asked us to suspend that rule and meet with the industry to talk about the very issues you are suggesting. There are some things that we definitely could have done better in that regard, but I have to say that the time frames for implementation for the IPS were extremely short for the complexity involved. Senator Collins. My response to that would be that HCFA was very involved in all those negotiations during the Balanced Budget Act. Many of the provisions that were in there came directly from HCFA. Ms. Buto. But not the biggest data gathering exercise, which is the regional blend. We did not have a data base, and we had to create that by pulling in the data. That was something that was added as part of the conference discussion and was not part of our proposal. Senator Collins. It is also HCFA's obligation to come back to us in Congress if you think something is not working. I have had a lot of conversations with Nancy-Ann Min DeParle about the problems with the formula penalizing the historically cost- efficient agencies, which just seems like such a reverse of what it should be doing. I have talked with Secretary Shalala about it, I have yet to see a concrete plan from the administration on how to solve this problem. When might we receive the recommendations from you? Ms. Buto. Let me first address your concern and then talk about how we get from here to there. I think the concern comes from the fact that as in so many areas of Medicare, and it is also true in managed care, we have such variation in the spending patterns and utilization patterns around the country. I think the tough thing for Congress certainly in devising the formula for an interim system was do you take down, if you will, or try to average the utilization and the caps across the country, or do you try to keep people more or less where they are, with some reductions, which is what was happening, realizing that is going to have some inequities of its own. And I think that it is always a difficult thing when you also know that you are going to try to move to something else. It is hard to justify those kinds of issues when you have very conservative agencies that feel they have been especially penalized. But the alternative would have been to either spend a lot of money to bring them up to the national average or to bring down agencies around the country where the spending was higher. We sensed, and it was certainly discussed, there was not a willingness to do that. So that was very hard. I do not think it is easy to justify, but that is the way the formula works. What we obviously want to do is move to a formula that will reward agencies for the complexities of the individuals they actually see, so that they begin to get payment appropriately for higher-risk, higher-acuity patients. That is really what we need to move to, and again, we were going to do that by October 2000 for a lot of folks. That is some way away, and we realize that. Senator Collins. We have heard very strong testimony today that those patients that you have just described, those with chronic conditions, with complex cases, who are most in need of quality home care, are being most affected by the problems in the current system. And that recommendation, or that finding, rather, is consistent across the board. GAO says that they are most at risk. Ms. Smith's findings are that they are most at risk. The recent MedPAC report expresses concern that the Medicare patients who are sicker and more expensive to care for are going to have the most difficulty. Every one of our witnesses agrees that that is the case. What is HCFA going to do about that? Are you going to develop some sort of system for outliers for the expensive cases--because we have heard very clearly today, and it is a unanimous finding, that if we do not take care of those expensive cases and in some way develop a system for recognizing them, home health care agencies feel that they have no choice but to essentially cherrypick and take the healthier patients to care for. And that is contrary to the whole purpose of the system. Ms. Buto. I totally agree with you. I think the difficulty--and this gets to another kind of unpopular topic, OASIS--is that we do not have a standardized system right now for being able to say that among the home health care population, these are the characteristics or the individuals whom we can identify and also associate a higher payment for. That is exactly what we are doing with the payment system--we are going to associate higher payment with individuals who are more clinically complex, who are more functionally complex, and who require more services. I would like to ask Mary to comment on that, because she is more of an expert on OASIS, but that is exactly where we are trying to go with the payment system. Ms. Vienna. I would agree with Ms. Buto. And I wanted to say that contrary to some of the other rules that we have promulgated around IPS, OASIS was developed with extensive consultation with the industry. It took about 5 years to develop through a contract with the University of Colorado and was developed by clinicians. It was also proposed as a rule, and we got extensive public comment on the instrument, and it has had, prior to the rule, at least, a broad base of support. As a matter of fact, the National Association for Home Care distributed it to home care agencies for their voluntary use back in 1996 and 1997. So it is an instrument that was developed by clinicians, is useful in determining what kinds of services patients need and what kind of quality of care and outcomes patients are experiencing. And serendipitously, it turned out to be very useful in predicting the types of services that patients would need under a prospective payment system. Senator Collins. Ms. Buto, I want to go back to the point that you made that you recognize that we do need to somehow take care of the outlier case or the complex, chronic case that is expensive to treat, so that we do not create these perverse incentives. But I think that what you are telling me is that we need to wait until the prospective payment system is in place, which will not be until October 1 of the year 2000, to take care of this. We have heard today from agencies that are providing low- cost quality care, but they are not going to be around by October 1, 2000 if we do not remedy the system right now. What can we do in the interim to correct this problem? Ms. Buto. Senator Collins, I was listening very carefully, and in fact, I thought there were some very good comments about some of the burden issues, and we will certainly take a look at those. In terms of outliers, we really do not have a way to provide an outlier under the current structure. The statute is very specific. I think we do need to look at and continue to monitor the access issues. Although studies are remote, they are helpful. What we have also asked--and I would just suggest to the panelists who were here--is that anecdotes help us identify areas where we might be able to see if there are things that we can do under current authority or not. We have invited the National Rural Health Association and other providers to actually provide us with specifics so we can go out and look at particular cases for agencies that are experiencing trouble, and for beneficiaries who are having trouble. We are also working through our Center for Beneficiary Services, and we have State organizations that counsel Medicare patients. This has not been a big issue among the State agencies that are counseling Medicare patients, i.e., that they are being displaced, but we have asked them particularly to be alert to this, because we are concerned, and we are hearing of some anecdotes and some instances of individuals who are having difficulty and need help. So we have our antennae out there, and we would appreciate any intelligence these groups can give us, but yes, we are looking at the outlier issue in relation to the PPS system. Senator Collins. You have heard some pretty powerful testimony today from people who are on the front lines, who have told us, and told you, that there is a problem now and that it is only going to get worse. We also have the evidence of the MedPAC survey, and we have the preliminary findings of the George Washington University study. Has that changed your view on whether there is a problem here? Ms. Buto. I have never discounted that providers are having a problem and that some beneficiaries may be having problems. I have never ruled that out, and as I said, both through our regional offices, through the State counseling organizations and our 1-800 Medicare line, we are really trying to find out the extent of the problem and what is happening. We are also, as you are, looking at legislation and what kind of legislative changes we might want to suggest. We do not have those to give you today, but those are the kind of things that we are certainly looking at. Also, I think issues of burden are important. And if there are areas where we have some ability to loosen the burden, we should. We have taken some steps to do this, For example, the sequential billing requirement which led to claims processing hold-up, will be removed as of July 1. We have provided for the extended repayment plan which is interest-free for 12 months. That is unprecedented in Medicare. We want to give these agencies some breathing room to deal with the changes. So we are looking at changes, but I do not have a set of legislative recommendations that we could present to you today. Senator Collins. On the overpayment problem, I think it is important for the record to show that HCFA helped create that problem by being very slow in giving agencies their per- beneficiary caps. Ms. Buto. Yes, we acknowledge that. There is no question, and we actually got started just about the time the Balanced Budget Act was enacted, and we started to get information about what we would have to do to get our systems ready. The coincidence of this year and last year with our Y2K renovation efforts was really unfortunate. We were trying to renovate and certify our systems at a time when we had to change them and get the intermediaries to start doing different things, and they were torn in several ways. So I agree with you; we wish we could have done that more quickly, but they were under unbelievable pressure last year. Senator Collins. I would like to ask you about some specific recommendations that our witnesses have made for reforms. All of our witnesses have said that if the 15 percent across-the-board cut is allowed to go into effect, the results will be devastating for home care agencies and their clients. Similarly this morning, at the Finance Committee hearing, Bill Scanlon of the General Accounting Office expressed support for some sort of adjustment in the planned 15 percent reduction. He also raised a very important point, which is that another one of these across-the-board approaches only further penalizes the low-cost agency once again. Since I know you share my concern about not hurting those agencies that have been conservative and prudent with their use of Medicare dollars, that did not have excessive visits, that did not overutilize the benefit, how can we implement a cut of this nature? We know it is unfair, we know it is wrong, we know it is going to hurt patients. Is the administration prepared to support the repeal of that provision? Ms. Buto. I cannot speak to that right now. That is part of the consideration we are now undergoing about the legislation. But if I could, there are two issues I want to bring back to your attention. One, it is a 15 percent reduction. It would not be, in a Gramm-Rudman-Hollings fashion, an across-the-board reduction of the type I think you are talking about. What we are talking about is that that reduction would be against the base that we use to compute the prospective payment rates. I do not think that makes it any easier to swallow, quite frankly, for agencies that it is not just an across-the-board reduction, but it takes money out of the base. I think that what everybody is considering whether it is a good idea to include a 15 percent reduction as part of the prospective payment system. Senator Collins. In that regard, CBO testified this morning that, ``The one policy for which CBO may have significantly underestimated savings is the interim payment system for home health agencies.'' Since we know that the savings are far greater than Congress or the administration ever anticipated, why, given the problems we have heard about, would we impose a further 15 percent cut on the system? Ms. Buto. I think that this is one of the issues that everybody is looking at, including the administration. As you are well aware, the CBO and our actuaries estimate savings and costs relative to the current law baseline. They do not adjust savings or cost estimates, either, from year to year, even after changes have been made, and say that we are either spending too much vis-a-vis what we thought or that we are saving too much vis-a-vis what we thought. They are usually making projections 2 or 3 years ahead of time. But it is an issue that is clearly important when thinking about this. Senator Collins. Another issue that has been raised in the written testimony of the VNAA is the recommendation that Congress reinstate the periodic interim payment system. There have been considerable cash flow problems caused by the sequential billing system--which I realize has been suspended, but it did a lot of damage in the meantime--and the PIP reimbursement, particularly for smaller agencies, has been important. Are you giving any consideration to reinstating that? Ms. Buto. We are looking at that in the context of everything else, but in the context of the 2000 budget and the prospective payment system, I think some of those issues really should be very different because of the way that payment will be made on a per-episode basis for the individuals who are being served, rather than on a claim-by-claim basis. So some of the cash flow problems may be ameliorated, but we obviously need to look at the whole package. In fact, I think we need to look at the interactions among the various proposals to see what makes sense. Senator Collins. Another recommendation made by our witnesses is to postpone or repeal the implementation of the 15-minute interval rule. Would you comment on that as well--the stopwatch rule. Ms. Buto. That is clearly in the Balanced Budget Act, and we have been criticized for actually not implementing that provision on schedule. It was to go into effect in October 1998. Again, because of the difficulties around the year 2000 systems renovation and some proposals that were too complex were delayed. The uniform billing committee looks at making these kinds of billing changes for all insurers, and we got a late start. We could not come up with a proposal that was easy enough to do under our current system. So this ended up being delayed over its original effective date. This is an area where I heard some testimony that I had not heard about what is counted and what is not counted, and I certainly want to go back and look at that, but we really do not feel that we have the discretion to waive implementation of the 15-minute increment. We are going ahead with it. As people in the audience probably know, it goes into effect July 1, but there is basically a 3-month grace period so that agencies can fully come up-to-speed and use it, and we are giving them the extra time. But we are basically several months behind in implementing this provision. Senator Collins. There is no doubt that Congress shares in the blame for the problems that we have created here. However, HCFA has taken the statutory provisions to an extreme in almost every single case, whether it is the surety bond or the implementation of the 15-minute rule. What I am asking from you is to give us a specific set of recommendations so that we can work together in a bipartisan, cooperative, nonpartisan way to solve what is a very real problem for our cost-effective home health agencies, such as the ones that we have in Maine and that you apparently have in Michigan, as well as in many other States, and to ensure that we are not disrupting care for frail, vulnerable, sick, elderly people whom all of us care a great deal about. We need your help to do that job right. I have been disappointed that despite the many conversations I have had with administration officials at the highest levels of about this that we still do not have a proposal from the administration. We can learn from the mistakes that we both have made in this area. We can learn from the testimony we have heard today. We can learn by listening to the researchers and MedPAC and those home health agencies and nurses who are on the front lines. But we need your help to solve this problem, and we cannot wait until October 1, 2000 to do so. Ms. Buto. Well, we would like to work with you, Madam Chairman, and as soon as we have some proposals that we can discuss with you, we would be glad to do that. Senator Collins. Thank you. Senator Levin. Senator Levin. Thank you, Madam Chairman. I know you have already talked about the origin of the problem and the fact that there is some mutuality in terms of causation and who participated in the Balanced Budget Agreement and so forth. I do not think that that is really the issue now. The issue now is, as the Chairman said, what can we now do to correct the flaws in the Balanced Budget Agreement. There are obviously flaws, and whether they should have been foreseen or not is no longer the point. And by the way, even if Congress mandated it, which I am sure we did in many cases, HCFA can recommend changes in the law. You are able to make any suggestion just as any other American citizen. The administration could come forward and, if there is a mistake in the law, regardless of how it got there, suggest changes. It is equally important to work with the industry, with the providers, to understand what is happening at the grassroots level in the real world, and what are the real world impacts of what we have done. There seems to be a huge disconnect here between your conclusions and GAO's conclusions and what legitimate, honest providers of essential services to vulnerable people are facing in the real world. Since there is a vote on, I am going to be very brief. First, on Linda Stock's testimony that 10 percent of our State- certified agencies have withdrawn from the Medicare program, why are so many agencies withdrawing in your judgment? Ms. Buto. Well, it is a combination of two things. Some are withdrawing because they think the payment system is not favorable to them to continue to participate. Some are merging. There have been a lot of mergers of home health agencies with other home health agencies--consolidations. A third reason is that also in the Balanced Budget Act is a provision that says that payments for services to individuals will be based on where they live as opposed to where the agency is. In some cases, the agencies have chosen to pull back some of their satellite offices that are in areas that would now be receiving lower payments. So it is a combination of things. Senator Levin. But some of those are very undesirable, I would assume, from your perspective; is that not true? Ms. Buto. Some of the pullouts are undesirable? Senator Levin. Yes. If these areas are underserved, would that not be undesirable? Ms. Buto. It would be undesirable if the areas were underserved, but we found, as GAO has, that most of the home health agencies are pulling out where there are lots of other home health agencies, and that it is where there has been the most growth over the last 2 or 3 years in agencies--in urban areas, actually--that is occurring to the greatest extent. Senator Levin. If you found that in a significant number of cases, people who are no longer eligible or are removed from eligibility immediately moved into nursing homes, would that trouble you? Ms. Buto. That would trouble me, but we do not have any evidence of that, including in our---- Senator Levin. You heard this sort of evidence this afternoon. Ms. Buto. I heard the testimony, and I heard it was related to venipuncture. And of course, patients who were solely eligible because of the need for venipuncture are those who are now not eligible under the Balanced Budget Act for home health services. Senator Levin. I understand, but back to my question of moving them directly into nursing homes; would that then trouble you? Ms. Buto. It does trouble me, but again, we have not seen-- and the Inspector General is helping us do an analysis of what is happening with admissions to nursing homes with discharges from hospitals to see if we are seeing any of these patterns-- and we have not seen anything like this so far. Senator Levin. I am glad you were here this afternoon. Ms. Buto. Again, I welcome specifics, because I asked the last panel if they have got the specifics, we would like to have them so we can look into it further. Senator Levin. I hope that when you do look into it, and if you do find that information is accurate, your answer would then be that indeed you are troubled by it and that together we should try to see what the solution is. In any event, let me move on to the next question. I was very much struck by Ms. Stock's statement about sick people not getting benefits that they are entitled to under Medicare, not because Medicare will not pay for the service but because no agency would provide the service. I just want to make sure you heard that. Ms. Buto. I did hear that, but we are not finding that. Again, I would like to know where this happens. Senator Levin. Again, you heard this from a very credible source who will be happy to show it to you. Ms. Buto. I believe it. Senator Levin. I think it is important that you do see it and ask to see it and want to see it. Ms. Buto. Absolutely. Senator Levin. Would you agree with Ms. Stock's point that the interim payment system tends to penalize those who were the most efficient or the least costly in 1994--for whatever reason. Ms. Buto. I tried to address this a minute ago. The interim payment system, because it is what it is, when it was constructed, the decision was made not to move money from the higher-paying areas to the areas that were below the national average. Had we done that, that would have helped the areas that had held down their costs. It would have hurt home health agencies in other areas, and Congress just decided not to do that. Senator Levin. What was your recommendation at the time-- different from what we came up with? Ms. Buto. I will turn to our legislative staff to see whether we had one on that. We will have to get back to you for the record on that issue. Senator Levin. Would you let us know what your recommendation would be now in order to correct that negative incentive. This is not the way we want to deal with people, I would hope. Finally, if you have not already commented on it, what can you offer these agencies with respect to the 15-minute reporting regulation, if you have not already answered that question. Ms. Buto. Again, we have already delayed that. It is required under the Balanced Budget Act, and it is going into effect in July. What we have said is that we are going to give a grace period until the end of September to implement it---- Senator Levin. Are you going to recommend to Congress that the 15-minute reporting be changed? Or is that a regulation? Ms. Buto. No. It is in the statute. We are looking at a whole package of issues around the statute, and we are also looking to see what can we do in areas of cash flow to provide relief. So we are really looking at the areas where we have some control. I think the issues that were raised by one of the panelists about what is counted in the 15-minute increment is something we could definitely look at, but not the---- Senator Levin. You do not want folks with stopwatches, which is the way it would have to be under the existing regulations. It seems to me that that is what we are forcing people to do, or it is an absurdity which would have to be ignored. Neither one is acceptable, so I would hope you would come up with something which is workable. If it takes a change in law, let us know. That is our responsibility. But it is your responsibility, it seems to me, to make recommendations and to tell us what needs to be done to avoid those outcomes which are unacceptable. In the real world setting, they are either not going to do it or they are going to do it with stopwatches; neither one makes sense. You do not want someone with a stopwatch at each moment, and you do not want someone to pretend to be complying if they are not. Thank you. Senator Collins. Thank you very much, Senator Levin, for your usual excellent presentation in our oversight hearing. I want to thank all the witnesses for being with us today. Ms. Buto, I hope you will take back to your department our overwhelming concern about the impact of the system, and I hope that this Subcommittee will receive from the administration a concrete list of recommendations for statutory changes no later than the Fourth of July. I think Independence Day would be a good day for us to receive those changes.\1\ --------------------------------------------------------------------------- \1\ See Exhibit No. 10 which appears in the Appendix on page 197. --------------------------------------------------------------------------- This is a serious subject, and we do need to take swift action to correct the problems that have been very eloquently described today. We need your partnership in doing that, we need to work together, and we need to get the job done this year. I want to thank all of our witnesses for their testimony today. Finally, I also want to thank my staff for their excellent work, particularly Priscilla Hanley, Karina Lynch, Lee Blalack, and Mary Robertson. They worked very hard to put this hearing together, and I thank them for their contributions as well. I also want to thank the minority staff for their excellent work on this hearing. Thank you. This hearing is now adjourned. [Whereupon, at 4:25 p.m., the Subcommittee was adjourned.] A P P E N D I X ---------- PREPARED STATEMENT OF SENATOR TORRICELLI I would like to thank and acknowledge the distinguished Chairman of the Permanent Subcommittee on Investigations, Senator Collins, and the distinguished Ranking Member, Senator Levin, for holding this hearing to discuss the affect of Medicare cuts on the delivery of home health care services. This issue is of particular concern to the 100,000 patients who rely on home health services in my State of New Jersey. Despite these times of unparalleled economic prosperity, home health care agencies located in New Jersey are on the verge of financial collapse. This precipitous economic decline is not the result of mismanagement or inefficiency. Rather, it can be attributed, in part, to the unintended consequences of the Interim Payment System (IPS) included in the Balance Budget Act (BBA) of 1997. Indeed, the BBA was vital to the long-term strength of the Medicare program; however, the original estimated reductions of $25 million which are now estimated to be much higher, that New Jersey home health agencies will ultimately face will be economically devastating. In fact, three separate agencies in New Jersey have already been forced to close and others will undoubtedly follow. The fundamental flaw in the IPS is the requirement that home health services be reimbursed based upon their average cost per visit and the average number of visits in FY 1994. For States such as New Jersey, who had an average 39.7 home care visits in 1994, this payment methodology penalizes them for being diligent and efficient in the delivery of services. This inequity is best illustrated when States like New Jersey are compared with other States whose average home health visits are over 100 for 1994. The result is that New Jersey home health agencies are receiving only slightly more than $2,500 per patient annually, instead of the $4,000 per patient which reflects the actual costs of providing services. Making matters worse, the Health Care Financing Administration (HCFA) has developed burdensome regulations to implement the IPS which are compounding the economic pain for home health agencies. These regulations include a new 15-minute visit increment reporting requirement, increased claim reviews, additional audits, post-payment reviews, and branch office restrictions. Perhaps most troubling is HCFA's decision to use the Outcome and Assessment Information Set (OASIS) requirements in the development of a case-mix adjustor for a home health prospective payment system (PPS). It appears that HCFA may have significantly underestimated the cost to home health agencies to implement these requirements. In New Jersey, home health agencies have already incurred OASIS related costs estimated at $100,000. These legislative and regulatory requirements are having a very real impact for thousands of patients in my State who rely on home health services because they are unable to care for themselves. Every day, I hear the stories of my constituents who are forced to go without needed care. These stories include Mr. Faltisco of Morris County, New Jersey, who at 93 and suffering from Alzheimer's disease, recently had his home health aide visits cut from 20 hours per week to 90 minutes a week. It is Mr. Faltisco's family who must now struggle to provide the care he desperately needs. In many other cases, however, patients have no family to provide care. Thus, it is imperative that Congress now seize the opportunity to provide relief to home health agencies in States like New Jersey where efficiency has been rewarded with payment reductions. Last year, the FY 1999 Omnibus Appropriations Bill included some corrections to the inequalities created by IPS; however, we have a long way to go to reverse these dangerous trends. I look forward to working with the Committee and others in the Senate in supporting a legislative solution to home health care crisis. Again, I would like to thank Chairman Collins and Ranking Member Levin for their commitment and attention to this important issue. 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