<DOC>
[106th Congress House Hearings]
[From the U.S. Government Printing Office via GPO Access]
[DOCID: f:62373.wais]
OVERSIGHT OF FINANCIAL MANAGEMENT PRACTICES AT THE HEALTH CARE
FINANCING ADMINISTRATION
=======================================================================
HEARING
before the
SUBCOMMITTEE ON GOVERNMENT MANAGEMENT,
INFORMATION, AND TECHNOLOGY
of the
COMMITTEE ON
GOVERNMENT REFORM
HOUSE OF REPRESENTATIVES
ONE HUNDRED SIXTH CONGRESS
FIRST SESSION
__________
MARCH 26, 1999
__________
Serial No. 106-78
__________
Printed for the use of the Committee on Government Reform
Available via the World Wide Web: http://www.house.gov/reform
______
U.S. GOVERNMENT PRINTING OFFICE
62-373 CC WASHINGTON : 2000
COMMITTEE ON GOVERNMENT REFORM
DAN BURTON, Indiana, Chairman
BENJAMIN A. GILMAN, New York HENRY A. WAXMAN, California
CONSTANCE A. MORELLA, Maryland TOM LANTOS, California
CHRISTOPHER SHAYS, Connecticut ROBERT E. WISE, Jr., West Virginia
ILEANA ROS-LEHTINEN, Florida MAJOR R. OWENS, New York
JOHN M. McHUGH, New York EDOLPHUS TOWNS, New York
STEPHEN HORN, California PAUL E. KANJORSKI, Pennsylvania
JOHN L. MICA, Florida PATSY T. MINK, Hawaii
THOMAS M. DAVIS, Virginia CAROLYN B. MALONEY, New York
DAVID M. McINTOSH, Indiana ELEANOR HOLMES NORTON, Washington,
MARK E. SOUDER, Indiana DC
JOE SCARBOROUGH, Florida CHAKA FATTAH, Pennsylvania
STEVEN C. LaTOURETTE, Ohio ELIJAH E. CUMMINGS, Maryland
MARSHALL ``MARK'' SANFORD, South DENNIS J. KUCINICH, Ohio
Carolina ROD R. BLAGOJEVICH, Illinois
BOB BARR, Georgia DANNY K. DAVIS, Illinois
DAN MILLER, Florida JOHN F. TIERNEY, Massachusetts
ASA HUTCHINSON, Arkansas JIM TURNER, Texas
LEE TERRY, Nebraska THOMAS H. ALLEN, Maine
JUDY BIGGERT, Illinois HAROLD E. FORD, Jr., Tennessee
GREG WALDEN, Oregon JANICE D. SCHAKOWSKY, Illinois
DOUG OSE, California ------
PAUL RYAN, Wisconsin BERNARD SANDERS, Vermont
JOHN T. DOOLITTLE, California (Independent)
HELEN CHENOWETH, Idaho
Kevin Binger, Staff Director
Daniel R. Moll, Deputy Staff Director
David A. Kass, Deputy Counsel and Parliamentarian
Carla J. Martin, Chief Clerk
Phil Schiliro, Minority Staff Director
------
Subcommittee on Government Management, Information, and Technology
STEPHEN HORN, California, Chairman
JUDY BIGGERT, Illinois JIM TURNER, Texas
THOMAS M. DAVIS, Virginia PAUL E. KANJORSKI, Pennsylvania
GREG WALDEN, Oregon MAJOR R. OWENS, New York
DOUG OSE, California PATSY T. MINK, Hawaii
PAUL RYAN, Wisconsin CAROLYN B. MALONEY, New York
Ex Officio
DAN BURTON, Indiana HENRY A. WAXMAN, California
J. Russell George, Staff Director and Chief Counsel
Bonnie Heald, Director of Communications/Professional Staff Member
Mason Alinger, Clerk
Faith Weiss, Minority Counsel
C O N T E N T S
----------
Page
Hearing held on March 26, 1999................................... 1
Statement of:
Brown, June Gibbs, Inspector General, Department of Health
and Human Services, accompanied by Joseph E. Vengrin,
Assistant Inspector General for Audit Operations and
Financial Statement Activity............................... 9
Hash, Michael M., Deputy Administrator, Health Care Financing
Administration, Department of Health and Human Services.... 26
Letters, statements, et cetera, submitted for the record by:
Brown, June Gibbs, Inspector General, Department of Health
and Human Services:
American Hospital Association Compliance Program Survey.. 66
Information concerning Medicaid contracts................ 54
Information concerning voluntary compliance program...... 77
Prepared statement of.................................... 12
Hash, Michael M., Deputy Administrator, Health Care Financing
Administration, Department of Health and Human Services:
Information concerning policy............................ 82
Information concerning reconstructive surgery............ 61
Information concerning reforms........................... 91
Information concerning security of data systems.......... 63
Prepared statement of.................................... 28
Horn, Hon. Stephen, a Representative in Congress from the
State of California, prepared statement of................. 3
Turner, Hon. Jim, a Representative in Congress from the State
of Texas, prepared statement of............................ 6
OVERSIGHT OF FINANCIAL MANAGEMENT PRACTICES AT THE HEALTH CARE
FINANCING ADMINISTRATION
----------
FRIDAY, MARCH 26, 1999
House of Representatives,
Subcommittee on Government Management, Information,
and Technology,
Committee on Government Reform,
Washington, DC.
The subcommittee met, pursuant to notice, at 10 a.m., in
room 2154, Rayburn House Office Building, Hon. Stephen Horn
(chairman of the subcommittee) presiding.
Present: Representatives Horn, Biggert, Ose, and Turner.
Staff present: J. Russell George, staff director and chief
counsel; Bonnie Heald, director of communications; Mason
Alinger, clerk; Paul Wicker and Kacey Baker, interns; Faith
Weiss, minority counsel; and Earley Green, minority staff
assistant.
Mr. Horn. The quorum being present, the Subcommittee on
Government Management, Information, and Technology will come to
order. Today's hearing is the third in a series of hearings to
examine the results of financial statement audits of selected
Federal agencies.
On March 1, we heard from the Internal Revenue Service.
Unfortunately, that agency was unable to sustain the progress
it had made in 1998. Last Thursday, we discussed the serious
problems confronting the Department of Justice and the Federal
Aviation Administration. Today we'll hear testimony focusing on
the financial management practices of the Health Care Financing
Administration [HCFA], part of the Department of Health and
Human Services.
The Health Care Financing Administration is responsible for
funding Medicare and Medicaid, the two most extremely important
Federal programs for millions of our citizens. In 1998 these
programs provided over $290 billion worth in health care to our
most vulnerable citizens, the elderly and the poor. $298
billion represents nearly 18 percent of all Federal spending
last year. It's an enormous cost and one that analysts predict
will skyrocket during the next decade. The Congressional Budget
Office projects that by the year 2009 the cost of these two
entitlement programs will more than double to a soaring and
sobering $689 billion. We cannot allow any portion of that
money to be wasted.
Two previous financial audits of the Health Care Financing
Administration identified serious problems at the agency,
including an estimated $40 billion worth of improper payments
in the Medicare program during 1996 and 1997. Problems were
also found with the Health Care Financing Administration's
ability to collect money that is owed to the agency and with
its inability to provide adequate security for its computer
systems.
Medicare is critical to the health and well-being of
millions of elderly Americans. Likewise, Medicaid is the
lifeline for America's low income and chronically ill. I
understand that we will hear today that the Health Care
Financing Administration has made some progress in improving
its financial management. I sincerely hope that is true because
we need dramatic improvement in the way these programs are
managed.
[The prepared statement of Hon. Stephen Horn follows:]
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Mr. Horn. I welcome our witnesses today and look forward to
their testimony, but first I'd like to yield to my colleague,
Mr. Turner of Texas, who is the ranking member on this
committee. Mr. Turner.
Mr. Turner. Thank you, Mr. Chairman. It's a pleasure to
participate in this ongoing series of oversight hearings on
Federal financial management. I want to thank you, Mr.
Chairman, for your leadership in this area and for the
bipartisan way in which you proceed to examine the agencies of
the Federal Government.
Congress recognized as early as 1990, with the passage of
the Chief Financial Officers Act, that the Federal Government
should maintain reliable financial information that could be
audited. The Chief Financial Officers Act directed 10 Federal
agencies to conduct independent financial audits, and in 1994
Congress expanded the requirement to all 24 major Federal
agencies. Today we are going to have the opportunity to discuss
some of the tangible results of this process and the third
consecutive audit of the Health Care Financing Administration's
financial statements.
I want to welcome the Inspector General of Health and Human
Services and the Deputy Administrator of HCFA, who are here to
discuss the results of the fiscal year 1998 audit.
In the first HCFA audit, fiscal year 1996, the Inspector
found that HCFA's financial information was so unreliable that
the Inspector General could not finish the audit nor draw any
conclusions about the agency's financial statements. In the
audit conducted last year, HCFA received a qualified opinion
which, as I understand, means that while the financial
statements were generally reliable, inadequate documentation
existed for certain amounts.
This year the audit again resulted in a qualified opinion.
Although HCFA has made progress in resolving its financial
management weaknesses, the Health and Human Services Inspector
General raises serious concerns which we will hear about today.
As we all know, Medicare is a very important Federal
program. It provides health insurance for over 39 million
elderly or disabled citizens. Without Medicare, many of these
Americans would be deprived of adequate medical care. Medicare
provides Americans with the security that, as they grow older
and increasingly more vulnerable, they will have access to
sound health care without bankrupting them or their families.
It is surprising to note that the Medicare program
processed over 900 billion Medicare claims last year and paid
out more than $210 billion in benefits. We can see Medicare's
importance. That's why we must ensure that it runs well.
Clearly the program is susceptible to fraud, abuse, and
overpayments. Over this last year, however, HCFA demonstrated a
significant reduction in the total amount of estimated Medicare
overpayments. In fact, HCFA has reduced the error rate by 50
percent and has been actively trying to reduce the amount of
improper or inappropriate payments made by the Medicare
program. The results of these efforts are beginning to show,
and HCFA must continue to reduce these overpayments as
aggressively as possible.
In closing, I would like to commend the Health and Human
Services Inspector General and HCFA's leadership in working to
combat fraud and abuse in the Medicare program, and I look
forward to the hearing and to hearing from each of our
witnesses.
Thank you, Mr. Chairman.
[The prepared statement of Hon. Jim Turner follows:]
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Mr. Horn. Thank you very much for that thoughtful
statement.
Let me note the procedures here for some who are not
familiar with it. Once we introduce the witnesses, your
statement is fully put in the record--by your leave or without
objection, et cetera.
No. 2, this committee is part of the full Committee on
Government Reform, and all of our witnesses are sworn in on the
oath. So, if the three witnesses this morning would stand and
raise your right hands, just affirm the testimony you're about
to give this subcommittee is the truth, the whole truth, and
nothing but the truth.
[Witnesses sworn.]
Mr. Horn. We will note for the record that all three
witnesses have affirmed, and we will start with the Honorable
June Gibbs Brown, Inspector General of the Department of Health
and Human Services. She has a very rich background, as we all
know, having been Inspector General of the Department of
Defense from 1987 to 1989, and she's held numerous other
positions. She's won probably every award that can be given to
a career civil servant.
And it's always good to see you. We know you run a tight
shop. I've never asked you, is Defense easier than HHS or is
HHS easier than Defense? You're not about to tell, right?
Remember, you're under oath.
Anyhow, go ahead. Obviously if you want to summarize, fine.
If you want to go into exhaustive detail, we're all with you
because we've got the whole morning.
STATEMENT OF JUNE GIBBS BROWN, INSPECTOR GENERAL, DEPARTMENT OF
HEALTH AND HUMAN SERVICES, ACCOMPANIED BY JOSEPH E. VENGRIN,
ASSISTANT INSPECTOR GENERAL FOR AUDIT OPERATIONS AND FINANCIAL
STATEMENT ACTIVITY
Ms. Brown. Thank you, Mr. Chairman. I'll summarize. I'm
pleased to report to you on our fiscal year 1998 audits of the
Medicare fee-for-service payments and the Health Care Financing
Administration's [HCFA] financial statements.
With me today is Joseph E. Vengrin, Assistant Inspector
General for Audit Operations and Financial Statement
Activities.
I'd like to begin by acknowledging the cooperation and
support we receive from the Department, from HCFA, and from the
General Accounting Office. HCFA's assistance in making
available medical review staff and the Medicare--at the
Medicare contractors and the peer review organizations was
invaluable. We also work closely with GAO, which is responsible
for auditing the consolidated financial statements of the
Federal Government.
My statement today will focus first on the notable
reduction in Medicare payment errors this year and then on
HCFA's financial reporting. Our review included a statistical
selection of 5,540 medical Medicare claims from a population of
$176.1 billion in fiscal year 1998 fee-for-service claims
expenditures. Payments to providers for 915 of these claims did
not comply with Medicare laws and regulations.
By projecting these sample results, we estimated that
fiscal year 1998 net improper payments totaled about $12.6
billion nationwide or about 7.1 percent of the total Medicare
fee-for-service benefit payments. This is the midpoint at the
95 percent confidence level of the estimated range of $7.8
billion to $17.4 billion, or 4.4 to 9.9 percent.
As in the past years, the improper payments could range
from inadvertent mistakes to outright fraud and abuse. It
should be noted that medical personnel detected almost all of
the improper payments in our sample. When these claims had been
submitted for payment to Medicare contractors, they contained
no visible errors.
We are very encouraged by the reduction in payment errors
this year. This year's estimate is $7.7 billion less than last
year's estimate of $20.3 billion and $10.6 billion less than
the previous year's estimate of $23.2 billion, a 45 percent
drop. We attribute this improvement to several actions on the
part of the administration, the Congress, and the health care
provider community.
To provide just two examples, the Medicare Integrity
Program, under HCFA's direction, provides resources to expand
contractor safeguard activities, while the Health Insurance
Portability and Accountability Act has provided both HCFA and
my office with a stable funding source for Medicare payment
safeguards and fraud and abuse prevention activities for the
next several years. That is fraud and abuse prevention
activities.
Chart one, which is to the side here and is also attached
to my written testimony, demonstrates the reduction in improper
payments by the major type of errors found over the last 3
years. The red error indicates documentation errors where we
saw the most dramatic reduction. The blue indicates errors due
to a lack of medical necessity, a continuing problem. The
yellow, incorrect coding, which is also a concern. The green,
errors due to noncovered services. And finally, the purple,
which is all other types of errors.
Documentation errors dropped from $10.8 billion in fiscal
year 1996 to $2.1 billion this year. These errors had
represented the most pervasive problems in 1996 and 1997, even
though Medicare regulations specifically require providers to
maintain sufficient documentation to justify diagnosis,
admissions, and other services.
As shown in chart 2, the overall category of documentation
includes two components this year: insufficient documentation
for medical experts to determine the patient's overall
condition, diagnosis, and extent of services performed; and no
documentation to support the services provided.
Last year we included an additional component to identify
situations in which providers were under investigation and the
OI could not obtain medical records to support billed services.
This year, in contrast, we obtained all medical records on
claims under investigation. A lack of medical necessity was the
highest error category this year, and the second highest for
both 1996 and 1997.
As noted in chart 3, these types of errors in inpatient
prospective payment system [PPS] hospital claims, shown in red,
have been consistently significant in all 3 years. Decisions on
medical necessity were made by medical staff who followed their
normal claim review procedures to determine whether the medical
records supported the claims.
Incorrect coding is the second highest error category this
year, as illustrated in chart 4. Physician and inpatient PPS
claims accounted for over 80 percent of the coding errors in
fiscal years 1996, 1997, and in 1998. For most of the coding
errors, medical reviewers determined that the documentation
submitted by providers supported a lower reimbursement code.
Clearly, Mr. Chairman, progress has been made in reducing
payment errors, and we are heartened that providers are doing a
better job in documenting their services, but we caution that
diligence is needed to sustain the apparent downward trend. In
short, our audit results from the 3-year period demonstrate
that the Medicare program remains inherently vulnerable to
improper and unnecessary benefit payments.
To ensure continued progress while keeping abreast of
continuing changes in the health care area and adequately
safeguarding the Medicare trust fund, we've made a number of
recommendations to HCFA.
Turning to our audit of the fiscal year 1998 financial
statements, we're pleased to report that HCFA has continued to
successfully resolve many previously identified financial
accounting problems. For example, substantial progress has been
made in improving Medicare and Medicaid accounts payable
estimates, as well as estimates of improper payments included
in cost reports of institutional providers.
However, our opinion on the 1998 financial statement, as
mentioned by Mr. Turner, remains qualified because of
continuing documentation problems. Most significantly, we could
not determine if the report of $3.3 billion Medicare accounts
receivable balance, that is, what Medicare providers owed to
HCFA, was fairly presented because contractors did not maintain
sufficient documentation to support the reported activity.
Our report also discusses our concern that contractors do
not have uniform accounting systems to record, classify, and
summarize financial information, or adequate controls over the
electronic data processing environment.
To briefly summarize, I'm pleased that HCFA is
progressively pursuing a corrective action plan to address our
concerns. As part of that plan, we're working closely with HCFA
to establish an adequate internal control structure for
Medicare accounts receivable.
I appreciate the opportunity to appear before you today and
welcome your questions.
[The prepared statement of Ms. Brown follows:]
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Mr. Horn. Thank you very much for that very helpful
statement.
Before we open to questions, we will call on the Deputy
Administrator of HCFA, Mr. Michael Hash. He has a very rich
experience in health care problems, including several years on
the House Committee on Commerce dealing with the health issues
that come before the Congress. So, we look upon you as suitably
initiated, having worked on the Hill, and we obviously wish you
well. That's one of the toughest jobs in this city. So please
proceed.
STATEMENT OF MICHAEL M. HASH, DEPUTY ADMINISTRATOR, HEALTH CARE
FINANCING ADMINISTRATION, DEPARTMENT OF HEALTH AND HUMAN
SERVICES
Mr. Hash. Thank you, Mr. Chairman.
Chairman Horn, Mr. Turner, Mrs. Biggert, we're very pleased
to have this opportunity to discuss the fiscal year 1998 Chief
Financial Officer's audit of HCFA. As the Inspector General
just mentioned, this is the third such comprehensive audit by
her office. We are grateful for the valuable insights which
this audit process has provided to us, and we believe that we
are making substantial progress and improvements because of
them.
In just 2 years we have been able to cut the error rate in
half, from 14 percent to 7 percent. However, this year's audit
shows that the Medicare payment error rate is still too high.
We want to especially thank, for progress that we have made,
physicians and other providers, because they have made efforts
by improving their claims processing submissions and their
documentation. They have greatly helped in reducing the error
rate, and we have new provider education initiatives under way
to build on this success.
The 7 percent error rate represents about $12.6 billion in
taxpayer funds, which we all agree is simply unacceptable. We
must be diligent in sustaining and increasing the improvements
that we've made. To do that we have a number of initiatives
under way, and we have developed a comprehensive program
integrity plan to make sure that in fact we pay right the first
time.
Thanks to the work of this committee and the Congress, we
now have more tools to continue this improvement. The Health
Insurance Portability and Accountability Act [HIPAAA], for the
first time created a stable source of funding for program
integrity activities. In the current fiscal year we have about
$560 million available for our program integrity initiatives.
And the Balanced Budget Act helped close some important,
significant loopholes, and tightened controls on problem
providers.
President Clinton's fiscal year 2000 budget also includes
several new proposals to build on our success in fighting
health care fraud, waste and abuse. These measures would save
an additional $2 billion in Medicare expenditures over the next
5 years and, we believe, help to extend the life of the
Medicare trust funds. We look forward to working with you to
secure passage of these important proposals.
Through additional tools that were provided by HIPAA and
the BBA, our comprehensive program integrity plan, plus the
President's new proposals and your continued support, I'm
confident that we will continue to reduce the payment error
rate.
We are also pleased that this year's audit found that only
one remaining area, contractor accounts receivable, prevents us
from receiving an unqualified opinion, which is our goal. We
are working with the Inspector General to develop a short-term
solution to the accounts receivable documentation problem.
However, a full remedy of this problem involves systems changes
that must be delayed until we have cleared the year 2000
computer challenge.
These audits provide a valuable road map directing us to
areas that need attention. The findings in previous audits
helped us correct problems with our accounts payable, with our
Social Security Administration receivables, and other problems
that the audits have identified and the Inspector General
referred to. They have also helped us in our aggressive efforts
to improve our computer systems security. While we have a lot
of work that needs to be done to improve the results of the CFO
audit, we are pleased with the pace of our progress.
With your continuing help and support, we will continue to
do everything in our power to fight waste, fraud, and abuse,
and to ensure that the Medicare program pays it right. We will
also continue to improve our financial reporting and management
of the Medicare trust funds.
I want to thank you again for holding this hearing today,
and I'd be happy also to respond to any questions that you or
other members of the subcommittee may have. Thank you, Mr.
Chairman.
[The prepared statement of Mr. Hash follows:]
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Mr. Horn. Well, we thank you, and enjoyed reading your
statement. The way we're going to operate on the Q and A is
each of us will rotate in 5 minutes. I'm going to ask Mrs.
Biggert, the gentlewoman from Illinois, to take my first 5
minutes and question the witnesses, and then it will be Mr.
Turner, and then it will get to me, and we'll just go around
until either we're worn out or you're worn out, one or the
other.
I yield my 5 minutes for the purpose of questioning to the
gentlewoman from Illinois and vice chairman of this committee.
And by the way, if you had an opening statement, we'll put that
at the beginning, without objection.
Mrs. Biggert. Thank you, Mr. Chairman.
You have the work done in managed care or Medicaid. HCFA
had total program expenses of $308 billion in 1998 and these
expenses were broken down to Medicare fee-for-service payments
which was 57 percent, $177 billion; Medicare managed care
payments, $33 billion, 11 percent; and Medicaid payments of $98
billion for 32 percent.
It's my understanding that the testing is done to arrive at
the estimate for improper payments of $12.6 billion solely on--
is done solely on the $177 billion Medicare fee-for-service
payments. Is my understanding correct? I'm sorry, I'm
addressing this to the Honorable Ms. Brown.
Ms. Brown. Yes, that's true. This is the fee-for-service
area where we're making this estimate.
Mrs. Biggert. Then what level of testing is done on the
remaining $131 billion?
Mr. Vengrin. We, in conjunction with the General Accounting
Office, in all three fiscal years have examined the managed
care area. We attempted to project it back but we have no
material findings at this time to really report on the managed
care. With respect to the $90 billion or so for Medicaid, we
are relying on the work of the single audit. That is at the
State level, and we certainly do not want to duplicate that
effort.
We are aggressively working with three or four States to
develop an error rate comparable to what we're doing here in
Medicare, but because it's not mandated, it's a very difficult
process. The States complain that they do not have the money to
do this, but we're confident that an error rate does exist in
Medicaid and we're working very diligently with them to develop
that.
Mrs. Biggert. How many States? Is that all States?
Mr. Vengrin. We're working--again because it's not a
requirement either by Medicaid or the OMB through the
compliance supplement on the single audit, it's on a voluntary
basis. Currently we're working through the national
intergovernmental audit forum with the State auditors to
develop this.
Mrs. Biggert. And about how many States----
Mr. Vengrin. We're aggressively working in four States.
Mrs. Biggert. Four States?
Mr. Vengrin. Yes, ma'am.
Mrs. Biggert. Is there any evidence of improper statements
in these areas?
Mr. Vengrin. Yes, ma'am, there is. Again, we did meet with
a State auditor. They did make a first attempt at this process.
We went out and visited those particular States and found some
need for improvement in the thoroughness of the medical review,
plus the statistical sampling had some concerns. We're working
again with these States to develop a plan, a methodology, so it
can be replicated in other States.
Mrs. Biggert. Does this involve the Medicare Plus Choice
issue at all?
Mr. Vengrin. No. Basically this again would involve the
fee-for-service at the State level.
Mrs. Biggert. Thank you. Then to Mr. Hash, it sounds like
you're having success in reducing the amount of improper
payments, from the testimony, but that there still is a great
deal of work that remains. Can you explain a little bit more
about the area ``lack of medical necessity'' in your chart?
Mr. Hash. Yes, I'd be glad to. Also perhaps my colleagues
here would want to elaborate too, who conducted the audit. This
refers to a determination of the appropriateness of a covered
service for a given individual with a given condition or
diagnosis. What the audit does is evaluate the documentation,
generally in the form of the medical record of the patient, to
see that it appropriately supports the need, the appropriate
need of the patient for the service that's being paid for. This
is an area where we have been stepping up our efforts very
dramatically to improve and strengthen medical review by our
contractors.
Mrs. Biggert. It seems that the amount in the area has
stayed very constant. Is this an area where it's harder to
achieve progress? If you look at the area of documentation
error, it seems like this is harder to achieve any change for
the lack of medical necessity. Is there any reason for that, or
what actions have been taken in that area to try and change
them?
Mr. Hash. Medical review is a difficult area but I'm happy
to report that the audit does show, I believe, that we've
actually reduced by 20 percent the amount of error since 1996
that's attributable to medical necessity problems. So we are
actually making steady progress, I think, at reducing it, but
it remains a significant portion. In fact, about half of the
errors are attributed to medical necessity problems.
What we've done by way of strengthening medical review is
that we have hired an outside contractor that is actually
working with the carrier medical directors, the physicians, and
their staff who are charged with the responsibility of
reviewing claims for medical necessity, and we are giving them
assistance in overseeing their work much more closely. And
second, we are working with the peer review organizations
[PRO], who are composed of locally based physicians, to assist
also in the review of medical necessity activities. And we have
stepped up our prepayment review; that is, before we actually
pay, we're doing medical necessity reviews of services in a
more intensified manner.
Mrs. Biggert. Thank you.
Mr. Horn. I thank the gentlewoman from Illinois.
I now yield to the ranking member, Mr. Turner of Texas, for
the purposes of questioning, 5 minutes.
Mr. Turner. Thank you, Mr. Chairman.
Let me make sure I understand. You have to bring me up to
speed here, but as I understand it, all of the Medicare
payments that we make are actually handled by private
contractors; is that correct?
Mr. Hash. Not quite, Mr. Turner. The fee-for-service
payments are made by contractors, 40 of them around the
country, which are private organizations. But the managed care
payments, the capitated payments that are made to managed care
plans, are made by the Health Care Financing Administration.
Mr. Turner. What's the trend in terms of the percentage of
your funds that are paid through managed care? I assume that
has been on the rise?
Mr. Hash. It's rising. I think the Inspector General just
indicated that about $210 billion of our total expenditures are
related to fee-for-service payments and an additional--I don't
have the figure in front of me--about $33 billion for managed
care payments, and that number is rising.
Mr. Turner. This audit seems to be, and the sampling--I'm
glad to see you sampling here, Mr. Chairman--sampling seems
to----
Mr. Horn. Touche.
Mr. Turner [continuing]. To be directed solely at the fee-
for-service side. Doesn't there need to be some kind of audit
work done on the managed care side, even though those payments
obviously are set and the managed care company has got to make
do with what they get, but isn't there some necessity for
looking at that side as well?
Mr. Vengrin. We are, Mr. Turner. As I mentioned, we did
sample those and we did not come up with any deficiencies to
project back that would be material to the financial statements
this year.
Mr. Turner. When we're talking about managed care, what are
we looking for? What's your objective when you take a look at
the managed care side?
Mr. Vengrin. Whether we have an eligible beneficiary,
whether we have a correct payment. There are localities that
adjust the payments. We want to make sure the beneficiary is in
fact in that particular area that is used to compute the rate.
So we are looking at all factors there for the computation of
these payments.
Ms. Brown. The incentives are much different in the managed
care area. So, separately from the financial statement audits,
we're doing a lot of other work there to see whether or not
services are being identified; whether there's some form of
preselection, where that's possible because it is 100 percent
managed care to get healthier patients in; whether they're
driving out patients that have chronic conditions that would
make it difficult for them. We're looking at all those kinds of
things. We can't project an error rate at this point, but we
are looking at those situations and investigat-
ing where we have indicators that there is unfair influence
there.
Mr. Hash. If I might add a footnote, Mr. Turner, we also
have concerns about integrity of our managed care contractors
as well. And as a part of our Medicare integrity program, we
are going to be contracting with, again, an outside contractor
for the purpose of reviewing the appropriateness of the
submissions that the managed care plans make to us that are
used for purposes of determining payments to them. So we think
an oversight from an integrity point of view is also an
appropriate component of our overall comprehensive fraud and
abuse plan.
Mr. Turner. We have heard a lot recently about managed care
companies dropping their patients. What basically has been,
from your perspective, the cause of that disruption?
Mr. Hash. I think the answer to that is a complicated one.
For the most part I think managed care plans that withdrew from
Medicare did so because of business decisions that pertained to
the markets that they were in.
A closer look at what happened and in the withdrawals last
fall would suggest in some of the markets where plans left they
had very small penetration. They were otherwise very
competitive marketplaces. Clearly some of the factors that
influenced their withdrawal had to do with an expectation or
projection of what the Medicare payment rates would be in the
future. But altogether, I think the withdrawals had more to do
with business and market conditions than any single factor.
Mr. Turner. Is there anything that we should be doing to
try to create more stability? I mean, I think most of us agree
that managed care is here to stay and is probably here to stay
in the Medicare field, but it doesn't seem that we can endure
the disruptions that we've been seeing in the last several
months.
Mr. Hash. I think there are some things that are under way
now, that we started, that will bring a greater stability to
this marketplace. For one thing, the rates that are being
forecast for next year are going to be significantly raised
from what they have been in the past 2 years, so I think that
will go a long way toward stabilizing the market for
contracting by these plans.
I think also we're trying to take account of suggestions
and recommendations from the health plan community about ways
that we can streamline our program and make it less burdensome
from their point of view. So we are trying to work with the
managed care community to in fact stabilize participation in
the Medicare program.
Mr. Turner. Are there audit tools available that can allow
one to verify that managed care is saving money over fee-for-
service?
Mr. Hash. That's a tough question, Mr. Turner. I think
there is some evidence--first of all, the Medicare payments
themselves, as you may know, are roughly based on the average
cost for Medicare beneficiaries in fee-for-service discounted
by 5 percent. In other words, we figure out what the average is
and pay the plan roughly, on average, 95 percent of the cost of
fee-for-service. So there is an expectation that there is
saving right off the top from the payment system.
On the other hand, as you look at the characteristics of
individuals who have enrolled in managed care plans, there's
considerable evidence that they have less than average health
care costs. In other words, while we pay on an average basis,
their actual experience is that the enrollees tend to be
healthier and younger and therefore there is potential--not
only a potential but I think substantial evidence that
confirms--that we have overpaid managed care plans.
The BBA and other steps we've taken I think are bringing
payments more in line to the expected costs of the enrollees. A
significant part of that strategy is the implementation of a
risk adjustment payment methodology which we announced just
recently.
Mr. Turner. Thank you.
Thank you, Mr. Chairman.
Mr. Horn. Thank you. I am going to use just a little bit of
my time and yield 5 minutes to Mr. Ose.
Let me just refer to your chart, Inspector General,
documentation by error, to category dollars in billions. Down
there on the blue schedule under fiscal year 1997, we're
talking about $3 billion, documents not provided due to
investigations. What happened to those investigations? How many
did we win, in brief?
Mr. Vengrin. There were roughly around 151 claims last
year. When we went back to pursue and obtain the medical
reports, because there was an active investigation by the
Department of Justice or Office of Investigations, we were
precluded from obtaining those medical records. We really did
not go back and followup to determine the disposition of the
particular claim.
Mr. Horn. So, are we to say that $3 billion went down the
drain?
Mr. Vengrin. No, sir. Typically the investigation covered 2
or 3 past years ago. We were auditing 1997. We really can't say
that those claims were improper, sir.
Mr. Horn. What's the length in the statutes as to how long
you have to look at it, probably prosecute it? You'd have to
turn it over to Justice, or the U.S. Attorney in each area? How
does this system work in terms of any fraud and abuse you find?
Ms. Brown. When there is fraud, there are different
statutes depending upon the particular issue, and then there
are some where there are continuing issues like the RICO
statutes. If it's conspir-
acy or something of that nature, there is a continuing problem;
so you can go back much further. It varies in the individual
cases, but certainly all of these cases were followed up. And I
don't have the resolution of them with me, but they're either
still in process or they are on an individual basis making the
appropriate collections.
That's a separate thing from our analysis of what the error
rate is. Because the audit process of the error rates didn't
delve into it further doesn't mean those cases weren't pursued.
In fact those were the ones where there was a concentrated
effort to find out exactly what happened and recover any
losses.
Mr. Horn. In whose jurisdiction are the documents? Are they
under Medicare right now? Are they over in Justice? Are they in
the Inspector General's office? Where are the documents that
are reflected here under ``documents not provided due to
investigations,'' $3 billion, fiscal year 1997?
Ms. Brown. They were in more than one place. However, we
have worked out an arrangement so that we were able to get
information this year on documents, even though investigations
might be in process, enough information anyway to consider in
the error rate. So that wasn't a constraint, as it had been in
the past, where we just couldn't work out the arrangement in
time to do the audit.
Mr. Horn. Now, do you have lawyers on your own staff that
can take a look at these and say they conform to the law in
terms of time as well as substance?
Ms. Brown. Yes. In the Office of Counsel to the Inspector
General, there are about 60 attorneys and support staff. Of
course we work in prosecution closely with the Department of
Justice. We work closely with U.S. Attorneys as well as the AGs
from the various States when that's appropriate. So we work in
combination with others on almost all of our work before it's
concluded.
Mr. Horn. I know this is a tough question for you to
answer, but are there situations where the U.S. Attorney says,
``Hey, this doesn't matter to me, isn't significant enough
either in dollars or anything else. I haven't got the time for
it.'' How much of that goes on?
Ms. Brown. I can't give you a percentage. There certainly
are those situations. There are a few things we've done to
resolve them. We have an executive level fraud group including
the Deputy Attorney General and myself. We have someone from
HCFA represented, someone from the FBI, someone who represents
the U.S. Attorneys, and we talk over these cases and look at
national projects. They can establish a national protocol so
that there's more consistent enforcement throughout the United
States on certain types of cases. That's helped a lot. They
also can get in touch with U.S. Attorneys if any single
decision seems to go against what the national prerogative
might be.
I might mention, too, there's a lot less turning down cases
because there is additional money provided to the Department of
Justice also out of the HIPAA legislation for enforcement
efforts, and they've been very aggressive and quite successful
in this. We've more than doubled our enforcement and our
settlement activity.
But even saying that, when they decline a case, we have,
you might say, a third bite at the apple. Where criminal and
then civil declination has occurred, we have civil monetary
penalty authority, so we can still use that. Say something
doesn't meet the dollar criteria, which would be the most
typical, we could take selection actions based on that CMP
authority. So there is a variety of tools available to us,
where people aren't just slipping through the cracks once we
have developed some material on them.
Mr. Horn. Well, I'm going to ask both the minority and
majority staff to look at this and ask some questions for the
record, and without objection, the answers will be put in at
this point.
Ms. Brown. Be glad to do that.
Mr. Horn. Mr. Ose, you have less than 10 seconds on my
time, but you have your own 5 minutes.
Mr. Ose. Thank you, Mr. Chairman.
Mr. Horn. Do you have an opening statement?
Mr. Ose. I do not have an opening statement. Just
questions.
Mr. Horn. OK, good.
Mr. Ose. For the Inspector General, on page 8 of your
submitted comments, the bottom paragraph talks about
``deficiencies in nearly all facets . . . of the 12 contractors
in our sample.'' With great respect to my colleague, Mr.
Turner, I don't care to debate the sampling question today but
if that is the case, if there are gaps in the underlying data
that the contractors are using to report to HCFA, how is it
that we have any reliability in the numbers in the first place?
Ms. Brown. On page--are you talking about the accounts
receivable in particular?
Mr. Ose. Yes, Medicare accounts receivable.
Ms. Brown. Let me let Mr. Vengrin, who actually conducted
the audit, go into a little more depth.
Mr. Vengrin. We did find, sir, in all 3 years discrepancies
in the various reporting systems that the contractors used.
Typically there are multiple data bases tracking the same
number. Since fiscal year 1996 we noted millions of dollars in
discrepancies in these various data bases. Last year HCFA, in
trying to streamline this process and get one set of records,
issued instructions to their contractors to better maintain
their receivable information and in one set of books, but
unfortunately this year we went out there on a test basis and
still found millions of dollars in discrepancies.
There's a form called a 751 that tracks the accounts
receivable. When the contract auditor went back to try to find
support for that, on virtually every line from the beginning
balance to the current receivable activity to collections, we
found in one case $144 million was plugged to agree to the
ending balance. Another one of the lines on claims transferred
was plugged so it would balance. Right now the reported
information is just unreliable.
Mr. Ose. This gets to my basic question, and that is that
the contractors who are providing the service to HCFA and
perhaps the service providers themselves are unclear on the
rules that govern how to classify and assign different
services. I'm curious whether or not there is a clear
understanding on behalf of the people actually doing the coding
in the field, for instance, or the collections in the field as
to how to deal with these situations.
Mr. Vengrin. Sir, this is one where I would certainly have
to side with Health Care Financing. Our office has participated
in numerous training exercises with HCFA staff where they
repeatedly told the contractors how to record this information.
But I must tell you all, saying that information--as Mike Hash
was saying, we have a claims processing system out there. It
was kind of an afterthought to have a financial component to
that, so where the contractor pays claims in an expedited,
expeditious manner, tracking some of this accounting
information is coming kind of late in the game. They processed
860 million claims and millions of dollars of offsets.
I don't want to leave you with the impression that they're
losing $20 billion on this receivable. There are billions of
dollars, as for example on the Part B side, if a doctor has
been overpaid $100, the next time that physician submits a
claim, that $100 is offset and grabbed so there's no
outstanding amount. So the problem still is with the
recordkeeping.
Mr. Ose. I would appreciate if I could submit this
particular question in writing and have some suggestions as to
how we can more closely correlate this information. I don't
know if it's possible but I also understand the closer we can
correlate it time-wise, the better off and more accurate our
numbers are.
Mr. Vengrin. I believe we can correlate it. We're working
with HCFA this year to go back in 1998 and do a reconstruction
on that ending balance. The bulk of this overpayment is
attributable to particular transactions: One, cost report
settlements, and second, for periodic payment adjustments where
HCFA has given a particular provider too much money in setting
up accounts receivable.
Well, these particular categories lend themselves to
tracking even on a Lotus spreadsheet. I think we can track
this, and I'm convinced that we can go back out there and find
supporting information. So part of this is going to be a
reconstruction effort, and explicitly telling the contractors
yet again what type of information they need to maintain.
Mr. Ose. I think the education process is probably going to
have to be constant, just because those of us on this side of
the dias probably issue too many rules and then we get
regulations and they change constantly. I encourage that almost
on a constant basis.
I have one other question, Mr. Chairman. The HCFA statement
shows amounts due of about $7.5 billion, of which about $3.8
billon is estimated to be uncollectible. For the moment
ignoring the $3.8 billion deemed to be uncollectible, what's
the status of the other $3.7 billion? If it's not
uncollectible, that means it is collectible. What are we doing
to collect it?
Mr. Hash. I believe this is in regard to the errors that
have been identified in the audit process. We've actually been
making progress in the collection of that. From the 1996 audit
we've now collected, we believe, 100 percent of the identified
overpayments. From the 1997 audit I'm told that we have
collected about 53 percent of the identified overpayments. And
obviously we just got the 1998 audit, and we're beginning to
institute collection efforts for that money as well.
Mr. Ose. May I ask the chairman's indulgence for one final
question or observation?
Mr. Horn. Is this followup?
Mr. Ose. It is followup. The reason I ask that question is
in my district we have a system that identified, through its
own compliance effort, an overcollection on their part. In
other words, they had been paid too much. They voluntarily
reported it back to the contractor and returned the money. They
refused to take it. And there have been subsequent legal
inquiries as to the provider's veracity.
This is a provider that has identified on its own that they
have collected too much, they have proffered it back. They have
been told no and then they have been in the initial steps of
sanctions. I've got to tell you, that's why I ask these
questions.
Mr. Chairman, thank you.
Mr. Horn. You also wanted, a portion of the previous
question, to have the data brought in. And without objection,
that would be put in where you raise the question, and I'd like
to ask both the Inspector General and the Health Care Financing
Administration to give the answers to the question. So if
there's a policy question versus an audit question, we'd like
to have it in the record.
Let me just on nobody's time get on the record how the
providers are designated by HCFA. A lot of people don't really
know that. They think you're one vast bureaucracy and
everything is operated out of Washington and all that. But when
the law was written, there was an aim to not have that and so
providers were chosen to sort of decentralize operations around
America, and I know it poses some problems and the
Administrator and I have chatted about those.
So maybe just for the record, since you're Deputy
Administrator, how do they get picked? What are the concerns
that HCFA, Health Care Financing Administration, has here in
Washington, if any, with regard to providers? I got into it
because of the year 2000 problem. So why don't you just lay it
out for the record?
Mr. Hash. I would be happy to, Mr. Chairman. As you know,
we have for the last, I think, 5 or 6 years submitted
legislation to the Congress to consider reforming the methods
that we use for contracting with private organizations to
process claims and pay bills. The current arrangements for the
contracting with private entities are to some degree different
between whether we're talking about the fiscal intermediaries
who are responsible for paying claims that are covered under
Medicare and what we call the carriers----
Mr. Horn. Just for the record, put ``Part A'' in. A lot of
people don't know it unless they're aficionados of this.
Mr. Hash. Part A refers to that part of the Medicare
program that covers inpatient hospital services, the services
of skilled nursing facilities and home health agencies, for the
most part.
Mr. Horn. Which was in the original law.
Mr. Hash. That is correct, from 1965. And those contractors
that we call fiscal intermediaries or FIs, their selection is
actually governed by very specific statutory provisions that
include the right of providers within the geographical area
that may be served to nominate the actual entities with whom we
can then contract. So there is, how shall I say, not a lot of
discretion on the part of the program or the Health Care
Financing Administration to actually engage in any sort of
competitive competition for fiscal intermediaries because of
the nomination process that is written into the statute.
On the carrier side, which is the organizations that
process claims for services covered under Part B of Medicare,
which includes primarily physician services and other
outpatient services covered under the program, we do contract.
But there again, we are restricted by the statute to
contracting with organizations that meet certain criteria,
including being in the business of insurance, demonstrating
that kind of experience, and we think there are a broader array
of organizations out there who would be capable of and
interested in contracting with us to process claims and to
administer the Medicare program, and we would like to have
greater flexibility and discretion in that area.
Mr. Horn. That is very helpful. Do you want to add
anything, Ms. Brown?
Ms. Brown. Only that I heartily endorse HCFA's initiative
in this area. Among those who we have had huge settlements with
are many of the contractors, where they have misused their
authorities and overcharged in some way or defrauded in some
cases.
Mr. Horn. On that point, when that happens, can you
decertify them?
Ms. Brown. Yes. They can be excluded, or HCFA can take an
initiative and not contract with them any longer. However,
there is such a limited number of people they can contract
with, it puts HCFA in the dilemma of making sure that the
services are still performed.
So even when it might be appropriate to withdraw, there is
a great dilemma as to how to get the job done. So, contractors
who might not otherwise be chosen are still allowed to persist
in the business or get back into the business or assume
business in another area, because we just don't have others who
are eligible to perform that service.
Mr. Horn. Let's just put in the record for the last 2 years
how many contractor providers have been decertified.
[The information referred to follows:]
[GRAPHIC] [TIFF OMITTED] T2373.035
Mr. Hash. I will be happy to do that.
The Inspector General is correct. We are faced often with a
very challenging set of circumstances about transitioning work
to another contractor, which can in the best of circumstances
still be disruptive from the point of view of both the
beneficiaries and the providers who are affected by those
transitions. On the other hand, with help from our law
enforcement colleagues in the Federal Government, we have made
important strides on cracking down on behavior that is criminal
and unacceptable and we have excluded those contractors.
Mr. Horn. We are now going to start the next round again
with Mr. Turner.
Mr. Turner. Just to followup, are the States under the same
restrictions that HCFA is under with regard to the selection of
their contractors for the Medicaid program?
Mr. Hash. Mr. Turner, I am not familiar with their
contracting laws under the Medicaid program, but I would assume
that they have more flexibility than we do. But my presumption
is that each and every State has contracting laws that are
comparable to what we have in the Federal Government, the so-
called FAR regulations for contracting, and I think States have
comparable laws. But I am not aware that they have in their
State statutes very narrow prescriptive language about the
selection of contractors to administer the Medicaid program,
and some States administer their Medicaid programs directly,
with State employees.
Mr. Turner. What was the political motivation for the
restrictions that you have been discussing when they were put
into the law initially?
Mr. Hash. I confess that I was not around in 1965, but from
reading about the debates that took place at that time, the
philosophy was, as Medicare was being launched, to select a
process that would not create a Federal, as you will,
bureaucracy for the purpose of processing claims; but rather to
use the claims processing expertise in the private sector.
There was experience in the insurance world of processing
claims and paying bills.
In the early years of the program the majority of the
contractors were Blue Cross and Blue Shield plans around the
country, and many continue to serve the program to this day.
But essentially the philosophy at that time, in order to launch
the program quickly, was to use the expertise on this area that
existed in the private insurance company world.
Mr. Turner. And so the decision, in part, on selection of
contractors is left in the hands of the providers because they
have the option?
Mr. Hash. In part. On the Part A side, correct.
Mr. Turner. One of the recommendations in the President's
budget for fiscal year 2000 is a request for new authority to
enhance contractor performance. What is encompassed in that
recommendation, and are those the matters that you've been
discussing?
Mr. Hash. It does refer to the increased flexibility in
terms of contracting with private organizations, enlarging the
pool of potential contractors to include organizations that
have the capability, the resources, the electronic data
processing capabilities to actually take on these
responsibilities.
Mr. Turner. So the problem that you were discussing, at
least there would be more flexibility if the President's
recommendations were adopted?
Mr. Hash. That is correct, Mr. Turner.
Mr. Turner. A moment ago we were talking about the accounts
receivable. Are we approaching a situation with home health
care agencies, many of which are going out of business, where
we are going to have a large number of accounts receivables
that are uncollected from home health agencies that have
failed?
Mr. Hash. That is a factor in what the audit shows, an
increase in the cumulative net amount of receivables. I think
the figure is now $3.6 billion, rising from last year I think
$2.6 billion. And a good part of that increase in receivables
we think is attributable to an increased auditing function that
is associated with launching the new payment systems for home
health agencies, so we had to establish a base year and more
thoroughly audit the cost reports for agencies of that year.
Second, in that process, now that we have new limits in the
home health payment system, we have identified a number of
overpayments. Those add to the accounts receivable.
And then last I would say, in terms of the accounts
receivable number, we are experiencing an increase in the
number of bankruptcies in providers in general, and that also
contributes to the accounts receivable number.
Mr. Turner. Many of our home health agencies experienced a
great deal of financial difficulty adjusting to some of the
recent changes in their reimbursement rates. I somehow wonder,
and I don't know if you would comment or have an opinion on it,
but I wonder if we have not made adjustments so rapidly and
harshly for the home health agencies, our home health agencies,
that many of them are going to be forced to go out of business,
which is going to result in a lot of uncollectible accounts
receivable from those agencies. Have we been too harsh?
Mr. Hash. We have been very concerned about what is
happening with the home health agencies in light of the changes
in the payment system that were put into motion by the Balanced
Budget Act. I think it is fair to say that at this point we are
still trying to analyze the data and get better information
about the financial status of organizations. We are trying to
determine whether or not there is developing any sort of access
problem. That is to say, are Medicare beneficiaries having
difficulty being referred appropriately to a qualified home
health agency?
As of now we don't have any evidence that is a systematic
problem, but there is no question that there are many home
health agencies who have demonstrated that financially they are
having a very difficult time. I think that has to do with the
fact that the new limits in effect require home health agencies
to manage their delivery of services in a more efficient
manner, and that is a transition that is difficult to make.
I think many of them are making it. I have seen some
reports that some of the chain organizations in home health
have actually adjusted to the new payment system, while others
are still struggling with it. We need to carefully monitor the
impact of these payment changes, because in the end we are
responsible for assuring that our beneficiaries do have access
to appropriate home care providers, and it is something that we
are monitoring very closely.
Mr. Turner. Thank you.
Thank you, Mr. Chairman.
Mr. Horn. Let me just pursue the home health care bit for a
minute. In 1965, when this was all being patched together, I
happened to be a big advocate at the staff level for my mentor
on home health care, and we only knew of Detroit at that time
as having a very good operation.
One thing that has intrigued me in the last few years, is
that home health care providers come to the houses, make a
phone call when they arrive or when they leave so that the
record would show that they made that visit of 1 hour's length.
I gather that is where some of the abuse was, in terms of what
are they putting in for hours when they might have just given
the person 5 minutes or something.
So, could you explain a little bit how you are working on
that, because as I look on the ``Errors Due to Lack of Medical
Necessity by Provider Types,'' dollars in billions, we can see
that the outpatient situation has really been much greater in
terms of the $7 billion there, versus the very small amount
under $7.5 billion the preceding fiscal year, and the fairly
small amount of the outpatient area at the $8.5 billion. So, it
would look like, just looking at that chart, that the home
health care agencies have been squeezed a little in terms of
the medical necessity, and the outpatient area seems to be
maybe a similar problem to what home health care was at one
time. Is that just chance in the money trail here, or what is
your feeling on that?
Mr. Hash. Well, I think that--I am not certain that the
sample for the audit, although I would defer to my colleagues
here, is looking at an individual provider category that we
have necessarily a representative sample, at least on an
individual provider basis. But I think it is fair to say that
we have been taking a much more close look at the compliance of
home health agencies with our coverage requirements.
As you know, Mr. Chairman, home health under Medicare is
only covered if a patient meets all of three conditions. They
must be home-bound, they must require a skilled level of
service, and they must be referred to home health by a
physician.
In terms of the actual visit by a skilled professional or
by a home health aide, which is actually the largest number of
visits, they are made by home health aides as opposed to
registered nurses, physical or occupational therapists or the
skilled health care professionals. In the case of visits, we
pay now on the basis of a visit. And of course the issue for us
is if the visit is very long, then in fact the cost of the
visit can rise very dramatically as opposed to a briefer visit.
So since the duration of the visit is largely determined by the
health care professional, we are trying to track more closely
the timeframes associated with visits to make sure that the
costs for that period of time are reasonable.
Mr. Horn. Does the Inspector General want to add something
to that?
Ms. Brown. Yes. This particular benefit grew astronomically
and far faster than any projections in a very short period of
time. We found it was one of the most abused areas in health
care provisions. I literally can show you pictures of rooms as
large as this full of boxes of documentation that was created
in a very specific manner, with people being paid so much a
page of documentation, created for patients who were never seen
by anybody and yet they were being charged for regular home
health visits, with literally millions of dollars going out.
There are others where tens of millions of dollars were
paid monthly by HCFA, where the companies went bankrupt
immediately and never paid the money back because they were
protected under bankruptcy laws. They were being paid for home
health visits, most all of which, virtually all of them, were
never even performed. So, along with wanting to provide this
service, we must recognize that this was an extremely
vulnerable area.
Mr. Horn. I agree with you completely on that, even though
it should be a worthwhile service.
In the room full of documentation that you are referring
to, does this mean that the--I'm trying to get at the
documentation there. Does this really mean that when these
persons that ran that particular home care firm, when they were
caught, for want of a better word, and then took bankruptcy,
have we followed them to see if they have reopened this kind of
an operation somewhere else? And do you really have to accept
them if they have taken bankruptcy, or are we stuck there?
Ms. Brown. We have a number of convictions that have
already taken place and a number of indictments. There are more
pending. We are going after both the individuals and the
organizations. If there is a conviction, there is a mandatory
exclusion where they cannot come back into the business.
There are some refinements we are concerned about, like
whether they have relatives that they put in as a front and so
on. We are trying to propose some things to HCFA, and they have
done a great deal, particularly in excluding some of these
people who have not really got any qualifications for getting
into the business in the first place.
Mr. Horn. Can you exclude them forever?
Mr. Hash. If I may, Mr. Chairman, I want to make two points
about this.
One is, with regard to the enrolling of new providers into
the Medicare program, including home health agencies, we now
have in place a series of requirements that must be satisfied
that are considerably more rigorous than they were in the past.
For example, a home health agency now who wants to come
into the Medicare program must demonstrate a certain minimal
level of capitalization. They must demonstrate a certain
patient load indicating, before they start serving our
patients, they have actually demonstrated the capability of
providing home health services. And so we have really been
tightening up on the process for getting into the Medicare
program as a home health agency and being able to bill.
The other point I should have made about the visit issue
which I think is important, when the Congress designed the new
payment system, the interim payment system under the Balanced
Budget Act, they inserted into that payment system a new
payment limit that is an aggregate limit for each individual
who has served--it is actually an average limit for the patient
served. And what that means is that now under that limit
agencies have an incentive to be very economical and proficient
in the provision of visits, because otherwise they will run
afoul of this per-beneficiary limit that is imposed by the BBA.
So we now have a kind of payment system that creates incentives
to reduce inappropriate visits or visit lengths.
Mr. Horn. As I look at this chart, ``Errors Due to the Lack
of Medical Necessity,'' the big money still out there is the
``other'' category. As we look at that ``other'' category, are
there any particular types of real abuse within that that maybe
ought to be put into another category? Mr. Vengrin, do you have
any thoughts on that?
Mr. Vengrin. Mr. Chairman, it goes to all of the other
types of providers, and we really don't have statistical
information that we can say one is more aberrant than the
other. Right now it is still the big provider groups, the
inpatient services, and I think home health agencies have in
fact made tremendous progress in billing more correctly. I
believe statistically there is about $2 billion less in
expenditures this year. So I think there has been improvement
there, but the biggest story is the inpatient side.
Mr. Horn. It is clear on your chart that the home health
agency category seems to be really dwindling compared to the
other 2 fiscal years. What is getting out of control is the
outpatient as well as the inpatient, and that is where it looks
like the big billions are to collect in some way.
Mr. Vengrin. One of the biggest factors in the outpatient
area was partial hospitalization. There were substantial
dollars questioned because of the improper nature of those
particular claims.
Mr. Horn. On that, let me bring up what was quite a
hullabaloo around here 2 years ago. Under the Medicare law, one
goes into the hospital and is in a ward and says, ``Wait a
minute, I have some money in my banking account which I have
been saving for my health, I would like to move to a single
room.'' As we all know, apparently some language was put in at
the end of the session. A lot of that end-of-the-session
language does lead to trouble, and presumably it was going to
be repealed and I don't think it was ever repealed. What is the
philosophy of Medicare on the patient upgrading their place in
the hospital? I think it was in the original act, wasn't it?
Mr. Hash. Yes, sir. I am not completely familiar with this,
I confess, and I would be happy to supply for the record----
Mr. Horn. Let me give you another example. Let us say a
dermatologist is allowed certain reimbursement under Medicare
for certain types of surgery and the patient says, ``Wait a
minute, I have this other thing that is bothering me.''
And the doctor says, ``I'm sorry, Medicare doesn't cover
that.''
``That's OK, I am willing to pay you.''
Apparently that is a violation of Medicare regulations?
Mr. Hash. I do know what you are referring to now, Mr.
Chairman, and the matter is as follows, as I understand it: If
a Medicare patient, a beneficiary, is asking for a service that
is a noncovered service under Medicare, that is excluded, an
annual physical or plastic surgery or a hearing aid or
eyeglasses or any number of items that are not covered under
Medicare, there is no limitation on that beneficiary's ability
to purchase that service or those items with their own funds at
whatever cost the transaction results in. So there is no
imposition of a Medicare requirement in that circumstance.
The issue that you are referring to is a service which is
an otherwise covered service, but for the case of the
individual who is seeking it there is a question about whether
it is medically appropriate or medically necessary for that
individual, that in fact in those circumstances Medicare
provides special rules which require that a claim be submitted
to make a determination about the medical necessity; and that
if in fact a claim is denied because it is not medically
necessary, then it becomes a noncovered service and the
individual may purchase that service out of their own funds if
they so desire.
Mr. Horn. There is no inhibition against that. Well, let us
take some of the plastic surgery. Obviously there is a national
epidemic on breast cancer and there are also those people
marred in the face and whatnot, and I would think part of the
healing there psychologically for that person would be to have
plastic surgery. What are the ground rules on that?
Mr. Hash. There is a new provision in law that deals with
the Health Insurance Portability and Accountability Act
[HIPAA], which I believe requires coverage for reconstructive
surgery following a mastectomy. So I believe that now is a
covered service.
Mr. Horn. So that is no longer a problem?
Mr. Hash. I want to qualify it only because I would like to
check to make sure that I am absolutely correct.
Mr. Horn. Fine.
Mr. Hash. But I believe it is.
Mr. Horn. Without objection, we will have the answer from
the Health Care Financing Administration.
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Mr. Horn. Mrs. Biggert.
Mrs. Biggert. Thank you. Within the audit report there have
been disclosures across all aspects of computer security, and
one particular section of the report is very alarming to me.
The report reads that ``We were able to penetrate the security
and obtain access to sensitive Medicare data at 5 out of a
sample of 12 contractor locations.'' Simply stated, auditors
acting as computer hackers were able to easily access
confidential medical data.
My question to you, Mr. Hash, is why can't HCFA guarantee
the confidentiality of this medical data, and what steps are
being taken to secure these systems?
Mr. Hash. You are absolutely correct that the protection of
this information is critical, and it is our responsibility
because the privacy of the American public is certainly the
highest priority, and we take our responsibilities very
seriously in this regard. In addition to what is in the
Inspector General's audit report, our own Chief Information
Officer has been conducting similar tests of vulnerability of
contractor data systems, and we as a result of that have also
identified vulnerabilities.
We have taken a series of steps that involve new technology
that is now in place with our contractors, training of
contractor personnel and our own personnel as well, to ensure
that we have in place enhanced procedures, passwords,
validation systems, and transmission security through the lines
that we lease to transmit electronic data.
So you are correct, we must be vigilant about this. Our
intention is to continue working in this area of system
security, particularly once we are past the Y2K window of the
remaining part of this year, because we definitely feel like
security must be at the highest, and our intention is to work
with the IG as well as our own staff to make sure that any
vulnerabilities are corrected.
Mrs. Biggert. But it sounds like you are saying once we
have finished with the Y2K dilemma----
Mr. Hash. No, I think we have taken a series of specific
steps in terms of new technology, training programs that we
have undertaken that have greatly strengthened the security of
our data systems, but we need to do more. We are on hold in
terms of doing more until we pass the Y2K window.
Mrs. Biggert. Can you be a little more specific what these
steps are?
Mr. Hash. I would be happy to supply for the record, if
that is an acceptable statement, all of the steps that we are
taking.
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Mrs. Biggert. We appreciate that.
What other risks do the identified computer security
weaknesses present?
Mr. Vengrin. We also found problems with the shared system
where they were able to maintain and have full access to the
code. In many cases we found that they had the opportunity to
shut off edits such as a duplicate payment. During one of the
conference calls that I personally participated in, the person
in the computer environment said yes, they had full
capabilities to turn those edits off. So we advised Health Care
Financing Administration that type of control should not be at
the contractor level, and I believe they are in the process of
trying to get that back.
Mrs. Biggert. So a contractor really could just change the
amount?
Mr. Vengrin. They could do that anyhow, but they should not
be able to change mandated edits that the Health Care Financing
Administration imposes on them. Right now they can.
Mrs. Biggert. What would those be?
Mr. Vengrin. Duplicate payments. There is no reason that
they should have the capability of turning that edit off.
Mrs. Biggert. Any other risks?
Mr. Vengrin. We found a vulnerability, if a provider
submitted a duplicate payment on the same day, they did not
update their history file to capture that. Hence, we found a
couple of duplicate payments that did occur on the same day,
and I believe they moved aggressively to fix that particular
vulnerability.
Mrs. Biggert. Why wouldn't the computer be able to catch
that?
Mr. Vengrin. Because it didn't update the history file for
the activity of that particular day. It was a vulnerability in
the process.
Mrs. Biggert. Is that an environment where an individual so
inclined could make improper payments and cause unlimited
damage if they have access?
Mr. Vengrin. Yes, ma'am.
Mrs. Biggert. Do you have any suggestions or have you given
suggestions to HCFA on how to correct this?
Mr. Vengrin. We did. One of the recommendations that we
made is that the contractor should not have total access to the
code. They are agreeing in part with that, but again it has Y2K
implications. As they do code renovations, they tell us if they
don't have access to the code and there are problems in the
renovations, they couldn't fix the claims processing and
process claims. They are fixing things, but there are still
problems is what they are saying.
Mrs. Biggert. It seems like this is such an issue, and I
think probably on all of the committees that I serve on in this
House that privacy and confidentiality is such an issue, and
particularly even in subcommittees that I wouldn't expect, the
medical records confidentiality comes up, in the Banking
Committee and everything. It is such an issue and it is so
important and it is something that has to be guaranteed to
everybody. I hope that you will find a solution quickly.
Thank you, Mr. Chairman.
Mr. Horn. The gentleman from California, Mr. Ose.
Mr. Ose. Thank you, Mr. Chairman. I am aware that the
gentlewoman from Illinois has additional questions, and while I
have some, I would be willing to yield my time if she wishes to
use it.
Mr. Horn. Do you want to finish up on a round of questions?
Mr. Ose. We are going to have another round, Mr. Chairman.
Mr. Horn. Go ahead.
Mr. Ose. When we do these audits, the providers have in
some cases compliance systems and in some cases not. How many
or how often did you find that the providers had compliance
systems voluntarily imposed on their HCFA relationships?
Ms. Brown. I don't have a percentage of the providers who
have compliance systems. We have developed voluntary generic
compliance plans for certain segments of the industry and we
are doing others. For instance, we have done laboratories, we
have done hospitals and so on. These are very comprehensive
internal control plans, you might say.
The reason that we are making them voluntary is they have
to accommodate the smallest institution and the largest. What I
say in many speeches around the country is that we want them to
have the flexibility to look at these internal controls that we
suggest and pick and choose those that would apply to their
institution. The carrot that we give them for putting in
compliance plans is saying that should there be a problem in
their organization, that both the Justice Department and my
office make determinations on whether or not they should be
allowed to continue in business because we have exclusion
authority. The Department of Justice also has the decision
whether or not to go forward with a criminal or a civil charge
against them. In looking at the overall intent, their efforts
to have compliance with the laws and regulations would be very
influential in that. So, it could serve them well to have these
compliance plans. We know that they are adopting them.
Mr. Ose. Have you found a correlation between the existence
of a voluntary compliance plan and the accuracy on our audits?
Ms. Brown. We don't actually audit the provider themselves,
in other words, at least not in the financial system audit. We
do other audits based on evidence of wrongdoing or high error
rates or something like that.
Mr. Ose. When you do those audits, are they likely to have
a compliance system or unlikely to have a compliance system?
Ms. Brown. It is a growing thing. There were not many
compliance systems 3 years ago or 6 years ago when I came to
this job. But now a high percentage of them are, and I think
the American Hospital Association just did a study that showed
a very high percentage of hospitals either had them or planned
to have them in the next year, and I will get you the
percentage.
Mr. Ose. Do you have a copy of that study?
Ms. Brown. Yes.
Mr. Ose. Mr. Chairman, I would be interested in reviewing
that, and if we can add that to the record, I would appreciate
that.
Mr. Horn. Without objection, it will be inserted into the
record at this point.
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Mr. Ose. The other question is with respect to the
compliance systems that are in existence right now, how do they
break out in terms of frequency of implementation relative to
private, public, nonprofit, for-profit, nongovernmental, and
governmental? It would seem to me very important, because if
you find private providers without compliance systems with a
high degree of errors, that is an ``Over here, look here,''
kind of thing. So I want to make sure that we are ultimately
using our resources in this manner effectively, rather than
focusing them on areas where we already have a high degree of
compliance and a relatively low level of errors.
Ms. Brown. I would like to make a couple of points about
them that I think you would find interesting. First of all, we
started to develop these plans because there were many
consultants in the business who were charging over $100,000 to
help an institution put in a compliance plan, and it wasn't an
effective one or one that we felt would do them any good or
that we would consider as a good preventive measure. So we
started to develop this as part of our prevention efforts, and
the industry has adopted these. We are not far along enough
that I can give you percentages of all of the nonprofit/profit
and so on organizations who have adopted them, but there is a
great deal of interest.
The other point that I want to make is when we have
convicted somebody or an institution, we impose a nonvoluntary
integrity plan. We have, as part of the settlement of that
case, an integrity plan that is imposed on them and it is
usually 5 years. They have to report back to us on the status
of their business, the results of--how many complaints they
have received, what they have done about them, and a variety of
other things, and we monitor those plans. We are monitoring
several hundred of them right now. We will continue to impose
those integrity plans where we have found significant errors to
have taken place.
Mr. Ose. My time has expired, Mr. Chairman.
Mr. Horn. Do you want to pursue that?
Mr. Ose. For the record, I will submit this in writing. How
do you determine whether a voluntary compliance plan is
satisfactory? You can respond subsequently.
Mr. Horn. Without objection, there will be space left here
for your response and the Health Care Financing
Administration's response.
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[GRAPHIC] [TIFF OMITTED] T2373.048
Mr. Horn. I now yield 6 minutes to Mr. Turner of Texas.
Mr. Turner. Mr. Hash, several months ago the President
directed that all managed care providers under Medicare
subscribe to certain patient protections. As you know, we are
debating in the Congress patient protection legislation that
would affect the private sector managed care companies. Has the
President's order been implemented successfully by HCFA?
Mr. Hash. Yes, it has, Mr. Turner. We have put into place
what we think are the toughest beneficiary or patient
protection requirements in our standards for managed care plans
of any managed care plan around the country. So the President
issued an Executive order requiring that health care providers
who do business with Federal programs, including our program,
meet these patients' bill of rights protections as set forth
from the President's commission on quality and patient
protections.
Mr. Turner. How long have those protections been in place?
Mr. Hash. We published a regulation in June of last year
which implemented Medicare patient protections as a part of
implementing something called the Medicare Plus Choice program,
which is the Balanced Budget Act part dealing with managed care
improvements, and the Medicaid improvements to patient
protections are a part of a rule that we now have under
consideration for Medicaid managed care. The proposed rule was
issued at the end of September, and we expect later this spring
to be publishing a final rule for the Medicaid managed care
programs.
Mr. Turner. So Medicare patient protections have been in
effect since last June?
Mr. Hash. Yes, that is correct, Mr. Turner.
Mr. Turner. One of the issues that comes up in patient
protections is whether or not they are going to result in
additional costs for health care. In the instance of patient
protections in the area of Medicare, I think it would be
interesting if you could comment on whether or not there has
been a cost impact on the Federal Government as a result of
implementation of the patient protections for Medicare?
Mr. Hash. We don't think so, Mr. Turner. Our experience and
also in working with the associations which represent managed
care plans, that many of them--many of the best plans--already
had these protections in place for the most part. We believe
that they have been endorsed by the associations representing
managed care plans. So we think that there is a great deal of
agreement on these protections that are now in place for
Medicare Plus Choice.
Mr. Turner. How are you able to determine whether or not a
managed care company is making a reasonable profit with regard
to the reimbursement rates that you provide?
Mr. Hash. Each year for a managed care company that wishes
to contract with Medicare, we require them to file with us a
statement in which they detail some of their financial
information, including an estimate on their part of what it
costs them to provide the Medicare benefit package to their
Medicare enrollees. And that calculation is important because
we compare what it costs them to what we pay them, and in those
cases where their costs are lower than the Medicare payment
rate, we require them to make up that difference through either
reducing cost-sharing for their enrollees or by increasing
benefits.
So we actually have some window at least on the portion of
their business that relates to the Medicare program. Overall,
of course, almost all managed care plans have other lines of
business besides Medicare, and we do not have access to their
financial information across the board.
Mr. Turner. Would it be important or appropriate that you
have access to that information? Is there some overlap between
their other activities that would be important to know about in
assessing whether or not the Federal Government and the
taxpayers are getting a fair deal from the managed care
companies?
Mr. Hash. I think what we have concentrated on is this
filing of their estimate of their costs to provide the benefits
that are required under Medicare, that is the critical piece to
ensure that what we pay is in relation to what their costs are,
and if they are not, that the beneficiaries get the benefit of
the difference between their costs and what we pay. We have
recently completely revamped the system, the reporting system
for those estimates from plans, and we think now it is a much
stronger and more representative set of data about the costs of
health plans to provide the Medicare benefit package.
Mr. Turner. But what you base this on is the managed care
companies' estimate of their costs?
Mr. Hash. That is true, but through our reporting system we
are able to audit that more carefully because we have put into
place more systematic requirements about how they go about
doing that estimation. It is subject to requirements and
standards that we put forth in a protocol that they must use to
report to us their costs.
Mr. Turner. Ms. Brown, do you have authority to audit the
activities of these managed care companies?
Ms. Brown. We can. We don't as a rule go into the private
aspects of their business. However, there may be some occasions
where we would be looking at the cost distribution, for
instance, of their overhead, because they may be shifting costs
so that it appears that it is all Medicare costs. Sometimes
they are actually taking some of their private costs and
putting it on the Medicare side.
Mr. Hash. Mr. Turner, in fact the General Accounting Office
released a study within the last couple of years indicating
that in their reporting to us of their costs, that there were
some inappropriate allocations, particularly in the area of
administrative overhead, where in fact the costs of the plans's
overhead was being inappropriately allocated to the Medicare
side, therefore affecting--raising inappropriately their costs.
And so this new reporting protocol that I referred to no
longer allows plans to allocate their overhead in the same
manner that some of them were doing in the past, and we believe
now we have a much tighter system with respect to what it is
they are reporting to us and whether or not it represents a
fair allocation to the Medicare side from the business they are
otherwise doing.
Mr. Turner. How often are the rates readjusted for the
managed care companies?
Mr. Hash. Once a year.
Mr. Turner. Once a year, and does it occur at the same time
for all of the companies?
Mr. Hash. January 1, the calendar year.
Mr. Turner. Thank you, Mr. Chairman.
Mr. Horn. Let me pursue a couple of inserts that relate to
policy matters, and we would appreciate the aspects of the
Inspector General also on this.
I sent a letter to the Administrator with reference to a
series of administrative law decisions on behalf of a
particular surgeon that has had a brilliant record, and some of
his things go against the pattern of other surgeons. The letter
from the Administrator is dated February 8, 1999.
Thank you for your letter on behalf of your constituent,
Robert A. Nagourney, M.D., regarding the distinction between
the types of clinical resistance and sensitivity assay tests to
determine the effective treatments for cancer patients. I
regret the delay in response.
In the absence of a national coverage determination,
coverage and reimbursement of all assay tests are left to the
discretion of the local Medicare carriers. Dr. Nagourney is
correct. The two recent cases by administrative law judges did
permit the coverage of two cancer tests, extreme drug
resistance assays and cell culture drug resistance assays, for
individual patients. However, at this time the decisions of the
administrative law judges are limited only to those individual
cases and does not establish precedential coverage policy for
the Health Care Financing Administration or our Medicare
carriers.
I guess I would ask the question, if an administrative law
judge rules a certain way and you have another case that rules
another way, what does it take to get a policy changed?
Mr. Hash. Mr. Chairman, I think that is a very important
set of questions because, as you may know, we were in the
process of completely redesigning our coverage process at the
national level. And what that means is we are putting into
place a process that is much more open and transparent, that
involves a federally qualified advisory committee to assist in
making decisions about advancements in medical care that ought
to be covered under the program.
You are correct in saying that when information--or at
least I think you are implying, and I think it is a correct
inference--that if we get information about a new test or a new
procedure that holds some promise, and then we see that there
are conflicts in the handling of that at the local contractor
level, that it does behoove us to put that up into our system
of review to first bring some consistency where we can to these
kinds of issues.
I will say to you that one of the reasons that local
medical review policies are in place is that over the years we
have found that an effective way of dealing with new
technology, because we need to have information about what
kinds of patients benefit from a particular new procedure or
new service, we need to know something about the costs in
different settings, all of this information is initially
gathered through local medical review policies which then feed
into a decisionmaking policy for national coverage. But without
that sort of opportunity to get experience with advancements in
health care, it would be difficult to make appropriate national
decisions.
But in this particular case, where there has been conflict,
it should be something that we are reviewing through our
coverage process, and I would be happy to get back to you with
what might be the status of our look at that question.
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Mr. Horn. I would appreciate that. The Administrator goes
on to say,
We agree with Dr. Nagourney, there is a distinction between
the types of in vitro chemosensitivity technologies. As Dr.
Nagourney's letter indicates, these technologies are new, and
despite the recent rulings by the administrative law judges,
Medicare still considers these tests as investigative. I
believe the type of research being performed by Dr. Nagourney
is very important. Please be assured that when Dr. Nagourney's
work reaches a stage where a national and/or local coverage
decision is considered, we will carefully examine the
scientific and methodological differences in the application of
these cancer tests in the consideration of coverage and
reimbursement policies, including the development of CPT codes.
Do you want to translate CPT codes for me?
Mr. Hash. Current procedural terminology. It is actually a
manual of about 7,000 codes that describe various services and
visits that physicians and others provide. It is compiled on an
annual basis by the American Medical Association, and the
Medicare program actually uses that coding system in its claims
processing in order to communicate the type of services that
have been provided.
What that letter actually did, as you read on, Mr.
Chairman, is answer the status of this question in a way that I
think--I would be getting back to you on. What happens here is
we go through an evidence-based analysis of these kinds of new
things. And when we cover something, it needs to have moved
from the investigational phase to a point at which, in refereed
journals and among practitioners of whom we consult, that it
has been vetted and subjected to full scientific validation
before we want to make a national coverage decision.
But I think what often is the difficulty here is the speed,
or in some cases the lack that may surround new developments,
and people who think that they have an advancement that is
benefiting people are understandably interested in making sure
that all people who suffer from a condition that could be
helped by it will be able to access this new advancement. And
that is why we are committed to a much more time-sensitive,
transparent, and evidence-based coverage process.
Mr. Horn. Well, let me finish with the last few words of
the Administrator: ``In that regard, our coverage and analysis
group in the Health Care Financing Administration's Office of
Clinical Standards and Quality would be most interested in Dr.
Nagourney's research. Dr. Nagourney can send his materials
directly to the attention of Dr. Grant Bagley,'' and the
address, Baltimore, MD.
The reason that I am so wound up on this is I have known so
many lives that he has saved. Chemotherapy often is just the
wrong thing, and he has been able to match what actual therapy
is needed in relation to that particular cancer. You see that
proof and they are walking today, when others were dying, I
want a little progress being made here. So that would help.
In another letter that I sent to the Administrator on
September 25, 1998, I said: ``This letter is in reference to
the Health Care Financing Administration's policies on
outpatient psychiatric services. Specifically, we are concerned
with the lack of a national medical review policy for
outpatient psychiatric services.''
I noted that I am interested in reviewing Medicare's
current national medical review policy for all medical
treatments. I am also interested in the number of claims which
are processed by each carrier and with contracts with the
Health Care Financing Administration. I would like to know the
number of these claims that are accepted, the number rejected
for each type of medical procedure.
I would also like to know at what level in the process,
initial review, hearing, an administrative law judge hearing,
each type of treatment that was accepted for payment. Further,
I am interested in knowing which carriers are using the
national model policy developed by the career medical directors
for outpatient psychiatric services and which are not.
In the reply of the Administrator on February 26, 1999,
this was turned over to Dr. Robert A. Berenson, director of
health plans and providers, and the usual answer here: ``The
Administrator asked me to thank you for the Medicare policy for
outpatient psychiatric services. I regret the delay'' and so
forth. ``Staff members in our regional offices are often in the
best position to be of assistance to the people in their
area.''
Well, we have written now with detailed requests for
information to your San Francisco office, Health Care Financing
Administration, Health Plans and Providers Branch, and I would
like at this point in the record, without objection, to lay the
correspondence down plus some of the future answers so we can
get this one restored.
Just on the general point of Medicare policy for outpatient
psychiatric services, what can you tell me, Mr. Hash, in
relation to that, where are we?
Mr. Hash. The area that we have been concentrating on, and
it actually came up in the audits by the Inspector General. It
has to do with the coverage of the partial hospitalization
benefit under Medicare which, as you may know, is being
provided both by hospital outpatient mental health clinics as
well as freestanding community mental health centers. The IG
identified, as well as our own regional office staff, a
significant number of providers who were enrolled as qualified
to provide the partial hospitalization benefit, who upon site
visit and further inspection did not meet our requirements, and
furthermore that the kinds of claims they were submitting were
not being properly documented and they were being submitted for
services that were not covered, and so forth. In fact there is
quite an extensive report about this.
What we have been doing is to first visit a large--not all,
but a very large number of the outpatient mental health centers
to ascertain whether or not they are in compliance. For those
that are not in compliance, we have sent letters indicating
they need to supply us additional information about that. With
respect to medical review, we have enhanced the medical review
of claims that are coming into our contractors for partial
hospitalization programs.
Last, we have recommended to the Congress in the
President's legislation for the year 2000 that there be a
change in the law that makes it clear that partial
hospitalization services cannot be provided in a patient's home
or in a place that is not an appropriate clinical setting for
such services, because we have found widespread abuse in this
area, and that is where we have been concentrating our efforts
on outpatient psychiatric services.
Mr. Horn. Is there a limit to the number of sessions that
they can have with outpatient services?
Mr. Hash. There isn't.
Ms. Brown. No, sir, but the requirement is that these
services are something provided to somebody who would otherwise
have to be a full-time patient in a psychiatric hospital.
I am sorry to say that this was the most appalling abuse
area that I have seen in the 20 years that I have been serving
as Inspector General in various agencies. Over 90 percent of
the payments should not have been made that were being made in
this program. Fortunately, it wasn't that large a program.
HCFA has taken aggressive action to make sure that the
places providing the service are qualified and that the people
are qualified and that there is something other than just baby-
sitting type services that are being provided. Many of them
were providing just simple crafts and things like that rather
than true psychiatric services. This was one of those things
caught at an early stage, and I think corrective actions are
being taken.
Mr. Horn. Was there an actual certified psychiatrist behind
this, and they simply were training people to do a few things
that we would call what graduate students do when they try to
help people?
Ms. Brown. It was a range of services. Some of the services
might have been helpful but they didn't qualify for this
particular benefit. There may be other types of things that
would cover services in the line of giving people care, but----
Mr. Horn. You gave me one example of somebody going astray.
Can you give me a few more for the record on the outpatient
psychiatric situation? What is another typical thing that
happened that you had to do something about?
Ms. Brown. The people may not have been qualified to
receive the benefit. They may not have had a condition where
they otherwise would have had to be an inpatient. They might
have had some need for psychiatric sessions of some kind, but
they would have to be covered under some different benefit, not
the partial hospitalization. And of course there were many
places who really weren't qualified to provide the service
under the provisions of the legislation.
Some of them voluntarily withdrew, once challenged as to
whether or not they met the qualifications. So it was one of
those things where payments started to be made immediately, and
people were sort of jumping in to collect without a careful
screening of both the beneficiary's eligibility and the
provider of services' eligibility.
Mr. Vengrin. Some of the patients had no history of
psychiatric illness whatsoever, and these services were of a
recreational nature--dancing, social events, arts and crafts,
as the Inspector General mentioned.
Mr. Hash. And in fact from a coverage point of view,
Medicare does not cover adult day care. What some of these
providers were running were adult day care centers.
Mr. Horn. Interesting. I yield to the gentlewoman from
Illinois, Vice Chairman Biggert.
Mrs. Biggert. Thank you. In regards to Mr. Turner's
comments, I think it is important to note that in counties
surrounding my district many managed care plans have elected
not to participate in the Medicare Plus Choice program because
their costs are not covered. I met with one recently who stated
that although they are willing to break even under Medicare,
they simply will not go into the red for Medicare. So as I
think we discussed the relationship of managed care to
Medicare, it is important to note that many Medicare
beneficiaries are counting on HCFA and Congress to ensure that
Medicare Plus Choice remains a beneficiary choice.
Second, as far as home health care, in one of my former
lives I was on the board of directors of a home health care
agency and I served as chairman of that group celebrating its
100 year anniversary, and so this was in existence long before
all of us were here. And we went out of business because
although we had a huge endowment, we were serving preservice,
those patients who had no access to Medicaid, no access to
Medicare, and also those that were the Medicare/Medicaid
patients. We ended up subsidizing Medicare and Medicaid to the
tune of $2 million a year, and we could have continued this for
a number of years and then that huge endowment would have been
gone.
We chose to become a foundation, to be able to help in the
health care field rather than to continue that, because our
nurses would not work when they were seeing acute care patients
who were exiting the hospital earlier and earlier, and they
were only able to provide that skilled nursing care for a very
short period of time within the scope of the rules and
regulations, and so it did end up as a subsidy.
And I just want to note that for the record that there are
a lot of agencies that really are very committed, not-for-
profit agencies and those for-profit which are very committed
to providing that health care. I know that we are addressing
the fraud and abuse today, but I think it is important to note
that there are agencies that work very hard for us and are
great providers.
Ms. Brown. If I could just mention that one of the things
that got us involved in this were complaints from long-term
organizations who had been providing true health care services
that were needed in the home, and they were saying they
couldn't compete with these others who were providing cleaning
services and other things to patients, who in many cases
weren't qualified and were collecting the funding that was
available. And those who were truly trying to provide services
to patients were driven out of the business by the constraints
necessitated by these other illegitimate services.
Mrs. Biggert. I have one other question. Ms. Brown, you
stated in your testimony that the substantial year 2000
initiatives could negatively affect future error rates, and if
the collection and processing of the electronic data poses
challenges and risks, particularly in the year 2000, how does
HCFA propose to collect the volumes of data that will be
required in order to implement the risk adjuster it proposes? I
guess that would be to Mr. Hash.
Mr. Hash. I think that is to me. We actually began
collecting the data on hospital admissions with respect to
managed care enrollees. It began on January 1, 1998. We have
something in the neighborhood, I believe, of about a million
discharges that have been reported to our data system. That
formed the basis of the proposed risk adjustment which we
released at the beginning of March to the health plans who were
contracting with us. We are in the process of putting together
a plan to begin collecting outpatient data, physician services,
and clinical encounter data to support a more comprehensive
risk adjuster which is scheduled to come on-line in the year
2004.
Mrs. Biggert. I've heard that the systems have had
difficulty processing the data where beneficiaries move from
one county to another or one plan to another. How are you going
to verify the accuracy?
Mr. Hash. We have been working with individual plans. We
have about 300 health plans that contract with Medicare
currently, and since we began collecting the data, we have been
trying to work through any issues or questions about the
validity or representativeness of the data, having the data
coming from our contractors compared to what the health plans
believe they sent in, and either finding where the
discrepancies are, if there were, and correcting them and
getting to a point where both us and the health plan are
satisfied that the hospital admission data that they have
submitted to us is in fact accurate, because we don't want to
proceed on the basis of a risk adjustment that's based on
faulty data.
Mrs. Biggert. And then you'll have a means to verify? What
would be your accuracy level, do you think?
Mr. Hash. We've presented to each plan the information on
the admissions that we have that have been reported to us, for
them to in turn verify with their own internal records just to
make sure that the data we have is consistent with what they
think their records reflect in terms of hospital activity for
their enrollees.
Mrs. Biggert. I've seen no detailed accounting of how money
was spent, quite a good number of dollars to the beneficiary
education program, and how effective your efforts have been in
providing Medicare beneficiaries with the information they need
to make the right decision for plans.
Mr. Hash. We have a full accounting which we'd be happy to
share with you. We are very proud of the efforts we have
undertaken. As Secretary Shalala is fond of saying, the
Medicare education program is the largest peacetime program
ever undertaken in this country.
We have set up a multifaceted approach which involves the
submission of a handbook to each beneficiary, the creation of a
1-800 toll-free number, 1-800-Medicare, that actually connects
individual beneficiaries with customer service representatives
who are trained to answer commonly asked questions.
We also have an Internet site, Medicare.gov, which provides
comparative information about the health plans in their areas
as well as information about health plan performance, so-called
HEDIS data, which is health employment survey data about the
performance of plans and satisfaction data about the enrollees.
All of this is being made available to beneficiaries.
And last, we've been working with a partnership group of
private organizations who interface with our beneficiaries,
such as State health insurance counselors and other
organizations, unions, employers, to make sure that they can
also provide counseling and one-on-one information to
beneficiaries. This has been a very comprehensive undertaking.
It is, as you alluded to, financed by an assessment that is
made on the plans that participate in the Medicare program,
which was how the Balanced Budget Act established the funding
mechanism for these efforts.
Mrs. Biggert. I would appreciate the accounting.
Mr. Hash. I would be happy to supply that.
Mrs. Biggert. You have done an internal audit of that
program?
Mr. Hash. We have. In fact, last year--you may have read
about this--we decided not to provide the full array of our
information services nationwide but to target five States. We
did target five States, and in that process we went in advance
of our efforts and did a baseline assessment of information
needs, and then since the fall campaigns of November we have
gone back and collected, after the fact, information so we
could evaluate whether the materials were useful to people,
whether they actually were intelligible to them, whether the
toll-free number worked, and what sort of suggestions and
recommendations that people had to strengthen the information
program.
Mrs. Biggert. Did you share the results of that audit?
Mr. Hash. We're not completely through with the evaluation
but as soon as we have it done, we would be happy to share it
with you.
Mrs. Biggert. Thank you very much.
Thank you, Mr. Chairman.
Mr. Horn. Thank you.
The gentleman from California, Mr. Ose.
Mr. Ose. Thank you, Mr. Chairman.
Following up on the gentlelady's question, the five States
that were targeted, Mr. Hash, which were they?
Mr. Hash. Which were they? They were Washington, Oregon,
Florida, Ohio, and Arizona.
Mr. Ose. Let me jump ship for a little bit, back to my
question on compliance itself. Asking a large multifacility
system to engage in a compliance system is far different from
asking a single facility rural clinic to engage in a compliance
program. I'm curious if you have, on either side, any
information about the impact on those two relative classes.
My district is largely rural, and we have a significant
declination in the availability of Medicare in the rural areas,
and I'm trying to figure out what it is that is causing that.
Is it the reimbursement rates? Is it the cost of compliance?
What is it? I'm wondering if you have any information about
that, as to the impact of the compliance issue on a relative
scale between large multifacility systems in urban areas and
single site facilities in rural areas?
Ms. Brown. I can tell you that we have a concern about this
and, as I mentioned, we started putting out these generic
compliance plans because we found that contractors were
charging a huge amount of money and in some cases not adapting
compliance plans to the needs of the organization. We have
encouraged every organization to look at these generic
compliance plans and look at everything, including is it cost-
effective to implement a certain suggestion since it's made for
the entire range of that type of provider. I always told them
that they should then document why they made their choices,
including whether or not something would be cost-effective
within the size organization we're talking about.
So, to have a tracking system of some kind, you know, a
compliance manual might be much more effective for a small
organization than a large one having a compliance officer;
whether that individual is full-time or part-time; whether
there's a whole team of people; or whether to have a hotline
for reporting misdeeds should they occur. You know how
elaborate that system would be. We have tried to consider the
fact that there are a great many small providers where an
elaborate system would be impractical and financially
burdensome. They could adapt these compliance plans, a system
of internal controls and procedures for making sure that top
management gets the information and is aware of what's
happening in their organization, that there's a reporting flow
of information and so on, and that through plan ignorance they
were not denied information about misdeeds that are going on
within the entity itself. So, we have tried to consider that. I
don't have statistics as to what the cost is per organization
or anything like that.
Mr. Ose. Does HCFA have any information as to the
declination and available care in rural areas as a result of
the cost of compliance?
Mr. Hash. I don't have any information to quantify that,
but what I would say is what we've been trying to do is invest
in provider education initiatives, because we recognize that we
have a responsibility to make sure that our rules and
regulations are fully understood, that people have an
opportunity to get clear answers to their questions. We have
been working with educational programs through our contractors
to in fact install around the country an effort to educate
billing clerks of hospitals or of small physician practices so
that they can get assistance in understanding how to complete
an appropriate claim for the Medicare program.
We have targeted an educational effort at the beginning of
physician's careers, that is to say, with over 6,000 residents
who have participated in a training module for how to
appropriately comply with and bill the Medicare program. And we
have supported another Internet learning site that a very large
number of physicians can sign onto, go through a training
course, and not only physicians but their billing and business
managers and other folk, in order to keep up with the changes
in requirements and so forth, because again we recognize that
we have an enormous responsibil-
ity to make sure people understand what our expectations are
and what our requirements are.
Mr. Ose. I appreciate what you're telling me. The issue
that comes up is, if there is no doctor there, it doesn't
matter what the compliance requirement is. That just creates
enormous problems in my district, because doctors are naturally
aggregating or congregat-
ing in the urban areas and it's an enormous problem in my
district.
Mr. Hash. One thing that has happened, I think, and it was
a result again of the BBA, was the Medicare care program has
been able to expand the types of practitioners who are eligible
to actually participate and take care of patients and bill the
program, most notably, advanced practice nurses, nurse
practitioners, certified nurse anesthetists. These
practitioners are not necessarily a substitute certainly for
someone who needs a physician service, but there is a great
deal of work I think that can be done in reaching people who
need primary care services through advanced prepared health
professionals.
Mr. Ose. We have some facilities like that and I appreciate
that flexibility. I do want to ask something, and I would
appreciate visiting with you privately about, that is the
definition of fair or adequate reimbursement for services
within the system.
Again, going back to my district, if there's no medical
service available, what is a fair reimbursement level? There's
no doctor there. What's a fair reimbursement level? I don't
know how to reconcile that. Rather than spending the time of
the committee on that in discussion, I would rather visit with
you privately, but it's an enormous problem. It doesn't matter
what the reimbursement is if there's no doctor there.
Mr. Hash. I'd be happy to do that. There are some
strategies that some communities have tried to put into place
that would attract appropriate cadres of health professionals,
but we should talk about this, because access for our
beneficiaries who live not only in your district but in other
medically underserved areas is something that we should be
trying various strategies to get health care professionals an
appropriate incentive to serve those individuals.
Mr. Ose. I saw nothing in the material. Maybe I missed it
about initiatives addressing that particular issue, whether
they're on an audit trail or audit basis for analysis purposes
or initiatives that would follow on.
Thank you, Mr. Chairman.
Mr. Horn. Well, I thank you. You've raised a significant
issue. Mr. Turner and I have talked about it in his area and
now you've mentioned it in your area, so I think what we'll do
is hold a hearing in both districts. I know we're going to hold
one in Sacramento on the Y2K bit, otherwise known as the year
2000 computer glitch, and we might well work in this if you'd
like to do that.
Mr. Ose. Is this a double play?
Mr. Horn. This is a double play, yes. This gets the staff
in one place at one time and we can do two or three things. So
we welcome your thoughts on it.
Let me just ask a few closing questions, unless the
gentlewoman from Illinois has some.
Mrs. Biggert. No.
Mr. Horn. Just for the record, we've talked about various
reforms that the Health Care Financing Administration would
like to have. Are those before the Committee on Ways and Means
in the case of Medicare and before the Committee on Commerce in
the case of Medicaid? Is that where they are?
Mr. Hash. You're referring to the contracting flexibility?
Mr. Horn. Yes, and different things which you've mentioned
as reforms that you'd like to have.
Mr. Hash. Right. They would--the President's
recommendations for the year 2000 legislation, I'm not sure
whether the actual legislation has been transmitted to the
Congress. It certainly is included in the budget in descriptive
terms, but I'd be happy to let you know exactly whether it has
been transmitted formally to the Congress.
[The information referred to follows:]
The statutory language for this year's fraud and abuse
proposals has not yet been submitted to Congress. The
Administration's contracting reform proposal will be submitted
to Congress this year.
Mr. Horn. We did get into reorganization, but basically
those are the authorizing committees.
Mr. Hash. That is correct.
Mr. Horn. They need to concur with the policy.
Mr. Hash. That's my understanding.
Mr. Horn. OK. I guess I would ask this question of the
Inspector General, and it's probably outside of your
jurisdiction, but do you ever have a chance to look at the
revenue that flows into Medicare based on the withholding tax?
Have we ever looked at how that's handled by the Internal
Revenue Service?
Ms. Brown. That was one of the areas, because we didn't
have the jurisdiction to look at Social Security, we could not
audit that as part of our financial statement review, and this
year we have worked out arrangements.
Joe, did you want to go into that?
Mr. Vengrin. Yes. Mr. Chairman, we are contracting on a
task with the General Accounting Office, which contracts for
the Social Security audit, to get that coverage, but that's on
the Part B premium side. We could not go over to Treasury to
audit the trust fund accounting, so in effect we are precluded
from auditing that, Treasury as well as Social Security. I'd
love to. My plate is kind of full, though, with Medicare.
Mr. Horn. Let me find out what's precluding you. Is it a
law that's precluding you?
Mr. Vengrin. We really could not go into another Federal
agency.
Mr. Horn. Even though your revenue is based on how it's
handled by that agency?
Ms. Brown. That's true.
Mr. Horn. Well, we'll get at it some way. I have a memo I'm
going to insert in the record, without objection, on how that
revenue comes in for 14, 15 trust funds that are involved, one
of which is related to Medicare, the area of which is related
to Social Security, but there's a lot of others, the Aviation
Trust Fund, the Interstate Highway, so forth.
And it's my understanding, having reviewed the financial
status statement of the Internal Revenue Service, what you have
here is an Office of Estimates that sort of estimates what the
revenue is. I don't understand why we can't just, when the
check is made out by the employer, employee--and Social
Security, Medicare, where Medicare was modeled on Social
Security, it works generally the same way--and I just can't
understand why if the check is made out for that match in the
fund of employee and employer, I can't understand why that
isn't immediately segregated into that trust fund.
But what happens? It goes to one of the many banks that the
Treasury anoints and that becomes the general revenue. So
everybody is sort of a little murky about well, gee, did we
lose 10 million? Did we lose $100 million in terms of the
estimates? And we don't really have a good fix on that. Maybe
the General Accounting Office does.
We'll be pursuing that with them, but it's something that
does interest me and it interests--I turned a copy of the memo
in to Chairman Archer last night, and he's going to take a look
at it and see what happens also. But I am sort of amazed that
we can't connect the revenue bit with the expenditure bit, and
that the Inspectors General are precluded from maybe working as
a team. And wherever those trust funds are involved, either GAO
ought to do it as part of it or Treasury ought to do it as part
of it, as to just are we accurate in terms of our revenue.
Ms. Brown. I would appreciate that, sir.
Mr. Horn. OK. Let me close with a few detailed questions
here that haven't been asked, to my knowledge.
Medicare contractors, as we saw, collected over $7.5
billion in 1998, and your report points out significant
weaknesses in the area which we've been exploring. You reported
that contractors do not maintain records to support cash
collections. In addition, you reported that at some locations
the same person that receives checks endorses the checks,
prepares the deposit to the bank, performs the bank
reconciliations. This situation puts this money at tremendous
risk of being stolen.
You're absolutely right. The first thing you learn to do in
any organization is ``Look, we can't just let one person do it
from end to end,'' as wonderful as Aunt Minnie might be, and
you learned long ago when Aunt Minnie says, ``Oh, I've got a
lot of work to do, I don't want to take a vacation this
summer,'' and Uncle Louie does the same thing in the next
organization, you've got a real problem.
I'm a great believer in moving people around, making sure
they take their vacations, especially when they're handling
money, and let's see who sits at that desk and what they're
going to do. And there have been great exposes, at least in the
State of California we've had them, where somebody just took
over for the summer, said, ``Gee, I wonder where this,'' in
this case 800 bales of hay went to the ranch of a vice
chancellor of one of the systems in California and not to the
ranch that was being run to educate students.
So I'm just curious what your recommendations are on that
and if they're being followed, and can they be or is there some
block to it with Medicare contractors, or can you just plain
old mandate it?
Mr. Vengrin. Again, Mr. Chairman, the Medicare contractors
historically have done a great job on processing claims in an
expeditious manner, but the financial controls are gradually
catching on as a result of the CFO act. Believe it or not, in
many cases they just didn't do bank reconciliations. We've made
these recommendations and we have to see if they're following
them. They're just not doing them currently.
Mr. Horn. I think we would all agree when you combine a
poor recordkeeping of accounts receivable, the weaknesses in
collecting cash, the computer security problem which you
mentioned, that you end up with absolutely no control over the
money. So you're saying how can we solve that one in the next
audit.
Ms. Brown. Well, I think as Mr. Hash mentioned, having a
wider selection base for getting contractors so that there is a
great deal of incentive for them to live up to the expectation
of reasonable control systems would be very helpful.
Mr. Hash. If I might add a footnote, Mr. Chairman, we have
incorporated into our system of evaluating contractors
requirements with regard to financial reporting and
documentation. And obviously now the job is, as the Inspector
General has alluded to, that we are providing--that we need to
make sure we're providing--sufficient oversight and evaluation
of our contractors to make sure they're in compliance, because
I think we have the standards now in place, the requirements
for documentation and for financial reporting, and we are doing
training sessions; in fact, this spring a whole series of
training sessions on financial documentation and requirements.
And as a result, we think we are beefing up through our
regional offices the actual oversight of compliance with these
requirements by our contractors, and that's certainly a
responsibility that we have.
Mr. Horn. Inspector General, on page 9 of your statement
before us, point 2, you note financial reporting remains a
material weakness because Medicare contractors have not
adequately reconciled expenditures reported to the Health Care
Financing Administration. Also, the process for preparing
financial statements is manually intensive. Now, what can we do
on that? There must be computer programs here, and what do we
mean here by ``manually intensive?''
Mr. Vengrin. Mr. Chairman, as a result of the preparation
of the financial statements, they have to make hundreds of
adjusting entries to ultimately produce the final statements.
We've made recommendations that they pursue a software package
to do this more expeditiously. They are exploring that. That
way we can get the adjusting entries as part of this process.
Mr. Horn. Now, this is the contractors that are exploring
it?
Mr. Vengrin. No, this is HCFA central office.
Mr. Horn. Can they mandate that then along the line,
whoever is inputting?
Mr. Vengrin. Yes, they can do this work in central office.
We're not talking about the contractors.
Mr. Horn. Is that going to be done, Mr. Hash?
Mr. Hash. I need to--I'm being instructed at the moment
here.
I think what we have done, as I'm told, is that we have
hired a contractor, an outside contractor to help us install
those kinds of protections and procedures within our own
activities, and it's a part of our overall effort to make sure
that our own systems are adequately maintained and documented.
We are acting on the Inspector General's recommendation.
Mr. Horn. So the contractor will relate to the contractors?
Mr. Hash. Our outside contractor will relate to us as well
as to the contractors.
Mr. Horn. All along the line on the accounting side, then,
we're going to use software and not have to worry about
manually intensive things being done?
Mr. Hash. I would say, as you can tell--what I'd like to
say is that Mr. Vengrin is correct when you think about the
history of what these contractors have been doing. This is not
an excuse, but it's true that most of the emphasis has been on
refining their claims processing systems and their audits and
so forth as opposed to the area of financial documentation and
reporting. And this is an area in recent years that we've been
paying increased attention to, and we should, and we expect
that's going to show dividends in the next audit because we are
committed to removing the qualification to our accounts
receivable documentation for the next audit.
Mr. Horn. One last question relates to the year 2000
situation and are you using your need to get into conformity
for that to solve some of your other problems within the
agency, either in terms of new computers, new software, off-
the-shelf, whatever?
Mr. Hash. One of the bright lights of the Y2K problem has
been the opportunity that we've had to actually review
something like 50 million lines of code in our claims
processing systems and in other information systems that we
maintain that are mission critical for the agency. And the
result of that, I think, is at the end of the day we will not
only have a Y2K compliant information system but we will have
made improvements in that system that would otherwise probably
have taken a longer time to get to. So I think one of the
benefits of the intense scrutiny that has surrounded our
efforts to become millennium compliant has been a very thorough
renovation and testing of our information infrastructure and I
think that will pay us and the taxpayers enormous dividends in
the years ahead.
Mr. Horn. When did Medicare start in on the year 2000
conformity bit?
Mr. Hash. Well, I believe--I don't have a specific date but
intensively over the last 18 months--and we obviously, as you
are quite familiar with, set a goal for ourselves of December
31, 1998 to make sure that our internal mission-critical
systems were renovated and certified. We made that deadline. We
also set a similar deadline for our contractors. We did not
fully make that deadline, as you know. We had 54 contractors
who self-certified at the end of December of last year.
The governmentwide deadline is next week for compliance and
self-certification. We are cautiously optimistic that we're
going to be there with the contractor community. There are--
there is one standard system which has gotten a late start in
the testing phase, and for the seven contractors who depend on
that standard system, they may be a little late in the final
self-certification process, but otherwise we believe we're
going to cross the finish line together with our 40 contractors
and 78 mission-critical systems.
Mr. Horn. In 1989 both Medicare, Health Care Financing
Administration and Social Security were in the same agency,
namely Health and Human Services. Now, in 1989 the Social
Security Administration realized they had to start moving on
this, and the result is they've been given an A through our
reporting process ever since, and they are the first agency to
have year 2000 conformity and compliance.
Why didn't Medicare--and I know you just came in the last
year. We're not going to pillory you, but perhaps the Inspector
General has a long institutional memory. Why didn't Medicare do
what Social Security was doing? Where was the Secretary? Asleep
in 1989 or what?
Ms. Brown. I came a little later than that as well, in
1993, but I think there's been several things. For one, in
Medicare, worrying about all the contractors, there wasn't the
funding to contract with them to do some of this work. That was
one of the problems. And having worked in both Social Security
and on the rest of HHS, I had the privilege of signing the
first clean financial statement for Social Security. We had
done their financial statement audits for several years.
Although they're huge and it is a well-run agency, they
don't have the number of systems, the number of different
systems that we have in something like HCFA. So although the
volume is tremendous and it's as large an organization as far
as money being spent, it's a much less difficult one to both
audit and to make changes in because they do have the uniform
systems throughout the country. I think that's something that
HCFA is striving for, and, in the future, will have.
Mr. Hash. I would just say, Mr. Chairman, I think the
honest answer is we got a late start. There's no question about
that. We did in fact consider making some transitions into a
single operating system which failed to be realized. I think
that was part of the reason why we got a late start, but I
think we have really redoubled our efforts.
I think dealing with independent contractors has been a
real challenge for us, but for the most part I think we would
give them great credit for having cooperated with us, and the
Congress great credit for having provided us significant
additional resources with which to undertake the renovations
and testing that are required to make sure we'll be in business
on January 1, 2000. But it has been obviously a Herculean task,
and a lot of credit is due not only to the work that HCFA has
done but certainly the contractors themselves.
And as you know, we're now concentrating our attention on
making sure the provider community is in fact taking the proper
steps and devoting an adequate amount of resources to make sure
that they're ready for the year 2000, because if we're ready
and they can't submit to us a claim for services that's Y2K
compliant, it will be very difficult to make sure that they get
that claim processed. So we are now spending a lot of effort on
outreach to the provider community to make sure that they have
the assistance and the tools and the information to take the
steps that are necessary to review all of their mission-
critical systems, not only their information and billing
systems but, as you know, their clinical systems that may have
year or date problem sensitive issues, because the health care
quality of the country is at stake if providers are not clear
that their equipment has been properly reviewed and corrected
and tested.
So I think there's lots of reasons for where we are, but
we're quite proud of the accomplishments that we've made to
date, and we think we're going to be ready at the end of the
year.
Mr. Horn. The President has set a mark as March 31. Will
Medicare make that?
Mr. Hash. As I said----
Mr. Horn. The Health Care Financing Administration, will
you as an organization make that?
Mr. Hash. Yes, sir. We have actually at the end of December
for our own internal mission-critical systems. They were
renovated and certified as of December 31. So we believe our
own internal systems are ready and millennium compliant.
Mr. Horn. Unfortunately for you, they don't use the major
groups within, they use the Cabinet department, so then you're
in compliance but maybe a lot of parts of HHS are not
compliant. And I guess I would ask the question, Congress
removed Social Security from Health and Human Services; should
we remove Medicare, Medicaid from Health and Human Services?
Mr. Hash. I'd like to----
Mr. Horn. Make you independent offices? Everybody would get
a pay raise.
Mr. Hash. I would like to defer an answer on that to
Secretary Shalala. Speaking on our behalf, I think we have
benefited greatly by the efforts of the Department of Health
and Human Services to support our efforts on Y2K, and that's no
small part of the credit for the progress that we've made as
well.
Mr. Horn. How about it, Inspector General? Looking at it
from an independent view, would they be better off to be an
independent agency?
Ms. Brown. I do not believe so. I think the department adds
a great deal of stability and assistance, and there's a great
deal of overlap in the interests of the programs within the
department, and that would only add another dimension of
confusion.
Mr. Horn. You mean the confusion dimensions that are
already there?
Ms. Brown. That's true, sir.
Mr. Horn. OK. We'll let it go at that. Let me just mention
in some closing remarks here, one, I thank all three of you for
testifying. You're all very distinguished public servants.
Obviously progress has been made in reducing the amount of
improper payments in Medicare. However, we've got some serious
problems, as you all admit. The Health Care Financing
Administration is responsible for managing two of the most
important programs in the Federal Government, Medicare and
Medicaid. There's no room, obviously--and we all agree on both
sides of the table, both sides of the aisle--there's no room
for waste, fraud, inefficiency in these programs which by 2009
will provide nearly $700 billion in health care for our
Nation's elderly and poor.
Next Wednesday the consolidated financial report on the
Federal Government as a whole will be issued. We will hold a
hearing at 10 a.m., in this room to hear testimony from
representatives of the Office of Management and Budget, the
Department of the Treasury, and the General Accounting Office.
These witnesses will speak to the many different financial
problems found throughout the Federal executive branch. At the
same time, we will issue our second report card grading the 24
largest Federal agencies on how they are handling more than $1
trillion a year in taxpayer money.
So my thanks are to you again. Sorry to prolong it so long.
And let me now thank the staff who spent a lot of time putting
this particular hearing together. J. Russell George is the
staff director--and he's off working--as chief counsel for the
Subcommittee on Government Management, Information, and
Technology. Bonnie Heald is the director of communications,
professional staff member. And to my left and your right is
Larry Malenich, the General Accounting Office detailee to this
subcommittee, and his help is invaluable. Mason Alinger is the
clerk for the subcommittee. Our able interns are Paul Wicker
and Casey Baker, and I don't know if any of them are here.
Faith Weiss is counsel for the minority, and we thank you. And
Earley Green, staff assistant for the minority, and our two
court reporters are Laurie Harris and Doreen Dotzler.
And with that, ladies and gentlemen, we thank you all for
coming.
[Whereupon, at 12:35 p.m., the subcommittee was adjourned.]
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