[House Hearing, 105 Congress]
[From the U.S. Government Publishing Office]



 
      THE NEED FOR BETTER FOCUS IN THE RURAL HEALTH CLINIC PROGRAM

=======================================================================

                                HEARING

                               before the

                    SUBCOMMITTEE ON HUMAN RESOURCES

                                 of the

                        COMMITTEE ON GOVERNMENT
                          REFORM AND OVERSIGHT
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED FIFTH CONGRESS

                             FIRST SESSION
                               __________

                           FEBRUARY 13, 1997
                               __________

                            Serial No. 105-5

                               __________

Printed for the use of the Committee on Government Reform and Oversight








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              COMMITTEE ON GOVERNMENT REFORM AND OVERSIGHT

                     DAN BURTON, Indiana, Chairman
BENJAMIN A. GILMAN, New York         HENRY A. WAXMAN, California
J. DENNIS HASTERT, Illinois          TOM LANTOS, California
CONSTANCE A. MORELLA, Maryland       ROBERT E. WISE, Jr., West Virginia
CHRISTOPHER SHAYS, Connecticut       MAJOR R. OWENS, New York
STEVEN H. SCHIFF, New Mexico         EDOLPHUS TOWNS, New York
CHRISTOPHER COX, California          PAUL E. KANJORSKI, Pennsylvania
ILEANA ROS-LEHTINEN, Florida         GARY A. CONDIT, California
JOHN M. McHUGH, New York             CAROLYN B. MALONEY, New York
STEPHEN HORN, California             THOMAS M. BARRETT, Wisconsin
JOHN L. MICA, Florida                ELEANOR HOLMES NORTON, Washington, 
THOMAS M. DAVIS, Virginia                DC
DAVID M. McINTOSH, Indiana           CHAKA FATTAH, Pennsylvania
MARK E. SOUDER, Indiana              TIM HOLDEN, Pennsylvania
JOE SCARBOROUGH, Florida             ELIJAH E. CUMMINGS, Maryland
JOHN SHADEGG, Arizona                DENNIS KUCINICH, Ohio
STEVEN C. LaTOURETTE, Ohio           ROD R. BLAGOJEVICH, Illinois
MARSHALL ``MARK'' SANFORD, South     DANNY K. DAVIS, Illinois
    Carolina                         JOHN F. TIERNEY, Massachusetts
JOHN E. SUNUNU, New Hampshire        JIM TURNER, Texas
PETE SESSIONS, Texas                 THOMAS H. ALLEN, Maine
MIKE PAPPAS, New Jersey                          ------
VINCE SNOWBARGER, Kansas             BERNARD SANDERS, Vermont 
BOB BARR, Georgia                        (Independent)
------ ------
                      Kevin Binger, Staff Director
                 Daniel R. Moll, Deputy Staff Director
                       Judith McCoy, Chief Clerk
                 Phil Schiliro, Minority Staff Director
                                 ------                                

                    Subcommittee on Human Resources

                CHRISTOPHER SHAYS, Connecticut, Chairman
VINCE SNOWBARGER, Kansas             EDOLPHUS TOWNS, New York
BENJAMIN A. GILMAN, New York         DENNIS KUCINICH, Ohio
DAVID M. McINTOSH, Indiana           THOMAS H. ALLEN, Maine
MARK E. SOUDER, Indiana              TOM LANTOS, California
MIKE PAPPAS, New Jersey              BERNARD SANDERS, Vermont (Ind.)
STEVEN SCHIFF, New Mexico            THOMAS M. BARRETT, Wisconsin

                               Ex Officio

DAN BURTON, Indiana,                 HENRY A. WAXMAN, California
            Lawrence J. Halloran, Staff Director and Counsel
                   Doris F. Jacobs, Associate Counsel
                Robert Newman, Professional Staff Member
                Marcia Sayer, Professional Staff Member
                       R. Jared Carpenter, Clerk
                Ron Stroman, Minority Professional Staff
                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on February 13, 1997................................     1
Statement of:
    Buto, Kathleen, Associate Administrator for Policy, Health 
      Care Financing Administration, Department of Health and 
      Human Services; Marilyn H. Gaston, M.D., Director, Bureau 
      of Primary Health Care, Health Resources and Services 
      Administration, Department of Health and Human Services, 
      accompanied by Dena Puskin, Acting Director, Office of 
      Rural Health Policy, Health Resources and Services 
      Administration.............................................    45
    Finerfrock, Bill, executive director, National Association of 
      Rural Health Clinics; Tom Harward, physician assistant and 
      executive director, Belington Clinic, Belington, WV; and 
      Robert J. Tessen, M.S., co-founder and first president, 
      Texas Association of Rural Health Clinics, National Rural 
      Health Association.........................................    89
    Steinhardt, Bernice, Director, Health Service Quality and 
      Public Health, General Accounting Office, accompanied by 
      Frank Pasquier, Assistant Director, Health Issues, Seattle 
      office; Lacinda Baumgartner, evaluator, Health Issues, 
      Seattle office; and George Grob, Deputy Inspector General 
      for Evaluation and Inspections, General Accounting Office..     4
Letters, statements, etc., submitted for the record by:
    Buto, Kathleen, Associate Administrator for Policy, Health 
      Care Financing Administration, Department of Health and 
      Human Services, prepared statement of......................    50
    Finerfrock, Bill, executive director, National Association of 
      Rural Health Clinics, prepared statement of................    93
    Gaston, Marilyn H., M.D., Director, Bureau of Primary Health 
      Care, Health Resources and Services Administration, 
      Department of Health and Human Services, prepared statement 
      of.........................................................    60
    Grob, George Deputy Inspector General for Evaluation and 
      Inspections, General Accounting Office, prepared statement 
      of.........................................................    20
    Harward, Tom, physician assistant and executive director, 
      Belington Clinic, Belington, WV, prepared statement of.....   112
    Steinhardt, Bernice, Director, Health Service Quality and 
      Public Health, General Accounting Office, prepared 
      statement of...............................................     8
    Tessen, Robert J., M.S., co-founder and first president, 
      Texas Association of Rural Health Clinics, National Rural 
      Health Association, prepared statement of..................   118















      THE NEED FOR BETTER FOCUS IN THE RURAL HEALTH CLINIC PROGRAM

                              ----------                              


                      THURSDAY, FEBRUARY 13, 1997

             U.S. House of Representatives,
                   Subcommittee on Human Resources,
              Committee on Government Reform and Oversight,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 1:15 p.m., in 
room 2203, Rayburn House Office Building, Hon. Christopher 
Shays (chairman of the subcommittee) presiding.
    Present: Representatives Shays, Snowbarger, Souder, Pappas, 
Towns, and Kucinich.
    Staff present: Lawrence J. Halloran, staff director and 
counsel; Doris F. Jacobs, associate counsel; Robert Newman, and 
Marcia Sayer, professional staff members; R. Jared Carpenter, 
clerk; Ron Stroman, minority professional staff; and Jean Gosa, 
minority staff assistant.
    Mr. Shays. I will call this hearing to order.
    The Rural Health Clinic Program is adrift. Drawn off course 
by financial cross-currents and a weak hand at the helm, the 
program lost sight of its core mission: improved access to 
primary health care by Medicare and Medicaid beneficiaries in 
rural areas. Today, the subcommittee asks how the Rural Health 
Clinic Program lost its focus and grew dramatically away from 
truly underserved areas into less rural and suburban locations.
    The rapid growth in the number of rural health clinics 
since 1990 caught the attention of both the General Accounting 
Office, GAO, and the Health and Human Services Department, HHS, 
Inspector General, the IG. Through separate investigations, the 
two reached strikingly similar conclusions: rural health 
clinics are growing for the wrong reasons, in the wrong places, 
and at substantial cost to Medicare and Medicaid programs. 
Their testimony today will describe a program distorted by a 
focus on money rather than medicine.
    In launching the program in 1977, Congress permitted cost-
based reimbursement of primary care doctors as well as mid-
level practitioners, physician assistants, nurse practitioners, 
and nurse midwives, to induce the expansion of health care 
delivery into rural areas. The higher reimbursement rates made 
rural Medicare practices financially viable.
    In later years, as Medicare and Medicaid moved away from 
cost-based reimbursement to lower, fixed fee schedules in other 
areas, rural health clinics became one of the last 
opportunities for doctors and hospitals to get the higher 
payments.
    It appears this financial incentive, more than any other 
factor, drove the growth of rural health clinics after 1990 and 
tilted that growth away from independent clinics toward those 
owned and operated as part of a hospital or nursing home. In 
1990, less than 10 percent of the 600 rural health clinics 
nationwide were provider or facility based. Today, they 
represent almost half the Nation's 3,000 rural health care 
clinics, and their growth continues.
    The GAO also found many rural health clinics were formed 
through the purchase or conversion of existing medical 
practices, rather than through the extension of care to those 
without adequate access. In many instances, the rural health 
clinics designation became little more than an accounting 
gimmick. The result was not better rural health care, just a 
healthier bottom line for some suburban doctors and hospitals.
    Different program management and broad eligibility criteria 
also facilitated, perhaps even accelerated, this costly form of 
growth.
    The Health Care Financing Administration, HCFA, decided it 
would be easier to reimburse facility-based rural health 
clinics the same way Medicare pays for other outpatient 
departments. That decision proved very costly. Unlike payments 
to independent rural health clinics, reimbursement to provider-
based clinics are not capped, not reviewed for reasonableness, 
and may include institutional overhead costs shifted from a 
facility's other operations. We asked the agency to address 
this policy and their plans to control Rural Health Clinic 
Program costs in testimony today.
    At the same time, the Health Resources and Services 
Administration, charged with the designation of medically 
underserved areas and health professional shortage areas, where 
rural health clinics may locate, failed to update those key 
indicators to reflect current areas of need. Certification of 
one, or two, or any number of clinics in an area has little or 
no impact on its designation status. The availability of mid-
level practitioners, the very heart of the Rural Health Clinic 
Program, has never been factored into the designation formula.
    As a result, we have no way of knowing where the Rural 
Health Clinic Program is succeeding or where it needs to go 
next to meet real needs. Testimony from the agency today will 
address how rural health care access can be measured more 
accurately and more often.
    Finally, we will hear from rural health clinic association 
representatives and testimony from an independent clinic 
operator on how to extend the reach of Medicare and Medicaid 
into isolated rural areas more efficiently and effectively.
    For me, this type of hearing epitomizes good, constructive 
oversight. A 20-year-old program, targeted to meet rural health 
care needs, is found to be missing its mark. Through the 
process of thorough investigation, open public discussion, and 
the cooperation of the executive and legislative branches, we 
can recalibrate the program's trajectory and put it back on 
course.
    It may take additional hearings to clarify the 
administrative and legislative actions needed to focus the 
Rural Health Clinic Program on the rural elderly, the poor, and 
the children who truly need better access to Medicare and 
Medicaid. We are committed to the task, and I am grateful to 
all our witnesses today for their help in this effort.
    I welcome all of you.
    At this time, I would turn to the gentleman from Cleveland, 
if he has a statement he would like to make, and then I will 
turn to my colleague, the vice chairman.
    Mr. Kucinich. I just want to say, Mr. Chairman and members 
of the committee, what a pleasure it is to be on this 
subcommittee with the Chair. I look forward to a productive 
relationship, and I certainly appreciate the chance to be here. 
Thank you.
    Mr. Shays. I thank the gentleman.
    Mr. Snowbarger. I will forego any opening remarks.
    Mr. Shays. Well, we are eager to begin. We have a great 
committee, some wonderful new Members. This subcommittee, in 
the last session, had 52 hearings, and I felt that we not only 
had hearings, but we acted on what we learned. So we're going 
to learn a lot today, and we look forward to what we learn. 
Hopefully, we can all, collectively, make a contribution.
    Before actually calling on you, Mr. Towns is the ranking 
member of this committee and, frankly, an equal partner in this 
process. So, at this time, if he can catch his breath, we are 
going to call on you, if you'd like to make a statement.
    Mr. Towns. Thank you very much, Mr. Chairman.
    Access to adequate primary health care is a critical need 
in rural America. While I represent an urban district in 
Brooklyn, NY, I was born in a rural community in North 
Carolina, so I know personally the importance of this issue. I 
also know that the lack of primary health care in rural 
communities is also faced every day in inner city areas like 
Brooklyn. In both cases, there is a dangerous shortage of 
trained primary health care professionals, and we should never 
lose sight of that. That is why I support the goals of the 
Rural Health Clinic Program.
    This program was designed to attract and retain primary 
care providers and assistants to rural communities around the 
country. Unfortunately, as GAO has discovered, there appears to 
be widespread waste and abuse within this program. Even more 
disturbing to me is the fact that Medicare and Medicaid 
payments to rural health clinics are increasingly benefiting 
well-staffed, financially well off clinics in suburban areas 
that already have extensive health care delivery systems in 
place. That is a real concern.
    As the GAO points out, there are numerous rural underserved 
communities which desperately need the rural health clinics, 
but there are virtually no efforts being made to locate rural 
health clinics in these areas. Instead, more populated suburban 
areas are taking advantage of the large financial incentives in 
the program. This abuse must be stopped, and it must be stopped 
now.
    I am pleased to note, Mr. Chairman, that the Department of 
Health and Human Services appears to be moving in the right 
direction to correct some of these abuses. For example, it is 
my understanding that HHS will soon hold facility-based rural 
health clinics to the same payment limits and cost reporting 
requirements as independent rural health clinics. This would be 
a good first step, but more needs to be done, and that's what 
we have to talk about even further.
    As the GAO report makes clear, this problem will only be 
fixed if both the Congress and the administration work together 
to solve these problems. As a member of both this subcommittee 
and the Health and Environment Subcommittee of the Commerce 
Committee, I look forward to working with you, Mr. Chairman, 
and the administration to correct the problems that we know 
exist.
    I would like to yield back. Thank you for holding this 
hearing. I look forward to working with you in bringing about 
some solutions. Thank you very, very much. I yield back.
    Mr. Shays. I thank the gentleman.
    Before I swear in our panel, I would ask unanimous consent 
that all members of the subcommittee be permitted to place any 
opening statement in the record and that the record remain open 
for 3 days for that purpose. Without objection, so ordered.
    I also ask unanimous consent that our witnesses be 
permitted to include their written statements in the record. 
Without objection, so ordered.
    We have today Bernice Steinhardt, Director, Health Service 
Quality and Public Health, General Accounting Office; 
accompanied by Frank Pasquier, Assistant Director, Health 
Issues, Seattle Office; and Lacinda Baumgartner, Evaluator, 
Health Issues, Seattle Office; then George Grob, who is the 
Deputy, Office of Inspector General, Department of Health and 
Human Services. It is wonderful to have all of you here.
    At this time, if you would rise, we will swear you in. We 
swear in all our witnesses, including Members of Congress.
    [Witnesses sworn.]
    Mr. Shays. For the record, all four of our witnesses have 
responded in the affirmative.
    We basically have two statements, but all can participate 
in responding to questions.
    So we will start with you, Ms. Steinhardt.

  STATEMENTS OF BERNICE STEINHARDT, DIRECTOR, HEALTH SERVICE 
     QUALITY AND PUBLIC HEALTH, GENERAL ACCOUNTING OFFICE, 
   ACCOMPANIED BY FRANK PASQUIER, ASSISTANT DIRECTOR, HEALTH 
ISSUES, SEATTLE OFFICE; LACINDA BAUMGARTNER, EVALUATOR, HEALTH 
   ISSUES, SEATTLE OFFICE; AND GEORGE GROB, DEPUTY INSPECTOR 
  GENERAL FOR EVALUATION AND INSPECTIONS, GENERAL ACCOUNTING 
                             OFFICE

    Ms. Steinhardt. Thanks very much for having us at this 
hearing today to talk about our report on rural health clinics.
    As you pointed out, Mr. Chairman, this is a program that 
has grown very rapidly. We brought a couple of charts along 
with us, and, as you can see from the bar chart, the program 
started out relatively modestly, from about 100 or so clinics 
in its early days, to about 500 clinics a decade later. But in 
the early 1990's, for reasons that I know the Inspector 
General's Office will talk about in testimony, the number of 
clinics began to grow dramatically, and today, as the chairman 
pointed out, there are about 3,000 rural health clinics across 
the country.
    I wanted to add, though, that the growth in rural health 
clinic costs has also been dramatic, with Medicare and Medicaid 
expenditures growing at two to three times the rate of the 
Medicare and Medicaid programs overall. Currently, annual 
expenditures for rural health clinics total about $760 million, 
but by the year 2000, they could exceed $1 billion a year.
    When we started our study of the program for the 
subcommittee, we asked two broad questions. We asked first 
whether the program is serving a population that would 
otherwise have difficulty obtaining primary care. In other 
words, is this program improving access to care? And second, 
are there adequate controls in place to ensure that Medicare 
and Medicaid payments to the clinics are reasonable and 
necessary? The answer to both questions, simply put, is ``no.''
    Let me take a few minutes to elaborate. Returning to the 
first question of improving access, I think it's fair to say 
that some rural health clinics do, in fact, benefit their rural 
communities. These clinics are generally in sparsely populated 
areas with fewer than 5,000 people, that couldn't support a 
primary care practice otherwise, and which, by their presence, 
have made it possible to reduce by many miles the distance they 
have to travel for care.
    But while these types of rural health clinics can be found, 
as the pie chart shows there on the left, many of the areas in 
which clinics are being certified, and that's 19 percent of the 
pie there, are in well populated areas, sometimes with 
extensive primary health care systems. This has increasingly 
become the case among the clinics that have been certified in 
the last couple of years.
    What is more, in many of the locations that we looked at in 
depth, primary care was already available to the Medicare and 
Medicaid populations. We looked at care patterns for a sample 
of over 42,000 Medicare and Medicaid beneficiaries, and we 
found that before they became rural health clinic patients, 
about three out of four of these people had been seeing a 
primary care provider in the same city in which they lived or 
in which the clinic was located.
    Overall, in fact, we found that the availability of care 
didn't change very much for about 90 percent of these 42,000 
people after their rural health clinics were certified. As you 
pointed out, Mr. Chairman, this really isn't surprising, given 
that 68 percent of the clinics were simply conversions of 
existing physician practices, practices that, in many cases, 
had been in existence for 12 to 18 years before they became 
rural health clinics.
    Apart from the Medicare and Medicaid populations, the 
certification of rural health clinics seems to have little or 
no effect on the availability of care for any other underserved 
segments of the population. Even though many of these clinics 
qualify for the program because the overall population is 
designated as underserved, less than half of a group of clinics 
we surveyed said that they used the program to expand their 
staff or to increase the number of patients that they actually 
see. In fact, some of them told us they were seeing fewer 
patients after they became rural health clinics.
    Turning to the question of cost controls, we found that the 
Rural Health Clinic Program does not have adequate controls in 
place to ensure reasonable costs. These clinics, you will 
recall, are generally reimbursed by Medicare and Medicaid for 
the costs that they claim in providing services, rather than 
according to the lower set fees for these services that would 
otherwise apply.
    So, under this system, we estimate that, in 1993, rural 
health clinics were paid at least 43 percent more by Medicare 
and at least 86 percent more by Medicaid than they would have 
been paid under a fee schedule system. In 1996, we estimate 
this amounted to an additional $100 million for Medicare and 
close to an additional $200 million in Medicaid reimbursement. 
This differential we found is particularly great among those 
rural health clinics that are operated by a hospital or other 
facility.
    As you can see--once again, I will turn your attention to 
the bar chart--about half of all rural health clinics are made 
up of facility operated clinics, which are the white portion of 
the bar. And their portion, as you can also see from the chart, 
has increased dramatically over the last few years. You can 
only see a white bar there beginning in 1990.
    Unlike the independently operated clinics, the facility 
operated clinics are not subject to any limits on payments for 
visits. In one case we came across, a clinic received over $200 
for a visit, or about four times the maximum $55 or $56 paid 
for a visit to an independent clinic. While independent clinics 
have a maximum reimbursement per visit, neither they nor the 
facility based clinics have any apparent limits on the amount 
or types of costs that they can claim.
    In a sample of independent clinics, we found that a quarter 
were paying physician salaries of up to 50 percent or more than 
the national mean of $127,000. These are rural health clinics, 
mind you. In looking at facility based clinics we found 
hospitals sometimes claiming overhead costs that were more than 
100 percent of the direct costs of operating the clinic.
    Finally, under current law, rural health clinics receive 
this extra Medicare or Medicaid reimbursement indefinitely, 
even if the area in which they are located is no longer rural 
or underserved, and even if the clinics don't depend on it for 
financial viability.
    So what does the program need to do to address these 
findings. Our report made several recommendations. First, we 
recommended that HCFA revise its Medicare payment policy to 
hold all rural health clinics to payment limits and to 
reimburse them for only the reasonable costs incurred in 
providing care. HHS has actually agreed with our 
recommendations and has said that it would begin to take 
actions to implement them.
    We also believe that the Congress needs to develop a more 
precise definition for the types of areas that are eligible for 
these higher Medicare and Medicaid payments, so that the 
program is more clearly targeted to increasing access to care. 
This wouldn't necessarily require redoing the existing 
criteria, only adding another screen that would be targeted to 
communities where access is a problem.
    We therefore recommended that the Congress restrict this 
higher Medicare and Medicaid reimbursement to rural health 
clinics in areas that have no other Medicare or Medicaid 
providers, or to clinics that can demonstrate that the existing 
providers, the existing capacity, if you will, is not great 
enough to accept new Medicare or Medicaid patients, and that 
that funding will be used to expand access to them.
    We also recommended that the Congress require periodic 
recertification to make sure that the financial assistance 
given to clinics is still appropriate.
    This concludes my remarks, and we would certainly be happy 
to answer any questions.
    [The prepared statement of Ms. Steinhardt follows:]
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    Mr. Shays. Thank you.
    We will hear from Mr. Grob and then we will start our 
question- ing. I like this era of charts. They one-upped you; 
they've got color.
    Mr. Grob. Mr. Chairman, it's 1997, and it's the 20th 
anniversary of this program. Like a birthday that ends in zero, 
it's probably a good time to take stock and see where we've 
been and where we're going.
    When we began this evaluation, we found that the General 
Accounting Office was also beginning work on this subject, so 
we began to collaborate with them early on in the project to 
divide the work up. We took somewhat different approaches to 
the study. Our approach was based very much on onsite reviews. 
We sent inspectors out into the countryside to locate the rural 
health clinics that were there, to see what they were like, to 
talk to the people who were there, and things of this nature. 
We did some other larger analysis of national data.
    What is good about the fact that we took these two 
different approaches is two things. One is, I think if you put 
the two reports together, you get a pretty full picture of 
what's happening. The second is a remark you made in 
introducing this, which is, the results were identical. For all 
practical purposes, the findings and the recommendations were 
the same. So it seems that no matter what direction you look at 
this thing from, you get the same answers, which gives you even 
more confidence about the results.
    Briefly, we found that the rural health clinics are 
important to people who live in rural areas and who need access 
to primary care. But the program is vulnerable to waste because 
of the placement of the centers and because of weak cost 
controls or unsatisfactory reimbursement systems.
    Rather than repeat all of the details of those findings, 
which you have just heard from the representative from GAO, let 
me concentrate instead on talking about the growth and the 
nature of the growth. I've got a growth chart here that is 
similar to GAO's, and, frankly, I did it so that the line would 
appear to be a bit steeper, because I wanted very much to 
illustrate the rapid rate of growth of this program.
    From 1990 to the end of 1996, the number of centers has 
increased tenfold. In the last year alone, the increase in the 
number of centers was 30 percent. When we calculated it, there 
were more than 250 applications still pending at the end of 
that year. In some of the States that we went to and asked them 
questions, they expected growth rates of 50 percent in 1 year, 
not a small number of States.
    As far as the dollars are concerned, as was mentioned, we 
are now at about three quarters of a billion dollars. The 
growth began to accelerate in recent years. It wasn't so heavy 
in the beginning years. The remark that by the year 2000 we 
would be at $1 billion actually may come true sooner than that. 
In the last year alone, the growth rate was 48 percent in the 
dollars. So if we have the same growth rate next year, we will 
be at $1 billion just next year.
    Now, why is this growth occurring? And a good question that 
might be asked, is anything different today than was the case 
20 years ago when the program was first started? Well, some 
things are still the same. One thing pushing the growth is the 
need. About a quarter of the population of the country still 
lives in rural areas, and they are going to continue to need 
access to primary care. Hopefully, that will become the driving 
force for any growth in this program.
    Another big part of it, though, is the incentive funding. 
And to make it simple, I have just included a chart here that 
shows what the funding levels are in just a few States, and 
these are typical of what you will see. Basically speaking, the 
reimbursement rates for the rural health clinics are about 
twice what they would be for clinics that don't receive this 
incentive. And if they are provider based, because that cap is 
not on them, they can even be considerably more than that, 
perhaps two or three times that amount. So that chart there 
just illustrates that fact.
    Now, where health care is missing, where people have 
trouble with the financial base, that might be just what the 
doctor ordered, financially. But in places where there are lots 
of services--for example, in one area we visited, we found 10 
pages in the Yellow Pages, 10 Yellow Pages full of health care 
providers in a location where a health clinic was located.
    Mr. Shays. Just to clarify that, you mean like the big ad?
    Mr. Grob. Well, I was just saying, we sent our inspectors 
out to actually see these things.
    Mr. Shays. I just want to understand 10 pages.
    Mr. Grob. Ten pages in the Yellow Pages.
    Mr. Shays. Was it lines?
    Mr. Grob. Well, it was the usual mixture of ads and lines, 
typical Yellow Pages full of health care providers, as an 
example, just to give you a sense of how rural it was or how 
needy it was.
    So the incentive funding no doubt is a big cause for the 
growth. Now, in fairness to the Health Care Financing 
Administration, the last time this Congress took a look at this 
program, there was a concern that there wasn't enough growth in 
the program, and HCFA was instructed to notify various 
providers of the availability of this program, and they did so. 
That might have had a hand in spurring the growth of some of 
the provider-based rural health clinics.
    We found a reason that we didn't expect, and that was 
managed care. What's happening here is that there are 
unspecified fears of the coming of managed care in rural areas, 
and the large providers are basically trying to get a foothold 
in the area before other managed care organizers come into the 
area. They are trying to establish a foothold, a very common 
thing that we heard over and over again.
    A lot of those provider-based rural health centers are very 
small, one practitioner. They may even be claiming to lose 
money, but what they are saying is, they want to be there so 
that they have a stake in it before someone else comes in and 
organizes the area.
    Another thing is the business organization. Initially, a 
lot of these clinics were just small operations, one or two 
doctors, and things like this. Now, with the providers becoming 
heavily involved in it, we have the basis of a large 
organization behind them, some chains are cropping up here and 
there, as well. So that accounts for it.
    Finally, as far as the dollars are concerned, there is the 
problem of tenure that was alluded to earlier. Once you have 
the incentive funding, you have it; it never goes away. There 
is no recertification of these programs periodically.
    The reason that I mention these areas of growth is that all 
of them are still there. In fact, the forces behind some of 
them are growing, and the forces for some are such that they 
will spur the growth even faster. For example, where we had the 
centers opening up, initially their costs were not high because 
they were new businesses. Now they are maturing, so their cost 
is going to be even greater. They are going to be doing more 
and more business as time goes on.
    The tenure never goes away, so it keeps accumulating. We 
keep getting more and more growth that way. And certainly the 
concerns for managed care will be increasing and not decreasing 
in the near future.
    For all these reasons, we feel that what is important to 
consider now is the rate of growth that is occurring and also 
the notion that someone iterated earlier, that if we do want to 
do something about this program, we need to do it now, because 
there are large dollar amounts looming right behind that curve. 
Even without the reasons, I think any analyst would put a ruler 
in that curve and guess where that curve is going to end up 
next year.
    Our recommendations are similar to GAO's, and I won't 
repeat them. We think a control can be placed on the location 
and the cost. There are numerous ways to do this that are 
spelled out in both of our reports and in our written 
testimony.
    Thank you very much.
    [The prepared statement of Mr. Grob follows:]
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    Mr. Shays. Mr. Towns, you have the floor.
    Mr. Towns. Thank you very much, Mr. Chairman.
    Mr. Shays. Let me just say, Mr. Grob and Ms. Steinhardt, 
both reports were very well-written, well-organized, and I 
think fairly clear, not oversensationalized. I thought they 
were both excellent reports. In some sense, I almost feel we 
don't have to issue a report; we just submit yours to the 
Congress.
    We hope, very shortly, to respond to what you all have 
written. Before I do give the floor to Mr. Towns, I want to be 
clear on one thing. When we're asking HCFA to make a change in 
the process--I guess what I really want to know is, I feel a 
number of people have gained the system and are making a 
gigantic windfall. Do we have the ability quickly, through 
regulation, to change, or is it going to be a long, laborious 
process?
    Mr. Grob. I could give an opinion on that. I think that 
some of the change that needs to be made can indeed be made 
through the regulatory process, but the regulatory process is 
never quick. The rules for public rulemaking generally take a 
year or more because of the requirement for the opportunity for 
the public to comment, and dealing with those comments, and 
things of this nature.
    Mr. Shays. And there is no shortcut, Ms. Steinhardt?
    Ms. Steinhardt. Well, there is no shortcut to the 
rulemaking process. But I think the point here is, if we have 
the will to take action here, there are things we can do to 
make sure that this program is back on track. It had a purpose. 
It has lost focus and lost track of that purpose. I think both 
the Congress and HCFA need to take action.
    Mr. Shays. By the time it comes to my questioning, because 
I will go to Mr. Snowbarger after Mr. Towns, I would love you 
to just articulate what changes are really rulemaking changes 
and what can be done more quickly. That will be something I 
will ask.
    Ms. Steinhardt. Sure.
    Mr. Shays. Mr. Towns.
    Mr. Towns. Thank you very much, Mr. Chairman.
    Let me begin with you, Ms. Steinhardt. You mentioned 
recertification more than once. In order to do that, how much 
money are we talking about? Have you thought about it in 
dollars and cents?
    Ms. Steinhardt. What it takes to actually recertify?
    Mr. Towns. Yes, the costs. Yes, the costs involved, that 
process.
    Ms. Steinhardt. We didn't calculate the cost, but this is 
not something that needs to involve onsite field visits or 
anything. This is something that HCFA can do, or HRSA could do, 
with a data base, just knowing who these clinics are and where 
they are located. This is a data base search.
    Mr. Towns. Right. And I guess it would not take too much to 
put that equipment in place.
    Ms. Steinhardt. They ought to know where all these clinics 
are.
    Mr. Towns. As you know, Congress established the Rural 
Health Clinic Program because many rural communities were 
having difficulties attracting and retaining primary care 
providers. In your review, did you come across sparsely 
populated rural areas that lacked primary care providers?
    Ms. Steinhardt. Yes. We found that there were some areas 
that met the general criteria that would qualify them for rural 
health clinics that were still without a rural health clinic. 
Maybe Mr. Pasquier wants to add some details to that.
    Mr. Towns. Sure.
    Mr. Pasquier. Yes. I think the real contrast that we say 
was, when we took our sample of beneficiaries, the ones where 
access has improved, we noticed in the smaller communities 
where there were these clinics that the program really did make 
a big difference. In the larger communities, there really 
wasn't much of a change in access. The patients were going to 
the same providers or providers in that same community.
    So I think the benefits of the program are much more 
pronounced and easier to see when they are restricted to the 
smaller community. That's what we found.
    Mr. Towns. In your judgment, why aren't those communities 
using the Rural Health Clinic Program? Do you have any reason 
as to why they were not using it?
    Ms. Steinhardt. They may not be aware of it, that they 
qualify for it. I know, just anecdotally, some of the rural 
health clinics that we spoke with became aware that they were 
eligible for certification because financial consultants 
contacted them and told them that they had an opportunity to 
increase their reimbursements if they applied for designation 
as a rural health clinic. So not every community is aware of 
the benefit available to them.
    Mr. Towns. Do you have any suggestions as to how HHS might 
be able to target these communities to be able to get this 
information?
    Ms. Steinhardt. Well, I think the recommendations we make 
would certainly help the program be focused on those places 
where there are no Medicare or Medicaid providers or where the 
providers can't accommodate any more Medicare or Medicaid 
patients. That's where we think this program was intended--
those are the communities we think were the intended 
beneficiaries of this program, and we think that's how the 
criteria ought to be targeted.
    Mr. Towns. Let me ask a question I think the chairman sort 
of alluded to, but I want to turn it around, maybe, to a 
degree. Once a rural health clinic is designated, that 
designation cannot be removed, even if the area has developed 
into a well financed and viable health care delivery system, if 
it has it in place. Once that designation is there, it is 
there. How would you recommend fixing it?
    Ms. Steinhardt. We would revisit that. It's not that it 
can't be dedesignated. In fact, there were some clinics that, 
during the 1980's, I guess, the sort of earlier years of the 
program, that were dedesignated.
    Mr. Towns. How did that come about, do you know?
    Ms. Steinhardt. I think they asked for it, or the 
definitions changed.
    Mr. Shays. Excuse me. Could you be clear as to whom 
``they'' are? Did the rural health clinic ask, or did HCFA ask 
for it? Where is it coming from?
    Mr. Towns. The ``who,'' yes.
    Mr. Shays. If you don't know, I would just as soon not 
speculate. I want us to be very clear on this.
    Ms. Baumgartner. They are dedesignated--if there is a 
change of ownership, they have to reapply for certification, or 
if they lose their status as a Medicare provider, they would be 
dedesignated. There was some movement to dedesignate some of 
the shortage areas, I think, in the 1980's.
    Ms. Steinhardt. Right. My point is simply that it is 
possible to dedesignate; it's just that, by and large, no one 
has ever gone back to take another look at the clinics to see 
whether they still met the original criteria that qualified 
them. And that's our recommendation--that such a review take 
place to see whether they still meet the original criteria, and 
we would add our additional screening criteria.
    Mr. Grob. That would require a statutory change, that 
review.
    Ms. Steinhardt. Right. The recertification requirement 
would require Congress to act.
    Mr. Towns. You know, I agree with you that there should be 
a review, but I think the point I want to make is, how often 
should this review take place?
    Ms. Steinhardt. Good question. We didn't specify the 
frequency of the review. One thought that came to our minds was 
every 3 years, which is the frequency with which the health 
professional shortage areas are reviewed to see whether they 
still qualify as health professional shortage areas, but we 
have no set feelings about it.
    Mr. Towns. Any other comments?
    [No response.]
    Mr. Towns. Your report suggests restricting the cost-based 
reimbursement benefit of the program. What impact will this 
have on the financial viability of rural health clinics in 
truly underserved areas?
    Ms. Steinhardt. Good question. From our review, we found 
that most of the clinics don't depend on their rural health 
clinic status or cost reimbursement status for financial 
viability. It's just not the case. And these clinics, unlike, 
say, federally qualified health centers, are not required to 
serve underserved populations. They don't have to see uninsured 
populations, for example, as a condition of their being a rural 
health clinic.
    So this is not as though they need their rural health 
clinic status in order to make sure that they are able to care 
for the uninsured, because they don't have to see them if they 
can't afford to.
    Mr. Towns. I know you made some recommendations. Is there 
anything else, now that you've had an opportunity to look 
further, that you would like to recommend that we might be able 
to do on this side?
    Ms. Steinhardt. Well, as far as the Rural Health Clinic 
Program, I think the recommendations we've made in this report 
would take care of the two big areas that we are concerned 
with, which is improving access for the intended beneficiaries 
of this program, and establishing better cost controls.
    There are things, I think--and this is something we intend 
to do some more work on--we think that there are issues related 
to the whole area of how we deal with increasing access to 
communities that are regarded as underserved. There are a whole 
variety of programs that are intended to help these 
communities. They are not well coordinated; they are not really 
well related to one another. We think there are opportunities 
to improve, overall, how we, as the Federal Government, support 
access to these communities by doing a better job with those 
programs.
    We have done some work in this area in the past. We have 
recommendations on the whole medically underserved health 
professional shortage area system. We have looked at the J-1 
visa waiver program that allows foreign physicians to serve in 
underserved areas. We have looked at the National Health 
Service Corps. There are common themes that run across all 
these programs, and I think there is certainly room for 
improvement in how we put all these programs together to deal 
with improving access.
    Mr. Towns. Thank you very much. I yield back, Mr. Chairman.
    Mr. Shays. Thank you.
    Mr. Snowbarger.
    Mr. Snowbarger. Thank you, Mr. Chairman.
    I apologize for the simplicity of these questions. You all 
are out there sitting there as experts, and the chairman is 
probably an expert on this, and the audience is probably expert 
on this. I want to go back just to some very basic things.
    Mr. Grob, if you can help with your chart, your South 
Carolina line. If you can just explain to me the differences 
there in the reimbursement, it would be helpful.
    Mr. Grob. OK. First of all, let me tell you that there is 
no central data bank of Federal data for what happens in every 
State. Whenever we look at the Medicaid program, we really have 
to hustle after the data and get it State by State, and we 
don't always get uniformly comparable data when we do so.
    But just to give you an example, there is a rate that each 
State sets for reimbursement of primary care. Health care 
providers, they have the option to set whatever rate they want. 
So for each of those three States, I have shown what rate those 
States have set on their own.
    For a freestanding rural health clinic, they are allowed to 
receive reimbursement based on the costs that they incur, but 
it is subjected to a limit, and the limit is imposed by HCFA, 
by the Health Care Financing Administration, which basically 
certifies the centers. That's what you see there for the 
independent rural health centers. You notice they are all about 
the same. The rate now is about $56.65, something like that, 
but, again, it's a cost limit, so there might be a few that are 
below that.
    Mr. Shays. If I could just interrupt you, I would just 
point out to the gentleman that the questions can be simple, 
but the answers are never.
    Mr. Snowbarger. I suspected that.
    Mr. Shays. I thought I understand this, and I'm getting a 
little confused. I want you to speak a little more slowly and 
define the difference between Medicaid and Medicare. I just 
think it would be helpful. And I just want to say to you that 
we learn more from the simple questions, so that's the way we 
proceed.
    Mr. Snowbarger. Prepare to learn.
    Mr. Shays. Yes. So I'm going to ask you, if you don't mind, 
to answer the vice chairman's question by just starting over 
again, giving a different framework. You've got independents, 
you've got the provider-based, you've got the independent 
doctors, and you've got Medicare and Medicaid. If you could 
kind of sort all this out, because this is going to be the base 
from which we ask other questions.
    Mr. Grob. OK. Let me start out, first of all, there are 
both Medicare and Medicaid program. The Medicare program is 
administered by HCFA. The Medicaid programs, of course, are 
administered by each State. Each of those programs sets their 
own rates. There are rates that HCFA sets for the Medicare 
program, and each State sets its own rate for the Medicaid 
programs.
    If a center, physicians' office, or any group would like to 
become a rural health clinic under the Medicare and Medicaid 
Rural Health Clinic Program, they apply to the Health Care 
Financing Administration for a certification to that effect. If 
they pass certain criteria, which includes providing certain 
primary care services, having the assistance of mid-level 
providers, and things of this nature, and if they live in an 
underserved rural area, then the Health Care Financing 
Administration will certify them as being one of these centers.
    Now, if they are certified, they get more money, under both 
the Medicare program and the Medicaid program. The money that 
they get is based on the cost that they incur. So instead of 
getting money for a certain fee, they are basically allowed to 
charge what it costs them to do business.
    However, that cost reimbursement is limited by a cap which 
the Health Care Financing Administration has set. That cap is 
updated every year, and it applies to the freestanding clinics. 
Whether they be under the Medicare program or the Medicaid 
program, they are subject to that cap. Right now it's about $56 
or $57. OK?
    Other clinics, of course, get paid by a fee, are on a basis 
other than that. However, if they are not freestanding, if they 
are basically owned by a hospital, then the Health Care 
Financing Administration has construed that they are part of 
the hospital, and they are reimbursed the way that, say, the 
outpatient department of a hospital or another ancillary unit 
of a hospital would be reimbursed.
    That reimbursement system under Medicare does not have a 
cap placed on it. It is based on reasonable costs. The result 
of that is that if you are a clinic that is owned by a 
hospital, the cap doesn't apply to you.
    So this chart that I have prepared here illustrates how 
this would work under the Medicaid program. It shows the fact 
that those rates would vary from State to State, because the 
underlying Medicaid rates would vary from State to State. A 
similar thing would happen, however, under the Medicare 
program.
    Basically speaking, in these rural areas, the independent 
clinical labs are receiving about twice as much money as a 
clinic would receive under the Medicaid program. For those that 
are owned by providers, it could be a lot more.
    Mr. Snowbarger. Could I follow through with a few 
definitional things here?
    Mr. Shays. Yes.
    Mr. Snowbarger. I understand that Medicare and Medicaid are 
different programs, and you have indicated that both of those 
programs have some kind of rural health clinic designation.
    Mr. Grob. Yes.
    Mr. Snowbarger. Are they definitionally the same?
    Mr. Grob. They are.
    Mr. Snowbarger. Wow, we finally coordinated something.
    Mr. Grob. Yes, we did. However, I will tell you--and you 
didn't ask me this, but I think it's worth laying on the table.
    Mr. Snowbarger. Well, I'll ask it.
    Mr. Grob. OK. Another issue is, different people would 
represent the interest of the States. You each represent the 
interest of the States that you come from, to some extent. So 
would the people running the Medicaid program or the Governors.
    It is the Health Care Financing Administration that 
certifies these clinics. So if they certify them, then the 
Medicaid program must pay the higher rates. Not all the people 
who run the Medicaid programs are happy about the fact that 
they have to pay higher rates because the Health Care Financing 
Administration certifies the clinics.
    So there is a single certification, which is unusual, and 
it applies, for this program, to both Medicare and Medicaid. 
The State officials don't have any control, or very little 
control, over that certification process. Some wish they did 
have more control. To change that, by the way, I believe that 
would be a statutory matter.
    Mr. Snowbarger. Again, coming out of HCFA, Medicare makes 
the designation?
    Mr. Grob. In essence, yes. The Health Care Financing 
Administration speaks on behalf of both.
    Ms. Steinhardt. One thing that I think might be important 
to keep in mind, just in sort of a historical context about 
this program, when the Rural Health Clinic Program was 
established, Congress' concern was that there were parts of the 
country, rural areas in the country, which depended for primary 
care on people other than physicians--nurse practitioners, 
physician assistants--and they were not being reimbursed under 
Medicare.
    So the initial thrust of this program was to provide 
reimbursement to nonphysician providers of primary care, to 
make sure that those areas of the country were not penalized, 
you might say, for depending on nonphysicians for their care. 
Everybody was under a cost reimbursement system then. So it 
wasn't cost reimbursement that was the sort of benefit, by 
itself, to these rural health clinics; it was coverage of 
nonphysician providers that was the benefit then.
    As we moved to a prospective payment system, where we moved 
to a fee schedule, and under this sort of managed care--the 
whole restructuring of the health care system, in which 
suddenly there were concerns about managed care and 
establishing market share, and so on. The whole flavor of the 
program really changed dramatically, so that it's now operating 
really in a very different environment and with different kinds 
of concerns than it did back in 1977 when it was established. 
And that's important to remember.
    Mr. Snowbarger. One other question, and I want to just make 
sure that the reference over here to provider base is the same 
as reference to facility base here?
    Mr. Grob. Yes, it is. Yes, thank you.
    Mr. Snowbarger. A phenomenon I've seen occur in our area is 
for, say, a metropolitan hospital--it comes from a large area--
would not qualify, I presume, as a rural health provider. As is 
common with a lot of hospitals, both buying and creating family 
practice clinics, and some of those clinics end up in areas 
that now qualify for the higher reimbursement.
    Is that the kind of thing we're talking about?
    Mr. Grob. Yes.
    Mr. Snowbarger. What is the rationale used by these 
agencies that this perhaps even transplanted clinic from an 
urban area to a rural area, frankly, operated under a separate 
structure even, now qualifies?
    Mr. Grob. I think I can address that, if you wish, sir. It 
gets to say that I still live in a rural area and have been 
following these developments very carefully in the area that I 
live.
    What you see happening there is that there is quite a 
concern among various organizers of health care. They may be 
the large hospitals, they may be HMOs that are associated with 
hospitals or freestanding, they may be groups of physicians who 
want to band together to have their own health maintenance 
organizations, or whatever, but they are all quite concerned 
about organizing the medical care in the areas where it is 
unorganized right now. Those areas may be rural areas.
    So exactly what you are saying is happening. Hospitals and 
others are, as I said earlier, trying to gain a foothold so 
they have a stake in everything that happens and that they are 
basically in the game. We were surprised about this. When our 
inspectors went out and talked to the people as to what was 
happening, they started coming back with these reasons, which 
are somewhat nebulous, but very commonly given.
    I know I, myself, have seen it firsthand where I live. It 
is a consideration, and it's exactly what you are describing. 
That's starting to fuel this instead of the original purpose of 
the program.
    Mr. Snowbarger. Again, Mr. Chairman, what is the rationale 
for the higher reimbursement for the provider-based and 
facility-based, in the circumstances that I was saying.
    Mr. Grob. OK. What happened here was that, when the Health 
Care Financing Administration had to establish what the limits 
on cost-based reimbursement were, it had a harder time, 
administratively, dealing with how we pay hospitals. Since they 
were controlled by the hospitals, they had to be paid for as 
part of the system for paying hospitals, which is a different 
system entirely.
    Mr. Snowbarger. Thank you, Mr. Chairman.
    Mr. Shays. You're welcome. I would love to just get a much 
clearer sense of what is rural. Define for me ``rural.''
    Ms. Steinhardt. Under 50,000. The definition now is non-
urbanized areas, and for the purposes of this program it's non-
urbanized areas of less than 50,000 population.
    Mr. Shays. In a 15-mile square?
    Ms. Steinhardt. No, that's it. That is the definition with 
no other qualifications around it. It could be only a few miles 
away from a larger area.
    Mr. Shays. That's just too absurd to contemplate. If you 
had a 10-mile-square area, and you said there were less than 
50,000, and right next to it you had even a larger area, you 
are saying that would be defined as rural?
    Ms. Steinhardt. Yes.
    Mr. Shays. OK. That doesn't take a rocket scientist to know 
that's the first thing we change. Except, politically.
    Ms. Steinhardt. Yes. Go ahead.
    Mr. Shays. No, I'm happy to have both of you participate in 
this dialog. Do you have something to add to it?
    Mr. Pasquier. No, the definition in this program uses the 
Bureau of the Census definition, which is ``non-urbanized,'' 
and it depends on the city. If the city has an under-50,000 
population, then it is considered rural.
    Now, looking at solutions to the program, we think, if you 
establish additional criteria rather than try to redefine what 
is rural, if you establish additional criteria that is trying 
to target funds to those beneficiaries that are experiencing 
problems with access, you can avoid having to redefine 
``rural'' in the statute, which is a problem.
    Mr. Shays. I hear what you are saying. There must be 
another reason why I can't do it. Are you saying that a 
Ridgefield, CT, that maybe has a population of 10,000 people, 
or 12,000, or 15,000 people, could be designated as rural under 
our system? There must be other factors.
    Mr. Grob. These would be areas that are outside the large 
metropolitan statistical areas.
    Mr. Shays. It's not logical to me, so there is something 
I'm not getting.
    Ms. Steinhardt. There are lots of problems with trying to 
define ``rural,'' just as there are lots of problems with 
trying to define ``medically underserved'' and ``shortage 
areas.''
    Mr. Shays. Let me just say that what this committee, I am 
almost certain, is going to do: we're going to recommend that 
we do a better job serving people in rural areas. And what I'm 
getting a sense of is, I'm not sure that your reports are going 
to really help us get to that, if I'm not able to see a little 
more definition to this issue.
    Ms. Steinhardt. I think, though, the way we tried to get at 
it was to focus on the problem of access. If the people in the 
community are not well served, if they have no Medicare or 
Medicaid providers, or the ones they have can't see any more 
patients, that, to us, gets at the problem of access most 
directly.
    So, while I think it may be very important to take on the 
issues of defining ``rural,'' and defining ``medically 
underserved,'' these are very thorny problems.
    Mr. Shays. Is that a thorny problem politically, or 
statistically is it a problem?
    Ms. Steinhardt. Maybe both.
    Mr. Shays. The other two who are going to follow afterwards 
maybe can answer some of these questions. Where I get concerned 
is when you basically tell me that the new people who have 
gained access, basically about 90 percent of them didn't need 
it, and that tells me that we're building this gigantically 
expensive system that is going to have a constituency. When you 
get into the billions of dollars, you are going to have a hard 
time changing it. So I feel there is a tremendous sense of 
urgency to get at that problem.
    So you, basically, in your chart over there against the 
wall, when you say 27 percent are in areas that are 25,000 to 
50,000, that is even a misstatement, in some ways, because they 
could be right next door to a community with a lot more.
    I mean, I have a friend who lives in Montana, who thinks 
nothing of going shopping 5 hours away, or going, literally, to 
a movie that is 3 hours away. But to my suburban mind, if it's 
10 miles away, that's a distance. There's a mind-set here that 
we just have a big disconnect.
    Ms. Steinhardt. Well, every 3 years, HCFA does a survey of 
Medicare beneficiaries. When they ask Medicare beneficiaries 
how they feel about their access to care, 97 percent of 
Medicare beneficiaries feel they have adequate access to care. 
It's an important reminder.
    Mr. Shays. OK. Let me just say, from my standpoint, I'm 
going to investigate this with the panels that will follow. You 
have kind of thrown the ball into play and have provided a 
tremendously useful effort for us.
    Mr. Souder, do you have some questions you would like to 
ask?
    Mr. Souder. Just a couple of clarifications. I apologize; I 
missed the original testimony. I tried to look through some 
last night and some here while we were talking through. I'm a 
bit confused on a couple of terms in Mr. Grob's testimony.
    You have a statement that rural health clinics converted to 
rural health clinic status--in other words, they were already 
rural health clinics--when you say independent rural health 
clinics, do you mean those are the ones that haven't converted 
to status yet.
    Mr. Grob. No. You may be running a clinic in a rural area, 
but you may not be receiving the benefit of any special funding 
from either the Medicare or the Medicaid program.
    Mr. Souder. So you would be the blue on your chart?
    Mr. Grob. Yes, the regular rate. So, if you wanted to 
receive that funding, then you would have to apply for 
certification to get into the Medicare and Medicaid Rural 
Health Clinic Program. Then, if certified, you could receive 
the higher rates of pay.
    Mr. Souder. So, then, if you are independent, you move to 
the red; and if you work with a facility, you are in the green.
    Mr. Grob. Yes, that's right.
    Mr. Souder. And your chart over there is, the gray is, in 
effect, the red; and the white is the green?
    Mr. Grob. That's correct.
    Ms. Steinhardt. Yes.
    Mr. Souder. The increase in the amount of independents, you 
are arguing, was due to the financial incentives; both of those 
groups, the white and the gray?
    Mr. Grob. That's correct.
    Mr. Souder. There is some implication in the testimony that 
some of these places might have closed if they weren't able to 
convert. How do we sort that out?
    Mr. Grob. I really don't think anybody knows that, to be 
honest with you. I certainly don't think we would have any way 
of telling. I can tell you that our inspectors, in reviewing 
the facilities, didn't see very many that they felt were really 
in jeopardy. In fact, the opposite may be the case. Because of 
the special rates that these facilities receive, they may 
actually be making it more difficult for nonsubsidized 
enterprises to come into existence, because they have an 
advantage in these heavily populated areas.
    It is possible, though, I think in the rural areas, that 
are truly rural and truly underserved, I do think the financial 
thing could make a difference. And I don't think that any of us 
are advocating that we eliminate that financial benefit for 
those in the rural areas where you need the money for financial 
stability or because you might want to attract providers in the 
area that aren't there now. I think it does turn more on what 
is truly rural, what it truly underserved.
    Ms. Steinhardt. In our survey--if I might just add--in our 
survey we found that, while some may depend on this 
designation, many don't depend on it for financial viability. 
Even if they were not to have that designation, they would 
remain financially viable.
    Mr. Souder. The other question I have is that--anybody here 
can answer the questions; I was picking on Mr. Grob--obviously, 
the group of the facility-based has exploded, proportionally, 
yet there has been a steady growth of the other as well.
    My understanding is, you were having independents also 
convert to facility-based, so it means there has been a fairly 
substantial percentage converting from nothing into the 
independent. Then there also is probably some resistance--I 
certainly hear this in Indiana--the resentment of doctors and 
independent clinics having to go with facilities. There is 
somewhat of a rivalry.
    So on what grounds--is this being facility-driven, trying 
to come in, is that part of your argument, as opposed to--are 
the independents that associate with a facility actually 
struggling financially?
    Mr. Grob. No, I think you stated it exactly right. Again, 
now, this is not hard; this is what people were telling us. 
What I think we are seeing is that, on the provider side, on 
the facility-based, it's the facility that is bankrolling the 
center, to get it established, to kind of extend themselves 
out. Whereas, for the independent practitioner, they are the 
ones who want to convert over because the funding is more 
favorable.
    I don't think that the facilities are necessarily 
establishing these centers because they expect to make a lot of 
money in them, initially. I think they are simply trying to 
position themselves. In fact, a lot of them told us that they 
weren't making money. Of the facility-based centers that we 
saw, a lot of them were very small: one doctor, a few visits. 
The independent ones were the large ones, because they were 
behaving much more as the program was intended to behave.
    Again, we can't prove this, and I'm sure that 
representatives of the industry might deny that it's the case, 
and perhaps on good basis. I am simply trying to tell you what 
our inspectors saw and what people told them when they were 
there.
    Mr. Souder. How much of this may be caused by the fact that 
the hospitals in towns 5,000 to 10,000 are in relatively deep 
trouble?
    For example, in my district, which is centered by Fort 
Wayne and has nine rural counties around it, what has happened 
is with the access of the interstates and the commuting, and so 
on, the Fort Wayne hospitals are in heavy competition to get 
the feeder system that, on almost anything major, they are 
drawing in the patients from the rural areas, leaving 
substantial empty beds in the rural hospitals, then starting to 
set up this outreach to feed in and through system.
    Are they using this heavily to do that? Is that partly what 
is going on?
    Mr. Grob. I believe that, in a general manner, they are 
using the ability to sponsor these centers as a way to reach 
out and fill those areas with things less than hospitals.
    Mr. Souder. Thank you for helping clarify.
    Mr. Towns [presiding]. Thank you very much.
    Any other questions from any Members?
    [No response.]
    Mr. Towns. Let me thank the members of the panel for 
enlightening testimony. Also, you have pointed out that we 
still have a lot of work to do in order to make certain that we 
are not wasting resources. I think that is a real concern. I 
think that when we get involved in the checking and the 
rechecking, we don't want to spend all of our money checking 
and rechecking either. We also want to be able to have some 
resources to spend in terms of getting rid of the problems in 
terms of the patients.
    So thank you very, very much.
    The second panel: Kathy Buto; Dr. Gaston; Dr. Puskin.
    We swear in all of our witnesses. If you would just please 
stand.
    [Witnesses sworn.]
    Mr. Towns. Let the record reflect that all of them answered 
in the affirmative.
    Why don't we start with you, Ms. Buto.

   STATEMENTS OF KATHLEEN BUTO, ASSOCIATE ADMINISTRATOR FOR 
  POLICY, HEALTH CARE FINANCING ADMINISTRATION, DEPARTMENT OF 
 HEALTH AND HUMAN SERVICES; MARILYN H. GASTON, M.D., DIRECTOR, 
 BUREAU OF PRIMARY HEALTH CARE, HEALTH RESOURCES AND SERVICES 
   ADMINISTRATION, DEPARTMENT OF HEALTH AND HUMAN SERVICES, 
 ACCOMPANIED BY DENA PUSKIN, ACTING DIRECTOR, OFFICE OF RURAL 
  HEALTH POLICY, HEALTH RESOURCES AND SERVICES ADMINISTRATION

    Ms. Buto. Mr. Chairman, members of the subcommittee, I am 
very pleased to be here. I am Kathleen Buto, the associate 
administrator for policy at the Health Care Financing 
Administration, HCFA.
    I am pleased to have the opportunity to address rural 
health clinics and to respond to the concerns raised by the 
Inspector General's report and the GAO about the program not 
improving access to primary care services in underserved areas.
    The GAO and IG reports indicate that while the number of 
rural health clinics has grown rapidly in recent years, their 
proliferation has not necessarily been in areas where Medicare 
and Medicaid beneficiaries face access problems. Rather, many 
clinics are being certified in areas where other clinics, RHCs, 
already exist or where beneficiaries have other sources of 
medical care. The process does not adequately identify 
underserved areas, and Medicare's current cost base payment 
methodology encourages providers to seek RHC status.
    HCFA generally agrees with the findings of the reports and 
is working with the Public Health Service to correct these 
problems. Before discussing how we are addressing these issues, 
I would like briefly to touch on some background of the Rural 
Health Clinic Program.
    The Rural Health Clinics Act was enacted in 1977 by 
Congress and implemented by us in 1978, to increase access to 
primary health care services for Medicare and Medicaid 
beneficiaries living in rural areas. To be classified as an RHC 
by HCFA, clinics must be located in a rural area and a shortage 
area. I would emphasize that, because there was a lot of focus 
on the rural designation in the last panel. The shortage area 
designation is equally if not more important in this program, 
as designated by the Public Health Service or by a Governor, 
and approved by the Public Health Service.
    In addition, an entity applying for RHC designation under 
Medicare must meet specific conditions of participation set out 
in the Medicare statute, including staffing requirements, lab 
requirements, and other criteria appropriate to a setting for 
primary health care.
    Under the Medicare statute, HCFA must continue to designate 
existing clinics as RHCs, even if the area in which they are 
located is no longer considered a shortage or rural area. This 
is a statutory provision. Certification by Medicare as an RHC 
leads to corresponding RHC status under Medicaid, if the clinic 
elects to serve Medicaid beneficiaries.
    The scope of services furnished by these clinics is 
comparable to services provided in a physician's office. These 
services may be provided by physicians and mid-level 
practitioners, including physician assistants, nurse 
practitioners, and certified nurse midwives. Services provided 
by RHCs also include outpatient mental health services 
furnished by clinical psychologists and clinical social 
workers.
    Medicare regulations for this program distinguish between 
two types of rural health clinics: independent and provider-
based. Independent clinics are freestanding practices that are 
not part of the hospital, skilled nursing facility, or home 
health agency. Provider-based clinics are integral and 
subordinate parts of hospitals, skilled nursing facilities, or 
home health agencies, under common licensure, governance, and 
professional supervision.
    The rural health clinic benefit has allowed many 
communities in rural America to establish and maintain rural 
health clinics. Communities located primarily in the western 
United States rely heavily on Medicare and Medicaid support to 
provide primary and emergency care to beneficiaries living in 
remote and mountainous areas.
    While some rural clinics serve primarily Medicaid 
beneficiaries, most rural health clinics are an essential 
source of care for the entire community, including patients 
with Medicare, Medicaid, private insurance, as well as the 
uninsured, even though they are not required to cover the 
uninsured. Rural health clinics often provide care free of 
charge to patients who are unable to pay.
    When the act was passed in 1977, projections of 
participation were optimistic. By October 1990, only 581 
clinics around the country participated in the Rural Health 
Clinic Program. Recognizing the importance of rural health 
clinics in improving access to vital health services, Congress 
enacted several amendments to the original law to encourage 
participation of providers.
    For example, in OBRA 1987, there was a mandated increase in 
the payment caps applied to this program and annual updates to 
the caps based on the Medicare economic index. Prior to that, 
we didn't have any indexing or increases in the cap. OBRA 1989 
provided Governors the option of designating health care 
shortage areas within the States, thereby increasing the number 
of areas where RHCs could potentially locate.
    This law also required that HCFA disseminate rural health 
clinic application materials--I think as alluded to by the 
previous panel--to all Medicare providers, including hospitals, 
skilled nursing facilities, and home health agencies, as a way 
of promoting participation in the program. The legislation also 
required us to expedite the approval time for rural health 
clinic certification.
    In part due to these changes instituted by Congress, the 
number of rural health clinics has grown significantly, as 
pointed out. Much of the growth in rural health clinics has 
occurred in States where there are large rural areas that for 
many years had few or no clinics. The GAO and IG are concerned, 
however, that while increases in the number of rural health 
clinics may approve access in certain geographic areas, these 
clinics are also locating in areas where Medicare and Medicaid 
beneficiaries have adequate access to other primary care.
    Let me now address some of the initiatives HCFA and the 
Department are pursuing to address the concerns raised in the 
two reports. First, a HCFA work group charged with monitoring 
the growth in rural health clinics; second, the Public Health 
Service's plans to reevaluate the shortage area designation 
process, which I will pretty much defer to the other panelists 
here; a proposed regulation that would consider a new payment 
methodology for rural health clinics; a study underway to 
evaluate access to clinic services; and legislative proposals 
that would give States flexibility in establishing new Medicaid 
rural health clinic rates that are in the President's 1998 
budget.
    We are concerned about the inappropriate proliferation of 
rural health clinics in recent years. The agency first received 
reports from State Medicaid agencies about the number of rural 
health clinics growing rapidly in 1994, and we moved to convene 
a working group in October 1994 to analyze and propose 
solutions related to this proliferation and other issues 
impacting the Rural Health Clinic Program.
    Although we certainly agree with the GAO and IG reports, I 
would point out that we began to work on payment limits and 
payment reforms 2 or 3 years ago, and think that, basically, we 
are ready to go forward with rules.
    Representatives from the Health Resources and Services 
Administration have also participated with us as partners, and 
our work group meets periodically with representatives from the 
rural health care clinic community to solicit input and gauge 
industry reaction to some of our proposals.
    One of the first issues addressed by the group, also 
identified by GAO as an area of concern, is the method by which 
the Department designates clinics. HCFA is concerned about the 
current method to establish areas and the fact that it only 
measures the number of primary care physicians to the 
population base.
    In fairness to HRSA, HRSA is also concerned and is looking 
at the issue of whether mid-level practitioners, who typically 
provide the majority of services in rural health clinics, 
should be included in that calculation. So they are beginning 
to look at that, as well.
    HCFA is concerned that all shortage area designations are 
not periodically updated, and, as such, a rural health clinic 
may be established in an area that was designated years ago but 
would no longer meet the criteria for shortage area. We are 
also sensitive to the fact, however, that the shortage area 
designations are used for a wide variety of governmental 
purposes. So any changes that need to be made to it need to 
take those broader purposes into account.
    Given that scenario, we in HCFA believe we need to take a 
look at additional tests of need beyond the two that are set 
out in the statute already, the rural provision and also the 
medically underserved. So we are looking at a variety of other 
factors that could be put into place to add criteria in 
selecting rural health clinics, in addition to the two that 
exist.
    We would consider the fact that rural health clinics 
currently, a number of them, are already located in areas, but 
that we ought to maybe take a look at nonphysician personnel, 
such as physician assistants and nurse practitioners, in 
considering future designations. We believe that additional 
tests and better measures of need will limit RHC growth to 
areas that are truly underserved, and we are working with a 
work group to develop specific proposals in this area.
    The GAO and IG reports identified the currently statutorily 
mandated cost-based payment system as another factor 
contributing to the rapid growth of these clinics, particularly 
of the provider-based variety. We believe that a significant 
reason for this growth is the differential between independent 
and provider-based. We are preparing regulations to eliminate 
the difference in payment levels and apply a payment cap to the 
provider-based rural health clinics, or at least to seek 
comment on the application of a payment cap through 
regulations.
    We are looking to get additional information about the 
relationship between RHCs and the access to care through an 
evaluation that our Office of Research and Demonstrations is 
sponsoring. Some of the questions that came up in the last 
panel about access to care issues in relation to costs that are 
rising are among the things that we will be looking at there.
    Let me mention a budget proposal in the 1998 budget that 
deals with the Medicaid provision, that would phaseout cost-
based reimbursement. Right now, as you heard, Medicaid is 
required to pay the Medicare rates. This would phaseout that 
cost-based reimbursement. In place of that, our proposal would 
provide some supplemental payments during a transition period, 
both for rural health clinics and FQHCs, as States move away 
from that to a more competitive basis.
    Just in conclusion, as you know, we agree with many of the 
conclusions of the IG and GAO reports. We recognize that 
changes need to be made. We are working on some regulations to 
make those changes and to look at other criteria that ought to 
be applied.
    I will end my statement there.
    [The prepared statement of Ms. Buto follows:]
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    Mr. Towns. Thank you very much.
    Dr. Gaston.
    Dr. Gaston. Thank you very much, Mr. Chairman, members of 
the committee. I am Dr. Marilyn Gaston, director of the Bureau 
of Primary Health Care within the Health Resources and Services 
Administration. I am pleased to be accompanied by Ms. Dena 
Puskin, acting director of HRSA's Office of Rural Health 
Policy.
    We implement safety net programs which provide primary 
health care services to underserved populations. In the Bureau, 
these include the National Health Service Corps and the 
federally qualified health centers, FQHCs, including community 
health centers, migrant health centers, health care for the 
homeless programs, and health care for public housing 
residents, and the FQHC look-alikes. In connection with these 
programs, we also manage the underserved area designation 
processes.
    Safety net programs are a critical part of the health care 
delivery system in the Nation today. As you know, that system 
is being challenged rapidly and dramatically, with profound 
effects upon these programs and, most of all, upon the people 
that they are trying to serve.
    In the last 5 years, the numbers of uninsured persons 
increased nationally by 15 percent, but the number of uninsured 
increased by 34 percent within our safety net programs, clearly 
double. These programs are also affected by decreasing 
revenues, as managed care is implemented, and by loss of 
capacity caused by closures of other safety net providers. Yet 
these programs are more essential than ever to assure access to 
health services for uninsured and other underserved 
populations.
    RHC's and FQHCs are both intended to enhance access in 
underserved areas. However, FQHCs serve as safety net 
providers, as they must provide care to all patients in their 
target populations who seek their services regardless of their 
ability to pay. This is an essential feature of safety net 
providers. As GAO points out, some RHCs are serving as safety 
net providers and providing care to the underserved populations 
on which their certification is based, including not only 
Medicaid and Medicare patients but also the uninsured and 
underinsured.
    HRSA agrees with the GAO finding that many RHCs are located 
in areas of highest need. This is occurring, in part, because 
their location is a designated underserved area alone is not 
sufficient to ensure that Federal resources are targeted to 
areas of highest need.
    In HRSA Bureau of Primary Health Care, we use the 
designations as only one aspect of determining need for Federal 
resources and funding of FQHCs. For example, the National 
Health Service Corps uses a HPSA designation as a first screen 
in determining where a provider should be placed. Other scoring 
mechanisms are then used to determine priorities among HPSAs 
and among primary care delivery sites in HPSAs, before 
available providers are allocated to those HPSAs of greatest 
need.
    Similarly, the MUAMUP designation is the first screen in 
determining potential need for a health center grant. Then a 
grant application for a health center is also required to 
confirm that unmet need in the designated community and how 
they intend to increase access. Throughout all of these 
determinations, we routinely gain invaluable input from States 
regarding the need and required intervention.
    Like health center grantees and National Health Service 
Corps placements, applicants for FQHC look-alike status must 
also provide information on additional aspects of need. So we 
use designations as a first screen and other measures of need 
as additional considerations. Most of all, we continuously 
monitor our programs for need, access, quality, and community 
impact.
    To assure adherence to the mission, we require annual grant 
or recertification applications from grantees and FQHC look-
alikes, respectively. In addition, for grantees we conduct 
monitoring activities beyond the annual applications, which 
include regularly scheduled onsite reviews.
    Finally, we agree with the GAO that MUAs be updated 
regularly. HRSA has developed a new approach to improve the 
existing designation process for HPSAs and MUAs. The new 
approach will consolidate the two existing procedures, thereby 
eliminating two overlapping lists of designations and 
additional data burdens for States and communities.
    As a result, in the future, both MUAs, MUPs, and HPSAs will 
be updated simultaneously, on a regular schedule, the one we 
are using for HPSAs at this point. We would ask States to 
review their designations annually and require States to submit 
new data for those designations every 3 years. With the new 
designation process, we also plan to begin counting nurse 
practitioners, physician assistants, and certified nurse 
midwives.
    We also agree with the GAO that the current RHC eligibility 
criterion of location in an underserved area does not go far 
enough to ensure that the program is directed and maintained in 
needed communities with critical shortages of primary care 
providers. As has been stated, additional assessments of need 
are required.
    Before an entity is certified as an FQHC or RHC, it is 
important that it documents the lack of sufficient health care 
resources in the service area and how it intends to increase 
access to health care for a substantial number of underserved 
persons. We in HRSA support HCFA's efforts to explore 
additional tests of need for RHCs, and have been working with 
them in their efforts.
    I would also like to note that just last week the 
Secretary's Advisory Committee on Rural Health adopted a 
position which supports certification of new RHC sites based on 
additional program-specific needs assessment. Clearly, HRSA 
considers State involvement in the certification process as 
critical. We have also been collaborating with HCFA in 
determining how to increase State involvement. HRSA also agrees 
with the GAO recommendation to require periodic recertification 
of RHCs to ensure that clinics continue to meet eligibility and 
need requirements.
    In conclusion, we believe all of these changes will greatly 
improve decisions around the location of RHCs and will help 
ensure that they are strategically placed. A recertification 
process will ensure whether they should be maintained in 
underserved communities.
    Provider types that are reimbursed by higher Medicaid and 
Medicare rates than others, because of their safety net nature, 
which includes FQHCs and RHCs, should be held accountable for 
receiving the special subsidy. It is imperative that FQHC or 
RHC provide increased access to health care for a substantial 
number of underserved persons.
    Given the changing health care environment and budgetary 
pressures at both the Federal and State levels, it is critical 
that Federal grant programs and financing mechanisms for health 
care services maximize their contribution to the safety net and 
increase access for the many underserved citizens in our 
country.
    Thank you very much for the opportunity to testify. We will 
be glad to answer any questions.
    [The prepared statement of Dr. Gaston follows:]
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    Mr. Towns. Thank you very much, Dr. Gaston. I understand 
that Dr. Puskin will not be testifying, so we will move 
forward.
    Let me just move to you, Mr. Snowbarger, and let you open 
up.
    Mr. Snowbarger. Thank you, Mr. Chairman.
    I have just a couple of questions. I guess I didn't realize 
until your testimony, Dr. Gaston, that we've got two different 
kinds of certifications: one is medically underserved; the 
other one is, what, health professional shortage?
    Dr. Gaston. Shortage area.
    Mr. Snowbarger. OK. I looked on the map for my State, and 
where I see these RHCs going in, there may be some areas where 
they are medically underserved or there would be a shortage; I 
see other areas of the State where there definitely is, but 
there aren't any RHCs out there. So if we are trying to target 
this relief--or maybe incentive, I ought to say--if we are 
trying to target this incentive to places where there really is 
a medically underserved or health shortage area, how do we 
change the definitions to get them focused in the right way?
    Dr. Gaston. As I mentioned, one of the things that is 
important to remember is that the HPSA--let me talk about them 
in a little more detail. The HPSA, the health professional 
shortage area, is to really look at those areas that need 
providers. The medically underserved areas are looking at 
services. Now, you can't separate providers from services, but 
that is the main intent.
    The HPSAs are published annually, and they are updated 
every 3 years. OK. The first screen for the HPSA relates to--
it's focused on providers--it relates to the physician to 
population ratio in that area, in a rational service area.
    Mr. Snowbarger. So ``provider'' refers specifically to a 
physician?
    Dr. Gaston. It does. Right. We are going to begin counting 
other providers, the mid-levels; we have not done that in the 
past. So it's talking about mainly the physician to population 
ratio, starting at a 1 to 3,500 ratio. After that, though, 
before we put any core providers in an area, we look at the 
poverty of that area, we look at the infant mortality rate, we 
look at the access barriers as it relates to distance, we look 
at low birth weight.
    So there are many other criteria that go into the 
determination, and then we take those HPSAs and score them and 
prioritize them. Then we also score the sites in those 
prioritized HPSAs. So it's a three-stage process. I think that 
is the point that we want to make.
    And we do this in conjunction with the States. So if we 
want to target certain areas, first of all, those communities 
have to ask for those designations. We don't designate them 
from the Federal Government. This is a ground-up process. So 
the communities and the States decide what areas they want to 
be designated, and then they send them to us for that. I think 
that's an important distinction, too.
    So the targeting of those areas first starts with the local 
concern, and then to get resources, to have Federal 
interventions put into those areas, we really have to look at a 
major series of steps that determine need further than just the 
HPSA or the MUA.
    Mr. Snowbarger. The statute that talks about HPSAs 
indicates that they are to be reviewed annually and, if 
necessary, revised. Have we been revising those?
    Dr. Gaston. Yes, they are reviewed.
    Mr. Snowbarger. Well, what are we revising? What do you 
interpret that statute to mean? The reason I ask is, 
apparently, it looks to me like we need to be revising the 
designation or the definition of where there is a shortage.
    Dr. Gaston. What gets revised are the resources in areas. 
OK. And this is happening very rapidly now, as you might 
expect. But what changes could be the level of poverty, it 
could be, certainly, the physician to population ratio. So all 
those criteria are subject to changes based on the environment.
    Mr. Snowbarger. But they are measured against some kind of 
standard? Let me try to do it a different way. I see a problem 
happening here. When I measure these bar graphs with, again, 
the map of my State, where these RHCs are located. I see a 
mismatch. And with the pie chart over here, I see a mismatch.
    Has there been any attempt to try to change that mismatch, 
to try to get RHCs into areas that are medically underserved 
and the health professional shortage?
    Dr. Gaston. Let me mention something very important. We in 
HRSA do not administer the RHCs. We don't know when they get 
certified. We don't know where some of them are. This is 
administered by HCFA.
    Mr. Snowbarger. OK. I'm asking the wrong person.
    Ms. Buto, same question.
    Ms. Buto. Any attempt to try to target the areas that are--
that's the issue of further additional criteria for targeting. 
We have set up this group of folks to look at those criteria. 
Some of the issues would be, can you come up with a way to 
target frontier areas, for instance, areas which are really 
underserved, that really aren't able to get professionals in 
there? That's one of the things we're looking at.
    Another thing we're looking at is, there might be different 
purchasing strategies that you need to take. For instance, in 
the budget this year, we are asking for authority so that 
Medicare can go in.
    Where we have a need and we're not able to use a major 
statutory framework to get at the need, maybe we ought to go in 
and say, we need to purchase special services in a really 
underserved area; let's see what kind of bidding we can set up 
to get interested parties into this area. That might be a more 
effective way to get at those really hard to get at areas, by 
figuring out what you need in that area to get people into it.
    So I think we've got to use more than one strategy to get 
at this issue.
    Mr. Snowbarger. Mr. Chairman, just two more short 
questions. The question may not be short, but the answer is 
expected to be. Let's put it that way.
    Have we decertified any of these areas since 1977?
    Ms. Buto. The law does not allow us to--there is an actual 
provision that grandfathers in existing rural health clinics. 
So one of the issues that I think the GAO and IG both raised 
is, if we really want to put teeth in decertification, if you 
will, there probably has to be a change in the law. That's one 
of the things we've looked at, as well.
    One issue that has to be dealt with in any provision in 
that grandfather clause would be, you know, you want to be sure 
you are not just decertifying in an area and then it becomes 
medically underserved again and you recertify. You want to be 
sure that you have criteria that get at the problem rather than 
create a churning in the system that actually disadvantages the 
people being served.
    Mr. Snowbarger. It looks like we've given an awful lot of 
incentive for some areas that may have been medically 
underserved in the past to be fully served, maybe excessively 
served at this point in time.
    Dr. Gaston. May I make one point?
    Mr. Snowbarger. Sure.
    Dr. Gaston. Just to clarify the decertification versus 
dedesignation.
    Mr. Snowbarger. OK.
    Dr. Gaston. The designation process relates to what we do 
in HRSA, MUAs, OK. There has not been a decertification, as far 
as I know, or very few, in terms of the RHCs, the clinics 
themselves. There's a constant process where we are 
dedesignating areas all the time. They lose their HPSAs, and 
then new HPSAs are designed. So that process is very fluid.
    Ms. Buto. The problem--just to get back to the connection 
to the grandfather issue--is that even after that has occurred, 
if there is one designated in that area right now, the law says 
they continue.
    And the reason, I think, originally, for that was, there 
was a lot of concern, especially as the program was getting 
started, that by the time you invested the capital and actually 
set up a clinic, that if the designation was lost, you would 
have really deterred people from getting into the program. That 
was, obviously, a long time ago.
    Mr. Snowbarger. Since the answers don't appear to be short, 
the next question will be a rhetorical one. There's a statement 
in the report that concerns me greatly. Let me just read it 
quickly.
    ``HCFA officials said that they did not establish cost 
limits for facility-based RHCs as they did for independent 
RHCs, because few facility-based RHCs were certified when the 
program began.'' Here's what bothers me: ``And it was easier to 
reimburse these RHCs the same way as Medicare paid the 
facility's other outpatient departments, on the basis of lower 
costs or charges for services.''
    That may be easy, but the time has come to put a little 
hard work into it and figure out why we're paying at different 
rates for the same service.
    Ms. Buto. Yes. And I think I mentioned that we're going to 
that. I should just say that, at the beginning, there were only 
10 hospitals. There was a real danger in double paying, because 
in a hospital accounting system, you would pay them for some of 
the overhead here, and then you would also pay in the clinic 
over here.
    So the feeling at the time was, one accountant looking at 
all the books was better than paying them out of different 
pockets. Now, we feel that, you know, that's obviously out of 
control and we need to put limits on.
    Mr. Snowbarger. Thank you, Mr. Chairman.
    Mr. Towns. Thank you.
    We have a vote on, so what I would like to do is to finish 
with this panel and then bring the next panel up.
    Let me begin by saying that GAO recommended four changes to 
the Rural Health Clinic Program. Which of those recommendations 
do you agree with, and which ones do you disagree with? Or if 
you want to add some more, fine.
    Ms. Buto. We basically agree with all of them. Two of them, 
I think, were legislative changes, and two were administrative 
changes. One of those, as I say, we're already planning to 
propose a cap on the provider-based. And the other was to apply 
some screens in terms of reasonable costs, if I recall. I may 
be getting IG and GAO mixed up. We are also doing the 
development of screens. So we're doing both of those 
administratively, and the legislative proposals we also agree 
needed to be addressed.
    Dr. Gaston. We also agree that there need to be further 
determinants of need. There needs to be a recertification 
process and some monitoring.
    Mr. Towns. In your testimony, Dr. Gaston, you used the term 
``periodic'' recertification. What do you really mean by that, 
every 3 years, every 5 years, every 6 months? What do you 
really mean?
    Dr. Gaston. OK. Again, we don't certify or recertify the 
RHCs. We are involved in that process as it relates to the FQHC 
look-alikes, which we also do conjointly with HCFA and really 
could serve as a model of how we could do the RHC program. But 
we designate areas of underservice. They are looked at annually 
by the States. We do this in conjunction with the States. Then 
their designation is either given to them, or they are 
dedesignated on a 3-year basis.
    Mr. Towns. Right. That's the test for need.
    Dr. Gaston. Yes.
    Mr. Towns. OK. Can HHS meet the statutory 1-year 
requirement for updating the health professional shortage area 
list? If not, how long would it take you to do it?
    Dr. Gaston. Well, we are assessing them annually. The 
States do that. We rely on the States to do that. And we do it 
every 3 years; we do a complete one. It's very labor intensive, 
in terms of finding the data. So to do it annually, when we are 
not convinced that the criteria need to be looked at that 
often, we have not considered moving to a complete assessment 
annually. We do that every 3 years, and that seems to work 
fine.
    Mr. Towns. Let me ask a question, Ms. Buto. How much time 
and money is needed to conduct the type of periodic 
recertification recommended by GAO? How much money would be 
involved in doing that; do you have any idea?
    Ms. Buto. I don't. We have a general survey budget in 
Medicare. Unlike someone else's statement in the earlier panel, 
Medicare certifies hospitals and nursing homes, home health 
agencies, and many other providers, for Medicaid. So this is 
not the only instance in which we have the same standards. So 
we have to budget that. When the budget for the agency comes 
up, we usually line item how much we can allocate to each of 
the different categories.
    I can't tell you specifically, if we were to go to 
recertification, how much it would cost. We would need to 
reshuffle some of our money, because that hasn't been growing. 
We have had to reallocate and target that funding.
    Mr. Towns. Thank you very much, Mr. Chairman.
    Mr. Shays [presiding]. I thank the gentleman.
    Unfortunately, because I wasn't here during the previous 
questions and some of the statements, what I may do is cover a 
little bit of old ground, but I want to just establish a sense 
of what the obstacles are in this situation. Basically, the GAO 
is saying that 90 percent of the people who are being served 
would have been served anyway. So first I need to be clear with 
both of you whom you have your disputes with: the GAO or the 
Inspector General.
    Ms. Buto. I think we said earlier we really don't have 
disputes with the GAO and Inspector General around the 
recommendations. There are a number of areas where I would 
dispute or at least raise the question that I don't think that 
they had the time or the focus of their review was in the same 
direction.
    The 90 percent is a good example. Ninety percent may have 
been served. I don't think we know many of those would actually 
have received the same range of services. They may have had a 
provider; it may have been an emergency room. Again, it depends 
how the question was asked and how extensive the services were 
that were available. It may be some smaller percentage, but the 
fact is, we all know that there are many of these rural health 
clinics that are in areas where there are plenty of other 
providers.
    The issue of overpaying them is really, again, related very 
much to the managed care penetration, both in Medicaid and 
Medicare. Particularly where physicians are seeing themselves 
moving into managed care in Medicaid, the rural health clinic 
option has become more and more attractive, even more 
attractive because the fee schedules themselves are going away 
in Medicaid and being replaced by negotiated managed care 
arrangements.
    In Medicare, it's more complicated. We actually have an 
abuse in the program where some physicians have actually picked 
and chosen between sometimes billing us as a physician and 
sometimes billing us as a rural health clinic. Our regulations 
are intending to address that issue, as well, because there are 
fees in the Medicare physician fee schedule that are higher 
than what you could get as an RHC.
    We find that some billings are occurring for those fees. 
And then when the clinic rate is higher, billing is occurring 
there. This is not a widespread problem, but it is enough of an 
issue that we're going to draw some very clear lines about what 
an RHC is, and if it's an RHC service, you cannot bill the fee 
schedule.
    So those are the kinds of things we're finding that I'm not 
sure GAO or IG went into, because that wasn't the line of 
inquiry. So the nature of service, if you will, and the reasons 
people are doing RHC billing may vary, and there actually may 
be worse abuses in some other areas related to lack of clarity 
here.
    Generally, we agree with the recommendations.
    Mr. Shays. Well, I think your key point is that, if it was 
even 70 percent of the problem, it would be bad. Now you are 
going to decide at what level people are being served. I have a 
sense that you might have a disagreement as to what level. So, 
in essence, you basically buy into the fact that this system is 
broken.
    Ms. Buto. That's right, that we need to fix--we either need 
to narrow those criteria to really get at the areas of need and 
change the payment limits to really discourage that 
proliferation on the provider-based side.
    Mr. Shays. Usually, if there is 10 percent type of abuse in 
the other way, you would say we're starting to see a problem. 
So 10 percent may be working the way we want, and 90 percent 
not working the way we want raises some questions, obviously, 
that really make us wonder: are we approaching this in a quick 
enough manner? And I'm not getting a sense that that's 
happening.
    Dr. Gaston, where do you agree or disagree with the general 
thrust of the Inspector General's or GAO's report?
    Dr. Gaston. We agree that the determination around need and 
where they are placed really needs to be refined and looked at. 
The way we do it in the Bureau is the way we would recommend 
doing it, that the designations, as they are published, are 
only screens, first-level screens, and then, after that, you go 
through a whole list of other need determinants, along with 
access, other health services, the community impact.
    So these entities really have to show that they are 
performing the mission, they are increasing access, and having 
an impact. That's the first thing. They certainly need to be 
recertified so that, over time, you do have to make decisions 
as to whether that is continuing. So the monitoring and the 
recertification is another key aspect.
    We certainly agree that this has to be done in conjunction 
with the States. We cannot do that in isolation. So all these 
decisions, the States have to have input in terms of data, 
input in terms of their priorities, input into interventions 
they think should happen, et cetera.
    Mr. Shays. One of the things that we determined in looking 
at other areas where we wanted to change rules, the rules are 
basically stacked against the people who have to pay the bills, 
because it takes us so long, in our regulations and rules, to 
change them.
    So if the system favors the seller--and I consider the 
government the buyer; in other words, we are paying for it--if 
it favors the person who is providing the service, they are 
going to readily want to take advantage of it. If it doesn't 
favor them, they simply aren't players. So we only lose. In 
other words, we're just going to continue to pay out.
    I need to get a sense of how we can move more quickly. I 
need some specific recommendations of what you suggest that we 
do, so that this committee staff can write a report soon, and I 
can go to the leadership on both sides of the aisle and say, we 
need to take action. So tell me some very real, specific things 
we can do right away.
    Ms. Buto. We're about to issue the rule on putting the 
payment limit on the provider-based side. Clearly, as you say, 
regulations take a while.
    Mr. Shays. How long will it take? Just run me through that.
    Ms. Buto. The regulations take--a good estimate is a year 
from the time that they go out in proposed to the time they are 
actually finalized and implemented, because we give our 
intermediaries a chance to put them into place. If there were 
legislation, for instance--and I think it's fair to say we 
would support legislation of this sort--that were to make the 
same change, we would still have to give our contractors time 
to make the change, but it would be quicker.
    Rulemaking is important for another reason. I just have to 
say this. We often create unintended consequences, and we're 
concerned about that, and that's why we seek public comment. So 
there's a balance. But in terms of quickness, you know, 
legislation is quicker than regulations.
    Mr. Shays. Do you both agree? I'm sorry. Dr. Gaston.
    Dr. Gaston. Yes.
    Mr. Shays. What could be done relatively quickly?
    Dr. Gaston. Well, from our side, we already have revised 
regulations as it relates to the designation process that I 
described in my testimony, that would improve what we are doing 
in terms of MUA and HPSA designations. Hopefully, that will 
proceed. Again, we have to go through the same process that 
HCFA is having to do, in terms of rulemaking, et cetera. But 
certainly that will be on board very soon.
    Mr. Shays. The GAO report came out in November 1996. Why do 
we not yet have suggested rule changes?
    Ms. Buto. The rule changes--and I mentioned a little of 
this before you came in--involve more than just the payment 
limit. They are going to address some commingling of funds 
between physicians who are billing us sometimes on the fee 
schedule, sometimes as RHCs. They are going to incorporate a 
number of other changes the law has made over time.
    So it is a process that--by the way we do rulemaking, we 
try to involve interested parties, beneficiaries, then we clear 
them with our lawyers and issue them. That usually does take a 
few months. The IG's office has also been involved in looking 
at our rules in the Department. It just takes that long, quite 
frankly, to do.
    Mr. Shays. Let me back up a second. Why did it take the 
GAO's report to get us to take some action? Why didn't we do 
this 5 years ago?
    Ms. Buto. And I disagree with that, because we started the 
rulemaking effort way before the GAO issued its report. We 
began working on the commingling issue a couple of years ago, 
just gathering the data on what was happening, because you 
can't assume it's happening everywhere until you look at what 
records are being billed, as well as the cap issue. We have 
been working sort of in tandem with the Inspector General and 
others on this, and gathering the information.
    Part of it is, their information has helped us refine some 
of the policies in the regulation, but we did not start after 
they completed their report.
    Mr. Shays. Either way, it's not a good commentary, frankly, 
on HCFA. If you started sooner, you should have been done 
sooner. And if you started later, you should have started 
sooner. So from my simple mind, you basically want people to go 
into rural areas, doctors; you want to provide health care in 
rural areas.
    So my simple mind says, there are reasons why people don't 
do it. The reason they don't do it is, there is not a large 
population; therefore, they don't get enough traffic. And maybe 
they don't even want the lifestyle of a rural area. So there 
has to be some inducement. So it seems logical that we should, 
in fact, pay more to serve a rural area.
    My simple mind says, though, that if someone can go 10 or 
15 or 20 miles away and get that same service, that maybe then 
you don't need to have a higher reimbursement rate. And it 
seems to me that that's a no-brainer. Tell me where I'm wrong.
    Ms. Buto. You're not.
    Dr. Gaston. We agree with you.
    Ms. Buto. We agree with you. What we are doing is--because 
certification is still in our court, when new ones come in, we 
really are focusing on the areas where there aren't any, where 
we really, genuinely don't have providers, and we're giving 
those the highest priority. But right now, the way the law is 
structured, there is no ability, once you're certified, even if 
the designation changes, for you to be out of the program, 
nondesignated.
    So we feel that, No. 1, we've got to move on that issue of 
adding more criteria.
    Mr. Shays. You're talking about being designated as a rural 
health clinic.
    Ms. Buto. That's correct.
    Mr. Shays. Let me ask you this: Why can't you have two 
levels of rural health clinics, those that are clearly isolated 
from other health care facilities, and those that aren't?
    Ms. Buto. You can. I mentioned also earlier that we're 
looking at the issue of frontier areas where there really is a 
dire need, where we can really focus this effort. And that's 
one of the things that we are likely to be having a proposal to 
address.
    Mr. Shays. I guess the thing that concerns me is that there 
is a political problem. The political problem is that once you 
have allowed people to invest in these facilities and develop a 
political constituency, we're not going to change it. Yet if 
the number was 20 percent who really couldn't have gotten 
health care without this, but if we're looking at anything to 
more than 75 percent, it tells me that the system had to have 
been sick for a long time.
    I don't mean to throw stones at HCFA or anyone else, 
because I know that politicians, of which I am one, sometimes 
come in and say, why didn't you do this or protect this person. 
I understand, but it strikes me that there is a tremendous 
imbalance at HCFA, where you are so sensitive to the criticism, 
to what doctors might say, and to what the politicians might 
say about you cutting off services or making it more difficult 
that we now end up with an abuse like this.
    For me, recertification should be something that shouldn't 
take a long time. That's just a no-brainer that we would 
require recertification. Why do we have to compile all these 
different rules? I don't like to be in a large group sometimes, 
because you're only as quick as the slowest person in the 
group. I got that same image when you were talking about where 
you've got all these different rules you want to change.
    So things that we know we can do now, we're waiting until 
we get some other things that we might want to do, and you want 
to package them all in one. Tell me why we have to package them 
all in one.
    Ms. Buto. They are done. They are very close to being 
issued, so I think, at this point, we ought to just proceed 
with those. They are related. The issue of a cap on provider-
based entities and the commingling of funds, they are all 
related, because there are different ways to push the balloon, 
if you will.
    Mr. Shays. And recertification?
    Ms. Buto. Recertification is in the statute. We cannot do 
it under the law. That's the problem.
    Mr. Shays. OK. Have you asked anyone in Congress to 
recertify? Prior to this effort, have you made an effort, or 
anyone?
    Ms. Buto. We have not asked for legislative authority to 
repeal that or to change that, but it is one of the three or 
four things we are working on.
    Mr. Shays. How long will it take you to do that?
    Ms. Buto. I think the next couple of months developing the 
proposal.
    Mr. Shays. No, that takes us too long. We're not going to 
wait a couple of months. I mean, why would we have to wait a 
couple of months to have you write a letter to ask us to 
recertify?
    Ms. Buto. Oh, to ask for the authority?
    Mr. Shays. Yes. In other words, why can't you all tell us? 
Put some of the burden on us. Why can't you tell us these are 
the things you want us to do, and we will work on them? I'll 
give you an example. In this very committee, we had the issue 
of people ripping off Medicare and Medicaid. It was not a 
Federal offense to commit fraud, except by wire or mail, and 
health care fraud was not a Federal offense.
    We had a hearing like this, and it became evident to us, 
and the administration was asking us to change it. We went to 
our leadership, and we put it in the health care reform bill. 
But, I don't see why we would wait a day.
    Ms. Buto. We'll take it back and get back to you quicker.
    Mr. Shays. OK. I would like to say that by the end of this 
month, if you could make some preliminary suggestions of things 
that you would like us to do statutorily. We need to get it in 
to start that process, and then, if you want to finalize it, or 
even if you want it to be oral in the next 2 weeks and then 
tell us in a month, but in the next 30 days. It seems to me 
that you have studied this long enough and you can ask us to do 
certain things.
    Ms. Gaston, is there anything, statutorily, that you would 
like us to do?
    Dr. Gaston. No. I would like to make a point, though, that 
you made, that was very important. We want people to go into 
underserved areas. What kind of incentives can we give them? As 
we look at cost-based reimbursement, that certainly has been an 
important one. We fully support those programs that are meeting 
the mission of seeing everybody, increasing access, everybody, 
regardless of ability to pay, do need cost-based reimbursement.
    Also, the ones that are increasing access through enabling 
services, that are dealing with language barriers, et cetera, 
those kinds of incentives and those kinds of payments will keep 
them alive. So I want to make that as a point as that is being 
considered.
    Mr. Shays. You are suggesting, then, you have a two-tiered 
billing.
    Dr. Gaston. Yes.
    Mr. Shays. Some rural health care clinics won't get that 
kind of reimbursement; some will.
    Dr. Gaston. It has to be the ones that are meeting the 
mission of serving the underserved, increasing access, 
improving health outcomes, those are the ones that then get it.
    Mr. Shays. Is there anything that you all wish we had asked 
or statements or comments you want to make?
    Doctor, do you have any comment?
    Ms. Puskin. The only clarification is, it's very important 
to understand what was said earlier about the very critical 
role of Medicare and Medicaid in assuring that services are 
available in rural areas. These are communities that often the 
providers have 60, 70 percent of their patient load is Medicare 
and Medicaid.
    So the role of Medicare and Medicaid in stabilizing access 
to health services in those areas is very critical. Therefore, 
this program and its role in stabilizing the availability of 
services needs to be considered very, very carefully. So as we 
look at certification and recertification, we certainly feel 
that we need standards that are better than the current ones 
that we have.
    As we look at it, it's very critical, as we look at 
underserved, the potential for communities to become 
underserved in the future is very critical to look at, 
particularly, I think, as we look at the history in the past. 
When we didn't have supportive services, special provisions for 
hospitals, for example, under Medicare, we saw that hospitals 
went under very quickly when we removed those underpinnings.
    Mr. Shays. You are triggering a question that I do want to 
put on the record. In some of our urban areas we have 
community-based health care clinics that basically get 
reimbursement from Medicare and Medicaid, but also, frankly, 
provide health care services and aren't properly reimbursed. 
Will the rural health clinics come to me and say, you are 
seeing one part of the story; the other part of the story is 
that the extra money we get from the Federal Government has 
enabled us to serve other people who are the working poor? Will 
that be one of the claims that will be made?
    What I'm trying to understand is, it seems so illogical 
that we could have allowed it to get to this point, there must 
be something I'm just not getting. For me, it should have been 
dealt with years ago, and I should have known about it years 
ago, and we should have dealt with it years ago, if it has 
gotten so bad. What am I missing here?
    Ms. Buto. I think what you are missing, what we all were 
missing for a while, is that a big part of this problem is in 
Medicaid, and it took us a while to understand the dimensions 
of what was going on in Medicaid. That is more than half of the 
growth issue. The other big part of this issue is provider-
based clinics growing out of control, and that very much is 
related to the cap.
    Were those two things really addressed--and, as I say, we 
have a legislative proposal on the Medicaid side and the cap on 
the Medicare side--then I think Dena is right. What we have to 
look at, and the tough thing about writing back to you in a 
month, is trying to develop the right criteria so that you're 
not putting everybody at risk where you really need those 
critical clinics. That's the part we're really going to have to 
address.
    Mr. Shays. Let me ask you this. Really what I would like is 
there to be some oral communication between this committee and 
your staff in the next 2 weeks, telling us where you think we 
could logically move and where the trouble points are, and that 
timeframe could obviously be adjusted then. It's just that I do 
think that we have to bring some kind of timeframe, some kind 
of deadline.
    Given that I know the regulation process and the statutory 
process, I'm only here for, basically, 18 more months. That's 
the way I'm thinking. So I don't think I have that kind of 
timeframe to just go on indefinitely.
    May I just clarify? Because HCFA focuses more on Medicare 
than Medicaid, obviously, you're saying that the Medicaid part 
you lost.
    Ms. Buto. The data we get from the States varies 
tremendously by State. So we have heard episodically about it, 
but until we had some of this very state-specific study that 
both GAO and IG have done, we haven't had that kind of detail 
in some of the State experience.
    Mr. Shays. Doctor, do you have anything you want to add?
    Ms. Puskin. One of the things is, you asked a question, if 
these clinics use the money to serve the uninsured, and I think 
that's a very important role. These clinics were designed, 
however, to ensure that there was access for the Medicare and 
Medicaid population. We did do a survey in 1994, when we had 
about 1,300 clinics, and we did find that about 16 percent of 
them had more than 25 percent of their volume in the uninsured.
    We don't know exactly where that stands now. It is 
important to State, the mission for these clinics is to 
ensure--and we need to make sure that they do this--serve the 
Medicare and Medicaid population and ensure access for them. It 
is a much more complicated question when we get to the 
uninsured, because that is not necessarily part of their 
mission by statute.
    Mr. Shays. It's not part of their mission, but they may 
have taken it on.
    Ms. Puskin. In our survey, a significant percentage had a 
very high percentage of uninsured that they provided care to.
    Mr. Shays. That is a good lead to the next panel. Let me 
just ask each of you, though, tell me the most difficult 
political obstacle. Clearly we have to define exactly what we 
want, but on merit, we need to make major changes and as 
quickly as possible. Define for me the political challenge that 
HCFA might have, HHS, in general, might have on this side. What 
are the political challenges?
    Ms. Buto. It's a very general one, and that is that we 
continue to see real problems in rural areas in terms of 
access, both in physician access and practitioner access. You 
will see we are proposing some greater access to nonphysician 
practitioner services. So there is this bigger problem. The 
problem in dealing with this one is not overdoing it in a way 
that we have done harm.
    Mr. Shays. Let me put it in my words. Since it has the name 
``rural health clinic,'' just the name alone, if we make any 
changes in rural areas, people will say, what are doing 
changing a system that is helping us? Even if they are only 
getting 10 percent of the benefit, they are fearful that some 
change could be harmful. Whereas, we've got to sell them on the 
fact that we really want to do a lot more in rural areas to 
meet their needs. But that would be one.
    Ms. Buto. I see that as the biggest one.
    Mr. Shays. Any others?
    Dr. Gaston. I would agree.
    Mr. Shays. Is another obstacle that we have people 
entrenched in the system that are making a windfall; they have 
a collective mass that means that they will be able to prevent 
change?
    Ms. Buto. I may be naive on this, but I think there's 
enough concern from good rural health clinics and the 
legitimate providers that everyone wants to clean up that part 
of the problem where there are entrenched and undeserving, if 
you will, entities involved in the program.
    Ms. Puskin. Can I just say, one thing that you need to 
recognize is, some people see rural health clinics and the 
toehold that some of the urban may have in it as actually a 
good thing, because what they are seeing is the need, using it 
as a tool to organize care in rural areas, and that what you're 
doing is creating the linkages that help to prepare those rural 
areas to become part of networks of care that are more 
effective.
    Now, in fact, there is a lot of abuse, but I think, as you 
are looking at the system, rural health clinics have a 
reputation for both good and bad, for the good that they do in 
helping to maintain services out there. So the political 
problem you face is a concern of throwing the baby out with the 
bathwater.
    Mr. Shays. One last question: The two-tier approach, will 
that encounter a lot of opposition?
    Dr. Gaston. Yes, it will.
    Mr. Shays. But that enables us to get around the whole 
issue of what is truly designated as a rural area. I mean, 
that's the way we can deal with that problem; correct?
    Dr. Gaston. No. No, that's not going to deal with that 
problem.
    Mr. Shays. Let me put it this way: An area that I might not 
consider rural, the census will call it rural--we're not going 
to change that. You are recommending that we not change that.
    Dr. Gaston. No, the first thing we have to do is really 
define where they are, in terms of underserved areas.
    Mr. Shays. Right.
    Dr. Gaston. That has to be fixed right away, and I think 
that can be fixed right away.
    Mr. Shays. OK. Thank you very much.
    We will call our last panel. Bill Finerfrock, executive 
director, National Association of Rural Health Clinics; Tom 
Harward, physician assistant and executive director, in West 
Virginia; and Robert J. Tessen, co-founder and first president 
of the Texas Association of Rural Health Clinics.
    If you would all remain standing.
    [Witnesses sworn.]
    Mr. Shays. Let me just say that you are free to read your 
statements, but sometimes, as the third panel, you can almost 
be more effective just responding to what you have heard. So I 
would encourage you to do that, but do whatever you are 
comfortable with. I want to address what you're hearing before 
we even start our questions.
    We will just go down the line.

  STATEMENTS OF BILL FINERFROCK, EXECUTIVE DIRECTOR, NATIONAL 
  ASSOCIATION OF RURAL HEALTH CLINICS; TOM HARWARD, PHYSICIAN 
ASSISTANT AND EXECUTIVE DIRECTOR, BELINGTON CLINIC, BELINGTON, 
WV; AND ROBERT J. TESSEN, M.S., CO-FOUNDER AND FIRST PRESIDENT, 
   TEXAS ASSOCIATION OF RURAL HEALTH CLINICS, NATIONAL RURAL 
                       HEALTH ASSOCIATION

    Mr. Finerfrock. Thank you, Mr. Chairman.
    I think I would prefer to perhaps respond rather than 
recite what is in the testimony, because I think there are some 
important things that have been brought out here today and some 
things that perhaps need some clarification and explanation.
    First, as was mentioned, this is the 20th anniversary of 
the Rural Health Clinic Program, 1997, and I think it's 
important that Congress take a look at the program at this 
time. What we're finding is that, while the Rural Health Clinic 
Program has not changed substantially over the last 20 years, 
the world in which rural health clinics operate has changed.
    So while we didn't see tremendous growth in the early 
years, changes in Medicare, Medicaid, and other areas, managed 
care, as has been mentioned, has created perhaps an opportunity 
for folks to take a look at the Rural Health Clinic Program 
that didn't exist in the past.
    I think it's important. We had the pie chart over there, 
and you focused somewhat on ``rural'' as part of what is the 
problem. The statute all along has defined ``rural'' as a non-
urbanized area. So for the GAO report to say at the outset that 
the premise of the program was to put practitioners in 
underserved, low-density, low-populated areas is really an 
inaccurate reflection of the record.
    In fact, at the time the Rural Health Clinic Program was 
created, there was very little discussion about the size of the 
community in which the clinic was located. In fact, the Carter 
administration had proposed that there be no restriction on the 
size of the community, that really what the focus was on was an 
underserved area, that what we were trying to do was provide 
access to underserved populations.
    Congressman, in Brooklyn, you've got underserved 
populations even though you've got a million people who live in 
Brooklyn. So population is not your determiner of whether or 
not a community is underserved. So no one ever sat down and 
said, ``Well, are you a population of 8,000 that is adjacent to 
another population,'' to a great degree; they said, ``Are you 
underserved?'' And therein lies the problem.
    We have a situation that has evolved over the last almost 
18 years where our definitions and what we define as 
``underserved'' have really become outdated and inefficient. If 
you look, as has been mentioned, rural health clinics are 
supposed to be in underserved areas, defined as underserved 
areas or health professional shortage areas.
    The MUA lists haven't been updated since 1981, which means 
that they were probably using data from the late 1970's to make 
those designations, if you look at the way we do data 
collection. So we're sitting here in 1997 certifying clinics in 
areas that were defined as underserved based on information 
from 1979. That doesn't make any sense. We have to update those 
medically underserved area lists, as has been mentioned by 
others.
    In that regard, we would support an initiative to change 
the statute to put the words ``currently certified'' into the 
statute, with ``currently'' being defined as the area having 
been reviewed within the last 3 years. In other words, 
tomorrow, if that were to be in law, if someone were to seek 
certification as a rural health clinic and use the MUA list, we 
went to the MUA list and said, ``Sorry, this designation was 
done in 1981. You can't have it until you come back to use with 
more accurate, up-to-date information.''
    We think that is absolutely critical, and we think the law 
needs to be changed to incorporate that into the statute, to 
give us that ability to have some degree of reliance that the 
information is at least timely and current.
    We also believe that there is a problem with the cap that 
does not exist on provider-based, as you have heard, relative 
to the independent clinics. I would just say--and you started 
to get to this toward the end of your conversation with the 
previous panel--we've known about this problem for a long time.
    The Health Care Financing Administration embarked--over 2 
years ago, they announced in the Federal Register that they 
were going to develop regulations to address this particular 
problem. The rural health clinics community has been waiting 
for over 2 years for HCFA to publish regulations so that we 
could move ahead to begin to close what we see as a very 
serious gap in this process.
    So we would encourage, as a community, the rural health 
clinics that I speak on behalf of, that we move ahead 
expeditiously in this area. That having been said, though, I 
think it's important, you had another chart up there, and I'm 
sorry it's no longer there, but it looked at the three 
different types of reimbursement. There was blue bar, a green 
bar, and a red bar.
    The blue bar looked at what clinics get through traditional 
Medicaid. The green bar was what clinics get that are hospital-
based. And the red bar was independent clinics. That's really 
not an accurate comparison or a fair comparison to make. In 
many respects, you are comparing apples to oranges.
    Let me give you an example. Under the Medicaid program, as 
they mentioned, you had what was an office visit that might be 
charged at $25, and that was compared to a rural health clinic 
visit where the practice might get $56 or a provider-based 
clinic where they were going to get some higher amount. What 
that's not accurately reflecting is that the independent rural 
health clinic and the provider-based clinic are based on 
aggregate costs; it's an all-inclusive rate.
    So if a Medicaid beneficiary under traditional Medicaid 
comes into a physician's office and has an ear infection, which 
is a fairly simply diagnosis to undertake and fairly simple 
prescription, it's a short visit, Medicaid pays that practice 
$25. That same patient goes into a rural health clinic, they 
are going to get $56. Seems like a pretty good deal.
    But 2 days later, that same patient, that same mother 
brings that child back, and she has fallen off her bike, she's 
got a wound that perhaps needs suturing, needs debridement, 
needs bandaging, may have a suspected broken bone. That clinic 
has to do an x-ray, has to suture the wound, has to bandage it, 
has to cast and set the fracture.
    The clinic is only going to get $56 for that visit, even 
though, under traditional Medicaid, they might get $120, 
because an office visit is not just an office visit. Under fee-
for-service, you have to add in all of the ancillary, 
additional costs that a practice can bill for. Rural health 
clinics don't do that. They look at the entire cost of 
operating that clinic on an annual basis and then aggregate 
that and bring it out to an average.
    So some patients, as would be shown there, you're going to 
win on. But what that fails to show is that there are a lot of 
patients on which you're going to lose money on that particular 
encounter. So we need to really understand what cost-based 
reimbursement is.
    Mr. Shays. Is that independent and provider both?
    Mr. Finerfrock. In provider-based clinics, it's a little 
bit different. In my testimony, I give you another example of 
where that somehow can be very misleading the way that is 
characterized.
    A provider-based clinic is paid based on what is referred 
to as the lesser of cost or charges, and it's a step-down 
process in their accounting that is done through the hospital. 
So there is never a per-encounter rate that is done for a 
hospital-based rural health clinic.
    The figure that you saw there is that GAO went in after the 
fact and looked at the aggregate that that hospital was 
reimbursed for its clinic, then looked at the number of 
patients they saw, and did a calculation. But that clinic was 
never reimbursed on a per-encounter basis.
    Why that can be very misleading, in my testimony I give you 
an example. You have three clinics that all cost the same 
amount to operate, $250,000, let's say. They are identical in 
every way: overhead, services, the health professionals that 
they employ, the salaries that they pay each of those health 
professionals. The only difference is one is located in a 
community with 1,000 people; one with 3,000 people; and one 
with 5,000 people.
    If, on average, every patient visits that clinic two times 
a year, you're going to have 10,000 visits, 6,000 visits, and 
2,000 visits. What GAO has done is taken the $250,000, in the 
one case divided it by 10,000; in another case divided it by 
6,000; in the other case divided it by 2,000, and come out and 
said, ``Well, geez, in the community of 1,000, we're 
reimbursing these people $125 per encounter, and in the other 
community we're reimbursing them $25 per encounter.''
    The point is that in the low-density population, by virtue 
of the way they are doing their calculation, it's going to come 
out with a very high per-encounter rate. Now, we can argue 
whether or not that is fair or unfair, and so forth, but the 
point being that there is a volume factor here that comes into 
play. When you are talking about low-density areas, as they 
are, by definition you are going to have a high per-encounter 
cost, because you have a low patient volume.
    Mr. Shays. But they are not really talking about low 
density. In some areas, they aren't low-density at all.
    Mr. Finerfrock. They may not be. In some areas, they are 
not. I'm just saying that looking at a provider-based clinic 
and doing the calculations the way they do it can present a 
very misleading picture of what may or may not be occurring.
    I will let it go on, and then we can answer questions.
    [The prepared statement of Mr. Finerfrock follows:]
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    Mr. Shays. Mr. Harward.
    Mr. Harward. Thank you for the opportunity to be here. In 
this setting, I'm about as nervous as some of these people 
would be feeding my horses. So I'm going to stick with my 
statement, but I think that it addresses what's going on here.
    Mr. Shays. Let me just say something to you. We all get 
nervous sometimes before this committee, for different reasons. 
So we're happy to have you read your statement.
    Mr. Harward. Thank you.
    Mr. Shays. And don't rush when you read it.
    Mr. Harward. OK. Thank you very much.
    Thank you for the opportunity to comment on the Rural 
Health Clinic Program. My name is Tom Harward. I'm a physician 
assistant, and I practice in a small community clinic in 
Belington, WV. I've been the only resident health care provider 
in our town of 1,800 for the past 19 years.
    There are other health care services in towns 14 to 16 
miles away. Although not every single person in Belington uses 
the clinic, I believe that most take a certain amount of 
security in having the clinic there. I'm equally sure that the 
RHC Program has been valuable to many other rural areas in West 
Virginia.
    In 1985, I talked a friend of mine into relocating to a 
small town called Riverton. Riverton has about 500 residents, 
and its' clinic had closed. The town is on a fair-sized creek 
in the mountains, about 50 miles east of where I practice.
    About 2 weeks after he arrived, he found himself, along 
with his wife, mother-in-law, and 4-year-old, sitting in a barn 
loft. He was watching his home and about half of that town 
float down the creek. I had a little trouble looking him in the 
eye for a while after that flood, but he rebuilt his home, and 
he rebuilt his clinic. He is still practicing there today.
    My friend is a PA. I think he represents the hearts and 
guts about what non-physician providers are supposed to be 
about, and that is cost-effective care, particularly to 
underserved populations. That's what the Rural Health Clinic 
Program is supposed to be about, a lean, cost-effective program 
providing care to rural and underserved populations.
    Perhaps the respective agencies and professions need to be 
reminded of this focus on occasion. Perhaps we need our 
collective professional feet held to the fire a bit. So be it. 
But like the lady said earlier, don't throw the baby out with 
the bathwater.
    The GAO report does not make good reading for those who are 
advocates of the Rural Health Clinic Program, particularly when 
it States that it was adrift, without focus. I cannot speak for 
the areas mentioned in the report. I found it well written, but 
I know it doesn't reflect anything about my clinic, and I know 
it does not generally reflect what has transpired in West 
Virginia.
    Our clinics are in rural areas. They do serve rural 
populations. They are also in areas where the weather can be 
treacherous, the terrain rough, and there is often no public 
transportation. The GAO report cited a failure to increase the 
number of patients served. When I joined our clinic in 1978, we 
saw less than 3,000 patients a year. This year we will see 
nearly 14,000.
    The report cited a failure to increase the number of health 
care providers. When I began, there was a physician a half day 
a week and myself. Today, we've got another full-time PA and a 
half-time OBGYN nurse practitioner. Two family docs give us two 
half-days a week each; a pediatrician, the same; and a surgeon 
also comes in. In the western end of the county, a new 
provider-based RHC has brought in another family physician and 
a PA.
    Mention was made in this report of the failure to provide 
care to the underserved and a lack of a sliding fee schedule 
for this group. We do offer a sliding fee schedule. We provide 
care for every single person who walks through the door and 
asks for it. We have programs for indigent children, adults, 
and seniors.
    The report was critical of the cost-based system whereby 
high overhead and administrative costs resulted in counter 
rates which, in some cases, were cited as $200. The two 
provider-based clinics in the western end of our county have 
rates of $52 and $56, respectively. I represent the 
administrative overhead of our clinic, and I see 4,000 to 6,000 
patients a year. Our rate is $38, and I believe it is good 
value.
    For this $38, we are able to provide our community with a 
clinic that is open 5\1/2\ days a week, a call system where 
help is available 24 hours a day, 7 days a week, a 
comprehensive family practice situation where we can provide 
both inpatient and outpatient care, including obstetrics. We 
have a house call service that reaches hundreds of the elderly 
and disabled a year. And we have health programs such as 
cervical cancer screening and the pediatric health service.
    We also have two innovative projects--and I want to make 
this clear--that are not financed by the Rural Health Clinic 
Program, but because of the stability we have by it, we've been 
able to move forward on these. We have one of the finest 
school-based clinics in the State. We provide screening 
services there, acute care to kids who can't get services 
elsewhere, and health education programs.
    We also have built, from donations in the community, 
because of the support that our clinic has, a preventive health 
center that is opened from 7 a.m. until 8 p.m. We offer 
nutrition counseling here, exercise instruction, aerobics, 
water aerobics, hydrotherapy services, stretching exercises for 
seniors, et cetera. We feel like that people need to take 
responsibility for their own care, and this is our attempt.
    I would like to close with these final thoughts. I grew up 
here in the Washington area. I left Connecticut Avenue and 
Chesapeake Street here about 20 years ago. And I know that we 
are not completely unique, or my area is not completely unique 
in its weather and terrain, but people do come to care late and 
they are sicker.
    We deal with an extraordinary number of people that have 
diabetes, obesity, chronic obstructive pulmonary disease, and 
other illnesses. We provide care to families who really do 
exist on $6 and $8 an hour, in areas where the unemployment 
rate is likely to run 12 to 22 percent.
    I just ask you to remember, as you take a look at this 
program, that it has been important to us. We have adhered to 
its original concept. Obviously, it needs fixing. Reasonable 
caps would be a good start, and also redesignation.
    I want to throw one issue out here in the comments made 
today. We talk about decertification. I've been there 19 years. 
I'm 56 years old. If you decertify my clinic, I can't practice. 
I put my whole life in this place, because I would not be 
eligible to be reimbursed under Medicare. So if you fix this, 
it needs to be fixed right.
    Another issue, in terms of decertification, at our rate, 
$38, I challenge you to go to a doctor in Washington for $38, 
in most cases. It has given us a floor, and it has allowed us 
to develop these other programs.
    I have watched dozens--and I mean dozens--of physicians and 
other providers come into this area. There are cultural 
reasons; there are social reasons; there are economic reasons. 
They fear the school system. You know, if you want your kid to 
be a physician or a lawyer, you might not want him in our high 
school. And they are there a year or two, and their kids start 
to grow up, and they pull out--not everybody--but they pull 
out.
    I've been there when we got $7.50 from Medicaid for a 
patient encounter, and I've also been there when Medicaid took 
6 months to pay us. So I want to make those points. If you fix 
this thing, it's got to be fixed right, and I think it should 
be done in an expedient manner.
    [The prepared statement of Mr. Harward follows:]
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    Mr. Shays. Tell me again how many years you've had your 
clinic or you've been involved in the clinic.
    Mr. Harward. Nineteen.
    Mr. Shays. I don't think you need to fear, for a variety of 
reasons, that we will be acting too quickly. You don't need to 
go to sleep at night fearful that the next morning HCFA or 
Congress will have taken decisive action. But I'm going to be a 
little more sympathetic and sensitive to the areas you 
describe. So I look forward to having a dialog with you.
    Mr. Tessen.
    Mr. Tessen. Mr. Chairman, members of the committee, I do 
want to follow my script to some degree.
    Mr. Shays. Where are your cowboy boots?
    Mr. Tessen. Well, I wanted to act urban today. I figure 
this is Washington, you can't act Texan up here.
    Mr. Shays. I don't know one Texan up here who wears normal 
shoes, as a Member of Congress.
    Mr. Tessen. I would challenge you to see what's in their 
closet, then.
    Mr. Shays. OK.
    Mr. Tessen. I figure a good pair of Niconas these days cost 
$600, so we can't afford too many.
    Mr. Shays. OK.
    Mr. Tessen. I appreciate the opportunity to share some 
information with you. I just want to follow the script and 
bring out some points particularly reflective of some of the 
comments that had been made earlier.
    I am representing the National Rural Health Association, 
which is a national member organization comprised not just of 
rural health clinics but physicians, Federal qualified health 
clinics, community-operated practices, research and education, 
everyone. I am the founder and the chair of the division which 
we call constituency groups within the NRHA, to represent rural 
health clinics.
    I would suggest that there are some other reasons that the 
number of RHCs has exploded in the last 6 or 7 years, other 
than those that have been brought out so far during testimony 
today. No. 1--and I will use Texas as an example--the reason 
there were no functioning RHCs in Texas up through 1989--there 
were 12 originally, and they all went under after the 1977 
legislation.
    So by 1989 there were none, because in Texas the State 
regulations did not allow independent practice by a physician 
assistant. So we could not have a rural health clinic without 
over the shoulder supervision of a physician assistant until 
1989. After 1989, the numbers took off like crazy, but it was 
because of the change in State regulations that allowed PAs to 
practice.
    I would also suggest another reason for some of the 
numbers, something we have experienced in some of the western 
States, a lot of the physicians in rural areas are aging. I 
guess we're all aging, at least some of us, faster than others, 
it seems. But in rural areas, a lot of the physicians are or 
are at retirement age. One of the things that the Rural Health 
Clinic Program has allowed communities to do is, instead of 
that practice closing and the community losing its access to 
care, allow a rural health clinic to come in. That's going to 
show up as a conversion, No. 1.
    Mr. Shays. Fair enough.
    Mr. Tessen. But what it's going to do, it's going to allow 
a mid-level practitioner, nonphysician provider to be brought 
into that community to continue that practice. Whereas, without 
the Rural Health Clinic Program, there may not have been the 
ability to convert that practice and convert that primary care. 
I think that's another aspect of rural conversions we have to 
look at, in terms of rural health clinics.
    I would emphasize that one of the biggest problems with 
this program is the lack of data. OIG did a report. GAO did a 
report. Bill's association did a report a couple years ago. 
There have been a couple studies. But I would challenge anybody 
to be able to tell you what is going with rural health clinics 
in the United States, across the board, with objective data. 
There isn't any. There simply is no data. Instead of being 
proactive, we end up reacting to a study or something that was 
done that wants to change something.
    I guess what I would recommend is that there really be an 
effort made to find out what is really going on. I think 
clinics like Tom's don't get the recognition they need. They 
don't show up in the data.
    I would also point out that I think there are some other 
discrepancies or faults with the design of the GAO study. One 
of the things that I would suggest is that there is an 
assumption made, it seems, in their report, that all those RHCs 
they found are full-time clinics. That's not necessarily true.
    We had one county in Texas that received notorious play in 
the media because there were 10 RHCs in the county. I went down 
there. Four of those are owned by the same physician assistant 
who has opened each of those clinics 1 day a week.
    Mr. Shays. Interesting.
    Mr. Tessen. That's not brought out in the GAO report.
    It also assumes, I think, in the GAO report, that all 
clinics serve all patients, and that's not true. There are some 
rural health clinics that serve just pediatric patients. In 
that case, that clinic does not provide access to Medicare 
patients. That was not brought out in the GAO report.
    I also think using population assumes that all patients in 
all locales are the same, and that's not true. I think that 
every area has a different patient mix. Number of Medicare and 
Medicaid patients, unemployed, indigent care, levels of 
poverty, those are different. You may have some areas 15 miles 
away--which, by the way, I think 15 miles in Texas is a little 
bit different than 15 miles in Connecticut. If I've got to 
drive 15 miles in Texas, I'm in another town half a county 
away. And I think we, in the western States, look at it a 
little bit differently.
    Mr. Shays. But that would imply you would look at 15 miles 
as being pretty close, not a big deal.
    Mr. Tessen. Except that, in terms of access to care, the 
orientation of the folks in that town 15 miles away is going to 
be to that community rather than to a town 15, 20, or 30 miles 
away.
    Mr. Shays. But isn't the issue whether someone can get a 
health care?
    Mr. Tessen. It is, yes.
    Mr. Shays. That's really the issue. And I'm seeing the 
abuse. Let me let you finish your statement. I'm really happy 
you all are here, because I think we will learn a lot.
    Mr. Tessen. I would also assume that 15 miles assumes the 
presence of transportation. I would contend that, for a lot of 
the elderly, particularly in a lot of rural areas, 
transportation is not available, as a matter of just a way of 
life.
    I would also suggest the current system is broken in 
another way. I think left unspoken here today has been the idea 
that the current system is working as it is supposed to have 
been working in a number of ways. And I'm going to tell you 
it's not. I have clinics in Texas that have not been surveyed, 
even though the regulations require an annual survey, have not 
been surveyed in 6 or 7 years. There has been no one coming in 
to check on those clinics to see if they are in compliance with 
the existing law, much less any abuses that may be going on.
    I would also suggest that the feedback system is poor. We 
have clinics in the western part and some of the fiscal 
intermediaries out west that are not giving feedback to the 
individual RHCs on their cost reports, their allowable costs, 
if their data is in line with what it should be, for 18 months 
after the data has been submitted.
    I would suggest, if we were running a private business and 
had to wait on our accountant's report for 18 months before we 
could determine if we were in line or not, or if we tried to 
convince that when we appear before the IRS tax board, it 
wouldn't fly, but that's what rural health clinics face as a 
matter of routine.
    I think the National Rural Health Association is in full 
agreement that the program needs to be fine-tuned. We agree 
that access to care should be the primary determinant for 
placement and certification of a rural health clinic. But what 
we would also contend is that the objective definitions be 
that, objective and consistent across the board. I mean, when 
we talk about developing policies, we can't even agree on the 
definition of ``rural.'' I think we're going to have to have 
objective data.
    I just want to make a couple other quick points.
    Mr. Shays. OK. And then we would like to get to 
questioning. Just make one or two more points, and then we will 
get to the questioning.
    Mr. Tessen. I would say that there has been a thing in the 
GAO report that said that conversions in even the rural health 
clinics in the suburban areas did so without adding staff. I 
would contend that's not possible, because, by requirement, by 
definition, a rural health clinic has to have at least a mid-
level practitioner 50 percent of the time. So by simply going 
to a rural health clinic certification, they have to add a mid-
level practitioner at least 50 percent of the time. They can't 
avoid that and still be in compliance with the law. So I would 
contest that.
    [The prepared statement of Mr. Tessen follows:]
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    Mr. Shays. Let me just have a sense of where your 
perspective is, in terms of background. There are approximately 
3,000 rural health clinics today.
    Mr. Tessen. Yes; 3,273.
    Mr. Shays. How many belong to the National Association of 
Rural Health Clinics?
    Mr. Finerfrock. Well, we have about 450 that pay dues, but 
they represent, in many instances, because you have multiple 
clinics, we have about 900 clinics.
    Mr. Shays. You are part of the National Rural Health 
Association.
    Mr. Tessen. Right.
    Mr. Shays. How many members do you have?
    Mr. Tessen. Just over 200 now.
    Mr. Shays. Now, do these two different--your association, 
do you have the same basic type clinics part of it, or do you 
kind of go after a certain group?
    Mr. Finerfrock. Our membership is both independent and 
provider-based. I don't want to speak for Sam.
    Mr. Shays. Is it geographically based?
    Mr. Finerfrock. I think the way I would describe the 
difference in our organizations is--and I mean this 
positively--NRHA is a department store, and we are a boutique. 
NRHA has a variety of rural entities that are members, all 
under the broad, so there are rural hospitals, independent 
providers.
    Mr. Shays. So you have other organizations besides.
    Mr. Tessen. Using that analogy, we would be like Saks.
    Mr. Finerfrock. And we're the boutique on the corner. We 
just work on rural health clinics.
    Mr. Shays. So, Mr. Harward, did you join a ``Saks,'' or 
which one are you in?
    Mr. Harward. Rural Health Care Association.
    Mr. Shays. Now, Mr. Tessen, do you have clinic of your own? 
You have your own clinic besides being part of an association?
    Mr. Tessen. I manage a clinic at this point.
    Mr. Shays. You manage a clinic.
    Mr. Tessen. But that's not my full-time job. I also work at 
a medical school in Texas, in Galveston.
    Mr. Shays. And you're basically in charge of this 
association.
    Mr. Finerfrock. I'm kind of a policy wonk.
    Mr. Shays. OK. Listen, we're policy wonks. We can't be 
totally against you guys.
    Mr. Harward, you're in the trenches.
    Mr. Harward. Yes, sir.
    Mr. Shays. OK. Describe to me your community.
    Mr. Harward. My community has one stop light, one bridge, a 
Quick Stop, a couple small grocery stores. As I said, the 
population is about 1,800. It's primarily marginal farming, 
timber industry, a declining coal industry. The town itself is 
about 1,800. The county is 16,000, probably 350, 450 square 
miles.
    Mr. Shays. So the closest community of more than 50,000 
would be how far away?
    Mr. Harward. 150 miles.
    Mr. Shays. See, in my own mind, that's the kind of 
community that I would visualize we're trying to focus in on. 
Now, I do understand your point, Mr. Finerfrock. Your point is 
that you could even make an argument that a rural health clinic 
could be in the Bronx, in terms of need.
    Mr. Finerfrock. Yes. You have heard reference here to the 
FQHC program, federally qualified health centers program. Some 
of the previous witnesses made reference to that program. That, 
in essence, is very similar in its financing to the RHC 
program. Those facilities get cost-based reimbursement under a 
cap, and their costs look at the same things that the RHC costs 
do. So there is, in essence, an urban component or model of 
this.
    Mr. Shays. Yes, there is a model, but my sense is that when 
Congress started this--and we will look at the record--in 
``rural,'' certainly the implication was that we were talking 
more like areas that Mr. Harward is part of.
    Mr. Tessen. Under the initial legislation, there was also 
the certifiability in medically underserved populations, MUPs. 
HCFA has gotten rid of that.
    Mr. Shays. HCFA has gotten rid of?
    Mr. Tessen. The RHC eligibility under the MUP certification 
process. But when that was in effect, we have ``rural health 
clinics'' in downtown Dallas because of the population being 
poor, impoverished, no work, and no medical services 
whatsoever.
    Mr. Shays. I'm not saying we don't have to deal with that 
problem, but my sense was, this program was not designed for 
that.
    Mr. Tessen. Right.
    Mr. Shays. That's all I'm saying. I can make a strong 
argument that you need to be in Bridgeport, CT, in one sense. 
But what I don't like is, where people were, in fact, serving 
the community, they decided to be under a new system that gave 
them a greater reimbursement. I do think you're making the 
point of older physicians selling.
    Mr. Tessen. Retiring.
    Mr. Shays. Retiring, and then a clinic coming in. You have 
answered one question. All three of you answered one question. 
To me, it appeared to be a no-brainer, and you're saying, you 
just need to get into this a little deeper to understand.
    Mr. Harward, I'm just going to say to you that I will use 
you as the test. If we're doing anything or if HCFA is doing 
anything that would negatively impact your circumstance, then I 
think we're headed in the wrong direction. So I will use you as 
the benchmark, in a way, and others like you, because I do want 
you to go to sleep at night.
    Mr. Harward. I want to go.
    Mr. Finerfrock. I'm really glad to hear that, because, I 
mean, for me, personally, Tom is kind of the benchmark. This is 
where this grandfather clause, I think--if we could spend a 
little bit of time perhaps on that.
    Mr. Shays. I don't want to spend too much time. I don't 
want to grandfather people who shouldn't be grandfathered.
    Mr. Finerfrock. That's right. I don't think we do. But my 
point is that there are reasons why that grandfather clause was 
put in there, and Tom mentioned one of them at the end of his 
presentation, which is that you have PAs and NPs who are 
staffing these clinics. If you take away the certification from 
them, there is no mechanism for Medicare, in many instances, to 
pay for their services.
    Mr. Shays. I want to let Mr. Towns ask questions. The one 
thing that I'm going to qualify my own response, I could see 
where you were truly in what I would call a rural area, serving 
people that aren't going to get care elsewhere. And I can see 
how that community can change. And then I can see how you've 
devoted 20 years of your life. I would be very sensitive to not 
saying, ``Oh, my gosh, no longer should you be there,'' if you 
have shown that kind of commitment to the community.
    So I think there should be some way to give credit to, and 
allow for, that individual to continue to practice. The 
question would be, not that you would decertify, but would you 
put them on a different reimbursement rate that would be 
competitive with the area and be fair?
    Mr. Finerfrock. I would agree. There has got to be some 
kind of a glide path or some mechanism for transition. I just 
saw it earlier. I mean, HCFA mentioned they are working on 
legislative proposals. I saw it just as we were coming in here. 
Their proposal is, you would immediately be kicked out of the 
RHC program. If your area was decertified as an underserved 
area, you would be immediately shut down as a rural health 
clinic, which means he's out of business. My view is, that's 
too simplistic.
    Mr. Shays. Would you be put out of business? I'm sorry. I 
want to get to Mr. Towns.
    Mr. Harward. If we cannot be reimbursed.
    Mr. Shays. No, no. It seems to me that you would meet the 
test of reimbursement.
    Mr. Harward. I can't be reimbursed unless I'm in a rural 
health clinic.
    Mr. Shays. Right. I don't see how your health clinic would 
be one that would be targeted for decertification, is what I'm 
saying.
    Mr. Harward. Not likely, except we have two other rural 
health clinics in the other end of the community, provider-
based clinics. You factor us in as providers--currently we're 
not factored in, in figuring a medically underserved area--
that's going to change the ratio a little bit. It might be a 
little plus or minus.
    I'm not afraid for our clinic to compete, what I'm saying, 
on the ``private'' market, but I want an even playing field.
    Mr. Shays. But you're an independent, correct, or are you 
provider-based?
    Mr. Harward. We're an independent.
    Mr. Shays. So you're not even getting reimbursed at the 
rate that some of your competition is.
    Mr. Harward. We don't need it.
    Mr. Shays. No, let me back up a second. You're not even 
getting reimbursed at the rate that some of your competition is 
getting reimbursed.
    Mr. Harward. No, we're not.
    Mr. Shays. OK. So I'm just saying it's interesting that 
you're not upset that others are making more money than you are 
in this system, that you may tend to compete.
    Mr. Harward. I might be a little more upset than I show.
    Mr. Shays. OK. At least your human. I wanted to know.
    Mr. Towns.
    Mr. Towns. Thank you very much, Mr. Chairman.
    Let me thank all of you for your testimony. I know you have 
heard the comments that were made earlier by GAO and also the 
Deputy Inspector General. I guess I could start with you, Mr. 
Harward. I would like to ask each member to tell us how you 
would correct the problems that GAO and the Deputy Inspector 
General described earlier.
    Mr. Harward. The cap is absolutely essential. I mean, the 
cap is going to take care of a hugh amount of the problem. I 
think that's important. The designation issue is tremendously 
important, to be updated regularly. And it's tremendously 
important to include, on some formula, nonphysician health care 
providers in this designation. Those are two most important 
things. Those two things alone, I believe, would give you the 
kind of cost control that you need and stop the proliferation.
    Mr. Shays. May I just ask?
    Mr. Towns. Sure.
    Mr. Shays. Do you mean new designation, or do you mean 
decertification?
    Mr. Harward. The first thing you need to do, I guess, is 
level it off, OK. And then, in terms of the decertification, I 
think it has to be on the table. Yes, I agree.
    Mr. Towns. I want to move to also ask Mr. Finerfrock, and 
you, too, Mr. Tessen. Before I do that, if a clinic is closed 
in the State of West Virginia, just assume that it happens, the 
worst, what happens to the medical records?
    Mr. Harward. There is no central repository that I'm aware 
of.
    Mr. Towns. You are educating us here, too, you know. I want 
you to know that.
    Mr. Harward. Yes. They would be locked up somewhere. We 
would advertise in the paper, you know, when that's going to 
happen. Once my clinic was provider-based, many, many years 
ago, and it was one of the very few, one of two or three. And 
the hospital that I worked for in the early 1980's, before this 
happened, went bankrupt and closed down. A lot of those records 
are just sitting in a basement somewhere, and people can't get 
to them.
    So, I mean, you know, they advertised for a while. We've 
been an independent, private clinic now, or community clinic, 
since that bankruptcy, for I guess 12 years.
    Mr. Towns. In other words, they just left the records.
    Mr. Harward. Yes, sir. Yes, sir. Now, people, when you 
advertise, would ask that they be transferred to another health 
care provider, you know, in an adjacent area or the same town. 
We just don't happen to have any in our town. It would be one 
of those providers in a nearby town.
    Mr. Towns. Mr. Finerfrock.
    Mr. Finerfrock. I would agree with Tom that a cap is really 
important on the provider-based side. One of the other issues 
that has not been addressed, concurrent with that, is a 
productivity standard. On the independent clinics, in addition 
to the cap, clinics are required to maintain a productivity 
standard in order to get their reimbursement rate.
    That standard is 4,200 visits per year on a full-time 
equivalency for a physician; 2,000 visits per year for a PA or 
a nurse practitioner. If they don't achieve that level, then 
there's a downward adjustment in their payments to reflect that 
they were not operating at what was considered to be maximum 
productivity.
    In addition to there not being a cap on the provider-based 
clinics, there is not a productivity standard, the issue I was 
addressing earlier. So simply imposing a cap on provider-based 
is not sufficient. There also needs to be a productivity 
standard, in order to make sure that they are operating 
efficiently, as well.
    In terms of the shortage area issue, I would agree those 
need to be updated and updated immediately. Short of that, we 
need to institute into the law, ``currently certified,'' which 
would be the area has been reviewed in the last 3 years, in 
order to prevent people from doing a designation based on 
information that is outdated. It also needs to include the 
availability of PAs and NPs at some appropriate FTE 
substitution rate for physicians.
    There should be a tie-in notice. Once a clinic is 
certified, the Health Care Financing Administration should 
notify the Office of Shortage Designation that that clinic has 
been certified. Otherwise, what you run the risk of is that, 
during that 3-year intervening period, you know, people come in 
and set up multiple rural health clinics when it perhaps was no 
longer warranted.
    So we need to have a mechanism for alerting the Office of 
Shortage Designation that there may have been a change in the 
provider availability in that community, so that designation 
may no longer be appropriate.
    We need to create a glide path in order to transition folks 
off of rural health clinics, if, for some reason, the area is 
no longer rural or no longer underserved. What I would 
recommend there is that we look at a situation where they would 
actually be excess capacity. In other words, you heard earlier 
that it requires 1 physician to 3,500 population in order for a 
designation to occur. So if the community exceeds that, if 
there were 1 physician for 3,000, it would lose its 
designation.
    What I would suggest is that dedesignation wouldn't kick in 
until you had an infrastructure perhaps that was 1 to 1,500 or 
1 to 1,000. In other words, so that you were sure that there 
was adequate capacity within the community such that losing 
that designation would not result in them being back as an 
underserved area, what I refer to as the yo-yo effect. I think 
Kathy Buto talked about that, where you create an incentive to 
get someone to an area, then by virtue of being successful at 
recruiting to the area, the area is no longer underserved, and 
so we pull away that incentive.
    I think those would be my recommendations.
    Mr. Towns. Just before I leave you, Mr. Finerfrock, how 
many provider-based clinics do you represent?
    Mr. Finerfrock. You know, I'm not sure. I mean, I don't 
make that distinction in our membership. We have provider-based 
on our board, and we have provider-based on our policy 
committee. But I can find that out for you.
    Mr. Towns. Mr. Tessen.
    Mr. Tessen. I think there are a couple of things. I think 
the cap on provider-based is in the right direction, but I 
would make a case that there should be some sort of exception 
or level or some differentiation for those rural hospitals that 
have rural health clinics that are really rural hospitals, out 
in the middle of no place, that are just struggling to survive 
with patient loads of one or two patients per day. I mean, 
we've got to do something to protect the people in the frontier 
areas and the really rural areas from just pulling out 
infrastructure across the board.
    Mr. Shays. May I?
    Mr. Towns. Yes.
    Mr. Shays. In a sense that raises the two-tiered approach. 
Are all three of you comfortable with that approach?
    Mr. Harward. I would like to respond. You asked do I resent 
that $20 difference between the people in the other end of the 
county. One is a rural hospital that's now one of these each 
piece hospitals. Their bed capacity went from 90 to 12, and 
they are associated with a distant hospital. They are sort of 
the junior partner in this program. That clinic is real 
important to the survival of that hospital, and they do 
maintain emergency room there, and it's part of their financial 
base. I think we have to avoid doing things to these small 
hospitals that could hurt that.
    On the same subject, on the question of decertification, 
it's real important. One of the things that you could do in 
decertification is just knock the rate to 75 percent of the 
maximum, if you reach a point. Because these people that are 
abusing it are way, way above. If you've got the cap and even 
you limited my community-based clinic to 75 percent of the 
maximum rate because we hit that magic number where we were no 
longer served, we could continue to do what we do best, which 
is community health.
    Mr. Tessen. I think another thing that really concerns me 
is, we're talking about all kinds of changes in the system 
without addressing the fact that we aren't following the 
current system. I mean by that the lack of surveys, the lack of 
audits, the lack of timely feedback and cost reports, the 
waivers for the mid-level practitioners are not being enforced. 
If we change the system and don't address that part of it, 
we're going to have the same problem. I mean, people are going 
to go into it, and there's no real way to find out if people 
are in compliance or not.
    I guess my point is, why have a system if we're not going 
to follow the basics of it, even it's required by regulation 
and law at this point.
    The other thing that I would say is that the NRHA, the 
National Rural Health Association, has put together a white 
paper on a whole list of proposals for rural health clinic 
refinement. I guess that has been submitted as part of the 
testimony. It is intriguing, in NRHA, the process of devising 
policies, because I have to sit and argue with the rural 
hospital folks, and I have to sit and argue with the FQHC 
people, and I have to argue with the research and education 
people when we develop policies.
    So the policies that are in this NRHA paper are really a 
real strong reflection of kind of the microcosm that is going 
on in the whole argument about rural health clinics on a 
national basis. So these are fairly good, I think.
    Mr. Towns. Thank you very much.
    Thank you, Mr. Chairman.
    Mr. Finerfrock. Mr. Chairman.
    Mr. Shays. Yes.
    Mr. Finerfrock. You asked about the two-tiered approach. On 
that, we've had some discussions with the Health Care Financing 
Administration on that concept of having a different cap and 
different standards for clinics that are located in what are 
defined as frontier areas. I think that's a reasonable thing to 
take a look at.
    The only difference I would make, perhaps, on this point, 
with Sam, is that I don't think that we should make that 
exclusive to hospital-owned clinics. To me, the payment should 
be based on the services that you are delivering and the care 
that you are delivering. The ownership of the clinic shouldn't 
make that distinction.
    So if we're going to create this level playing field--I 
just got a call the other day, a physician in the Upper 
Peninsula of Michigan is 40 miles from the nearest town of any 
size, he's by himself, could really use to be a rural health 
clinic, but can't be for a variety of reasons. If you were to 
do the two-tiered approach, I suspect that he would be able to 
do that and make it attractive. He's on the verge of leaving 
that community, and I think that kind of an approach would 
really help.
    Mr. Shays. I just wonder, in that case, if knowing that we 
might change the rules to benefit him would keep him there.
    Mr. Finerfrock. We might.
    Mr. Shays. The process is still going to take so long.
    Mr. Finerfrock. It will, but it may keep him there.
    I think another point needs to be made. There was a 
reference to managed care, I think, by one of the earlier 
witnesses, that perhaps the growth was a result of managed care 
and the concern about that. I think we also have to consider 
the Health Care Reform plan that the Clinton administration 
proposed back in the first Clinton administration.
    The reason I say that is, in that plan there was a proposal 
to create facilities that are called, ``essential community 
providers,'' and that those ``essential community providers'' 
would have special status when it came to negotiating with 
managed care or any plan that the Clinton proposal was going to 
put into that community. And rural health clinics were 
automatically defines as an essential community provider.
    I think, for the same reason that you were suggesting that 
the prospect that we might be able to do something for that 
physician, might encourage him to stay in, I think the prospect 
that the government was going to create this ``essential 
community provider'' category and give you special status for 
purposes of negotiating with managed care also was an incentive 
to become a rural health clinic, even though they didn't intend 
to expand their services to Medicare and Medicaid. They were 
looking down the road, trying to provide some kind of a special 
status for themselves when the world, as they new it, was going 
to change.
    Mr. Shays. Very interesting.
    We have been joined by Mike Pappas, from New Jersey, a new 
Member, and a wonderful new Member. I don't know if you would 
like to just enter into this dialog or just say hello.
    Mr. Pappas. Yes, if I could, Mr. Chairman.
    Mr. Shays. Sure.
    Mr. Pappas. Thank you. I'm sorry for getting here late.
    You may have covered this, but if you would bear with me, I 
understand there is a program called Partnership for Rural 
Opportunities. I'm wondering if you folks, in various 
capacities, are familiar with it and, if so, if there has been 
any work with them?
    Mr. Shays. This may be a viable program none of you have 
heard about, but we are continually learning of government 
programs that we voted for, right?
    Mr. Pappas. As I understand it, it's a division within the 
Department of Health and Human Services.
    Mr. Tessen. Never heard of it.
    Mr. Finerfrock. I'm not familiar with it.
    Mr. Shays. Is there anyone in our audience who might know?
    Ms. Rapp. I know.
    Mr. Shays. If you don't mind just coming up. We won't even 
swear you in. I'm just curious.
    Ms. Rapp. I won't go to the front.
    Mr. Shays. No, no. We need you to be in the mike here. Just 
identify who you are.
    Ms. Rapp. I'm Jennifer Rapp. I'm the government affairs 
director for the National Rural Health Association here in 
Washington. We work closely with the National Rural Development 
Partnership, which is affiliated with the PRO. The PRO was 
formed within the Department of Health and Human Services by a 
number of divisions within HHS. The Federal Office of Rural 
Health Policy belongs, so do several of the other divisions 
within HHS. They formed this group to kind of cut across 
division barriers, but to look at rural issues department-wide.
    So I know what the group is, and we have had communication 
with them. They are a relatively new group. I think they just 
started holding meetings within HHS about 6 months ago.
    Mr. Shays. Do you want to pursue that a minute?
    Mr. Pappas. Yes. I just would be curious, these folks who 
are very involved, on the witness stand--what effort is going 
to be made to--if folks such as these should be made aware of 
this. I'm assuming this new conglomeration has been established 
to try to, say, improve the situation. Their input may be 
helpful. Do you know?
    Ms. Rapp. So far they have involved outside groups through 
the larger, National Rural Development Partnership, which there 
is a Washington component called the National Rural Development 
Council, which I sit on. They, in the past year, have invited 
outside organizations such as other associations to sit on the 
council, indirectly interacting with this department group 
called the PRO.
    So I don't attend PRO meetings, because it's only intra-
HHS. But I do participate, and I'm sure other outside 
organizations could participate through serving on the National 
Rural Development Council.
    Mr. Shays. And the purpose of the organization is what?
    Ms. Rapp. I think to really have a rural filter. I know the 
woman who heads it up, in the Office of the Secretary, actually 
spoke at our meeting on Monday about the group, and she likes 
to call it a rural filter for all issues that pass through the 
Department of Health and Human Services.
    I would also like to mention that I think Jake Culp, from 
the Federal Office of Rural Health Policy, is here, and he 
participates.
    Mr. Shays. Would you like to just comment on this?
    Mr. Culp. I could just say one more thing.
    Mr. Shays. Let me just say this to you. You're going to 
come up here, but just would you say your name again so our 
recorder has it. Do you have a card?
    Ms. Rapp. Yes, I do. It's Jennifer Rapp, R-a-p-p.
    Mr. Shays. And you represent?
    Ms. Rapp. I'm the government affairs director for the 
National Rural Health Association.
    Mr. Shays. And you, sir, are?
    Mr. Culp. I'm Jake Culp. I'm with the Office of Rural 
Health Policy. I work with Dr. Puskin, who was here testifying 
earlier.
    Mr. Shays. Now, did you want to make a response?
    Mr. Culp. Yes. I would just like to elaborate. Jennifer got 
at that. This is a group that was formed, I think it's about 9 
or 10 months ago, and it's serving two purposes in our 
Department, in my view.
    The first purpose is to get all of the various components 
of the Department together on a regular basis, who have 
something to do with rural health care, and that's a lot of us. 
That's the Health Care Financing Administration, that's our 
office--we're in another part of the Department, the Health 
Resources and Services Administration--the Administration on 
Aging, another part of the Department that also has some rural 
interest. So it's an opportunity for us to come together, and 
the leadership for that is provided out of the Office of the 
Secretary.
    One of the goals of the group that's a little different is, 
we've been working hard over the years, our office and the 
Department, as well, to get a close tie-in between economic 
development issues in rural issues and health. The Department 
of Agriculture, for example, has agents out there in small 
rural communities all over the country, and we're trying to 
work with them to make health a part of their agenda as they 
work on local economic development issues in small communities. 
So this group also has that role, to work closely with the 
Department of Agriculture and other parts of the executive 
branch on rural health care kinds of issues.
    It's a very important activity.
    Mr. Pappas. Thank you. One of the things, I think, that 
could be done to maybe even improve what I think is a very 
worthwhile effort is to provide some sort of a mechanism where 
people out in the community could then be given a forum to 
maybe express what their views are as to what the various 
Federal programs do or don't do.
    Ms. Rapp. May I make one comment about that? State rural 
development councils do sit on the larger body. So within each 
State there is a State rural development council, and that's 
kind of the ground-up approach.
    Mr. Pappas. OK. Thank you, Mr. Chairman.
    Mr. Shays. You're welcome. I will say, I've broken my rule, 
not swearing in two witnesses here, but circumstances dictated 
that. Thank you both very much.
    I want to ask if there is anything you wish we had asked 
you, that you wanted to make a point on before we close up 
here. You have given a nice definition to the hearing, and I 
thank you all for being here. Is there any closing statement 
you want to say?
    Mr. Tessen. I would just invite members of the committee or 
their staffs to come out and visit some real rural health 
clinics, like Tom's or some others. Some are closer.
    Mr. Pappas. Easy for you to say.
    Mr. Shays. Be careful. He's from Texas.
    Mr. Tessen. I think that rural health clinics, in reality, 
are really interesting animals, and I think that seeing them in 
operation is an experience to behold.
    Mr. Shays. As you were testifying, particularly Mr. 
Harward, I was thinking that it would be important for us to 
find a way to visit a few. I have, obviously, seen community-
based health care clinics who do some of the same stuff.
    Any other comments?
    Mr. Finerfrock. If I could. In the testimony that Dr. 
Gaston presented, she made reference to the fact that the 
Department was going to now incorporate PAs, NPs, and CNNs into 
the designation process. If you could get clarification, in the 
written testimony, there was a caveat that was not addressed in 
her oral presentation, which was, once we feel that there is 
sufficient data.
    I don't think that that should be taken lightly. I think 
there is data. They have suggested that there is not sufficient 
data. We've done some checking around. Tom was on the medical 
board in West Virginia and can provide accurate information 
there.
    I would be remiss to Congressman Towns if I didn't 
acknowledge your efforts on the part of correcting the problem 
for Medicare reimbursement for PAs and nurse practitioners 
outside of the rural health clinic. You have been a real leader 
on that issue. I know last year, as part of the budget act, 
that provision was adopted by Congress, through no small effort 
of yours, and I know the PA and NP communities are very 
appreciative of everything that you have done in that regard.
    Mr. Shays. He's a good guy.
    Mr. Finerfrock. The last thing I just wanted to say is that 
Tom's calm demeanor, he has earned that honestly. Tom is the 
father of 15 kids.
    Mr. Towns. No wonder he's so calm.
    Mr. Finerfrock. Anybody who can survive that experience--
ranging in age from 9 to 33--anybody who can survive that 
experience, I think coming before Congress is probably a piece 
of cake.
    Mr. Harward. Actually, when they left home, we would be 
dedesignated. [Laughter.]
    Mr. Towns. Mr. Chairman, if I could just ask one quick 
question.
    Mr. Shays. Sure.
    Mr. Towns. I'm concerned that there seems to be no 
continuity in terms of records, when facilities close and 
facilities consolide. What happens to records in your area? 
Because I think it's something we're going to have to look at, 
at some point in time, as to what happens to records when 
facilities happen to close.
    Mr. Tessen. As I understand it, legally, medical records 
are the property of the owner of the clinic. I guess there's 
legal precedent for that someplace. If whoever owns that 
clinic, whatever clinic it is, rural health clinic or anything 
else, if that clinic closes or anything else, those medical 
records remain the property of that owner.
    Mr. Harward. They should go to the patient. I mean, you can 
mandate that they go to the patient if the facility closes. If 
they have not assigned them to another provider, it's pretty 
simple. You know, if they choose to abuse them or throw them 
away, that's their problem. It's simple enough.
    Mr. Towns. What I'm thinking about, see, most clinics or 
most hospitals do not close down with everyone elated over the 
fact that it's closing. It generally closes, and people are 
upset, the union is involved, and everybody is mad. I can sort 
of picture them throwing the records out the window. I think 
that somewhere along the line we have to have a uniform way of 
doing this as we move along. I don't know exactly what we need 
to do, but I think it's something we need to investigate.
    Mr. Finerfrock. I know you have a background in hospital 
administration and medical records. I've heard you raise this 
issue at other hearings, and I think you're right. This is not 
the first time. I mean, a couple years ago I heard you raise 
this issue.
    The whole area of medical records is getting a lot of 
attention now, in terms of privacy, and security, et cetera, 
and computerization of medical records. I think you talk to the 
health professionals and see. It's not something we've looked 
at, but I think it's a serious issue. My understanding is that 
each State handles it differently. It's an area that is 
governed, at the current time, by State law.
    Mr. Shays. Let me ask, before we close up, is there anyone 
from the GAO's office here? Anyone from the Inspector General's 
Office here?
    I'm not going to ask you to come up. Thank you for staying.
    Is there anyone from HCFA or the Health Resources and 
Services Administration?
    I just want to thank you for staying. I appreciate your 
doing that, because the third panel deserves to be heard by the 
people that ultimately impact your lives. So thank you for 
staying.
    Thank you all. We will call this hearing to a close.
    [Whereupon, at 4:20 p.m., the subcommittee adjourned.]

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