[House Hearing, 105 Congress]
[From the U.S. Government Publishing Office]
PAYMENT SYSTEMS FOR MEDICARE'S HOME HEALTH BENEFIT
=======================================================================
HEARING
before the
SUBCOMMITTEE ON HEALTH
of the
COMMITTEE ON WAYS AND MEANS
HOUSE OF REPRESENTATIVES
ONE HUNDRED FIFTH CONGRESS
SECOND SESSION
__________
AUGUST 6, 1998
__________
Serial No. 105-109
__________
Printed for the use of the Committee on Ways and Means
U.S. GOVERNMENT PRINTING OFFICE
63-934 CC WASHINGTON : 2000
COMMITTEE ON WAYS AND MEANS
BILL ARCHER, Texas, Chairman
PHILIP M. CRANE, Illinois CHARLES B. RANGEL, New York
BILL THOMAS, California FORTNEY PETE STARK, California
E. CLAY SHAW, Jr., Florida ROBERT T. MATSUI, California
NANCY L. JOHNSON, Connecticut BARBARA B. KENNELLY, Connecticut
JIM BUNNING, Kentucky WILLIAM J. COYNE, Pennsylvania
AMO HOUGHTON, New York SANDER M. LEVIN, Michigan
WALLY HERGER, California BENJAMIN L. CARDIN, Maryland
JIM McCRERY, Louisiana JIM McDERMOTT, Washington
DAVE CAMP, Michigan GERALD D. KLECZKA, Wisconsin
JIM RAMSTAD, Minnesota JOHN LEWIS, Georgia
JIM NUSSLE, Iowa RICHARD E. NEAL, Massachusetts
SAM JOHNSON, Texas MICHAEL R. McNULTY, New York
JENNIFER DUNN, Washington WILLIAM J. JEFFERSON, Louisiana
MAC COLLINS, Georgia JOHN S. TANNER, Tennessee
ROB PORTMAN, Ohio XAVIER BECERRA, California
PHILIP S. ENGLISH, Pennsylvania KAREN L. THURMAN, Florida
JOHN ENSIGN, Nevada
JON CHRISTENSEN, Nebraska
WES WATKINS, Oklahoma
J.D. HAYWORTH, Arizona
JERRY WELLER, Illinois
KENNY HULSHOF, Missouri
A.L. Singleton, Chief of Staff
Janice Mays, Minority Chief Counsel
------
Subcommittee on Health
BILL THOMAS, California, Chairman
NANCY L. JOHNSON, Connecticut FORTNEY PETE STARK, California
JIM McCRERY, Louisiana BENJAMIN L. CARDIN, Maryland
JOHN ENSIGN, Nevada GERALD D. KLECZKA, Wisconsin
JON CHRISTENSEN, Nebraska JOHN LEWIS, Georgia
PHILIP M. CRANE, Illinois XAVIER BECERRA, California
AMO HOUGHTON, New York
SAM JOHNSON, Texas
Pursuant to clause 2(e)(4) of Rule XI of the Rules of the House, public
hearing records of the Committee on Ways and Means are also published
in electronic form. The printed hearing record remains the official
version. Because electronic submissions are used to prepare both
printed and electronic versions of the hearing record, the process of
converting between various electronic formats may introduce
unintentional errors or omissions. Such occurrences are inherent in the
current publication process and should diminish as the process is
further refined.
C O N T E N T S
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Page
Advisory of July 30, 1998, announcing the hearing................ 2
Witnesses
Health Care Financing Administration, Michael Hash, Deputy
Administrator.................................................. 15
U.S. General Accounting Office, William J. Scanlon, Ph.D.,
Director, Health Financing and Systems Issues, Health,
Education, and Human Services Division......................... 43
Medicare Payment Advisory Commission, Hon. Gail R. Wilensky,
Ph.D., Chair; accompanied by Stuart Guterman, Deputy Director.. 55
U.S. Department of Health and Human Services, Hon. June Gibbs
Brown, Inspector General....................................... 73
______
Home Care Association of Louisiana, John L. Indest............... 124
National Association for Home Care, and California Home Care and
Hospice, Inc., Denise Palsgaard................................ 137
Texas Association for Home Care, and Guardian Homecare, Inc.,
Mary Ann Brock................................................. 108
Tri County Visiting Nurse Association, and Visiting Nurse Service
System, Ruth Odgren............................................ 131
Visiting Nurse Associations of America, and Visiting Nurse Health
System, Jerry Knight........................................... 96
Submissions for the Record
A+D Health Care Professionals, Inc., Saginaw, MI, Roselyn Argyle,
letter and attachment.......................................... 167
American Federation of Home Health Agencies, Silver Spring, MD,
Ann B. Howard, statement....................................... 169
American Hospital Association, statement......................... 174
American Physical Therapy Association, Alexandria, VA, statement. 178
Argyle, Roselyn, A+D Health Care Professionals, Inc., Saginaw,
MI, letter and attachment...................................... 167
Baldacci, Hon. John Elias, a Representative in Congress from the
State of Maine, statement...................................... 8
Bradberry, Anita, Texas Association for Home Care, Inc.,
statement...................................................... 229
Burgers, Timothy, Home & Health Care Association of
Massachusetts, Inc., letter and attachments.................... 205
Burkemper, Carole, Great Rivers Home Care, Inc., St. Peters, MO,
letter and attachments......................................... 183
Durrence, Hugh D., PHC Home Health, Charleston, SC, letter....... 215
Ferry, Robert, Georgia Home Health Care Agency, Inc., letter..... 182
Fling, James C., TLC Home Health Services, Shamrock, TX,
statement...................................................... 225
Georgia Home Health Care Agency, Inc., Robert Ferry, letter...... 182
Great Rivers Home Care, Inc., St. Peters, MO, Carole Burkemper,
letter and attachments......................................... 183
Health Industry Distributors Association, Alexandria, VA,
statement...................................................... 193
Home Care Association of New York State, Inc., statement......... 197
Home Care Coalition, Alexandria, VA, statement................... 201
Home & Health Care Association of Massachusetts, Inc., Timothy
Burgers, letter and attachments................................ 205
Home Health Services and Staffing Association, Alexandria, VA,
statement...................................................... 209
Howard, Ann B., American Federation of Home Health Agencies,
Silver Spring, MD, statement................................... 169
Jefferson, Hon. William J., a Representative in Congress from the
State of Louisiana, statement.................................. 10
Matthews, Bonnie, South Shore Hospital, South Weymouth, MA,
statement...................................................... 222
New York State Association of Health Care Providers, Inc.,
statement...................................................... 212
PHC Home Health, Charleston, SC, Hugh D. Durrence, letter........ 215
PPS Work Group: James C. Pyles, letter, statement and attachment. 217
South Shore Hospital, South Weymouth, MA, Bonnie Matthews,
statement...................................................... 222
TLC Home Health Services, Shamrock, TX, James C. Fling, statement 225
Texas Association for Home Care, Inc., Anita Bradberry, statement 229
Watts, Hon. J.C., Jr., a Representative in Congress from the
State of Oklahoma, statement................................... 12
PAYMENT SYSTEMS FOR MEDICARE'S HOME HEALTH BENEFIT
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THURSDAY, AUGUST 6, 1998
House of Representatives,
Committee on Ways and Means,
Subcommittee on Health,
Washington, DC.
The Subcommittee met, pursuant to notice, at 10:17 a.m., in
room 1100, Longworth House Office Building, Hon. William M.
Thomas (Chairman of the Subcommittee) presiding.
[The advisory announcing the hearing follows:]
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Chairman Thomas. One year ago yesterday, the President
signed the Balanced Budget Act of 1997. That legislation
represented a bipartisan agreement to shore up the solvency of
the Medicare trust funds and increase the number of health care
choices for our seniors.
The Balanced Budget Act also brought out necessary changes
in the way Medicare reimburses providers of home health
services.
Let me say at the outset of this particular hearing,
Republicans and Democrats alike share faith in the value of
home health care. It is an integral part of the continuum of
care. We want to ensure that our seniors have access to care
when they need it, or it best serves their health needs.
However, as the American populace ages and more seniors go
into the Medicare program, it is imperative for us to make
secure the finances of the Medicare trust fund.
We have taken several steps to ensure the long-term
solvency and continuing success of Medicare. But I can tell
you, as Administrative Chairman of the Medicare Commission, we
still have a long way to go.
In recent weeks, the administration has reported to this
subcommittee that, for a number of reasons, the Health Care
Financing Administration will not be able to implement on time
the new Medicare home health prospective payment system.
The delayed implementation of the new reimbursement system
means that the interim payment system is more significant than
it would have been, since it will simply have to be used
longer.
Today, we will hear testimony on the expected impact of the
interim payment system, and about the extension of this system
beyond the intended two-year period as set forth in the
Balanced Budget Act of 1997.
We have witnesses from HCFA, the administration, the policy
experts from the General Accounting Office, Medicare Payment
Advisory Commission, and the Office of the Inspector General in
terms of another area that we're dealing with in home health
care, fraud and abuse.
We also have witnesses from a number of home health care
agencies, from all parts of the country. I look forward to not
only a spirited exchange of ideas, but that all witnesses
provide their solution to the current problem.
Any discussion of this issue must begin with the
recognition that significant changes were necessary and are
necessary. When Congress acted, spending for the Medicare home
health benefit was spiraling out of control.
There are people in the home health care business who
continue to manipulate innocent seniors, the media, and I'm
sorry to say, Members of Congress, with half-truths and
misrepresentations.
These people want to go back to the cost-based
reimbursement system, or at least suspend any changes for as
long as they could possibly have that suspension. Those choices
are simply not options.
The IPS, no matter how poorly crafted, was designed to
control escalating spending and over-utilization, and provide
more efficient and effective delivery of home health care
services during the transition to a prospective payment system.
The IPS does not limit the amount of home health care services
a beneficiary receives.
I have seen stories, as I'm sure you have, reported in the
press, that hundreds of home health agencies are closing. Be
assured that we intend to closely scrutinize the stated facts
and the situation involved in these stories, but before these
facts get bandied about, and the stories become reality, I want
somebody to closely examine what occurs with the numbers.
For example, how many of these agencies are, quote unquote,
``closing,'' but are, in fact, merging?
This was going to be an inevitable consequence, as an area
that had, in large part, been a cottage industry, continues to
grow and become more significant in the delivery of health
care. But how many of these that are actually mergers are
counted as closing?
Then, one of the more insidious aspects of past behavior:
how many of these agencies closed, and then quickly applied to
reopen, to take advantage of possibly higher reimbursement
rates for new agencies? That was just a question.
MedPAC reports that, in 1994, there were 8,057, more or
less, home health agencies. In 1997, the latest year for which
we have numbers, and additional 2,525 agencies opened, so that
today, we have 10,582 home health agencies serving our seniors.
And of course, remember, the administration imposed for
four months, between September and January of last year and
this year, a moratorium, when there were openings at
approximately 100 a month, so that this number would have been
far higher had there not been a temporary moratorium imposed.
Every report that we have received indicates that the
number of home health care agencies continues to climb, and
that patient access is not a problem.
I would draw your attention to the HCFA regulation soon to
be published, which refutes accounts of mass closings. HCFA
reports that it is ``currently receiving many new applications
from agencies wanting to become Medicare-certified. If there
are any closures as a result of this payment system, it is
expected other new agencies or agency expansions will offset
these closures.''
I thank the witnesses in advance for being with us here
today. I ask them to focus, on their oral remarks, onspecific
recommendations to refine the interim payment system, which address
both national and regional variations in home health care delivery.
I apologize to the numerous colleagues who wanted to
testify.
I will tell you there has been a greater response to the
desire to testify on this issue by our colleagues than on
virtually any other issue that I can remember, and that it
required a letter, jointly signed by myself and the ranking
member, to indicate that, given the number of Members who
wished to testify, that we would receive written testimony only
from Members, so that we could get through the schedule in a
reasonable time frame.
I expect to hear, from every witness, their solution to the
problem. I don't want to hear the problem. We know the problem.
We're looking for solutions, in a difficult time, in which HCFA
can't do what it is supposed to do, because of the ``Y2K
problem.''
The gentleman from California.
Mr. Stark. Thank you, Mr. Chairman. Thank you for holding
this hearing in response to much concern from many of our
colleagues. There has been an outcry for change in the Balanced
Budget Act's home health provisions.
I would like to join with you to enact a better interim
payment formula, but I'm worried that if we make changes, we
may jump from one frying pan into another.
If we change the interim payment system formula, we're
going to make a new set of agencies unhappy. The question
before us really is, who are the agencies, or which are the
agencies that would win and lose in a formula change; and, is
there any good health policy rationale for that change?
You indicated that you had heard that a lot of these
agencies closed. I heard that 200 for-profit agencies have
closed in Texas, but 900 have opened. I don't know whether
that's good, bad, or indifferent, but it doesn't worry me. If
they want to make a profit, some win, some lose. That's part of
the market.
Fraud, waste, and abuse remains rampant in this sector. On
its face, it's fraud when for-profit agencies provide twice the
number of visits to the same type of patient as the not-for-
profits. Why shouldn't we, for example, just set the payment
rate at the median of the nonprofit cost per case, and save us
all some money?
In its regs on Medicare Plus Choice, HCFA is requiring that
HMOs have a compliance plan in place. The OIG is only promising
a voluntary plan for home health agencies, and I am going to
urge that HCFA make a compliance plan mandatory for home health
agencies in the future.
The nation really needs a long-term care program. We are in
turmoil over home health care because it is really becoming, by
default, our long-term care program, and nobody wants to pay
for it.
I was on the Pepper Commission in the 1980s. We tried to
develop a long-term care proposal, but no one wanted to pay for
it then either. In Medicare Catastrophic, we moved toward
better long-term care benefits, but no one wanted to pay for
it, and it was repealed.
You, Mr. Chairman, are now co-chair of the National
Commission on the Future of Medicare, trying to find a way to
extend Medicare's future, and no one wants to pay for it.
Rather than sneak a long-term care policy through the back
door of our acute care Medicare program, we should probably
propose a long-term care social insurance program, and ask the
public if they're willing to pay for it.
Until we do, I feel that Members will just be trying to get
two ends of the teeter-totter in the air at the same time,
saving money on one group over here, while this group goes
down. We won't be saving money, or moving the fulcrum, and will
continue accomplishing nothing.
We are just going to disadvantage new sets of providers, as
we change the formula. Maybe we will be able to do that to the
overall advantage of the public. I hope so.
Finally, Mr. Chairman, I would like to enter into the
record a number of written statements from members on our side.
Mr. Cardin and Mr. Jefferson had other meetings this morning,
as did Mr. Sanders and others. I would ask unanimous consent
that those statements be inserted at this point.
Chairman Thomas. Without objection, any Member's written
testimony will be made a part of the record.
Mr. Stark. Thank you, Mr. Chairman.
[The following was subsequently received:]
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Chairman Thomas. At this time, I would ask Mr. Hash,
representing the administration and the Health Care Financing
Administration, if he would come forward, and as he is coming
forward, to tell the gentleman from California his point is
well taken about winners and losers.
However, if you could examine a number of the pieces as
moving parts--and this will be a preface to any testimony,
including the HCFA testimony--that if you dealt with a formula
adjustment and you dealt with a per visit structure, and you
dealt with an outlier approach as, for example, three parts,
making adjustments in those three could mitigate the loss or
gain, principally the loss, of someone in a formula shift, and
so in trying to create a new interim payment system, it may be
a blend of those three, which would not maximize the advantage
of any, but minimize the damage, might be and most appropriate.
With that, Mr. Hash, I believe this is the first time you
have appeared before the committee. Oh, it's not true? It's the
second time. Well, maybe this time you'll make more of an
impression on me. [Laughter.]
Chairman Thomas. I'm just teasing. Your written testimony
will be made a part of the record, and you can explain to us
what your suggested change in the formula is, in your own
words.
STATEMENT OF MICHAEL HASH, DEPUTY ADMINISTRATOR, HEALTH CARE
FINANCING ADMINISTRATION
Mr. Hash. Thank you, Mr. Chairman. I think maybe the reason
you didn't recall me was that on the previous occasion, Mrs.
Johnson was the chair of the subcommittee; you were unavoidably
detained that day, I believe.
Chairman Thomas. Ah, okay. So it's not Alzheimer's. Go
ahead. [Laughter.]
Mr. Hash. No, sir. Chairman Thomas and Congressman Stark
and other members of the committee, we want to thank you for
inviting us to discuss with you today the home health payment
system issues.
I would first like to associate myself, and the Health Care
Financing Administration, with the sentiments that you
expressed, Mr. Chairman, in your opening statement, about the
intrinsic value of home health services as a part of the
continuum of care for all Medicare beneficiaries.
As you know, the Balanced Budget Act included and mandated
many changes in the way that Medicare pays for home health
services.
The new payment systems create incentives to provide care
more efficiently and to control spending. However, as you noted
earlier, the prospective payment system for home care must be
delayed while we address the year 2000 problem with our
computer systems.
The Balanced Budget Act established the specific structure
of the interim payment system that is now in place, until we
have prospective payment. And it was designed, we believe, to
assist in the transition from cost-based reimbursement to a
prospective payment system.
Like the prospective payment system, the interim payment
system does have incentives for efficiencies. We are aware, as
I know you and the other Members are, of the concerns that have
been raised about the impact of the interim payment system.
We have tried to make changes within our discretion, to
ease the burden of the interim payment system.
Since, as you know, the system may result in overpayments
to providers, I'm happy to announce this morning that we are
advising our regional home health intermediaries to put into
place extended repayment schedules for up to 12 months, for up
to a year, to make sure that those agencies who have a
repayment obligation have an adequate opportunity to meet those
obligations without undue hardship. We are notifying our
contractors this morning of this new, extended payment policy.
Secondly, you noted that we recently published an interim
payment system regulation in which we announced some further
discretionary steps that we believe will help home health
agencies.
We have adjusted the aggregate cost limits per visit and
the per beneficiary aggregate limits for inflation, as we are
required to do.
Secondly, we have updated the data on which we base per
visit cost limits so they are based on more recent cost report
data than has been the case up until now.
Thirdly, we have put forward a more flexible definition for
determining when a provider is considered a new provider, as
opposed to an old provider.
Beyond that, Mr. Chairman, we do have little discretion
within the law to go further. As you know, we have been working
with your staff and with the staff of many other members of
this committee, and of the House and the Senate, to provide
technical assistance on a number of reform proposals that
Members are considering.
We do believe that changes in this area of the interim
payment system need to enjoy broad support, be budget neutral,
protect vulnerable beneficiaries, and not conflict with our
year 2000 priorities.
The year 2000 compliance activities, as you know, have
limited the range of options that we can implement at this
time.
One of our important tasks recently has been to identify
those administrative actions that we think are feasible and do
not increase the risk of not being compliant with the year 2000
date problem.
In that regard, we can, as we have been trying to make
clear, change the per visit and the per beneficiary cost
limits, as long as we continue to use currently available data.
We cannot make changes to the current claims processing
system or create any new databases, or do any programming for a
new claims processing system.
For example, we are not able to change the base year that
is required in the statute, because that would require
extensive new data gathering and programmatic changes to our
information systems.
We could implement a new blend of national, regional, or
agency specific rates, based on fiscal year 1994 data, which is
the statutory base for the interim payment system. But changing
the interim payment system, obviously, may raise budgetary
concerns.
Also, if we reduce the agency-specific component within any
kind of blend, there are both advantages and disadvantages that
are well-known to you. Agencies with lower costs would tend to
benefit from such changes, but agencies that serve special
needs populations with legitimately high costs would experience
payment reductions.
An outlier system, to increase payments to agencies with
more costly patients, is also problematic, but could be
accomplished within the constraints of our administrative
limits.
A case mix adjustment system, as you know, is being created
for the prospective payment system itself. That case mix system
will look at the resources involved in providing care and
accounting for both low and high-cost cases.
In the meantime, we cannot make outlier adjustments for
high-cost cases that are based on particular diagnoses or how
long a beneficiary receives home health services.
For the time being, outlier adjustments could be made only
retrospectively, in combination with the settlement of home
health agency cost reports and could be based only on the data
that is included in those cost reports.
We are aware that there has been a proposal for creating,
perhaps, a block grant of Medicare trust fund dollars to the
states to pay for outlier cases. We are not supportive of that
approach.
We think there are no good data that either we or the
states would have available to fairly determine which agencies
should get such funds. We also think such aproposal sets a
dangerous precedent and raises substantial program integrity concerns.
Mr. Chairman, we do recognize the challenge of crafting
interim payment reforms within these constraints. We do,
however, take very seriously our obligation to work with
Congress in evaluating all of the options for further payment
reforms to the interim system to address the concerns raised by
home health agencies and by Members of Congress.
Working together, I think we have made some progress in
identifying what can and cannot be done. We, of course, want to
continue seeking solutions, and join with you in solutions that
protect our beneficiaries and the trust funds, and that sustain
essential home health services.
I'm happy to answer any questions that you or other members
of the subcommittee may have, and appreciate very much the
opportunity to participate in this hearing. Thank you.
[The prepared statement follows:]
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Chairman Thomas. Thank you, Mr. Hash. I guess my very
strong desire, mentioned twice in the opening, didn't catch on.
I'll do it again.
The administration, in the discussion and negotiations over
the BBA, had a policy that they were offering for a change in
the home health care area. The policy that the administration
advocated had a blend. Actually, that's probably a misnomer.
What was it that the administration offered as a formula
base; do you remember?
Mr. Hash. I think we were proposing 100 percent agency-
specific.
Chairman Thomas. I know you were proposing. That's why I
said it was a misnomer, to be a blend, because it wasn't a
blend.
My assumption is that you offered that in good faith,
believing that to be the most appropriate policy choice among a
number of alternatives in terms of the mix. In fact, as I
recall, that was what the Senate carried with it to conference.
The House had a different position.
What brought you, in terms of your examination of the area
at the time, to propose a 100 percent agency formula?
Mr. Hash. I think, Mr. Chairman, that the rationale behind
that position was related to a recognition that home health
costs, on an agency-by-agency and region-by-region basis, vary
quite considerably and substantially.
Since we were not able to prospectively identify those
agencies which had higher costs that were the results of
inefficiency, versus those that had higher costs with regard to
the nature of the patients they were taking care of, we wanted
to ensure that any kind of limits reflected the current
experience of those agencies.
Chairman Thomas. If I were to ask you, and you were to do
as I asked, what is your suggestion for a change in the
formula, would you want us to go to 100 percent agency-
specific?
Mr. Hash. I think our position at this point, Mr. Chairman,
is that we would like to continue working with you and your
staff to----
Chairman Thomas. Would you suggest that we go to the
position the administration initially advocated, 100 percent
agency-specific, since we didn't follow your advice when we
wrote the law coming out of Conference?
Mr. Hash. I would like to tell you that I think we would
still stand by that position, but I would say this, that given
how the BBA came out in the end, I don't know right offhand
what the implications of that would be for the scoring that was
otherwise associated with these provisions.
Chairman Thomas. I'm not talking about scoring right now.
I'm not talking about the artificial world of the budget
gimmicks that we have to deal with, which frankly impair our
ability to write good policy, often.
You now have data, and we are talking about looking at a
number of options, in changing the formula from the current 75/
25 to a series of different mixes. In fact, in your testimony,
you indicated that any change beyond the current one creates
new winners and losers.
There is no--I love the quote, and I can't remember who
made it--there is no Lake Woebegone, where everybody can be
above average, in trying to deal with these restructurings.
I know you're constrained, but I want to make the point,
you folks advocated 100 percent agency formula. That really
didn't begin to deal with the enormous discrepancies, we
thought, within a state, let alone between states.
I can't imagine that if you went back and huddled and
decided that you were going to offer a new position, that it
would be 100 percent agency specific.
Mr. Hash. I think, like you, Mr. Chairman, since last
year's deliberations on this area, we have learned a lot and
recognized that it is much more complex than we originally
thought.
Chairman Thomas. That's why we're here.
Mr. Hash. Right. And I think that we would definitely want
to revisit that position of ours of over a year ago.
Chairman Thomas. We are revisiting. That's why we're
holding the hearing. We are asking everyone who is coming
before us to assist us. To simply indicate that you're willing
to assist us gets us nowhere.
We do not have enough time before we take this work period
break to pull together and create a change. What we need to
have, beginning now, is input from everyone who will be major
players on what is suggested to be the best avenue today.
I'm not putting you on the spot. I'm putting me on the
spot; I'm putting every member of the subcommittee on the spot.
We have to have a solution and it has to be presented as soon
as we come back, and it has to mitigate the current problems.
Now, the administration continues to advocate a budget
neutral position. When you deal with a budget neutral position,
there are darn few boxes inside the big box that you can move
around. It may not mitigate the problem sufficiently to get a
decent bipartisan support.
I would ask you, and we will try again, on the per-visit,
my recollection is that the per-visit change from the
administration was, in fact, what we have now, wasn't it, 105
percent on the median, changing from the mean?
Mr. Hash. I believe that's correct, Mr. Chairman.
Chairman Thomas. You have to get people to do better
thanshrug their shoulders. It's 105 percent of the median. The current
change was, in fact, the administration's advocated change. Would you
stick with that? Or, based upon our experience and your examination,
would you suggest a change?
Mr. Hash. Mr. Chairman, I think what we would commit to,
and what we have committed to, is that in the time frame you're
talking about, we need to sit down and actually explore the
implications of each of these kinds of changes, and come to a
consensus about what is the most appropriate way that we can
address the kind of problems that have been identified with the
current system.
Chairman Thomas. Okay. What about an outlier policy?
Mr. Hash. I think we indicated that we could put into place
an outlier policy that was related to the settlement of agency
cost reports, and----
Chairman Thomas. What would that be, specifically?
Mr. Hash. It would have to be designed specifically on the
basis of legislation since, as you know, the statute does not
permit any outlier payments.
Chairman Thomas. I'm anxious to write legislation, as are
all members of this subcommittee. what is your suggestion on an
outlier policy?
Mr. Hash. We would like to work with you with regard to
that, Mr. Chairman.
Chairman Thomas. I appreciate that.
Mr. Hash. I'm trying to say, Mr. Chairman, that at this
point, we are exploring, as are you, different options, and we
would like to continue----
Chairman Thomas. Mr. Hash, we didn't put ourselves in the
box. We didn't come in front of this committee and say we can't
do what we committed to do, and we can't carry out the policy
we advocated, fought for, and required to be in the law or the
President wouldn't sign the agreement.
You folks have reneged on your end of the deal. Now, I know
that's not a full, fair way to put an argument, in terms of
Y2K, but we are here because the policy that we guessed at
wasn't very good. We can't keep guessing.
There are people out there who are not going to be able to
be with us in September, and it isn't because of fraud, it
isn't because of wasteful resources. It is because Congress, in
its inability to have accurate data, didn't do a good job in
setting up an interim payment system. We are going to have to
do that when we come back.
The reason it is even more critical than it would be
otherwise is because whatever we come up with has to last for a
longer period of time, because you aren't going to be able to
do your job in the time frame that you said you were going to
do it. It is very difficult for us when, here we go again, no
specific recommendation.
Now, I noticed in your written testimony, ``Congress
required,'' ``Congress required,'' ``Congress required.'' That
was a mutually agreed arrangement. And as you indicated--and
the per-visit was exactly what the administration advocated--
you people are equal partners in being where we are today.
I have a number of proposals I would like to offer to you,
but there is no sense in going forward, because the answer will
be, ``We would like to work with you, and we will, over the
period, look at them, and we will get back to you.''
What we are trying to do is communicate through our friends
who do the communication in a greater way, and among our
members, is we have to have specific changes that minimize the
downside, that certainly, as best we're able, minimize the
cost.
But cost, frankly, at this point, is somewhat secondary to
making sure that the policy is as good as we can get it, given
the fact we're going to have to live with it longer than we
thought, because you're not going to be able to hold up your
end of the agreement.
Mr. Hash. Mr. Chairman, as you have noted, we are not able
to implement the prospective payment in a timely manner. With
respect to the interim payment system, as you know, we have put
it in place. We have put the regulations in place, and we are
operating it.
We are not in any way saying, or trying to leave the
impression that we are not open to suggestions and to working
with you to make changes to address the kinds of problems that
the members have heard about. We think that over the next
month, working together, we can find some solutions that we can
all agree on.
Chairman Thomas. I'm not saying that you're not open to
suggestions. What I'm saying is that we have to come up with
solutions.
Saying you're open to suggestions sounds as though you're a
third party waiting for us to come up with the solutions.
You're supposed to be a partner. You're supposed to be part of
the solution, not part of the problem.
We have got to get serious and move forward and make
statements so people will have some degree of belief that when
we get back, we will have a solution. That's what we need.
One last question. There are a lot of people out there
hurting. There are a number of people who have closed. I
believe, as I said in my testimony, some of them were mergers,
consolidations, some may have even closed because of an
advantage of being a new agency, rather than an old.
Have any of these agencies applied to HCFA for an exemption
from the rules, for whatever reason they may provide?
Mr. Hash. I am not aware of that, Mr. Chairman, if they
have.
Chairman Thomas. Is HCFA examining the possibility of
offering exemptions to any agencies based upon whatever
evidence they may present to them?
Mr. Hash. Mr. Chairman, our review of the existing language
does not provide any authority that we can find for providing
for exceptions or exemptions, other than the existing authority
with regard to cost limits per visit.
Chairman Thomas. I would request that you get back to me in
writing, once you go back and ask that question directly, if
there are any agencies that have either been examined for the
possibility of an exemption or if, in fact, an exemption has
been granted.
Mr. Hash. I will be happy to do that, Mr. Chairman.
Chairman Thomas. Thank you very much. The gentleman from
California.
Mr. Stark. Thank you, Mr. Chairman. Mike, we are hearing
from some home health lobbyists that they would like the
administration to enforce a moratorium on the IPS system. It is
my understanding that you cannot legally do that. Is that
correct?
Mr. Hash. That is my understanding, Mr. Stark.
Mr. Stark. Your proposal that all Medicare+Choice plans
have a compliance plan in place, I think, is excellent.Could we
not require the same compliance plan for home health agencies?
There has actually been more concern, I think, about fraud
and abuse in the home health sector than in managed care. If an
agency doesn't have a plan to ensure compliance, I don't
suppose we would want them doing business, anyway.
Could you implement this compliance plan, and require it of
home health agencies?
Mr. Hash. Mr. Stark, I think that is an excellent question.
As you know, just this week, the inspector general at the
Department of Health and Human Services announced the
development of a voluntary compliance program for home health
agencies. Of course, the inspector general will be testifying
shortly, and will talk to that.
Let me just say, in connection with your specific question,
that we currently have out a proposed rule for conditions of
participation for home health agencies. We are analyzing the
responses to that proposed rule.
Among them will be issues that are raised about various
pieces or elements of a compliance program. The way we would
address your concerns, Mr. Stark, would be in the context of
finalizing our home health conditions of participation.
Mr. Stark. But not voluntary. I mean making it, the same as
the requirement for managed care plans, a requirement of
participation.
Mr. Hash. What I want to be clear about is that our
conditions of participation are mandatory on home health
agencies. What we would be looking to would be to coordinate
those conditions of participation with the core elements of a
compliance plan that makes sure that those are addressed
adequately through our conditions of participation.
Mr. Stark. I think you are saying that there would be a
compliance plan required, in one form or another, in the
conditions of participation, and that makes it not voluntary.
Is that what I hear you saying?
Mr. Hash. Yes.
Mr. Stark. Okay. You are asking us for new legislation to
better protect nursing home residents. I support that idea. You
asked for staff to prevent dehydration, malnutrition,
background checks to keep abusive people away from nursing
patients, which has been, at least anecdotally, a concern.
Why don't we mention home health agency staff? If we are
requiring, or plan to require, background checks to keep
abusive people away from fragile people in a nursing home
situation, why should we not require the same thing for home
health? In home health, the people are even more isolated,
often, and we are less apt to be able to check on them and
protect them?
Would you support parallel legislation that would require
home health aides and staff to have background checks to keep
people with a history of crime and abuse from participating the
program?
Mr. Hash. Again, we do have, in our proposed conditions of
participation, requirements, proposed requirements related to
doing background checks.
I think the piece that is missing out of that, Mr. Stark,
is making sure that, in those checks, there is access to a
national database, because the states, of course, keep
background records, but that would only reflect adjudications
that take place within a particular state.
As we know, some of these people who have had convictions
move to different jurisdictions, and----
Mr. Stark. I would like it to be as broad as it could be.
But let's not defeat the better with the perfect.
Mr. Hash. No, absolutely. I would say that I think the
national database is the area in which legislation would likely
be required. We would be happy to work with you to take a look
at that.
Mr. Stark. My time is going to expire, but let me try and
say--and I have a hunch the chair will indulge me on this--what
I thought I heard the chairman saying differently.
Part of why we are here today, and trying to move the
chairs around on the deck of the Titanic, is because of the
lack of implementation of the prospective payment system.
It would seem to me that in any legislative solution, if
there is to be an outlier program to ease the fringe providers,
that there is no sense in our trying to develop one only to
have HCFA subsequently say, ``We can't implement this.''
You have staff that is better equipped and better
understands the questions of outliers. You have the data. I do
believe that the chairman is coming at it the right way.
It is incumbent on you, I believe, to suggest to us the
structure of an outlier plan. You may choose to reserve the
payment amounts until we see what the cost of changing the
formula is.
You now have the month of August. Stay home from Martha's
Vineyard and get us a plan that will work and that you can
implement.
We may or may not be able to get the votes to pass it. But,
there is no sense our sitting down here, going through a lot of
concern with our colleagues, because in changing this plan,
there are going to be different winners and different losers,
and then trying to ease that burden by saying we have an
outlier plan, and then have you come back in three months and
say, ``We can't do it.'' I think that is what he is saying.
If you don't want to give us the exact numbers, at least
give us the structure, with some certainty that it is something
you can do. That the data exists, that you have the staff and
the legal ability to provide these outlier payments.
If you can't do it, then tell us now. If, for some reason,
it is just impossible--which I guess is conceivable--then let
us know.
But we--as Members of Congress--are saying, ``Well, if that
doesn't quite work, we'll have an outlier plan that's going to
ease this burden and that burden.'' We may be dreaming. If so,
wake us up, please.
That's all I have to say. The chairman's request is fair,
and it is incumbent on your staff to follow through. We are
going to hear later from the people who advise us.
It may be the Medicare Payment Advisory Commission that's
going to help us come up with this solution. But, you would do
it best. Other professionals would do it second best. We would
be the third, at least, best people to have to devise it.
All I'm asking is, hear what the chairman is saying and put
your troops to work to come up with something for us, so we can
have it early in September.
Mr. Hash. If I may briefly respond, Mr. Chairman----
Chairman Thomas. I was just going to tell the gentleman,if
he had any more questions like that, we can ignore the time light.
Mr. Hash. I am happy to respond to that, because both in my
written statement and in my oral statement, I want to make
clear that, with regard to outlier payment policy, we have done
a very careful look at what we can do.
What we have tried to communicate is that we can administer
an outlier policy, one which would be administered in
conjunction with the data that is included in the cost reports
that are filed by home health agencies, so that the actual
determination of an outlier payment would be made at the time
of settling the cost reports, it would be made on the basis of
the data in those cost reports.
The limitations of that are that there are not in the cost
reports specific patient diagnostic information, but certainly
there is cost information. To the degree we are adjusting for
problems that agencies have with limits through an outlier
payment, that can be done in connection with using data from
home health cost reports.
Mr. Stark. There is no way that you can take certain
episodes and say that ``We know from experience that these are
so much more expensive than others that we can prospectively
adjust for those cost differences.'' You can't do that?
Mr. Hash. We are unable to do that.
Mr. Stark. All right. Thank you.
Chairman Thomas. I would only indicate to the gentleman,
before I recognize the gentlewoman from Connecticut, that I
recall that the President had quite an ostentatious liftoff on
the changes that were made.
Saying it in slightly another way, for the gentleman from
California, as well, we are not interested in continuing to be
on the airplane and find out there was one parachute, and it
has been used, and you folks are more than willing to provide
us with some kind of background and green eyeshade technical
expertise.
This was a mutually-agreed-upon project, and I expect, when
we come back, that the Health Care Financing Administration,
under the Health and Human Services Agency of the Clinton
administration, will all be out front publicly suggesting
changes, and be partners in the adjustment period, as you were
partners in the takeoff period of new program.
The gentlewoman from Connecticut.
Mrs. Johnson. Thank you, Mr. Chairman. Both of the
gentlemen from California have been very polite, I believe.
I know that you have been working with us over the last few
weeks. You have been working with some of us over the last few
months.
I would have to say I am extremely disappointed in your
testimony. In my estimation, we are at the time when we need to
be talking about solutions. If you've done all the work that
you've done on the outlier program, why didn't you propose
something today?
I'm going to be back in my district for three weeks. I'm
going to be sitting down with my home health agencies. It would
have been very helpful to be able to say, ``Here is what HCFA
says.''
You have the resources, the computers. We sit and look at
the chart printouts. We can't tell whether the efficient
agencies are being damaged or the inefficient agencies.
We know new agencies are coming into the system. In many
parts of the country, those new agencies are going to be paid
more than the agencies we are pushing out of business with the
overall cost increase for Medicare.
Now, you have far better technical capability than we do.
You have people with long-term experience in this area, much
longer term than any of us have.
You know, you have got to be specific. What outlier policy?
What size agencies? We need to see, will this help?
Let me ask you: do you think this is a crisis? Do you think
the problem we face is serious enough so that, if we don't
address it, it will have serious consequences for senior care?
Mr. Hash. We think that the concerns, Mrs. Johnson, that
have been raised by you and by agencies are legitimate ones.
They are concerns, and we want to work with you to address
them.
Mrs. Johnson. That does not answer my question. There isn't
a part of Medicare in which there aren't serious concerns,
frankly. We have so many problems in this system right now.
What I am saying to you, do you consider the situation we
face in home health right now a crisis? In other words, do you
believe that, if we don't do something before we leave here in
October, that in fact we will diminish access and quality to
home health for seniors?
Mr. Hash. We believe that we do need to take action. We do
not believe at this point that we have the evidence that would
confirm for us that we have an access problem in home care.
We have agencies that are still coming in. We have over 170
applications pending right now for new agencies. So, on the
access side, we really don't have data.
Mrs. Johnson. Have you done an analysis of where the new
agencies are coming in and where the agencies that are closing
up are going out?
Mr. Hash. We have some data on that. I would be happy to
share that with you.
Mrs. Johnson. I think part of what we ought to be looking
at is, are we creating an access problem? In spite of the
larger number of agencies, are we creating deficits in rural
areas because those lower-cost agencies are going out? I'm just
speaking from my own limited experience in my own district.
We need to know that stuff. When we make changes in this,
we have to have some understanding of are we going to create a
better answer from the point of view of the survival of
services.
So you do not consider this an emergency. You consider it
serious, but you don't consider it an emergency. I assume from
that, that if we didn't do anything about it, you would think
that was not very good, but it wasn't very bad?
Mr. Hash. We have obviously taken a number of steps on our
own, because we think it is a serious problem, to address many
of the problems that, within our discretion, we could----
Mrs. Johnson. Are the steps you've taken sufficient?
Mr. Hash. No. I believe that, based on the conversations
that we have had with you and others, that additional steps
need to be taken, and we need to take them together.
Mrs. Johnson. What will be the impact of the 15 percent cut
going into effect next year?
Mr. Hash. What will be the impact?
Mrs. Johnson. With no change.
Mr. Hash. The CBO estimates that it would remove on the
order of $2.8 billion in fiscal year 2000, if that was the
scoring associated with the 15 percent.
Mrs. Johnson. What is HCFA's estimate of the impact of that
on access and quality, on home care as a service to seniors? If
we do nothing, what will be the impact of the 15 percent?
Mr. Hash. We obviously do not have a specific estimate on,
agency-by-agency, how it will impact them. It will definitely
have a substantial impact, because that is a lot of money that
is being taken out of payments to home care agencies.
Mrs. Johnson. Would you describe the situation that we
would face then as serious, very serious, or just concerning?
Mr. Hash. I think it's very serious, because I think the
Congress did not intend, nor did we, the 15 percent to be a
part of the interim payment system.
Mrs. Johnson. I agree with you absolutely, and I would ask
that, by the end of this interim, you come back with a plan
that includes how do we relieve that 15 percent? Frankly, you
can't do it budget neutral, and you've put that out as one of
your criteria. You have to get beyond that. That's your
responsibility.
Furthermore, you know the whole system. Where is there
money that is not being paid as well? To whom are we paying
money that we shouldn't be paying?
You're closer to the fraud and abuse people than we are.
Why can't we capture the dollars we need to prevent something
that is totally irrational from happening, when you've taken
$2.1 billion more out of an industry than you anticipated.
Indeed, we anticipated that the baseline would be 21.4 in
1998 and it's 18.2, but it all comes out to a cut of $2.1
billion more than anticipated. When you have done that, you
have to have a way to respond.
I would ask you that, when we get back, you have something
concrete, and I would hope that you would have it in two weeks,
instead of four weeks, so we would have some time in the
district to talk to our own agencies about it, so we can get
some--I mean, they are not always right. I understand that. And
it's going to affect agencies in Connecticut very differently.
There are going to be winners and losers.
Unless we can get some hands-on opportunity to evaluate
that, and to put it with our own ideas and their input, we are
not going to get a solution that will actually be a step
forward, and we certainly won't be able to deal with that 15
percent. It is imperative that we not neglect to relieve that
date while we are making these changes.
I hope the next time we meet, it will be concrete, a very
concrete discussion. I am truly disappointed that I don't have
the opportunity to go home and go over ideas that are concrete
in your mind, as well as a few that are concrete in mine. Thank
you.
Chairman Thomas. I do want, before I recognize the
gentleman from Louisiana, to note that the dollar amount that
the gentlewoman indicated, a $2.1 billion difference in the
baselines between 1997 and 1998, is partly attributed to--and
the reason I'm saying this is, I don't want any witness who may
come later in the program to ascribe that to the immediate
behavioral changes based upon the programmatic changes that we
put in.
Because what did occur between 1997 and 1998, as I
indicated, was a four-month moratorium on the startup. In
addition to that, I believe that there was a releasing of the
wage rates and other items that were built into the 1998
baseline, that wasn't in the 1997, which neither of those would
be attributable to the BBA for baseline purposes.
Now, that is a shorthand way of saying what I said earlier,
that the stupid budgetary procedures that we have to operate
are not going to stand in the way of you folks and us
presenting a better program for Americans who want to use home
health care, and need to use home health care.
I want to underscore what the gentlewoman from Connecticut
said. It is a little difficult for us, trying to look at policy
when, as the gentleman from California said, you have added a
new parameter that we have never had before. That is, we come
up with what we believe to be proper policy, and you tell us
you can't do it. You've got to be more out front than you have
in the past, in an advocacy role of options, instead of us
asking you whether you can do this or do that, and then we wait
to find out if you can do it or not. We don't have the luxury
of that kind of a timeline.
The gentlewoman from Connecticut.
Mrs. Johnson. Thank you, Mr. Chairman. My red light was on,
so I didn't go into those details.
He brings up a very good point. What it means is, that when
you come back, you need to be able to say, ``We recommend a
moratorium on any new agencies who are going to come in at a
reimbursement rate that is above the national average,'' or
whatever.
I mean, that might be one of the things we need to look at
here, that we need to look at the extent to which we do adjust
to wages. We need to look at what we think.
You also have access to monthly cost reports. Are we
beginning to see a slowdown in number of visits? In the GAO
testimony, that seems to be something we are beginning to see
now.
I understand perfectly well that this isn't all attributed
to a slowdown in the number of visits, but the things to which
it is attributed are also useful to us. That's the level of
analysis and assistance we need here so we do the right thing,
and we actually improve the situation, rather than just sort
of, in a sense, slog along in a way that we all too often have.
Thank you.
Mr. Hash. We are in complete agreement with you on that,
Mrs. Johnson. We are as frustrated as you are with regard to
our lack of information about certain kinds of things, but
whatever we do have, we want to make fully available to you and
to the other members of the committee.
Chairman Thomas. I don't think you realize how frightening
that statement is to us. [Laughter.]
Chairman Thomas. You people are the keepers of the flame,
and if you can't do it, we'll sit down and rethink how this
place operates, and get people who do.
The gentleman from Louisiana.
Mr. McCrery. Thank you, Mr. Chairman. Mr. Hash, I think you
have gotten the message, so I'm not going to beat it to death.
Let me just go over a couple of things.
I gather from your statements regarding the severity of the
crisis, as Mrs. Johnson would put it, that you would not favor
a moratorium on the IPS, the interim payment system, and that
you would not favor, as the administration, going back to the
old agency-specific cost reimbursement?
Mr. Hash. Mr. McCrery, let me answer that in two ways.
One is--and this is not whether we favor it or not--one is,
we could not do it on our own. I want to be clear aboutthat.
Mr. McCrery. Yes.
Mr. Hash. The second answer, as to whether we would favor
it or not, we, as the chairman has pointed out to me
repeatedly, are partners, not only in the home health area, but
in the Balanced Budget Act in general. So that if we were to
recommend a suspension or a moratorium of the interim payment
system, it would be incumbent upon us to identify how we would
live up to our commitments with regard to the Balanced Budget
Act.
We have not identified, as of this point, areas in the
Medicare program that have not otherwise been adjusted by the
BBA, that could provide the resources that would make up for
the impact of a moratorium.
Mr. McCrery. So, your answer is, no, you don't want to go
back, you don't want to put a moratorium on the interim payment
system; and I hear you saying that the reason you have reached
that conclusion is that you don't think that this problem with
the interim payment system in home health outweighs the damage
that might be done to other parts of Medicare by paying for a
change in the IPS, they would involve more dollars.
Mr. Hash. I think we believe that we need to do everything
we can to make sure that neither access nor quality of home
care services are unduly interrupted by the payment policies
that are in place.
On the other hand, we have an equally strong obligation to
make sure that, if we take steps in changing the current
policies, that we do so in a fiscally responsible manner, to
make sure that we protect the trust funds and sustain the
program for the current beneficiaries and for those to come.
Mr. McCrery. Well, let me just get right to the nub of it.
Would you favor--and you need to think about this, I guess,
over the recess--would you favor using some of the surplus to
finance a change in the interim payment system?
Mr. Hash. As you know, Mr. McCrery, the administration,
taking direction from the President, has indicated that our
position is that the surpluses that are occurring in the budget
should be set aside to deal with the challenges that are facing
the Social Security program.
Mr. McCrery. You would not favor using any of the surplus
to solve this problem?
Mr. Hash. No, sir.
Mr. McCrery. Just one more quick question. Did I hear you
say that in any prospective payment system that you think you
could come up with--and we hope you do, eventually--you would
have to have some sort of outlier adjustment as part of that
prospective payment system?
Mr. Hash. I actually did not address that in my comments,
but I believe the statute, with respect to the home health
prospective payment, makes provision for outlier payments.
Mr. McCrery. Okay. Thank you. Thank you, Mr. Chairman.
Chairman Thomas. The gentleman from Nevada.
Mr. Ensign. Thank you, Mr. Chairman. First of all, one way
or the other, whether the formulas are adjusted or not, Nevada
is not really affected that much. I don't really have a dog in
this fight.
What I am more concerned about is whether or not seniors
across the country are going to be getting the type of care
they need--and hopefully, that's what all of our concerns are.
I know that it has been expressed to you already that the
committee is hopefully trying to elicit your help.
Mr. Hash. Yes.
Mr. Ensign. We are not trying to, just beat up on somebody
that is in your position, just for the sake of beating them up,
but we really do want your input, because of what Mrs. Johnson
said, that you have the experts, you have everybody that we
don't have up here.
We have very limited resources as Members of Congress, as
this committee, compared to what the administration has.
Because of that, we do want the answers coming from you, to
help us with this problem.
I know you have some areas in which you have a lack of
information, and that is frustrating, and I guess I can
understand that. At the same time, if you have a lack of
information, we have that much more of a lack of information.
What we need from you, at least, sir, is a positive, you
know, ``This is what we can do.''
My question, though, for you, is you say you don't want to
pay for this out of the surplus. If this ends up being a cost
to make the adjustments, where does the administration propose
to come up with the money to pay for that?
Mr. Hash. As I said before, our view on that is, as we have
examined what has occurred as a result of the Balanced Budget
Act, to the Medicare program, we have not been able, to this
point, to identify areas in Medicare that could be further
adjusted in terms of payment policies or other kinds of
adjustments that would yield the kind of money that might be
necessary to do some of the things that Mrs. Johnson and the
chairman and others have suggested.
That doesn't mean we can't take a look, and continue to
take a look at opportunities. But, as I'm sure you know, the
Balanced Budget Act, in the aggregate, reduced expenditures in
Medicare $115 billion over the next five years, and as a result
of that, other providers and other benefits that are covered by
Medicare are also feeling important changes and reductions in
payments of one kind, or limits on increases in payments.
As a result of those things, we have not yet identified
ways in which we could take money from another part of Medicare
for this purpose, but obviously we have not said that we
wouldn't continue working with the Congress to try to identify
ways in which resources could be applied to support the kinds
of changes that are being talked about.
Mr. Ensign. I guess the question that would follow from
that, then, is over the next four weeks, before we come back,
can the administration come back with a proposal that has
identified some suggestions to us to make changes? Will those
suggestions have your commitment to come back with where you're
going to come up with the money.
Because, if we have identified that there is a problem
getting the care to seniors that need it, we have to come up
with solutions. Whether they're popular or not, we have to come
up with solutions, to make sure that seniors get the kind of
quality care that they need.
Mr. Hash. I think it is accurate to say that we would not
come forward with a proposal that implicated additional
spending without also being prepared to support a way to do
that. That is why we need to continue exploring if there are
appropriate ways to do this.
As I said, we recognize we would need to be fiscally
responsible and that we shouldn't make a recommendation that
implicates additional spending without a way in which to
finance it.
Mr. Ensign. Do we have the commitment of the
administration? Can you guarantee to us, or at least reasonably
guarantee to us, that when we come back, that we will have some
of the answers to this, or do you think that there is no way we
can say that?
Mr. Hash. I believe that, during the course of the recess,
there will be a sustained effort on our part and on the part of
your staff and others, to actually work through this to come to
some conclusions by the time of your return.
Mr. Ensign. Okay. Thank you, Mr. Chairman.
Chairman Thomas. I thank the gentleman. Does the gentleman
from New York wish to inquire?
Mr. Houghton. Pass.
Chairman Thomas. Does the gentleman from Texas wish to
inquire?
Mr. Johnson. Thank you, Mr. Chairman. A couple of
questions.
One, I'm interested in trying to find out what the problems
are with the high-cost states of Louisiana, Texas, and
Oklahoma. I wonder if you've done any investigation in that,
since they kind of stand out, and since they are all in the
same district.
Mr. Hash. I think at least our preliminary assessment of
the circumstances is that, in some cases, high-cost agencies
have high costs because the patients they are taking care of
require more services, longer services, more intense services
which, of course, means that the costs are going to be higher.
Mr. Johnson. Yes, but why are they different from some high
retirement area, like Florida, for example?
Mr. Hash. If I may, let me finish. I think the types of
patients definitely has an effect on the cost. At the same
time, there is ample evidence that in some cases home health
agencies have not been as efficient as they should be. The
incentives of our cost-based reimbursement have rewarded
increased spending.
It is very difficult to discriminate between higher costs
related to inefficiencies and the incentives of cost-based
reimbursement and higher costs related to the kinds of patients
that are being taken care of.
Secondly, I think another issue that implicates higher use
of home care services is the extent to which state Medicaid
programs provide other kinds of home-based and community-based
services that are available for patients with those kinds of
needs.
In states where Medicaid programs don't provide much
support for that, Medicare home health is probably much more
highly utilized, and in states where there is a stronger home
and community-based service benefit under Medicaid, Medicare
home health expenditures are lower.
There are a number of factors that influence whether there
are higher or lower-cost agencies in a particular part of the
country.
Mr. Johnson. Is that supposition, or do you have facts to
support that?
Mr. Hash. I think we have information about the character
of the Medicaid programs in states. What we don't have is
information that at least adequately discriminates between
agencies who have higher costs because they have been
inefficient and agencies that truly have higher costs because
of the nature of the patients they are taking care of.
Mr. Johnson. How often, and how many of your home health
care claims are scrutinized by your fiscal intermediary?
Mr. Hash. How often?
Mr. Johnson. Yes.
Mr. Hash. We have, as you know, regional home health
intermediaries. The claims that are submitted come in and are
reviewed for coverage and other requirements of home health
services, and then they are paid on the basis of interim rates.
Then, ultimately, at the end of the home health agency's
cost year, they submit a cost report and we compare the results
of analyzing that cost report to what we have paid them on an
interim basis.
Mr. Johnson. But specifically, do you go into and audit
those things through your fiscal intermediary?
Mr. Hash. Yes, we have----
Mr. Johnson. How many of them do you do nationwide?
Mr. Hash. I don't have the specific figures or percentages,
but a percentage of home health claims are subject to medical
review, both a randomized sample of claims as well as focused
medical review in agencies that have been identified with
aberrant utilization or cost patterns.
There are definitely intensive reviews of claims, selected
either on a random basis or on a focused basis.
Mr. Johnson. You don't know a percentage?
Mr. Hash. I think roughly 3 percent, on average, of home
health claims are actually reviewed by the regional home
health----
Mr. Johnson. Okay. In District 6, which is where Texas,
Oklahoma, and Louisiana are, are you using that same review
process? I would suppose, since the numbers are higher, you
would review more of them. Are you doing that?
Mr. Hash. I don't have the figures for your region, but I
would be happy to get them. We would have some average figures
about the percent of claims that are subject to medical review
and medical necessity determinations.
Mr. McCrery. Would the gentleman yield?
Mr. Johnson. Yes.
Mr. McCrery. Mr. Hash, in answer to Mr. Johnson's question
about is it supposition on your part, or do you have any data
to back up your conclusion about the reasons for some higher-
cost areas, didn't, in fact, HHS conduct or commission a study
in 1994 on that very subject?
Mr. Hash. I'm unaware of what study you may be referring
to.
Mr. McCrery. Mathematica Policy Research, dated September
30, 1994. You might want to look at that.
Mr. Hash. Yes, sir. I'll be happy to.
Mr. McCrery. Mr. Johnson, in fact, they do have a study,
which indicates that there are very solid reasons for higher
costs that vary, region by region. If you would like, the
gentleman from Louisiana that will testify later today has some
citations from that study in his testimony.
Mr. Johnson. Thank you. I appreciate it.
Mr. McCrery. Thank you for yielding.
Mr. Johnson. Thank you, Mr. Chairman.
Chairman Thomas. I would tell the gentleman, if it was data
from 1994, I would say that the world has changed quite a bit
since then. But since HCFA is locked into the world of 1994----
Mr. McCrery. And our interim payment system is based on
1994.
Chairman Thomas. Since HCFA is locked into the world of
1994, and cannot go beyond it, it seems to me
perfectlylegitimate for people to present data from 1994 in refutation
of a policy built on 1994, notwithstanding the fact that it may, in
fact, be much ado about nothing that applies to what we're doing today,
and that is one of the really sad factors we're dealing with.
Does the gentleman from Washington, a member of the
committee, wish to inquire?
Mr. McDermott. Thank you, Mr. Chairman. I am interested in
your statement about the Medicaid information and the extent to
which those services overlap. I wonder how solid that data is,
and how collated it is. It sounds like there may have been a
study in 1994.
I would like to know what kind of data you have, actually,
because as I look at these states, all the western states--
Washington, Oregon, California, North Dakota, South Dakota--
they have low utilization of home health care, whereas you have
a cluster of Louisiana, Oklahoma, Texas, Mississippi, Alabama,
and Tennessee all with almost two or three or four or 500
percent more average visits.
There is something going on there that I am interested in--
and I have a theory what it may be, but I would like to hear
your answer.
Mr. Hash. I think, in short order, I'm not sure that we
have a definitive answer for those very large differences in
expenditures for home care, from region to region, because that
is at the heart of one of the problems we are dealing with
here, how to fashion a payment policy that appropriately takes
into account differences, without locking into place
differences that we would not want to recognize because they
flow from inefficiency or fraud or waste or abuse.
I think, in many respects, the kind of variation, although
the magnitude is greater here, but the kind of variation that
you are seeing in home care is often the variation you see
around the country in terms of the utilization and cost of
other kinds of health care services. In that regard, home
health is not fundamentally different.
What is different is the magnitude of the differences in
home health expenditures from region to region. And as I say,
we would be happy to share with you some of the analysis, I
think, that we have, that looks at the range of factors that
influence the use of home health agencies, and there are a
number of them.
One of them is the presence of home and community-based
services through Medicaid, but there are other factors, as
well.
Mr. McDermott. I think it would be very useful for the
committee to know that analysis, because Washington state has
run the most efficient, along with Minnesota, runs the most
efficient health care system in the country. We're at 30
visits, whereas Louisiana is at 153. The patients in Louisiana
can't be 500 percent sicker than they are in Washington state.
The same is true for most health issues. For example, we
got no money out of the children's heath initiative, because we
already cover children up to 200 percent of poverty. So there
is a real issue there.
There is a second issue; and I was in the state legislature
when we did this, in fact was in the middle of the fight. That
was protecting the certificate of need.
The state of Washington has a very tight certificate of
need process. Many states have disbanded that whole process, or
have a very loose certificate of need.
I wonder if you can tell me, Louisiana, Oklahoma, those
states, do they have certificate of need?
Mr. Hash. I don't know the answer to that. I'm told
approximately 22 states now have some form of certificate of
need legislation on the books. I would be happy to get that
information to you in more detail.
Sometimes certificate of need covers certain kinds of
providers, and not others, you know, sometimes hospitals, maybe
not home health agencies. But we would be happy to get that
information for you.
Mr. McDermott. Our certificate of need goes down to kidney
dialysis treatment stations. We do a whole series of things in
the state of Washington to deny people. I think one of the
things that we have to look at is this business of how much
capitalization there is in a number of states.
Clearly, if the system is open, when this benefit became
available under Medicare, or became a big issue, the companies
went in. They would never get into the state of Washington
today.
Mr. Hash. I would agree with you. I think I should
recognize that the BBA, as you probably know, has put into
place some additional tools for us to use in terms of more
strict criteria for provider acceptance or enrollment in
Medicare.
Those include things like standards for their
capitalization, evidence that they actually are serving non-
Medicare patients before we allow them to come in and serve
Medicare patients.
These kinds of requirements are going to, we believe, be
very important at the front end, as a preventive measure, to
make sure that agencies do not come into the program and serve
our beneficiaries when they do not meet appropriate standards.
Mr. McDermott. Do you think it is sufficient to have it all
done in Washington, D.C., rather than to have it done out at
the state?
I mean, the Balanced Budget Act may have been written that
way, but I wonder if you think it might not be better to put it
out at the state level, and let them actually look at it.
Mr. Hash. I think to the degree that states are doing that,
like Washington, as you've described, we would have nothing but
support for their efforts to do that.
We feel we have a responsibility, as the agency that is
enrolling providers, to make sure that they meet appropriate
standards, both clinical and quality standards as well as basic
business standards.
Mr. McDermott. Okay. Thank you, Mr. Chairman.
Chairman Thomas. The gentleman indicated he thought he had
a theory. I didn't hear it.
Mr. McDermott. My theory is----
Chairman Thomas. In terms of packaging, I'm requiring
everyone----
Mr. McDermott. I was advancing a theory in terms of
certificate of need. A tightly run certificate of need program
excludes inefficient and wasteful programs. Actually, in the
last, since 1994 to 1997, the number of visits in Washington
state has gone down, and we have only had one agency close,
where Texas has had 450 agencies closed.
There are enormous differences in what has gone on around
the country, depending on the nature of how you let these home
health agencies start up. We let them all start up, and now we
have the problem of a lot of them saying, ``We're going to have
to close down.'' Well, they never should have beenthere in the
first place.
Chairman Thomas. I understand. Perhaps, in the August
break, we can get at that from a potential angle of requesting
what would occur if you created a moratorium in highly served
areas, however you might define that, so that you can stop the
ongoing change, rather than go back and review whether or not
they should have been there in the first place, because they're
already there.
The gentlewoman from Connecticut wanted to ask one
particular question.
Mrs. Johnson. I just wanted to ask if you would develop
some information for us that I think will be necessary for our
evaluation.
I need to know whether the increase in health care
utilization reflects changes in the utilization of other post-
acute care services.
Are we still seeing home care keeping people out of nursing
homes? Are we still seeing, and can we document, that home care
is enabling people to be discharged from hospitals sooner?
Are we able to say that, in those areas like Louisiana,
maybe people are in home care longer because they don't have
congregate living facilities, and is that less costly or more
costly to the system?
We need some information that looks at rising home care
costs in the context of the overall cost of the system. That, I
think, would be very helpful to us, and play into some of these
other problems that we have.
Mr. Hash. We will be glad to try to provide what we can
with regard to that.
Mrs. Johnson. Thank you.
Mr. Hash. That's an important set of questions.
Chairman Thomas. Thank you, Mr. Hash. I want to underscore
what my colleague from California said.
We can sit here dreaming up ideas, hand them to you, and
you tell us whether you can do it or not. Seems to me you
changed the rules of the game by not being able to do what we
say you ought to be able to do.
We expect some specific model options in the area of
formula change, in the area of per-visit change, and in the
potential for an outlier policy.
Mr. Hash. We look forward to working with you, Mr.
Chairman.
Chairman Thomas. I would have preferred ``Yes,'' but that's
okay. Thank you very much.
Next panel, please--somewhat a cast of regulars. We welcome
back Dr. Bill Scanlon, director of the Health Financing
Systems, General Accounting Office; Dr. Gail Wilensky, Chair of
the Medicare Payment Advisory Commission, better known as
MedPAC; and Honorable June Gibbs Brown, Inspector General of
the Department of Health and Human Services.
I want to thank all of you. We did take a rather long time
with our first panelist, but as I think you know well, the
difficulty with the Y2K problem and the need to come up with a
solution required us to pursue options perhaps longer than we
normally would have.
Your written testimony will be made a part of the record,
and you may inform us as you see fit of your specific
suggestions or criticisms or critiques of the home health
interim payment system.
Dr. Scanlon.
STATEMENT OF WILLIAM J. SCANLON, DIRECTOR, HEALTH FINANCING AND
SYSTEMS ISSUES, HEALTH, EDUCATION, AND HUMAN SERVICES DIVISION,
UNITED STATES GENERAL ACCOUNTING OFFICE
Mr. Scanlon. Thank you very much, Mr. Chairman, and members
of the subcommittee. I am very happy to be here today as you
review the recent changes in Medicare payment policies for home
health services and the need to ensure that the spending for
these services and its distribution under the interim payment
system are appropriate.
The goal for a long time, as you know, has been to
implement a prospective payment system for this benefit, to
establish and maintain control over the growth of spending, and
also to better match payments with patient needs. However, in
enacting the Balanced Budget Act last year, you recognized the
implementation of a prospective payment system would not occur
before fiscal year 2000, and an interim payment system would be
needed to initiate control over payments.
As the interim payment system will be in place now longer
than you intended, issues with regard to its adequacy and
appropriateness become more troubling, though they might not
have been so in the short term. In particular, there are
questions about whether the per-beneficiary limits will
excessively restrict overall payments and about the relative
stringency of these limits among agencies.
One thing we should recognize is that the per-beneficiary
limits were established using the average number of visits per
beneficiary in the 1993-1994 period.
Most of the rapid growth we have witnessed in the number of
visits per beneficiaries since 1989 had occurred by then, and
would be reflected in the data used to establish these limits.
Evidence from both our past work and that of the Inspector
General have indicated that utilization levels in recent years,
to some degree, have been inappropriately inflated by services
provided to some beneficiaries who didn't qualify for the
benefit, by some beneficiaries receiving unauthorized visits,
and even by, instances of visits being billed but never being
delivered.
Consequently, concerns about the overall spending under the
interim payment system may be unnecessary. Ensuring, however,
that the limits reflect appropriate costdifferences across
agencies is a more difficult issue to address.
Blending historic agency-specific and regional payments to
determine the per-beneficiary limits was intended to recognize
that significant variation in costs across agencies and
geographic areas exists, and to reduce some of the extremes.
How much agencies spent in the past does provide some
indication of the types of patients they serve. Although cost
data are readily available, they are admittedly very crude case
mix adjusters, because cost differences can reflect multiple
causes.
Agencies can have higher costs due to inefficient
practices, and then they will have a higher per-beneficiary
limit. Conversely, if an agency had a history of managing its
costs and controlling its visits to each patient, its per-
beneficiary limit will be constrained.
Unfortunately, examining costs alone cannot reveal whether
an agency serves a more needy patient population or operates
inefficiently. As a practical matter, therefore, in order to
protect those serving a more complex mix of patients, other
inefficient agencies may be rewarded.
The per-beneficiary limits based on 1993-1994 data also may
prove problematic for some agencies if external factors have
resulted in significant changes in their costs since then. An
example would be a shift in the mix of patients that might
accompany a change in the number of providers in their local
market which would then have an effect on the clients available
to other agencies.
An even more widespread impact could accompany a state's
adoption of a so-called Medicare maximization policy. Through
these policies, some states have attempted to ensure that
Medicare is billed first, instead of Medicaid, for visits to
patients who are eligible for both programs. This increased
Medicare billing may not be reflected in the per-beneficiary
limits when states have recently implemented such policies, and
their agencies may be facing limits that are tighter than
appropriate.
Unfortunately, attempting to calibrate the per-beneficiary
limits to reflect legitimate differences among agencies without
data, on the causes of those differences, inevitably leads to
potential underpayments and overpayments. A well-designed
prospective payment system with an adequate case mix adjustment
will address these concerns and provide Medicare with better
tools to control its spending.
We believe, however, that the development of the
prospective payment system for home health will be a much
greater challenge than prior efforts to create one for
hospitals or skilled nursing facilities.
For home health, for example, defining what is the unit of
service, which most conceive of as an episode of care, should
contain may prove very difficult. At present, no consensus
exists on what constitutes a needed Medicare-covered visit or
what a visit should entail, basic information essential to the
appropriate definition of an episode and the design of
prospective payment.
We need a candid and realistic assessment of when the
prospective payment system and adequate accompanying oversight
mechanisms can be implemented. Depending on the delay, it may
be important to consider how to make agency-specific
adjustments to the limits to better account for appropriate
variations in current costs. Potential adjusters that could be
developed include information on the proportion of Medicare
patients that are Medicaid eligible as well, patient length of
stay, and the proportion of beneficiaries that were recently
hospitalized. Research that HCFA currently has underway to
develop the prospective payment system could very well guide
this kind of an effort. Without adjusting the limits, the
extent of overpayments and underpayments is likely to increase
over time.
Let me say in conclusion that you have taken very positive
steps in giving HCFA the tools to maintain control over the
growth of home health spending. The goal should be to move as
quickly as possible to take full advantage of those tools. In
the meantime, we need to remain attentive to the effects of the
interim system and seek to ensure that agencies are paid
appropriately for the mix of beneficiaries that they serve.
Thank you very much. I would be happy to answer any
questions that you may have.
[The prepared statement follows:]
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Chairman Thomas. Thank you, doctor.
Dr. Wilensky.
STATEMENT OF GAIL R. WILENSKY, CHAIR, MEDICARE PAYMENT ADVISORY
COMMISSION, ACCOMPANIED BY STUART GUTERMAN, DEPUTY DIRECTOR,
MEDICARE PAYMENT ADVISORY COMMISSION
Ms. Wilensky. Thank you for inviting me here to testify. I
am here as the chair of the Medicare Payment Advisory
Commission, and I have with me Stuart Guterman, who is the
deputy director of the commission.
You have heard in some detail about why the prospective
payment system was adopted as part of the Balanced Budget Act,
and I'm not going to review that with you. It is in my written
testimony.
You have also heard a clear description of what it is we
have moved to in the interim, in terms of the interim payment
before the time the prospective payment system is ready, and
I'm not going to go through the detail of that, as well.
I want to mention a couple of the provisions, the effects
of the provisions, in terms of what we know about the general
direction of the effect, and then make some suggestions about
where we might go from here.
Because of the introduction of not only a per-visit cost
limit, which had been part of the prior payment strategy, and
also the change, as you know, going from 112 percent of mean
cost to 105 percent of median cost, but also including, now, a
per-beneficiary limit, as well, which, as you have mentioned,
is based on 1994 data, we have set up a stress in terms of the
kinds of effects that this interim payment system will have
will differ according to the type of patients that will go to
the agencies.
In general, because of the system that was devised, what we
know is that those agencies which tend to have patients that
have a limited number of high-cost visits, like after a
hospital, for example, will have most of the effect, will come
from the per-beneficiary cost limit, because they don't have a
lot of visits, and the ones they have are very costly.
It appears, for example--and since you have Members up here
from these states--that Louisiana is, at least in large part,
affected more by the cost limits than, say, by the numbers of
visits.
On the other hand, if you have agencies that serve people
with a lot of chronic conditions, who have a lot of visits,
which perhaps, knowing a little bit about the demographics of
the country, is more associated, we think, with a place like
Connecticut, they are much more likely to get impacted by the
per-beneficiary limit rather than the visit limits, for cost.
These were not unreasonable additions to bring to the
payment. The problem is, we don't know what is going on in
these visits, and we don't have information about case mix.
The basic problem that you are now going to deal with is
that you are going to try to make changes that either will
increase costs, and then the issue is can you negotiate a way
to pay for some additional money, or that will create winners
and losers.
You are fundamentally going to be left in the position of
not knowing very well, at least, whether the money that you
shift is going to more efficient agencies or going to agencies
who have less sick or less complicated cases.
My first plea is that, while we come up--and we will,
certainly, at MedPAC, be glad to assist you in any way; we
have, I know, been providing some analysis during the last few
weeks, for some of the Members' requests--is to start working
on getting better information.
It doesn't have to be perfect information. It is certainly
possible to have approximation of information early on at the
same time we start instituting some more specific efforts to
get what goes on in the visit and to get case mix information,
so that we can move off the problem of not knowing whether
agencies have low costs because they are efficient, or whether
they have low costs because they have less sick patients.
The additional issues which we had raised as part of our
recommendations, which you may want to think about, depending
on what other steps you take in order to fix the problem that
you are now concerned about, which is whether too much money is
coming out of this system and more impact may be occurring in
terms of some of the agencies, is whether you want to consider
the recommendation we made with regard to a modest co-payment
on the part of beneficiaries, subject to an annual limit, and
secondly, after 60 visits, to have an independent case manager
review the case plan for the beneficiary so that the big
spenders of home care money--that is, the people who have over
100 or 150 visits--who are a small part of the population, 15,
20 percent, but who account for most of the money in the
system, know that they are getting an independent assessment
about whether they have the right plan of care for them, not by
somebody who is related to the home care agency, and not by the
physician who has been asked to sign off, because there is a
lot of pressure that that physician is frequently put under.
So my plea, again, as you go forward and try to deal with
the uncertainties of not knowing why these differences occur,
is to start early, soon, as soon as possible, on collecting as
good data as you can in the interim, and then better data over
time. It will help resolve these problems, which are obviously
causing you and your constituents a lot of concern.
Thank you. I will conclude my oral presentation at this
point.
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Chairman Thomas. Thank you very much, Doctor.
Inspector General Brown.
STATEMENT OF JUNE GIBBS BROWN, INSPECTOR GENERAL, DEPARTMENT OF
HEALTH AND HUMAN SERVICES
Ms. Brown. Good morning. I'm June Gibbs Brown, Inspector
General of the U.S. Department of Health and Human Services.
I am pleased to be here to talk about our recently released
voluntary compliance guidance for the home health industries.
The guidelines are the latest in a battery of remedies
addressing the extraordinary vulnerabilities inherent in the
Medicare program.
Indeed, the home health program is remarkable in its
vulnerabilities. In the past we have found payment error rates
of 19 to 64 percent in individual home health agencies, and are
40 percent across California, Texas, Illinois, and New York.
Improper payments were made for unnecessary services,
patients who were not homebound, inadequate physician
certifications, and services not provided. Numerous
investigations have revealed instances of outright fraud.
A recent example is a former owner of a now defunct Texas
home health agency who pled guilty to conspiracy to defend
Medicare. She was charged with submitting false cost reports of
more than $3.6 million.
Not all of Medicare's improper payments are due to fraud,
though. They probably run the gamut from innocent errors,
inadequate management, financial irresponsibility,
recklessness, abuse, and fraud. Whatever the underlying
motives, the result is the same--significant loss to Medicare,
and American taxpayers.
Fortunately, most of the vulnerabilities are being
addressed through the combined efforts of the Congress, the
Health Care Financing Administration, and the home care
industry itself.
Many potential solutions were incorporated into the
Balanced Budget Act of 1997, as well as in the regulatory and
administrative initiatives of the Department of Health and
Human Services.
To add to the remedies already available earlier this week,
on August 4th, I released the most recent in a series of
compliance guides entitled Compliance Program Guidance for Home
Health Agencies. This guidance was prepared in cooperation with
the Health Care Financing Administration, the Department of
Justice, and the representatives of the home health industry.
It is offered to assist home health agencies in developing
specific measures to combat fraud, waste, and abuse, as well as
in establishing a culture of integrity that promotes
prevention, detection, and resolution of misconduct. Copies
have been provided for members of this subcommittee.
I wish to emphasize that this guidance is voluntary. We
also encourage home health agencies to adapt these principles
to their particular needs and circumstances. I am pleased to
see that the home health industry has responded favorably to
this guidance.
We have identified seven fundamental elements to an
effective compliance program:
First, standards of conduct and written policies and
procedures that promote the home health agencies' commitment to
compliance and address specific areas of potential fraud. The
risk areas include claims development and submission processes,
cost reporting, and financial relationships with physicians and
other health care professionals and entities.
Second, the designation of a compliance officer, and other
appropriate bodies, responsible for operating and monitoring
the compliance program.
Third, regular, effective education and training programs
for all affected employees.
Fourth, a hotline or other reporting system to receive
complaints, and procedures to ensure the anonymity of
complainants, and to protect them from retaliation.
Fifth, a system to respond to allegations of improper
activities and enforce appropriate disciplinary action.
Sixth, audits and other evaluation techniques to monitor
compliance.
Seventh, finally, the investigation and remediation of
systemic problems, as well as policies to prevent employment
and retention of sanctioned individuals.
One advantage of the compliance guidance is that it
cultivates reform from within, rather than outside the home
health agencies. I believe that each agency itself is best
positioned to guarantee the integrity of its operation.
Like all recent reforms, the guidance is just the
beginning, a kind of structure to be filled out and implemented
by home health agencies. We are far from finished with the task
of reforming home health, and we cannot drop our guard.
We hope that the new initiatives of both the Congress and
the administration, coupled with the Compliance Program
Guidance for Home Health Agencies, will go a long way to
solving the serious problems that have plagued Medicare's home
health benefit.
This concludes my prepared statement, and I will welcome
any questions you have.
[The prepared statement follows:]
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Chairman Thomas. Thank you, Ms. Brown. You indicated a
couple of examples, and I know in your written text there are a
number of examples, and they seem to be, a significant
percentage of them, from one state.
I know that when you launched your Operation Restore Trust,
you did so initially in just five states, I believe.
Ms. Brown. That's right.
Chairman Thomas. What was the rationale for choosing
Florida, Illinois, Texas, New York, and California?
Ms. Brown. Those states represented a cross-section of the
country, and a great deal of the Medicare money was spent in
those states. (so) We felt that we could get some experience in
looking in those concentrated areas and then expand to the rest
of the country.
Chairman Thomas. The assumption would be that the bulk of
the examples that you would have available would be atypical,
because you drew those states initially?
Ms. Brown. That's right. They aren't typical of the
proportion of problems in those states, but only that we have
finished those at an earlier point in time.
Chairman Thomas. I wanted to make that point, and that as
you do the nationwide examination, unfortunately, you'll have a
number of examples that you could present from every state----
Ms. Brown. I believe so.
Chairman Thomas [continuing]. Unfortunately, in the Union.
Dr. Wilensky, this problem is even more difficult for us
than some others that we have tried to deal with, because of
the computer situation at HCFA, but also the game that
apparently a majority of my colleagues believe is important to
play, and the administration indicated it was going to be,
perhaps, a requirement as well, and that's budget neutrality.
The difficulty I think some of us are having is that we
could not believe the lack of information that had been
collected, or the usefulness of the lack of information that
had been collected, when everyone knew this is one of the
fastest-growing expenses in the Medicare area, so that a lot of
what we've been doing, frankly, is guessing.
We are now at the stage where we are examining, if you
will, our first guess, and we need to look at options.
How critical is it, in your opinion, as we look at options
to ease the transition for a longer period of time, now, as Dr.
Scanlon indicated, to try to do this in a revenue neutral
environment?
Can you move enough parts around to have any kind of a
meaningful impact in a revenue neutral environment, or should
we look at possible additions of modest sums, or significant
sums, in making these adjustments?
How critical is it to do it with no new money, or how
critical is it to do it minimally right for the period we are
going to have to live with, with some addition of funds?
Ms. Wilensky. If you knew more about either appropriate
clinical standards of care in home care, and more importantly,
the case mix that various agencies had, it might be possible to
do this in a budget neutral way, but the fact is you don't know
that.
So you will be flying blind. You can change the mix of
money, and all you will know is that there will be winners or
losers. You will have no reason to assume that the winners are
the good guys or the agencies that have sicker patients and the
losers are the ones that are profligate in their funds.
Given that that's the case--and again, I implore you, at
one step, to try to engage in activities that will fix that--
you obviously can make a case for putting a little more money
in, both on the grounds that the surplus seems to be bigger
than what was being anticipated initially, and that the
slowdown in spending is greater than was anticipated in the
BBA.
As you know better than I do, that does not give you any
automatic call on those funds, but it is something that
indicates more of an impact than was scheduled, not
surprisingly. That, of course, happened at the beginning of PPS
for hospitals, as well. The very first year was a bigger
impact.
Chairman Thomas. I'll borrow the gentlewoman from
Connecticut's question to HCFA.
Do you consider the situation we are in, in dealing with
the home health care, and the ability to maintain adequate home
health care, an emergency situation? Is it a very serious
situation? What kind of a context should we be examining this
in, in terms of immediacy of need for action and degree of
action?
Ms. Wilensky. I don't think there is any indication yet
it's an emergency. It is somewhere between serious and very
serious. More money is coming out than we anticipated, and
that's a fact.
My understanding is that there is a net increase of
agencies, home health care agencies. There is not any available
evidence that there is either a big dropoff in agencies or an
access problem for the seniors themselves.
The difficulty is, by the time we actually can see either
of those, we will have caused a problem. If you want to take
the first step and say substantially more money is coming out
of the system than we anticipated, we are at least setting
ourselves up for a problem, although there is no documentation
yet that we have one. So it is, at the very least, a serious
problem.
Chairman Thomas. As I indicated at the beginning, we can
talk about examining the blend, but because the variation,
intrastate, is as great or greater than the variation
interstate----
Ms. Brown. Correct.
Chairman Thomas [continuing]. It is extremely difficult,
just in adjusting the blend, to really deal with the problem.
We could deal with the per-visit. Since we changed it from
the mean to the median, we can play with the percentage in that
area.
The outlier has been mentioned, just for those who don't
have the ability to deal with a case mix, either pre or post,
and simply deal with the reality that some folks fall outside
it.
Would those be the universe of appropriate examinations?
Now, I know you mentioned a co-pay, and my colleagues here--
I've discussed it with them--are not as enamored with that.
Obviously, that involves a slight behavioral change in terms of
choices that are made.
You indicated a limit, which would limit the impact on
lower income. Of course, Medicaid takes care of that bottom
end, anyway.
Have you looked, at all, along the lines of a moratorium in
areas where there clearly appear to be a sufficient number of
agencies, or is that a policy that probably would not be looked
at if you could deal with it in terms of the blend, the per-
visit, the outlier?
Ms. Wilensky. A moratorium on going forward with the
payment, or----
Chairman Thomas. No, a moratorium on new home health
agencies in those areas where--using some criteria for
adequateness or number of agencies.
Ms. Wilensky. We haven't. At least, I am not aware of it.
Personally, I don't think that having a moratorium on a number
of agencies is the way that I would recommend going forward to
try to solve this problem.
Chairman Thomas. Thank you very much. I believe this is the
first statement that anybody has made today that indicates that
one option probably is one that we ought not to pursue. Thank
you very much.
Ms. Wilensky. You're very welcome. Let me tell you, there
is a blend that I was having a brief discussion on in terms of
what will be arbitrary changes in blends that might provide
some assistance.
That is, rather than the agency national as the primary
blend, looking at the differences in the number of visits that
are skilled nursing versus home health care aides, as a type of
a blend on the grounds that that may be picking up some
differences in the case mix.
The point is, it is possible that, having MedPAC staff work
with some of your staffs, that we might be able to come up with
some short-term interim fixes to try to proxy betterthan what
we have now in terms of the intensity of need.
Again, I plead with you to try to make sure you have either
legislative authority or other pushes to get going on the data.
It is impossible not to fly blind without it.
Chairman Thomas. Is our time frame that I tried to
indicate--doing a lot of heavy lifting over August, so that
when we come back in September, we will have to the best of our
ability, the solution that is the best that we can provide on a
bipartisan basis--an appropriate time frame?
That is, we need to respond as soon as possible,
notwithstanding the desire the longer we go the better info we
have?
Ms. Wilensky. The fact is, you don't have much information,
and you're not going to have it in the next few months, so you
might as well come up----
Chairman Thomas. Just let me interrupt you, and underscore
that, in looking through what we had mandated, it isn't until
October 1, 1998 that the home health care agencies are required
to specify by code to the Secretary the length of the service
visit in terms of 15-minute increments, so we don't even know
the length of the visits.
Ms. Wilensky. And we know, of course, nothing about the
content.
Chairman Thomas. The content of the visits. That kind of
underscores what we do. The point is, though, that if we wait
longer, we are not really going to have any more resources
available to us for making a better judgment on the changes
that might be needed.
Ms. Wilensky. In terms of the short-term options, I think
you will have as much as you're likely to have when you come
back in the fall, and as you know the calendar as well as I do,
if you don't do something then, it will be at least until the
springtime before you can do something. I don't know that you
will have substantially greater substantive information in
terms of intensity or content by that time.
So my recommendation is, if you re interested in moving
ahead, moving ahead in September is as appropriate as waiting
another five months.
Chairman Thomas. My assumption is you believe that we
should be interested?
Ms. Wilensky. I think that, because of the magnitude of the
change, the potential for doing things you didn't intend is
greater than if it had been about the amount you expected.
Chairman Thomas. Thank you very much. Mr. Stark.
Mr. Stark. No questions.
Chairman Thomas. The gentlewoman from Connecticut.
Mrs. Johnson. Thank you. I was interested in your comments
about a moratorium.
You know, the Dartmouth studies show, in their comparison
of Boston and New Haven, that the availability of services
definitely influences the amount of services delivered, and
that that amount can't always be correlated with quality of
care.
So it does seem to me that, first of all, we certainly can
look at the kinds of savings that would be realized if high-
resource, high-utilization regions were constrained to a lower-
resource, lower-utilization pattern. Look at New Haven and
Boston. You know, there are some things that you can learn.
The question I would ask you is twofold.
First of all, what do we know about the payment rates of
the new agencies? Do we know that, on average, or whatever,
that the new agencies coming in are coming in at higher
reimbursement rates--I think this is generally true in my part
of the country--as opposed to the older agencies that are
there?
If that is the case it is an overall loss to Medicare to
have older, lower-cost providers leave the market and higher-
cost new providers come into the system.
We need to look at who is coming in, what is it costing us,
who is going out, and are they going out because they are low-
cost, efficient providers, because that is not in our interest.
In that case, we might want to have a moratorium in areas where
there is already a high level of providers.
Then I think this issue of looking at what are the other
services we are paying for in those areas is important, so that
we can set home health care costs in the context of other
services.
I would hope that you wouldn't dismiss the possibility of a
targeted moratorium until PPS goes in, as one of the possible
tools in constraining costs and, frankly, freeing up the
dollars we definitely need if we are going to solve this
problem.
If we are not going to use any of the surplus, then there
has to be--and you can't solve this problem budget neutral.
Then you're just going to shift around the pain. If you're
going to have some new money to put in, you're going to think
about where it's going to come from.
It seems to me a moratorium in the dense, high-resource
areas has some merit.
Ms. Wilensky. You raised several issues. Let me try to
briefly respond to them.
There is some dispute about whether availability of
services drives demand. If it did, we wouldn't have hospitals
at 60 percent occupancy. It is much more complicated than just
if they're there, people will come.
The second issue is that variations exist all over
Medicare, as they do all over health care, and to try to
respond to them in one sector without looking at variations in
other part of Medicare is very, I think, dangerous.
We have enormous variations in the service of care--Mr.
McDermott raised this earlier--in terms of Florida and
California versus the state of Washington and the state of
Oregon and the state of Minnesota, for example.
The whole issue of should we narrow the amount that
Medicare allows for in terms of variation in practice style,
and at which level should we aim for, is a serious issue, one
that MedPAC and its predecessor commissions dealt with, and I
think it is an important issue for the Congress to deal with.
We have to be very careful to look at home care as the only
service in which you are really doing, because the fact is,
states differ in terms of how much home care they use vis-a-vis
physician care and hospital care and skilled nursing care, and
I think to put a moratorium in one area alone is to ask for
difficulties, because it's not the broader context.
Finally, if it is really only the concern that new agencies
are getting paid at higher rates and some of the older agencies
that may be exiting, although we don't know much about older
agencies exiting and whether they are efficient, you could, of
course, pay them at the lower cost. You can have the payment
for new agencies at whatever payment level you want.
Rather than put a moratorium on, if you think that the
newer agencies are getting paid too much, there are ways tofix
that.
Again, I spoke, obviously, not on behalf of the commission,
in response to Mr. Thomas's comment, but on behalf of myself as
a market economist, and I don't think moratoriums are a good
way to go.
Mrs. Johnson. I appreciate, particularly as a market
economist, why you would not be interested in moratoriums. But
we are talking about an interim between now and a payment
system that we think will be more sensitive to the product that
we're trying to deliver and the price of that product.
There is a macro difference. I mean, there are certificate
of need states. Mine happens to be one, too.
To look at the configuration of the services, not just home
care, but the others, in those states versus other states--we
certainly did find, when we looked at specialty care and
Medicare, that there was a very different use of specialists
and number of second, third, fourth, and fifth opinions in
areas where those services were easily available.
It does seem to me, at a time when we are under such
enormous pressure, that it is at least something that we have
to look at. Maybe we don't call it a moratorium. Maybe we look
at it in the certificate of need context.
Ms. Wilensky. Of course, MedPAC would be glad to respond to
any request for an analysis on this issue that we would have.
Mrs. Johnson. Thank you.
Chairman Thomas. Thank you very much. Does the gentleman
from Maryland wish to inquire?
Mr. Cardin. Yes. Thank you, Mr. Chairman. I thank the
panelists for their testimony.
Dr. Wilensky, I accept your characterization that the
situation is somewhere between serious and very serious, as it
relates to the entire circumstances on home health
reimbursement under the interim payment system.
As related to me, I think it has reached the critical or
emergency stage in some places. Let me just give you a few of
the examples that have been given to us, and get all of your
input here.
There are many areas that, because we are using historical
agency-specific costs, to such a high degree, that where
agencies has already brought down the costs, they are being
more adversely impacted than in those areas of the country that
have had higher utilization and costs.
In those areas, we have reached the critical point, because
of the reliance on the agency cost data, and it cries out for
some change in the mix immediately.
We also have problems in rural areas, that the per-visit
limit is so conservative, that there is need for a change there
if we're going to be able to provide services in rural areas,
where the number of patients that you can see in a given day is
much less than in other areas.
Thirdly, for those agencies that have made special efforts
on difficult patients, the outliers, having some form of an
outlier payment seems to make some sense on an emergency basis,
in order to be able to continue this type of service.
I agree with Mrs. Johnson that to try to do this without
putting more money into the system is going to be impossible.
First of all, as you pointed out, Dr. Wilensky, the dollars
have already been stretched more than we thought they would be,
and there is at least some indication that there we have gone
too far.
Secondly, the politics of trying to deal with taking money
from someone to pay others just won't work. We're going to have
to come up with some new money in this area.
My point--and I would like to get all of your reactions, if
I could--is that I think we've passed the very serious
situation, as it relates to these three specific points in some
agencies and that, if we don't take action quickly, we do run
the risk, in areas of our country, of seeing services actually
be eliminated and not available.
Ms. Wilensky. There is some question that, if you wait
until you can document the problem, you will, in fact, have
gone much farther than I believe that you wish to.
On the other hand, we clearly, as I said, don't have any
national system, and it is much easier to do it if it is not
budget neutral, particularly when you don't have very good
information on which to take money out of the pie.
The outlier payment, I think, is actually not one I have
given a lot of thought to. Personally, I think it is one,
particularly if you were to demand more information to justify
the outlier payment, that might help in the short term, while
we are getting better data.
It is a very skewed distribution of monies in home care. As
I mentioned earlier, something like 15 percent of the patients
use, or the beneficiaries, use more than 150 visits, but they
account for a very large amount of the dollars.
That means that you actually might be able, depending on
whether you used number of visits or the cost per visit, or
either, as an outlier potential, to demand supporting data for
these cases, so at least you would have a little better sense
that, in the outlier payments, that you had some idea about
what you were paying for, although you didn't know compared to
what.
I think that might well be a way to start, while we go
collect better data.
Mr. Cardin. Dr. Scanlon, if we wait and do nothing, what is
the risk here? Are there going to be agencies that are going to
close? Are there going to be services that are not going to be
provided?
Mr. Scanlon. Both could potentially happen. I think that,
as you have indicated, the issue is localized. It applies to
particular agencies; it may apply to particular areas, and
that's where the concern needs to be.
As Dr. Wilensky indicated, we have been operating without
information. We have a payment system that is designed with
very few refinements, and it impacts unevenly across agencies.
For the agencies that are seriously affected, some are
critically affected, and they believe there is a crisis today,
not at some point in the future.
More generally, with regard to access and quality of
services overall. I agree that we are not at a crisis point
now.
Mr. Cardin. Could any of you help me? On the three areas
that I mentioned, am I right on those three areas to be
concerned about?
Is there a priority within those three that is more
critical than others? Are we in more danger in rural areas,
more danger on difficult patients, or will there be more
problems because we're using the historical cost in the
formulas? Is there any relative concern here?
Ms. Wilensky. Those are the areas that you would think to
look at. Again, to the best of my knowledge, there is no
information suggesting we have a problem now.
The rural areas we worry about, because of the density,lack
of density; the very sick patients, because in this and other areas,
health care is so concentrated. Although there has been so much rapid
growth and spending in this area that it is hard to feel like, early
on, this is an industry that has been strapped for funds.
Again, there are probably some agencies in some parts of
the country that are very low-cost, and that will find
themselves in difficulty. I can't give a response whether or
not, in order to protect them, to put in money in a generalized
way.
Mr. Cardin. Thank you, Mr. Chairman.
Chairman Thomas. Thank you. The gentleman from Louisiana.
Mr. McCrery. Thank you, Mr. Chairman. Dr. Wilensky, I would
like for you to explore with me--because I know you have, in
your various capacities over the last few years, looked at
this--explore with me the possibility of instituting a co-pay
for home health services, or instituting an option for home
health agencies to impose a co-pay, if they so chose. Do you
have any thoughts on that?
Ms. Wilensky. Yes.
Mr. McCrery. And if possible, a partial solution to the
problem we find ourselves in?
Ms. Wilensky. I believe in a co-pay for two reasons,
particularly one that is rather modest, and that is subjected
to an annual limit, so that, for the small numbers who have a
great number of visits, it is not imposing a major burden.
In the first place, I think that it will help in some of
fraud detection. It focuses attention in a way that doesn't
always occur when you have a free service, so I think it would
assist in some of the activities that the inspector general has
been concerned with.
In the second place, it gives you a little money. That is,
if you allow for a co-pay, either on an optional or a regular
basis, it would give you a little more money to distribute
elsewhere, and it will have or it may have, depending on how
you define it, some impact on behavior.
Again, as you know, there has been a very rapid increase in
the number of users and in the number of visits per use,
basically a doubling over a few years, and while that appears
to have slowed down in 1997, you have a lot of years for which
that was growing like crazy.
I think it is a way to try to provide you with some
additional funds, and also try to have some involvement by the
patient.
I and MedPAC commissioners were concerned that it not be
too burdensome for the elderly. Therefore, we were talking
about a modest, in the neighborhood of $5, subjected to an
annual limit of maybe a couple hundred dollars, so that the
people who have these extensive numbers don't get materially
impacted.
Mr. McCrery. Thank you.
Chairman Thomas. I thank the gentleman. The subcommittee
will stand in recess until about 20 minutes until 1:00, at
which time we will be pleased to entertain the last panel.
Thank you very much.
[Recess.]
Chairman Thomas. I want to thank the last panel for their
patience, but I assume they have an ongoing interest in the
subject matter.
I would call Jerry Knight, chief operating officer of the
Visiting Nurse Health System, on behalf of the Visiting Nurse
Associations of America; Mary Ann Brock, owner and
administrator, Guardian Homecare, Bellaire, Texas, on behalf of
the Texas Association for Home Care; John L. Indest, chief
executive officer, Health Care Resources, New Iberia,
Louisiana, on behalf of Home Care Association of Louisiana.
Ruth Odgren, vice president of Operations, Visiting Nurse
Service System, on behalf of the Tri-County Visiting Nurse
Association, Plainfield, New Jersey; and Denise Palsgaard,
president, California Home Care and Hospice, Inc., Merced,
California, on behalf of the National Association for Home
Care.
Thank you all. Any written testimony that you have will be
made a part of the record.
I would ask you, in the time frame that you have, if you
would address us, hopefully, on the specifics as we indicated,
of any potential solutions, and I would hope that the solutions
do not totally consist of a moratorium, to go back two, three
years ago, pretend the current trends don't exist, or any of
those kinds of options.
With that, why don't we just start with you, Mr. Knight,
and we'll go right across the panel.
Let me, before you begin, indicate these microphones are
very unidirectional. You have to pull them down and speak
directly into them. Thank you.
Mr. Knight.
STATEMENT OF JERRY KNIGHT, CHIEF OPERATING OFFICER, VISITING
NURSE HEALTH SYSTEM, ATLANTA, GEORGIA, ON BEHALF OF THE
VISITING NURSE ASSOCIATIONS OF AMERICA
Mr. Knight. Mr. Chairman and members of the subcommittee,
my name is Jerry Knight, and I am chief operating officer of
the Visiting Nurse Health System in Atlanta.
Founded in 1948, VNHS is the largest not-for-profit home
health agency in Georgia, providing care to over 20,000
patients annually. We are a very cost-efficient agency, and let
me tell you what that means.
According to 1995-1996 Medicare cost report data, our
Medicare home health program cost per patient was $2,084,
compared to Georgia's statewide average of $5,054. In 1997, our
number of home health visits per patient was 38, compared to
the national average of 80 visits per beneficiary.
Our low utilization is not an accident. It is an intended
outcome for our organization. This has meant over $5 million in
savings to the Medicare program over the prior five years.
In fact, it is this very philosophy that has created the
serious financial problem for our agency, and many others that
have been efficient providers. The interim payment system
penalizes VNHS for its cost-consciousness.
I am pleased to present recommendations of the Visiting
Nurse Associations of America, an organization of nearly 200
members and nearly $4 billion in revenues annually, on how
Congress can address this problem.
The VNAA and VNHS are grateful to you, Mr. Chairman, for
holding this hearing and for your commitment to act this year.
Refinements to IPS are even more critical today because of the
expected delay of the Medicare home health prospective payment
system.
We are also grateful for the support of so many Members of
Congress for legislation that tries to address these problems.
Two IPS provisions are problematic, and must be addressed
now: one, the formula for calculating the agency-specific per-
beneficiary cost limit; and second the reduced per-visit cost
limit.
We estimate that at least 50 percent of our members are
affected by the new per-beneficiary limit, while another 25
percent are subject to the lower per-visit limit.
The impact of the per-beneficiary limit is harsh. Many
agencies will actually be reimbursed on the basis of their
calendar year 1993 cost. VNAA now estimates that its members
will experience average reductions in payments of 25 percent.
We can't compromise patient care and outcomes and quality,
and may be forced to make tough decisions about our
participation in the Medicare program.
The other primary problem is the low per-visit cost limit
in BBA 1997, which penalizes agencies that have had higher per-
visit costs but low numbers of visits and low overall per-
patient costs. This is where it hits home, Mr. Chairman.
For example, it costs VNHS, in the aggregate, close to $80
to make a home health visit. Under IPS, we will be reimbursed
$8 less than our cost per visit. In 1998, we anticipate a loss
of over $2 million from the 267,000 projected Medicare visits
because of this reduced per-visit cost limit.
Here are VNAA's specific recommendations on how to amend
BBA 1997 to address these concerns:
First, change the formula for the per-beneficiary limit to
a blend of 75 percent national and 25 percent regional,
retroactive to October 1, 1997.
I must stress at this point that retroactivity is an
extremely important issue to the organizations we represent and
to my particular agency.
This must be based on fiscal year 1994, as we heard
earlier, because HCFA apparently cannot calculate a new base
year because of its Y2K difficulties. Therefore, it is very
important to update these numbers by the home health market
basket index in each of the four years between fiscal year 1994
and fiscal year 1998.
Second, raise the per-visit limit to 112 percent of the
mean, the pre-1997 level.
Third, because PPS will be significantly delayed, eliminate
the imposition of the 15 percent payment reduction that is now
scheduled for October 1, 1999.
We understand that the need to maintain budget neutrality
may affect Congress's ability to act on this last issue until
next year.
Changing the per-beneficiary limit formula affects
different agencies in diverse ways. VNAA believes that a
transition might be considered as agencies move to a more
appropriate per-beneficiary limit formula, as well as an
outlier provision for those organizations that care for
unusually high-cost patients.
VNHS, and our VNAA colleagues in New Orleans, Dallas,
Houston, and other Sunbelt cities, are proof that cost-
effective and medically effective home health care is alive and
well in the South. If we can do it, why can't other agencies?
If VNAs and other cost-effective providers are the model
you want for Medicare for the future, then act on our
recommendations this year.
We have been gratified that you, Mr. Chairman, and other
Members of Congress, have been willing to listen to VNAA's
concerns about IPS, and we look forward to developing a
workable solution this year.
In addition, we are willing to bring some of our top
financial folks from around the country to work with the
subcommittee, then HCFA, to work out the details of some of the
issues that have been troubling us all morning.
This concludes my testimony, and I would be happy to answer
any questions.
[The prepared statement follows:]
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Chairman Thomas. Thank you very much, Mr. Knight.
Ms. Brock.
STATEMENT OF MARY ANN BROCK, PRESIDENT, ADMINISTRATOR AND CO-
OWNER, GUARDIAN HOMECARE, INC., HOUSTON, TEXAS, ON BEHALF OF
HERSELF AND THE TEXAS ASSOCIATION FOR HOME CARE
Ms. Brock. Thank you very much. I agree with you that we
need to find a solution. I thank you, Mr. Chairman and members,
for this opportunity. I am in Washington on a mission.
Chairman Thomas. Ms. Brock.
Ms. Brock. Yes.
Chairman Thomas. If you can turn your head, would you move
the mike? It is very unidirectional.
Ms. Brock. Yes, sir.
Chairman Thomas. Thank you.
Ms. Brock. Thank you, Mr. Chairman and members, for this
opportunity. I am in Washington on a mission. I am representing
myself as an owner of Guardian Home Care, a typical independent
owner of a small agency, and the 1,200 agencies that are
members of the Texas Association for Home Care.
I have approximately 100 patients on service, and 60 full
and part-time employees who have already been adversely
affected by IPS.
I believe we do have an emergency situation. I believe you
are going to have at least 75 percent of the agencies in Texas
closing within the next month or so.
When we talk about closing, we are not talking about
closing and then reopening, as you mentioned earlier, but
closing and staying closed. Texas is not a CON state, as we
were asked earlier.
I agree with Mr. Hash from HCFA that this is a situation
that is much more complex than originally thought out. That 75
percent of our agencies close that means that we will not be
able to make payroll, that we will not be able to pay our
bills, and that we have financial obligations that we will not
be able to meet. We will go into bankruptcy, both corporately
and personally.
I think that we need to look for a reasonable solution, and
look at all the different issues with the transition period.
I believe that we are guessing and that we are flying blind
at this point, and that we need to have a transition period to
discuss all the different options, so that we don't come up
with a plan that we would have difficulty implementing, and
becoming the same problem that we're in now.
When we discuss the 12-month repayment schedule that Mr.
Hash discussed earlier, there are a lot of agencies that are
not meeting payroll now, and they may not be able to meet a 12-
month repayment schedule.
You've discussed fraud and abuse on occasion, many times. I
believe that we have a zero tolerance and that we support the
compliance mandates and criminal history checks for all
employees.
We need to move to PPS as soon as possible--the costs, due
to a desire to be profitable and manage quality through
clinical outcomes monitoring.
I agree with Congresswoman Johnson's concern that HCFA does
not have a plan, and the committee, without involvement of the
home health agency sector, encapsulizes the information without
good implementation projections.
I believe that we need to have a 75 percent national and 25
percent regional for all agencies, with no pre and post-1994
issues. We need to treat all agencies equally in a community,
with the same per-beneficiary, per-patient limits.
We need to have outliers based on diagnoses, such as
insulin-dependent diagnosis or COPD. Those are patients that
are high-utilization, high-cost.
When we talk about the outliers--and Mr. Hash referenced
the fact that the outliers could be reimbursed on the end of
the year cost report, that's going to cause a big cash flow
problem, and I don't think that that would work at all.
The retroactive implementation will close agencies. Going
back to the 10-1-1997 cost limits per patient, per beneficiary,
is undoubtedly going to close agencies across Texas and across
the United States.
The patients should not be forced to go to a higher per-
beneficiary, per-patient provider, but should be allowed to
select a home health agency by quality.
I think that we should use the surplus to manage IPS, and
take some of those funds in order to help the problems that we
have now.
I think that we should cut costs. I think that we should
tighten homebound status and institute guidelines.
I think that co-pays, when we go into PPS, are realistic. I
think, at this point, when you have patients that you are
talking about $5 co-pays, they're not going to be able to
afford to do that.
I think that we need to look at the patient issues. We're
going to have a lot of patients that are in nursing homes and
emergency rooms and go into the hospital prematurely, because
they're not being taken care of properly at home.
We have insulin-dependent diabetics that are real committed
to their independence and staying at home, and so are their
families, and they're going to end up in a critical situation
and end up in the emergency rooms.
I think that we need to look at increased access and
substantial savings, already realizing expected--excuse me.
I think that we need to look at the 15 percent on 10-1-
1999, and go ahead and use some of the already realized savings
to that point, look at the decrease in utilization and the cost
savings that we have already achieved, and use that to offset
some of the percentage.
I don't want to create new winners and losers. Dr. Scanlon
mentioned that less than efficient agencies might be rewarded
if we use the system that we have now, or possibly in a new
system.
In Texas, the length of stays in hospitals has decreased
over the last five years. Nursing home admissions have been
flat.
In Texas, we have the highest number of poverty-level
elderly in the country, and I think that is one of the reasons
that we have high utilization in Texas. Those patients are
committed to independence and they want to stay at home.
Thank you very much, and I appreciate you letting me speak.
I think that we need to work towards a solution for IPS that is
not going to close down all the agencies throughout the United
States. Thank you.
[The prepared statement follows:]
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Chairman Thomas. Thank you, Ms. Brock.
Mr. Indest.
STATEMENT OF JOHN L. INDEST, CHIEF EXECUTIVE OFFICER, HEALTH
CARE RESOURCES, NEW IBERIA, LOUISIANA, ON BEHALF OF THE HOME
CARE ASSOCIATION OF LOUISIANA
Mr. Indest. Mr. Chair, too, I do thank you for the
opportunity to be able to address this subcommittee and the
rest of the subcommittee members.
I appreciate your acknowledgement of the inherent problems
that we are experiencing in IPS, and have changed my remarks,
because I assume that you realize that, hopefully, IPS, as it
stands today, is not a workable solution.
I also appreciate your commitment to our industry, to the
elderly people and the homebound, that we serve, and finally,
the urgency that you have expressed that something needs to be
done about this matter.
When Congressman Johnson asked the HCFA representative
about whether they considered the problem urgent, serious, in
crisis, probably that answer, if anything, more today scared me
than anything else.
We are in crisis. There is no doubt. I don't know
wherethey're coming from. But if they would like to come to Louisiana,
I would love to drive them around and show them that we are in crisis.
I would like to talk to you about the solutions that you
had requested of me, and address some of those points.
I and the Home Care Association of Louisiana fully
support--and if it is mandated, that would be fine--a corporate
compliance program for Medicare home health agencies. I think
that is a good idea.
We believe that we need to get away from an agency-specific
per-beneficiary limit and go to some sort of blend. While I
will be the first to admit that I would love to see a
moratorium, a blend is necessary. This blend should not be
agency-specific, because then we are rearranging the winners
and losers.
I can tell you that, in Louisiana, across the street from
each other, we have agencies with a $3,000 per-beneficiary
limit and an agency with close to an $18,000 per-beneficiary
limit. They are literally advertising the fact that they can
provide more care than someone else.
I am also familiar with agencies that are saying, ``I have
two provider numbers, both with high per-beneficiary limits,
and am willing to sell one for prime dollars.''
It is becoming a tool, in our state, that is just, in my
opinion, unacceptable.
I would recommend that we go to 110 to 112 percent of the
mean, versus 105 percent of the median.
We do need to establish an outlier program, an outlier
plan. My understanding is that many of our national
associations have tried to work with HCFA on this. The one
thing that was stated earlier about an outlier program, tying
it to a cost report causes me concern.
If you tie it to a cost report, which is filed five months
after the close of your fiscal year, by the time your fiscal
intermediary starts to look at it and owes you money back, you
could be out of business.
I think pro-ration is a bad idea that causes headaches that
can't be taken care of.
I'm concerned about implementation of OASIS in the midst of
all of this, there is no funding that will help us implement
this very costly program that is being proposed.
I would continue the PIP payments for home health agencies
until the enactment of prospective payment.
It seems that, as of late, our fiscal intermediary, PGBA,
has increased their claims review, and I do not condemn this. I
think claims review keeps us all honest, as long as we have a
right of appeal, which everyone should have a right to.
It also seems that, finally, statistical information is
being used to target aberrant behavior among home health
agencies. I've been in the home care business for 15 years and
have never seen this done before. But lately, it's being done,
by the OIG, by the United States Attorney's Office; by HCFA. I
consider this a good way of proceeding, and it certainly is
happening in Louisiana.
I believe we must go retroactive to 10-1-1997. I don't know
anyone in business who could see the Balanced Budget Act that
was enacted in August of 1997, it became effective 10-1-1997.
No one knew the rates. The national rates were published 3-31-
1998. Agency-specific rates, some have them, some still don't.
We are shooting in the dark. This is intolerable. To go
back is a must for us. The final nail in the coffin is that
most of the rates that are published are in error.
I would hopefully eliminate the 15% reduction--a lot of the
rates that are being sent out to the home health agencies are
in error, and subject to review.
Chairman Thomas. It was the Louisiana pronunciation. But
Jim immediately told me what that was. [Laughter.]
Mr. Indest. I'm sorry.
Chairman Thomas. That's OK.
Mr. Indest. Then, on top of that, I'm a Cajun.
Chairman Thomas. That's why he told me what you said.
[Laughter.]
Mr. Indest. Mr. McCrery is from the north, but I appreciate
the interpretation.
I would like to address, just for a second, co-pays. I
think co-pays are something that should not be acceptable in
the home health agencies. Co-pays are a tax on the sick. Those
patients who will be subject to the most co-pays will be the
sickest patients.
Any home health agency can cite you statistics, instances
where we enter a patient's home and, if we are going to ask
them for $5 a visit, they don't have the money to buy all of
the medicines that the physician has prescribed for them.
Or, like someone pointed out to me last night, because they
like their home health agency, they will come up with the $5
and not buy another medicine that they were supposed to have.
I, too, appreciate the opportunity to address this
subcommittee. Questions were brought up about CON, high
utilization in Louisiana. Those are certainly areas that I
would love to address upon further questioning.
Thank you.
[The prepared statement follows:]
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Chairman Thomas. Thank you. You can certainly submit those,
in terms of additional writing, if you want to direct it to
that, as well, if we don't give you ample opportunity to get
your point out.
Mr. Indest. Thank you.
Chairman Thomas. Thank you very much, Mr. Indest.
Ms. Odgren.
STATEMENT OF RUTH ODGREN, VICE PRESIDENT OF OPERATIONS,
VISITING NURSE SERVICE SYSTEM, ELIZABETH, NEW JERSEY, AND
PRESIDENT, HOME HEALTH ASSEMBLY OF NEW JERSEY, ON BEHALF OF
TRI-COUNTY VISITING NURSE ASSOCIATION
Ms. Odgren. Thank you. Thank you, Chairman Thomas and the
rest of the subcommittee, for allowing me to come and testify
on behalf of Tri-County Visiting Nurse Association in
Plainfield, New Jersey.
I am also the president of the Home Health Assembly of New
Jersey, which represents the majority of the home care agencies
in New Jersey, as well.
For those of you who are not aware, New Jersey is the
fourth lowest state in total overall Medicare home care cost.
We have a certificate of need in place in the state of New
Jersey, and we also have very strict and stringent regulations.
I would like to just talk for a minute about two issues
that have been brought up in the testimony, about ways to sort
of game the system, that are unavailable to home careagencies
in the state of New Jersey.
First of all, it is regulatorily impossible to close your
organization in New Jersey and reopen. It's not an option.
Secondly, if Tri-County Visiting Nurse Association was
merged into or acquired by another home care association within
the state of New Jersey, at its per-beneficiary limit of
$1,950, whoever acquired them would cost the system more money
than Tri-County VNA costs the system right now, because, to my
knowledge, it is also in the lowest region the fourth lowest
state, and the agency with the lowest per-beneficiary limit, so
I don't know that anybody would want us.
This year, Tri-County VNA, when we looked at our per-
beneficiary rate and the effect of the change in the per-visit
rates from 112 percent of the mean to 105 percent of the
median, was anticipating about a half-a-million dollar loss on
a budget under $4 million.
We have made some adjustments. We have reduced some of our
staff. We have suspended our pension payments to our staff for
the rest of the year, which was not an easy decision.
We have reduced the amount of money that we pay our staff
for using their automobiles to see patients. The Federal IRS
limit is 32.5 cents. We have reduced the amount that we are
paying our employees down to 20 cents.
We believe we have cut as much as we can from our budget,
and we will still anticipate being $2.5 million in the red at
the end of the year.
We don't have cash reserves. We are a voluntary, not-for-
profit organization established in 1894, and we do not have a
large ability to borrow money to offset that loss.
In my written testimony, I pointed out two, which I would
consider outlier cases, that cost the Medicare program between
$8,000 and $9,000 for each of those patients.
Had those patients been unable to get home care because the
agency no longer existed or a higher-cost agency existed--or
what may happen, and I believe is happening across the country,
forcing agencies to pick categories of patients they can no
longer admit across the board.
For instance, Tri-County Visiting Nurse Association could
develop a policy that says, ``We are no longer able to admit
anybody who requires daily care or care more often than that.
We can't afford to. We need to be here for the bigger
picture.''
Then, what would happen is, those patients that I used as
examples in my written testimony would end up in sub-acute
skilled nursing facilities, to the tune of $450 for the first
20 days of care, and 80 percent of that, or $360 for the next
80 days.
It costs the Medicare program between $8,000 and $9,000 for
those gentleman in Plainfield, New Jersey in home care. It
would have cost the Medicare program, in a skilled nursing
facility, in excess of $30,000 to provide the same service in a
skilled nursing facility.
Therefore, I think that IPS needs to be changed. It needs
to be changed for this current fiscal year, and not next year
or a year after, and I think that we need to go to a blend that
is more acceptable:
Seventy-five national/25 regional; 112 percent of the mean;
delete the 15 percent per-visit limit cap reduction of 10-1-
1999; continue PIP until HCFA can put in place a prospective
payment system; and everything needs to be retroactive to 10-1-
1997.
I have listened today to some of the ideas about co-pay and
outliers, and I'm certainly willing to listen to that. I don't
have enough information. Obviously, a lot of us don't have
enough information to make those decisions right now.
I thank you for listening to me, and I do implore you to do
something this year, because I do believe the Tri-County VNA,
and many other community-base VNAs in the state of New Jersey,
will not exist in and of themselves, come the first of 1999.
Thank you.
[The prepared statement follows:]
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Chairman Thomas. Thank you, Ms. Odgren.
Ms. Palsgaard.
STATEMENT OF DENISE PALSGAARD, PRESIDENT, CALIFORNIA HOME CARE
AND HOSPICE, INC., MERCED, CALIFORNIA, ON BEHALF OF THE
NATIONAL ASSOCIATION FOR HOME CARE, ACCOMPANIED BY MARY SUTHER,
CHAIRMAN AND CHIEF EXECUTIVE OFFICER, VISITING NURSE
ASSOCIATION OF TEXAS AND CHAIRMAN, BOARD OF DIRECTORS, NATIONAL
ASSOCIATION FOR HOME CARE
Ms. Palsgaard. Thank you, Mr. Chairman. My name is Denise
Palsgaard. I'm a registered nurse and president of California
Home Care and Hospice in Merced, California, home of the next
U.C. campus. The Chamber of Commerce asked me to say that when
I got here.
Mary Suther, chairman and CEO of the VNA of Texas, and
chairman of NAHC's board of directors, is accompanying me here
today.
NAHC appreciates the opportunity to testify on solutions to
the very serious problems resulting from IPS, and deeply
appreciates the support you, Chairman Archer, and members of
this subcommittee have shown for reforming IPS. IPS reform in
this session is urgently needed.
The per-beneficiary limit, the per-visit cost limit
reductions, the October 1, 1999 15 percent reduction, and the
effect of IPS on elderly and disabled individuals most in need
of home care top the list of issues that must be addressed.
NAHC fully appreciates the sensitivities surrounding the
concept of an IPS moratorium. However, the IPS problems are so
many and so serious that another solution simply may not exist
that would fix the problems for home health providers in all
parts of the country, and provide a solution that could be put
in place before October 1, 1998.
NAHC is joined by the American Federation of Home Health
Agencies, the Home Care Association of America, and the Home
Health Services and Staffing Association, in supporting this
position.
Absent a moratorium, there are specific issues that must be
addressed to adequately reform IPS. Unless reforms are
implemented retroactively to October 1, 1997, many of the home
health agencies that Congress most wants to help just won't
survive to see the life raft.
I sit here as one of those small companies. We have 45
employees, myself as the administrator, and we are a very cost-
effective agency. That has, like many on the panel, gotten us a
very low-cost per-beneficiary limit.
Some of the things we have done is to implement a 10
percent across-the-board pay decrease to our 45 employees. We
have tried to look at other cost savings. Because we were so
cost-effective anyway, that was very difficult to do.
I agree with Mr. Indest, that my agency is in a crisis, and
I believe that what will help that crisis is reform in this
session.
I also think that it is very interesting, as a registered
nurse, that many folks don't understand the crisis.
I would invite them, certainly to come and do home visits
with us, and then, on the other end of my spectrum, to sit in a
bank, as I did Monday, and ask for another line of credit
because I need to make payroll, when my receivables well could
make payroll, but they're stuck in a system that won't let the
money go. And bankers are tough people to address.
I think that those are crises, and they are real; and that
is just this week.
Specifically, Congress should revise the per-beneficiary
limit, implementing a regional blend that will help level the
playing field in all regions of the country.
Under this approach, each census region would be assigned
the greater of one or two blends--either 75 national and 25
regional, or 75 regional and 25 national. Payments would be set
at the percentage of the blends necessary to ensure that total
expenditures are no greater than budgeted levels.
Eliminate the 15 percent October 1, 1999 reduction. Raise
the per-visit cost limit to 110 percent of the mean from 105
percent of the median. Establish a funded outlier policy based
on costs incurred in caring for patients. Pro-rate the per-
beneficiary limits only where agencies transfer or prematurely
discharge patients for purposes of circumventing the limits.
Maintain PIP for home health agencies until 12 months after
implementation of PPS.
Other elements of IPS that should be addressed include the
application of extending the savings from the freeze to the
per-beneficiary limits; setting the base year at fiscal year
1994; and denying providers the opportunity for exemptions and
exceptions to the per-beneficiary limits.
Some of these issues can be resolved administratively, and
do not need a legislative fix. We urge the Committee to insist
that HCFA reverse its decisions in each of these areas.
While resolving these issues would not fix all the IPS
problems, it would certainly address some important points that
would make a legislative solution within the required budget
parameters that much more feasible.
Specifically, HCFA chose to apply the recapture of the
savings of the freeze provision to the calculation of the new
beneficiary limits in addition to the per-visit cost limits,
setting the per-beneficiary limits at artificially lower rates.
The new limits didn't even exist at the time of the original
rate freeze.
HCFA assigned new providers a rate that reflects national
rather than census data, giving some new providers much lower
and others much higher reimbursement levels than other
providers in the same areas.
HCFA chose to pro-rate the per-beneficiary limit in all
cases, rather than only in cases where home care agencies act
to circumvent the limits. HCFA is not allowing any exceptions
to the per-beneficiary limits, even though using a five-year-
old base year does not account for many changes in the amounts
and types of services provided to patients.
We deeply appreciate your leadership, Mr. Chairman, and the
support of other members of the subcommittee, to fundamentally
reform IPS this year, and we look forward to working closely
with you to resolve these issues. Thank you.
[The prepared statement follows:]
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Chairman Thomas. Thank you, Ms. Palsgaard.
I guess my basic comment to all of you is that I continue
to be very, very frustrated, although there are some specific
instances where there has been some useful information provided
to us; and frankly, this is not new with this particular
industry.
When we were trying to work out a program to deal with
this, when we were writing the Balanced Budget Act, we had
somewhat similar cooperation.
Virtually all of you want to go back to the 112 percent of
the mean. Virtually all of you want to eliminate the 15 percent
reduction. None of you have provided any way in which we could
find those dollars.
Your proper answer would be, ``That's up to you.'' My
answer is, the Congressional Budget Office tells us that
eliminating the 15 percent is a $4.1 billion cost.
The idea that we should just go ahead and let folks pick
their own poison in terms of the blend in their particular
area, on its face, is pretty naive.
The reason we are going with these structures--if you will
recall, the administration offered a 100 percent agency blend--
the reason we are going with some kind of a structured blend is
to begin to move in the direction of what will be in place on a
prospective payment system. It may not be going in place on
time, but it is going in place, shortly afterthey indicated.
If everybody is going out of business in this current
structure before the minus 15 percent is in place, then there
won't be anybody in business when the prospective payment
system goes into place. I see all of you nodding your heads.
Ms. Brock, you just testified that 75 percent of the home
health agencies in Texas will be out of business this month or
shortly thereafter. Is that correct?
Ms. Brock. Sir, I believe it is correct.
Chairman Thomas. All right. That means 1,500 home health
care agencies will close in the state of Texas.
Ms. Brock. That's true. And I think that there have been a
tremendous amount of new agencies since 1994, so we have to
take care of that, and we have to adhere to that----
Chairman Thomas. I understand all that. But I'm looking at
the data in 1994, not in terms of the number of agencies, but
in terms of the number of visits and patients.
In 1994, there were 20 million visits for 211,000 patients
and the average visit per patient was $96.75. In 1995, 28
million visits, 245,000 patients, $116. In 1996, 33.7 million
visits, 259,000 patients, $130 per visit.
In 1997, 35.8 million visits, 257,000 total patients--
interestingly, fewer patients, but 2,000 more visits between
1996 and 1997--to increase to $139 per patient.
In fact, if you look at it between 1994 and 1997, the
increase in the number of home health agencies went up 85
percent. And you are going to come in front of this
subcommittee and testify that, within the next month, 75
percent of the agencies are going to close in Texas?
Ms. Brock. As of my last year's cost report, the end of my
last year's cost report, on 3-31-1998, I was being reimbursed
$81.85 per visit. At this point right now, I am at $32.50 a
visit, and I have an overpayment due back to Medicare
immediately of $54,000. I have----
Chairman Thomas. I understand. That's the reason we're
holding the hearing.
Ms. Brock. Right.
Chairman Thomas. We're trying to make adjustments. But for
you people, as an industry, to come in front of me and tell me
that 75 percent of the agencies in Texas are going to close
within a month is either a scare tactic--which, guess what, it
doesn't work--or naivete, which, if you've been selected by
your various groups to testify and represent the sophistication
level of this industry, then what you have asked in terms of
the solution fairly well reflects that, that what you want is
nothing.
I said at the beginning of the hearing, we have to go
forward with the changes in this industry because it is rife
with fraud, people are being ripped off, and those that are
honest agencies have got to figure out ways to come to the
surface. Frankly, we don't have the tools that we would like,
but we have got to make sure that this industry rights itself.
I would much prefer a peer group review inside each of the
operations, going after the bad apples, so that when you sit
here and tell me that 75 percent of the agencies in Texas are
going to close, we can all agree that those should have closed,
because of the way they operate, and if they shouldn't have, we
would be sitting down and working on solutions that would
resolve it.
It is just extremely difficult for us, in terms of trying
to put together a solution for your problems, to be told the
answer is a moratorium, the answer is don't do anything, the
answer is, let us pick whatever rate we want in our area,
repeal or go back to previous law and, by the way, we're all
going out of business.
It just is simply not reflected in all of the evidence that
we're getting. If that's the position you wish to maintain in
our determining how we are going to change your industry, then
just sit back. We will do what we believe what we believe is
the appropriate thing to do, and the information that you
provide to us, we will simply disregard. That's not a healthy
relationship, when the committee reaches out and says, ``Give
us some solutions.''
Now, I would say that the testimony from Ms. Odgren from
New Jersey, based upon my knowledge of how narrow the range
between home health agencies is New Jersey, one of the
narrowest ranges between the high and the low, and at the same
time, very few visits, creates a real problem for us in trying
to determine how we evaluate it with the gentleman, Mr. Indest,
from Louisiana, which has one of the greatest ranges between
and the high and low, and the evidence he gave with the folks
across the street is clearly evident, but what it also sounded
to me like was that this is one of the hot new investment
areas, and that there are people who have gone into this
because clearly it appears to be a way to make money. At least
it was in the past.
Here is Entrepreneur Magazine for August of this year:
``Have health care experience? Here's a business just for you.
The demand for quality health care at affordable prices is
rapidly increasing, and you can turn that demand into a highly
profitable home health care agency.
``Many treatments that once required hospitalization can
now be done on an outpatient basis. If you have experience as a
nurse, therapist, or medical assistant, you can take advantage
of these advancements by caring for patients in their own
homes, or if business skills are your forte, you can provide
health care supplies and hire health givers to work for you''--
et cetera, et cetera. This is a new investment opportunity.
My guess is that perhaps your argument is that was true
pre-BBA; it isn't any more, and what you are doing is
indicating to me that there is going to be a settling out in
the industry. Frankly, it was overdue.
Our job is to make sure that the good people, who do a good
job, survive; those who weren't don't. And, frankly, we are
doing it with very little information and data.
We do know this, for example. On average--and perhaps all
of you are not average, or above--on average every home health
care agency had costs increasing faster than inflation. When we
did our caps in terms of the rates, we used market basket to
update them.
Why are costs going up faster than inflation? Is it
management?
Ms. Odgren. I would be happy to respond to that. I think
that some of the things that have caused the costs to go up
faster than inflation--and again, I can only speak from New
Jersey, I can't speak from any other part of the state--is that
the length of stay between 1993 and 1998, in New Jersey
hospitals, for Medicare patients has decreased by three days.
So there is a three-day period of acuity that wasn't there
before.
I don't think it's a single reason. I don't think it's a
single reason. I think there's a number of reasons.
Chairman Thomas. The ripple effect of other changes is an
absolutely legitimate argument, if we have empirical data to
back it up. We're trying to look at those factors.
Ms. Odgren. I got the hospital length of stay on Medicare
patients data yesterday, from the New Jersey Hospital
Association, so that's the information that I was given.
Chairman Thomas. The approach we need to take is to get as
accurate of information as we can, to be able to make the best
decision that we can, in largely a dollar neutral world.
You heard a lot of us willing to go find more money to help
fix this problem but, frankly, from my position, the industry
has to be far more responsive, far more open, and far less
hectic in trying to create impressions that are not backed up
by careful analysis of fact.
There are several organizations, national and other, that
are doing your industry no service whatsover by blast-facting
nonfactual information, by attempting to run around and create
difficulties for those of us that are trying to approach this
in a rational way by stirring up Members with information that
those Members do not have the ability to evaluate.
I would hope that, other than go back to current law, put
in a moratorium, let us pick our own rates--and there are a
couple of others that you have offered that, obviously, we will
be looking at--is simply not a conducive way to be able to make
decisions.
The gentlewoman from Connecticut.
Mrs. Johnson. Thank you very much, Mr. Chairman. I just
have a brief couple of questions, as I have to leave.
First of all, it is as frustrating to us as it is to you
that we are bound by budget rules, but you can only run a
nation with certain rules, and that is just simply the way it
is. So it isn't possible to do what you're proposing we do. It
just isn't possible.
What we have to do is, what are those things that we could
do that would be helpful to you, that are also affordable and
wouldn't draw money out of some other sector in a way that
would be destructive.
There are two things that I would say.
First of all, Ms. Brock, I think you have an enormously
good case, and somehow you have to all get together or be heard
better, and I think, frankly, your own Congressman can help you
be heard better by the regional HCFA people.
You should not be getting letters that tell you one week
your rate is going to be this, and two months later your rate
is going to be that. In her testimony she detailed how she got
one rate, and they said that they had underpaid her $117,000,
and then two months later, a much lower rate, and she had been
overpaid.
You can't run a business this way, and you can't go to the
bank and get a loan this way. That is something that we've got
to fix, just the mechanics of moving the payments out.
If you listened carefully, you might have heard the GAO say
that he thinks the two causes were the moratorium and also the
slow rate of payment.
We can probably help you on that, just being able to get
your money moved through in a way that you can stay alive if
you deserve to stay alive, and not lose your own personal
investment as a small businesswoman. That's----
Chairman Thomas. Will the gentlewoman yield briefly?
Mrs. Johnson. Yes.
Chairman Thomas. I want the record to reflect accurately
what has occurred.
In terms of the letter that was sent initially, that was on
the per-visit. In fact, the letter said: ``A review of your
interim rates incorporating the per-beneficiary limitation will
be addressed in a separate letter.''
The separate letter was, in fact, the per-beneficiary cost.
It wasn't that they said one thing and then said another.
Mrs. Johnson. Okay. Thank you. I did skim through her
testimony. Nonetheless, I think the point that you can't get
information about what your costs are in a timely fashion, and
then you can't get paid in a timely fashion, is a problem in a
period of such----
Chairman Thomas. I would tell the gentlewoman she, in
skimming, read the testimony correctly. The testimony
misrepresents the letters and the content of the letters in a
specific way. One was the per-visit, which said, ``Another
letter will be coming,'' which is the per-beneficiary.
It was not that they sent a letter with one rate and then
sent a second letter with a second rate. It was two different
rates because it was two different subject matters.
Mrs. Johnson. All right. It does need to be looked into
more carefully, though, because if under rate you were
underpaid $117,000 and at the other rate you were overpaid--so,
anyway, the point is that, really, these things ought to be
worked out with the administrators in a way that just merely
payment flow isn't the problem.
I am a big supporter of continuing PIP, and I can tell you
that, at least in my area, the regional people have really been
willing, once I brought that to them, because they're not
interested in seeing agencies die just because the bureaucratic
mechanism didn't allow, you know, honest reimbursement under
our current system to flow.
I will just urge you to try to deal with those problems,
and some of us can maybe help you.
I am very surprised that all of you are willing to move
into the future with a system that drifts toward national and
regional data, and excludes entirely agency data.
The more I've thought about it, and I think about the
spectrum of cases that you deal with, and the inability of the
national system, no matter how good, to ever really judge
efficiency, or really be patient-specific, I don't know why you
would want to go to a system that has no agency-specific data
in it.
Yes.
Ms. Odgren. I'll respond to that, as well. I think because
the people, for the most part, that I see that are sitting
here, are on the low end of the per-beneficiary limits, and
so--I mean, I understand what Chairman Thomas was saying, but I
don't think it is the people that he is the most concerned with
that are necessarily the people sitting at this table, because
they're not here to testify, because they're not being hurt.
So, if we are at the very low end, as an individual agency,
it would make sense that a national and a regional board----
Mrs. Johnson. That might make sense in the short run. What
I would ask you to think about is, do you really want that in
the long run? If you have any follow-on thoughts about that----
Ms. Odgren. I will.
Mrs. Johnson [continuing]. Yyou know, please let me know.
Becausewhile right now, it might look good to you, because it
would raise your rates, in the long run, are we going to have a system
that serves us, if it is blind to actual costs?
Ms. Odgren. Right. But, in the long run, we're going to
have the prospective payment system, which we're all looking
for. I mean, hopefully, not in the real long run. I'm trying to
exist in the short run.
Mrs. Johnson. Yes. Thank you very much. Thank you, Mr.
Chairman.
Chairman Thomas. The gentleman from Maryland.
Mr. Cardin. Thank you, Mr. Chairman. As I've indicated
earlier, I have a major concern that we move forward quickly,
because of the urgent situation, so I agree with the thrust of
all of your testimonies.
Let me talk a little bit about the per-beneficiary problems
and the way that the current interim payment is handled.
I must tell you, I can relate much more with New Jersey and
California than I can with Texas or Louisiana or Georgia,
because of the number of average visits per use. I come from
the state of Maryland, which is at 34 average visits per user
in 1997. California was at 47 and New Jersey was at 41,
compared to Texas at 134 and Louisiana at 153 and Georgia at
93.
I guess I have a question for each of you. That is, if you
come from a state that has a high average use per beneficiary,
why shouldn't we expect you to do something about that, and get
that number down to a more reasonable level?
If you come from a low-user state, how did you do it? Maybe
you should be sharing the secret with other states, and help us
save money on home health care.
Mr. Indest. If I may respond?
Mr. Cardin. Sure.
Mr. Indest. Since our state has the dubious honor or the
highest.
In my written testimony, I was very candid about what I
feel are the problems in Louisiana. I have served for numerous
years as chair of the Government Affairs Committee of our State
Home Care Association. I've been in business since 1983.
We tried, on numerous consecutive years, to get a CON, some
type of sensibility to the rapid growth of home care in
Louisiana. As an industry, we tried to do that.
We were very naive about the process. We found out the
first two years, it was the Governor's office that was shooting
us down.
Mr. Cardin. Let me just suggest and support what Mr. Thomas
has said, then. Why didn't you come forward and ask us to help
you in the interim payment, to put a reward on some action by
your state to reduce what I believe you are saying is
unreasonable utilization?
Mr. Indest. I might be misunderstanding your question. I'm
not asking for a reward. I do not support the wide variety in
per-beneficiary limits in Louisiana. I think that any business
needs to be on a level playing field, and what I support is a
level playing field for the home care providers in Louisiana.
Mr. Cardin. Good. How do you do it? Can you tell us
something of how you were able to get it down? You're being
penalized under the current formula for your success. But how
did New Jersey and California do it?
Ms. Palsgaard. Well, I can speak for California and
specifically the Central Valley, because they're the people
that I'm most around.
I do think one of the reasons is that we have had, in the
last few years, a big push for seniors, for managed care. In
some other kind of environment, perhaps you have to look at
exactly what the doctor is ordering and what you can provide.
Also, perhaps we have just been able to look at the issues
of the fact that, as a businessperson, we want to be very cost-
effective, because we were looking at the prospective payment
proposal that we have all been looking forward to happening in
our industry.
Our agency was looking at being just as cost-effective as
we could with our mission always being the highest quality care
possible to our patients and following the physicians' orders
for what care is needing to be provided.
I really can't speak for other parts of the country. I see
the statistics like you do, and I believe that, just in
California, we're just trying to work within all the
regulations and within all what is allowed under the Medicare
home care benefit, and try to do a very good job for the
patients----
Mr. Cardin. Let me compliment you on what you have done in
California, but let me just, I guess, underscore the point that
Mr. Thomas has made.
That is, your associations could do us a service to look at
this, and give us recommendations where we could come in with a
more rational formula--even if it's the interim formula, forget
the PPS--so that you don't lose money as you're losing today,
because we're paying for the inefficiencies of unjustified per-
visits in other parts of the country, or among other agencies,
if it's not the full state, if there are problems with
different practices within different agencies within a state.
Obviously, there is some waste here. It's difficult to
understand these numbers. We can't afford that, particularly
when we are trying to find revenues in order to deal with the
problem currently.
It would be useful if you could help us, and rather than
just say, ``Well, add more money and hold everybody harmless,''
if we could get at where we are paying for services that
perhaps are not needed, to be able to use those resources to
deal with the legitimate problems that you have brought to our
attention.
Chairman Thomas. I thank the gentleman. The gentleman from
Louisiana.
Mr. McCrery. Thank you, Mr. Chairman. Each of you has a
home health agency. Do you know what your per-beneficiary visit
cap is and, if so, would you just let us know? Mr. Knight?
Mr. Knight. Mine is about $3,300 in Atlanta. As I said in
my oral presentation, the per-beneficiary cap is not the issue
that confronts my particular agency.
Mr. McCrery. Yes, I'll get into that. I just want to know
if you know what your cap is. Ms. Brock?
Ms. Brock. About $3,300.
Mr. Indest. We do not know yet.
Ms. Odgren. $1,950.
Mr. McCrery. About $2,000?
Ms. Palsgaard. A little over $3,000.
Mr. McCrery. A little over $3,000?
Ms. Palsgaard. Mm-hmm.
Mr. McCrery. Okay. Mr. Indest, let me get the good stuffout
first.
You include, in your written testimony, a reference to a
report that was done for HHS which justifies, to some extent,
the higher cost in Louisiana and some other high-cost states
vis-a-vis other states that have lower costs, and they refer to
such things as availability of alternative delivery systems.
In your testimony, you refer to a higher incidence of
cancer and some other diseases that carry with them higher
costs in the home health field.
Would you like to elaborate on that? Do you think there is
really that much difference between Louisiana, Texas, and some
other high-cost states and, say, New Jersey and Connecticut,
and low-cost states?
Mr. Indest. The Mathematica study that I quoted came from
our national association, the National Association for Home
Care. I don't have the full study, but I quoted that section of
it that gave some explanation for the increase.
Again, I am being extremely candid. I think that is an
explanation but I don't think it is the full explanation as to
why we have high utilization in Louisiana, and that's all I can
speak for.
Louisiana has been an open state for home care. Those
people in Louisiana are reading the magazine that the chairman
read from, and I stated that in my written testimony.
Mr. McCrery. Let me stop you before you get into too much
more trouble. [Laughter.]
Mr. McCrery. How about, let me ask about the proposal from
the VNA that we go to a new blend of 75 percent national and 25
percent regional. How would that go over in Louisiana?
Mr. Indest. I think that would hurt Louisiana.
Mr. McCrery. I think you can leave off the ``think.''
Mr. Indest. Yes. It would hurt Louisiana substantially.
Mr. McCrery. So you would not be in favor of that new
formula?
Mr. Indest. I would not be in favor of that. No, sir.
Mr. McCrery. I want to ask you now another tough question.
In looking over the data for the number of home health agencies
in various states, I've picked out some states that are
approximately the same size as Louisiana.
Alabama has 183 home health agencies; Arkansas, 206;
Georgia, 98; Kentucky, 109; Mississippi, 70; Missouri, 275;
North Carolina, 162; Tennessee, 238; Louisiana, 514. What is
your explanation for that?
Mr. Indest. Well, the last time I started to make it, you
stopped me, because you didn't want me to get into any more
trouble.
Mr. McCrery. Yes, but now I'm prepared for you to go there.
Mr. Indest. Number one--and I can only speak to certain of
those states--Mississippi, I think, has a CMN, and that has
been in effect for a long time. I think the same is true for
Alabama.
As far as Louisiana is concerned, I spoke about the
problems we had with the downturn in our economy in the 1980s.
A lot of people, and I have people that I know of who were in
the oil and gas business, and they read the magazines and said,
``Well, you know, this looks like a great business to be in.''
It used to be, and I stress ``used to be.'' I would think,
in most states, if you had two physician friends who were high
referrers to home care, legitimate referrers to home care, and
you could get them to refer to you, you had a home health
agency.
Mr. McCrery. It's an interesting point, about the oil and
gas industry. Surely, there's nothing to that. But it does
appear that Texas, Oklahoma, and Louisiana have the highest
proportion of home health agencies in the United States for the
population. [Laughter.]
Chairman Thomas. Would the gentleman yield?
Mr. McCrery. Be glad to yield.
Chairman Thomas. I would want to point out that Kern
County, California, which is three counties away from Ms.
Palsgaard's operation, produces more oil than the entire state
of Oklahoma and that, if it were a state, this one little
county in California, it would be behind only Texas, Alaska,
and Louisiana in oil production; and we only have 48 visits. So
the series is going to stop right there. There is no connection
to oil and gas.
Mr. McCrery. That's probably true, but it is an interesting
coincidence. In California, you have other things to do besides
oil and gas.
Mr. Indest, it's clear to the members of this panel and to
the Congress and, obviously, to the Clinton administration,
that there were problems in the home health industry that
needed to be addressed. Utilization was going way out of
control, costs were going way out of control. We had to do
something.
It is clear to us now that the steps we took to try to get
us to a prospective payment system, which all of you told us
you wanted, and we said, ``Yes, it sounds like the solution,''
the interim steps were not the best that we could have devised,
evidently.
We are in a bit of a problem, due to the budget rules and
the reluctance of the administration to suggest any plans that
are anything but budget neutral.
I don't know what to tell you. I've been telling folks back
home, Mr. Indest, that we are going to do something, and we are
going to do something. Unfortunately, I can't report to you
today that that is something that we are going to do is going
to help.
We are looking to you all for more suggestions, if you have
any, short of ``Let's go back to the old system,'' because that
isn't going to happen. We would like to have them.
I will tell you, too, that this reshuffling of the formula
is just picking new winners and losers, and that's not
acceptable to me, nor is it acceptable, I would think, to any
of the other high-cost states. We have to find a way to wean
some of these agencies, while not hurting the good actors in
the program.
Thank you all very much for your help, and we look forward
to receiving more input.
Mr. Indest. If I just might say, the executive director of
our state home care association is with me today, and we will
take you up on your offer of getting in touch with your
office----
Mr. McCrery. Good.
Mr. Indest [continuing]. To hopefully come up with a
solution.
Mr. McCrery. Thank you.
Chairman Thomas. The gentleman from Washington, a memberof
the full committee.
Mr. McDermott. Thank you, Mr. Chairman. This is a bit like
a busman's holiday. I feel like Mr. Knight and Ms. Odgren and
the lady from California, Ms. Palsgaard, are sort of the people
that have been going through my office, one after another, for
the last three months in the state of Washington.
As I listen to this discussion, it seems like what we have
done is we have slammed the barn door when the cow is way down
the road, and now we are trying to figure out what do we do
with it. It seems----
Chairman Thomas. Excuse me. The cow or the barn door?
[Laughter.]
Mr. McDermott. Either. A good question.
Chairman Thomas. I'm trying to follow you, but I didn't
know which one you meant.
Mr. McDermott. The issue that, it seems to me, that we have
to decide on this committee is how much do we try and
micromanage this situation, and how much do we let it be
decided by the states, because Mr. Cardin and I and Oregon and
New Jersey are going to be in bad trouble here, very quickly.
I don't know how you stay open when you're $2 million in
debt. What do you say to a banker when you say, ``Well, I got $
2 million in debt and I would like some more line of credit''?
You don't make it up in the volume, so to speak.
The question is whether or not we might just block grant
the money to the states, give everybody a per capita amount,
and let them all figure out how to do it, because I know that
New Jersey and California and Maryland and Washington would be
able to figure out how to do it. There would be a lot of pain
in some places like Texas, but at least you would decide it
down there.
What troubles me is Texas and Louisiana seem to have the
problem that the state legislature and the Governor and people
at that level were unwilling to step up and do what had to be
done.
I think that the committee is caught between--I mean, many
of my colleagues on the other side don't like big government.
They don't want Washington to decide everything. This looks
like a perfect issue to give a block grant to the state and
say, ``You do your home health care agencies on the basis of
we'll give everybody $10 per person in the state, and you can
go down the road and figure out how to deliver the care,''
because that would force a process in the legislature.
The other way, sitting up here trying to figure out, should
we take back the 15 percent? Well, that gives us a short term
break. That's like taking your foot off the air hose for a
patient who is on oxygen for about 20 minutes.
Ultimately, it is going to come back down in some kind of
crazy way, if we don't figure a way to break this disparity
between the high and low states.
I would like to hear what your view is. I suggest to the
chairman that maybe we ought to lift the 15 percent cut, but
give every legislature exactly two years, or one year, to come
up with a certificate of need process, to weed out, according
to some national characteristics, who is capitalized properly,
and then you get these wildcatting entrepreneurs out pretty
quick.
I don't think the fact that Texas lost 450 nursing home
agencies worries me very much. I figure that's a real shakeout,
and it's going to have to get worse.
I would like to hear how you think, besides having us do
all the work and just shoveling more money to you, what is it
that has to happen at the local levels that we can mandate and
say, ``You people solve it your own way locally.'' Yes.
Ms. Odgren. I would like to speak to that. I think Mr.
Cardin has asked earlier, you know, how do we do it. I think
you're hitting on some of the issues.
I do believe, in New Jersey, we have a combination of two
things that keep our per-visit and our cost per visit low.
One is, we are a CON state. We are high-density population,
particularly frail elderly, a larger growing over 85
population, and that we have the certificate of need in place.
We have no more than 60 Medicare-certified home health agencies
in the entire state.
I think, for those of you who understand cost-based
reimbursement, if you have, I'm just going to say a million
Medicare-eligible home care patients in the state of New
Jersey, and you're cost-based reimbursed, it's going to cost
you more per beneficiary if you have 500 agencies versus 60
agencies, because you're paying the administrative overhead for
every one of those agencies.
I think, when you talk about whether it's state block
grants or thinking of some way, you have to, until we get to a
prospective pay system, while we are still in a cost-based
reimbursed system for home care, that the more agencies taking
care of the same amount of patients is going to cause you to
spend more money. That is one thing.
Second, I have to say that the region we are in, which
includes New York and New Jersey, I believe has one of the
toughest fiscal intermediaries in the Medicare program, and I
think that we have not been allowed to exploit the Medicare
program.
We are allowed to provide to Medicare patients what
conditions of participation say that Medicare beneficiaries are
allowed. We have very few people that get daily home health
aides.
We get what is called a 488 called in, which is the HCFA,
the intermediary's check to call the record in and check
medical necessity, check homebound status, and check all of
that.
I do believe those two factors have kept our visit number
per beneficiary low, and then our cost per visit low, because
of the CON issue.
Mr. McDermott. I have a Visiting Nurse Association in
Seattle that has an average of 17 visits per case.
Ms. Odgren. Are you a high-Medicare managed care?
Mr. McDermott. Yes. Sure. We've had it for a long time. We
have a 30-visit average. We have some that are obviously below
that, one is 17.
When you take a 15 percent cut in that, you are up against
the wall. I think that there is clearly going--and if the
Visiting Nurse Association goes out of business, it will be the
oldest, the longest-standing agency in the state that will go
bankrupt around the 1st of October.
They're bankrupt now, but they're going to have to say it
publicly, at some point. That's why I think that the chairman
is right in calling this hearing.
I don't have a clear answer. I don't know how we mandate
tough fiscal intermediaries in Medicare, because we have one,
too.
Chairman Thomas. Will the gentleman yield?
Mr. McDermott. Yes.
Chairman Thomas. We did in the BBA. At least, we began the
process.
I believe the gentleman from Louisiana's attempt to find
some linkage between Texas, Oklahoma, et cetera is the fact
that it's in the same region and that, while we mandated
Section 4614, normative standards for home health care claim
denials, including the frequency and duration of home health
services which are in excess of normative guidelines the
Secretary shall establish, by regulation, we set up a process
to begin to examine the out line and figure out why regions
utilized the home visits more than others, and HCFA will not
implement this section.
We are currently at war over their failure to do a number
of things under the BBA, including what is an obvious step to
begin to get adjustments on usage between regions.
Now, I agree with everything you said about getting people
to look at their state level, and that is one of the reasons it
bothers me a little bit, but there is easy stuff that we can do
here that we have already done.
I know the gentleman is not aware of every particular
segment, but this one was important to me because they kept
telling me they had no standards, they couldn't apply anything.
I said, ``The least you can do is a relative comparison
between what one region is doing and another which produces the
outliers, then make them explain why they're doing more than
the others.''
We are hearing some of the reasons: the certificate of
need; the very tough intermediaries; managed care as a kind of
a third party overseer for what is going on, versus wild
entrepreneurial areas with no certificate of need, with a
regional intermediary that is not doing the same thing that
somebody else is doing.
All those could be put into the normative standard
structure, and it would be a useful tool, had they begun the
process of implementing that section.
As a matter of fact, it was supposed to apply to services
furnished on or after October 1, 1997. We should have had a
half to three-quarters of a year of experience in looking at
this data. We don't have it because HCFA won't do the job that
the law said they should do.
Mr. McDermott. Mr. Chairman, could I just ask, though, the
bill passed when?
Chairman Thomas. It was effective immediately. It was on
the beginning of the fiscal year of 1997. That was the
effective date on the bill.
Mr. McDermott. What I am suggesting is that perhaps having
it effective immediately, you can't have the rules and
regulations prepared that quickly. I mean, you got to give them
a little time. You may say they haven't done enough, but I----
Chairman Thomas. It's normative standards. They already
have the data coming in by region. All you have to do is
compare the regions.
Mr. McDermott. I would like to work with you on it. The
reason I came to this hearing is because I think every Member
of Congress is going to be in trouble in their district after
the 1st of October when these home health agencies, the really
effective ones, and the old standing ones, are announcing in
the paper that they are going bankrupt.
That is going to be a real crisis for a lot of people in
the election.
Chairman Thomas. I agree.
Mr. McDermott. I really think this is something we must do
something with.
Chairman Thomas. I would tell the gentleman that, although
I have heard that suggestion, block grants to states, the
problem is that money then would be going to the states which
have refused to take what I would consider reasonable and
appropriate steps.
The next problem is that during the next Congress, you are
back lobbying for a larger block grant to maintain the same
discrepancies that weren't corrected in the first place by the
state that was getting the money, so it doesn't have to make
the tough decisions. To me, that is a circular problem.
We've got to go to the heart of it and figure out a way to
create a system which, on a cooperative basis, the people who
are doing a good job have got to get far more aggressive in
their associations and demand that the people who are trying to
maintain the old system, who are presenting arguments of
``Don't do anything, just bail us out, because it's a crisis,''
that will not carry the day.
Go back inside. Get your associations to get serious about
who is responsible and who is not in your area of activity.
What you do is important. You've got to look inward.
We will help you in terms of trying to make the system as
fair as possible. But there has to be a settling out in this
industry, and all of us want the settling out to be the quality
care folk.
Mr. McDermott. Mr. Chairman, I was making my suggestion
about the block grant following the aphorism of Benjamin
Franklin that the imminence of hanging tends to focus men's
minds.
If they know that they have a fixed period in which they
are going to be faced with real problems, there would be action
in those states, there is no question about it, or else they
would pay the price.
I think that's our problem. We either micromanage it, or we
do it bluntly. I'm not sure I know how to micromanage from this
level, but I do know how to be blunt.
Chairman Thomas. My concern is, that listening to the
recent testimony, I don't know that the message would
necessarily get through. It would probably create more chaos.
The gentleman from Louisiana had a couple of additional
questions.
Mr. McCrery. Thank you, Mr. Chairman. Mr. Indest, in your
testimony, written testimony, I think you say that, since
sometime in 1997, Louisiana has lost 80-something home health
agencies. Is that correct?
Mr. Indest. Those are statistics I received from my state
home care association.
Mr. McCrery. Okay. Do you have any statistics on how many
new agencies have been created since that same point in time?
Mr. Indest. One thing that I stated in my written
testimony, that I did not state earlier, currently in
Louisiana, I think, as of two years ago, there was a moratorium
on the establishment of home health agencies.
I do not have those statistics, but with a moratorium I
would hope that none.
Mr. McCrery. So there is a net decrease of 80-something
since this went into effect?
Mr. Indest. Yes, sir.
Mr. McCrery. I want to explore for a minute with all of you
the question of co-pays, because every time we mention co-pay,
industry just says, ``That won't work.''
What I am talking about, and I think the chairman is
talking about, is the possibility of giving agencies the option
to charge a nominal co-pay, $5 per visit, where there is some
cap on the number of visits that you could charge a co-pay for,
and then you, the agency, could discriminate at your will.
If you think some of your patients are unable to pay, don't
charge them, but those who are, charge them, and then you have
some income to supplement your activity.
What's wrong with that?
Mr. Indest. Could I respond to that, Mr. McCrery?
Mr. McCrery. Anybody. Yes, anybody.
Mr. Indest. Am I understanding you to say that we will be
able to charge the co-pay and keep that money?
Mr. McCrery. Yes.
Mr. Indest. It will not be deducted from our cost of doing
business?
Mr. McCrery. Well, we can work on that.
Mr. Indest. I think my understanding of co-pays is that it
is a built-in loss to the home health agency. If you don't
collect it, you're already operating in a cost-based system----
Mr. McCrery. We can discuss this. But it doesn't make any
sense to me to give it to you in one hand and take it away in
another. That doesn't help you.
Mr. Indest. You've just painted a very different light on
the way I understand co-pay.
Mr. McCrery. I mean, let's just explore this for a minute.
We're stuck in the budget, because we did some stuff that got
savings, and now we can't, even though we got more savings than
we thought, we can't go back and spend the extra savings. So
we're stuck.
We can't give you any more money. That's what I've
understood at this hearing today, from the administration and
from conversations with Members of Congress. We can't find any
new money to give you.
What I'm suggesting is, we give you the option to get new
money yourself, from your own patients. What's wrong with that?
$5 a visit. It's called balance billing, $5 a visit. Hey, a lot
of folks out there can probably afford $5 a visit. Some can't.
Why not leave it up to the agencies to decide?
I mean, that's a way to help you out of this interim--and
we could do away with that option at the time we get a
prospective payment system. I'm just trying to figure out a way
to help us through this problem time that we are experiencing.
Ms. Odgren. Thank you. I would suggest that, if we are
going to look at co-pay, it really needs to be an across-the-
board.
If I have a per-beneficiary limit of $1,950, in order to
survive, I have to charge a $5 co-pay to those people who, on
my sliding fee scale, can afford to do that, the agency down
the street that has a $3,300 doesn't have to, how long am I
going to be in business?
Mr. McCrery. Well, that's the market, you know. Maybe we
should try to get back a little bit to the market. That would
help. In fact, I'm of the opinion that, if people actually had
to pay something for what they get, utilization would go down.
I mean, if you want to get into it, I can get into that
with you, and we can just do away with all this stuff and let
people pay.
Chairman Thomas. Will the gentleman yield?
Mr. McCrery. That would be a lot better solution than a lot
of this junk that we are trying to do in micromanaging the
health care system from here.
Chairman Thomas. Will the gentleman yield?
Mr. McCrery. Yes.
Chairman Thomas. We keep talking about low income, and how
difficult it is for them to operate. It's my understanding that
Georgia has a co-pay.
Mr. Knight. For the Medicaid system?
Chairman Thomas. For the Medicaid system.
Mr. Knight. That is correct.
Chairman Thomas. How much is it?
Mr. Knight. $2, I believe, per visit.
Chairman Thomas. How good are you at collecting it?
Mr. Knight. Not very good at all.
Chairman Thomas. If we gave you a $5 co-pay in the rest of
the income range, in terms of the patients, you would be
better?
Mr. Knight. If that is an option to explore, to help offset
the challenge that we have on the 15 percent number for next
October, we would love to work with this committee and you, Mr.
Chairman, on that thought.
I think that there are other methods of managing
utilization, other than that. I don't disagree that the co-
payment system that exists in other parts of the health care
system is working.
What I think I take exception to is the fact that it is
cost reductive, as we have heard it, and as it has been
presented in the past. We are not even receiving all costs from
Medicare, to begin wit. There are some disallowed or nonallowed
costs, and this becomes yet another opportunity for us. So----
Chairman Thomas. I would tell the gentleman that his
statement is absolutely correct. The gentleman from Louisiana
is drilling a wildcatter here, and we don't know whether it's
dry or not, because we haven't discussed this proposal before.
My belief is it probably a dry well, because my concept was
an agency optional passthrough but, frankly, it was back to the
old traditional, the money comes through and it either comes
from you or it comes from the beneficiary.
The decision as to where it comes from is up to you, to
provide money to be able to do something like defray the 15
percent reduction, because that would be kind of a revenue
neutral way, on a passthrough basis, to remove what I consider
to be a far more onerous hammer that has a $4.1 billion price
tag that, if we can't get rid of that--let me say it another
way, and I'll give the time back to the gentleman.
If you had a choice--which nobody wants to do in this
industry, they just want us not to do anything--if you had a
choice between the 15 percent reduction going into effect on
its current date, or a $5 or $8 co-pay, which would replace the
minus 15 percent, but it really wouldn't be a co-pay, it would
be an agency optional passthrough, and you have only two
choices, which one would you choose?
[No response.]
Chairman Thomas. I know. You want moratorium. You want to
go back. You have two choices. Anybody, reaction?
Mr. Knight. I think, in our particular situation, it would
need to be studied, because I'm not sure today that the 15
percent wouldn't be a better hit if I had to take one of the
two, than the $8 co-pay. I'm not sure how that lines up.
I think that, when you think about the administrative costs
associated with that, which have not been factored into any
year, much less 1994----
Chairman Thomas. I understand.
Mr. Knight [continuing]. It is a little bit difficult to
sit here on the fly and make a decision and answer, you know
that question intelligently.
Chairman Thomas. All I'm telling you is that that should
have been the kind of discussions that you folks were making as
you were thinking about coming here to tell us how to solve the
problems, because those are the kind of decisions that we're
going to make with or without your input. I would much rather
make those kind of decisions with your input.
Ms. Brock, what do you want, minus 15 or the agency
optional passthrough?
Ms. Brock. I think both of them are going to make our lives
totally impossible.
Chairman Thomas. I understand that.
Ms. Brock. I think if we had a smaller co-pay, that might
be more realistic.
Chairman Thomas. $5. Going once.
Ms. Brock. I think they're both impossible. If I had to
pick, I would pick the co-pay.
Chairman Thomas. Thank you very much and thank you for
making a decision. I appreciate that very much. Mr. Indest?
Mr. Indest. Would the co-pay be, as Mr. McCrery,
Congressman McCrery described it?
Chairman Thomas. Notwithstanding your state affiliation,
the answer is a flat out California no. [Laughter.]
Mr. McCrery. I think you should explain exactly what your
proposal is, in case they don't understand your jargon.
Chairman Thomas. The proposal is an agency optional
passthrough, for example, a $5 levy. The agency could pay it,
or the agency, at its option, could pass it to the beneficiary.
Mr. Indest. If I had to state right now, I would go with
the co-pay. Without thoroughly studying----
Chairman Thomas. Agency optional passthrough.
Mr. Indest. Yes, sir.
Chairman Thomas. Not a co-pay.
Mr. Indest. Yes, sir.
Chairman Thomas. Ms. Odgren?
Ms. Odgren. I'm just trying to think----
Chairman Thomas. I understand.
Ms. Odgren [continuing]. From the cost perspective.
Chairman Thomas. All I'm trying to do is get you folks to
realize the kind of decisions that we're going to have to make,
and we would love to begin sharing the decision making process
with you.
Ms. Odgren. I would think that the agency optional
passthrough would be the----
Chairman Thomas. Agency optional passthrough. All right.
And the brain trust decides. Ms. Palsgaard?
Ms. Palsgaard. I think if you could look at how much the 15
percent, if you meet the budget target, how much of the 15
percent would be required to do that, or is there more. I'm
just----
Chairman Thomas. No, you don't understand the way the game
is played.
Ms. Palsgaard. I do.
Chairman Thomas. If we change the baseline, we are
obligated to find the money. It is a $4.1 billion cost. I have
to replace $4.1 billion if I drop the 15 percent reduction.
I'm trying to figure out a way to soften the blow in terms
of raising some money that might be a more palatable way, not
necessarily out of your pocket, but out of the larger
universe's pocket, rather than just yours, or you can choose
the option and it comes out of your pocket.
That's the agency optional passthrough--15 percent
reduction on the date that it currently occurs, or an agency
optional passthrough.
Ms. Palsgaard. For a co-pay?
Chairman Thomas. No, an agency optional passthrough. You
decide whether you want to collect it from the beneficiary or
not.
Ms. Palsgaard. I think that, if I speak as my agency----
Chairman Thomas. I'm asking you talk for yourself.
Ms. Palsgaard. Okay. If I speak for our agency, we have a
very, very poor clientele in our county right now, and it would
be very difficult for us to be able to do any kind of co-pay
collection.
There are certainly people that could afford it, but the
majority of the people in our Central Valley, as you know, are
farmworkers----
Chairman Thomas. What percentage are on Medicaid?
Ms. Palsgaard. In our service area, we have----
Chairman Thomas. Your clients.
Ms. Palsgaard. Our clients.
Chairman Thomas. Your clients.
Ms. Palsgaard. Our clients have a low percentage of
MediCal, probably, in Merced County.
One of the other things that I didn't remember when we were
talking about the lower utilization in California was the in-
home supportive service program in California, that maybe is a
reason there is not as much help there.
Chairman Thomas. That's another fallback that softens the
blow on the number of visits, if there is no such agency.
Ms. Palsgaard. I suppose, yes.
Chairman Thomas. I just wanted to finally get you into the
level of the kind of decisions that we are going to be looking
at.
Mr. Cardin. Would the chairman yield just for one second?
Chairman Thomas. Certainly.
Mr. Cardin. I think this is a very, very helpful
discussion, but I would just put on the table that we have to
realize that this is an interim situation.
Chairman Thomas. Exactly.
Mr. Cardin. What that is going to mean, as far as your
administration of home health services, an ability to keep the
network afloat until the PPS system comes into effect, I think
we need your good counsel as to what these different--of
course, we assumed the 15 percent was going to go in when the
PPS went into effect. We never assumed that the 15 percent was
going to be before the PPS.
Chairman Thomas. That's another renege on HCFA's part.
Mr. Cardin. I agree. We thought the new system would be in.
So we never thought that you would have to implement that under
the IPS.
Chairman Thomas. Correct.
Mr. Cardin. But now, if you are going to be asked to
implement some type of a collection process, on top of the IPS,
before the PPS comes into effect, what does that mean as far as
the ability to efficiently administer a program, until we can
get the PPS into effect?
Chairman Thomas. Again, all of us are committed--in fact,
we just had another conversation--to go try to find some money,
if we can, but you have to be realistic in terms of the needs
and the demands and the amount of money that this area was
changing, which was absolutely necessary for all the reasons
that you provided, in certain states, but there are victims in
other states that were doing a good job, that we don't have the
ability to select out with criteria and data yet, that we will
with the prospective payment system.
If you don't want us to impose something on you that we
will impose, we've got to get feedback from you on options,
just like the difficult one I made you go through.
Ms. Odgren.
Ms. Odgren. Yes. I would question, Chairman Thomas, when
you gave us the option of choosing the passthrough or the 15
percent, was that to pay, the passthrough was to pay for the 15
percent?
Chairman Thomas. Roughly, change the structure of where the
money comes from so you could then deal with having an option
of helping cast off that cost, because the 15 percent is yours.
Ms. Odgren. It doesn't impact any decision that this
committee will make about what will happen in 1998? I mean, is
it related in any way to, you know, the blend?
Chairman Thomas. No. What we would be doing is looking at
options of where we get money, if we could sweep the floor, do
some other things.
We would look at, in making changes, the possibility of
including in the package reducing the 15 percent reduction but
there would have to be a revenue source that assists us in
replacing it.
One of the revenue sources could possibly be the agency
optional passthrough, which not only produces a portion of the
revenue that we have now denied, but that, if the marketing
situation is such that you were able to pass it through, it
might have a certain beneficial behavioral restructuring, as
Dr. Wilensky testified, in terms of the MedPAC argument for
what would be a traditional co-pay.
But I didn't just want to do a co-pay. I thought the agency
optional passthrough would give you some decision in a
marketing way that might help some, since we have so few tools
available to let you make decisions on your own. That was the
reason.
Ms. Odgren. It's not really taxing the elderly? I mean, a
co-pay sometimes is considered taxing.
Chairman Thomas. But it's your decision.
Ms. Odgren. Right. That's what I'm saying. So----
Chairman Thomas. My assumption is you won't go taxing the
poor folk that you all are dedicated to serving----
Ms. Odgren. Right.
Chairman Thomas [continuing]. And that there may be some
individuals where it would be perfectly fine.
Ms. Odgren. Perfectly fine to do that.
Chairman Thomas. That's just one little exercise that we
are going to have to go through about 10 times, to come up with
a policy, because we are going to come up with a policy.
We are going to replace the current policy. It will create
new winners and new losers. We will do it before we adjourn.
Our goal is to try to minimize simply reshuffling the
dollars and creating new winners and losers. Everybody has to
participate, to be as positively creative as we can. That means
you folks and your associations.
If we ask for information again, to provide us with the
answer that three-quarters of your agencies are going to shut
down within a month, that the only options that we really
should be looking at are moratoriums, you know, et cetera, or
pick our own blend, then we simply have failed in our ability
to include you in the process of coming up with a relook at the
solution to the interim payment factor.
I would very much like to include you in the decision that
we come up with. All of us would like to include you.
With that, thank you all very much. The subcommittee stands
adjourned.
[Whereupon, at 2:27 p.m, the hearing was adjourned.]
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