[Senate Hearing 106-197]
[From the U.S. Government Publishing Office]


                                                        S. Hrg. 106-197


 
 HOME HEALTH CARE: WILL THE NEW PAYMENT SYSTEM AND REGULATORY OVERKILL 
                           HURT OUR SENIORS?

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


                                HEARING

                               before the

                               PERMANENT
                     SUBCOMMITTEE ON INVESTIGATIONS

                                 of the

                              COMMITTEE ON
                          GOVERNMENTAL AFFAIRS
                          UNITED STATES SENATE

                       ONE HUNDRED SIXTH CONGRESS

                             FIRST SESSION



                               __________

                             JUNE 10, 1999

                               __________

      Printed for the use of the Committee on Governmental Affairs


                                


                      U.S. GOVERNMENT PRINTING OFFICE
 59-580 cc                   WASHINGTON : 1999
_______________________________________________________________________
For sale by the Superintendent of Documents, Congressional Sales Office
         U.S. Government Printing Office, Washington, DC 20402



                   COMMITTEE ON GOVERNMENTAL AFFAIRS

                   FRED THOMPSON, Tennessee, Chairman
WILLIAM V. ROTH, Jr., Delaware       JOSEPH I. LIEBERMAN, Connecticut
TED STEVENS, Alaska                  CARL LEVIN, Michigan
SUSAN M. COLLINS, Maine              DANIEL K. AKAKA, Hawaii
GEORGE V. VOINOVICH, Ohio            RICHARD J. DURBIN, Illinois
PETE V. DOMENICI, New Mexico         ROBERT G. TORRICELLI, New Jersey
THAD COCHRAN, Mississippi            MAX CLELAND, Georgia
ARLEN SPECTER, Pennsylvania          JOHN EDWARDS, North Carolina
JUDD GREGG, New Hampshire
             Hannah S. Sistare, Staff Director and Counsel
      Joyce A. Rechtschaffen, Minority Staff Director and Counsel
                 Darla D. Cassell, Administrative Clerk

                                 ------                                

                PERMANENT SUBCOMMITTEE ON INVESTIGATIONS

                   SUSAN M. COLLINS, Maine, Chairman
WILLIAM V. ROTH, Jr., Delaware       CARL LEVIN, Michigan
TED STEVENS, Alaska                  DANIEL K. AKAKA, Hawaii
GEORGE V. VOINOVICH, Ohio            RICHARD J. DURBIN, Illinois
PETE V. DOMENICI, New Mexico         MAX CLELAND, Georgia
THAD COCHRAN, Mississippi            JOHN EDWARDS, North Carolina
ARLEN SPECTER, Pennsylvania
          K. Lee Blalack, II, Chief Counsel and Staff Director
      Linda J. Gustitus, Minority Chief Counsel and Staff Director
                     Mary D. Robertson, Chief Clerk



                            C O N T E N T S

                                 ------                                
Opening statements:
                                                                   Page
    Senator Collins..............................................     1
    Senator Cleland..............................................     4
    Senator Domenici.............................................     6
    Senator Levin................................................     7
    Senator Edwards..............................................    27
Prepared statement:
    Senator Torricelli...........................................    45

                               WITNESSES
                        Thursday, June 10, 1999

Maryanna Arsenault, Chief Executive Officer, Visiting Nurse 
  Service, Saco, Maine, representing the Visiting Nurse 
  Association of America.........................................    11
Mary Suther, Chairman of the Board, National Association of Home 
  Care, Washington, DC, and President and Chief Executive 
  Officer, Visisting Nurse Association of Texas, Dallas, Texas...    13
Rosalind L. Stock, Vice President, Home Health Services, Home 
  Health Outreach, Rochester Hills, Michigan.....................    16
Barbara Markham Smith, Senior Researcher, Center for Health 
  Services Research and Policy, The George Washington University, 
  Washington, DC.................................................    18
Kathleen A. Buto, Deputy Director, Center for Health Plans and 
  Providers, Health Care Financing Administration, Washington, 
  DC, accompanied by Mary R. Vienna, Director, Clinical Standards 
  Group, Health Care Financing Administration, Washington, DC....    33

                     Alphabetical List of Witnesses

Arsenault, Maryanna:
    Testimony....................................................    11
    Prepared statement...........................................    46
Buto, Kathleen A.:
    Testimony....................................................    33
    Prepared statement...........................................   148
Smith, Barbara Markham:
    Testimony....................................................    18
    Prepared statement w/attachments.............................   132
Stock, Rosalind L.:
    Testimony....................................................    16
    Prepared statement...........................................    88
Suther, Mary:
    Testimony....................................................    13
    Prepared statement w/attachments.............................    52

                                Exhibits

* May Be Found In The Files of the Subcommittee

 1. Memoranda prepared by Priscilla Hanley, Office of Senator 
  Susan M. Collins and Karina V. Lynch, Counsel, Permanent 
  Subcommittee on Investigations, dated June 8, 1999, to 
  Permanent Subcommittee on Investigations' Membership Liaisons, 
  regarding June 10, 1999 hearing: Home Health Care: Will the New 
  Payment System and Regulatory Overkill Hurt Our Seniors?.......   159

 2. Excerpt of Medicare Payment Advisory Commission's (MedPAC) 
  Report To The Congress: Selected Medicare Issues, Chapter 6--
  Access To Home Health Services, dated June 1999................   162

 3. Statement of Rosalind L. Stock, RN, BSN, CHCE, Vice 
  President, Home Health Services, Home Health Outreach, with 
  attachments. (Statement reprinted in this hearing record with 
  numerous attachments. Remaining attachments to submission 
  retained in the files of the Subcommittee as Exhibit No. 3)....     *

 4. Statement for the Record of the Home Health Services and 
  Staffing Association...........................................   174

 5. Statement for the Record of the Home Care Coalition.........   181

 6. Submission for the Record of the Center for Medicare 
  Advocacy, Inc. entitle The Faces of the Medicare Home Care 
  Benefit........................................................     *

 7. Supplemental Questions and Answers for the Record of 
  Maryanna Arsenault, Chief Executive Officer, Visiting Nurse 
  Service, Saco, Maine, on behalf of the Visiting Nurse 
  Association of America.........................................   186

 8. Supplemental Questions and Answers for the Record of Mary 
  Suther, Chairman and Chief Executive Office, Visiting Nurse 
  Association of Texas, Inc., Dallas, Texas, on behalf of the 
  National Association for Home Care.............................   188

 9. Supplemental Questions and Answers for the Record of 
  Rosalind L. Stock, Vice President, Home Health Services, Home 
  Health Outreach, Rochester Hills, Micigan......................   191

10. Supplemental Questions and Answers for the Record of 
  Kathleen A. Buto, Deputy Director, Center for Health Plans and 
  Providers, Health Care Financing Administration, Department of 
  Health and Human Services......................................   197



 HOME HEALTH CARE: WILL THE NEW PAYMENT SYSTEM AND REGULATORY OVERKILL 
                           HURT OUR SENIORS?

                              ----------                              


                        THURSDAY, JUNE 10, 1999

                                       U.S. Senate,
                Permanent Subcommittee on Investigations,  
                  of the Committee on Governmental Affairs,
                                                    Washington, DC.
    The Subcommittee met, pursuant to notice, at 2:05 p.m., in 
room SD-342, Dirksen Senate Office Building, Hon. Susan M. 
Collins (Chairman of the Subcommittee) presiding.
    Present: Senators Collins, Domenici, Levin, Cleland, and 
Edwards.
    Staff Present: K. Lee Blalack, Chief Counsel and Staff 
Director; Mary D. Robertson, Chief Clerk; Glynna Parde, Chief 
Investigator and Senior Counsel; Karina Lynch, Counsel; 
Priscilla Hanley and Felicia Knight, (Senator Collins); Linda 
Gustitus, Minority Chief Counsel; Michael Loesch (Senator 
Cochran); Ed Hild (Senator Domenici); Andrea Haer and Nicole 
Quon (Senator Specter); Laura Stuber (Senator Levin); Marianne 
Upton, Annamarie Murphy, and Angela Benander (Senator Durbin); 
Lynn Kimmerly, Jane Greares, and Donna Turner (Senator 
Cleland); and Lori Armstrong (Senator Edwards).

              OPENING STATEMENT OF SENATOR COLLINS

    Senator Collins. The Subcommittee will please come to 
order.
    Good afternoon. We thank all of you for being here with us 
today.
    America's home health agencies provide an invaluable 
service that has enabled a growing number of our most frail and 
vulnerable Medicare beneficiaries to avoid hospitals and 
nursing homes and stay just where they want to be--in the 
comfort and security of their own homes.
    In 1996, home health was the fastest-growing component of 
Medicare spending, consuming 1 out of every 11 Medicare 
dollars, compared with 1 out of every 40 in 1989. The program 
grew at an average annual rate of more than 25 percent from 
1990 to 1997. As a consequences, the number of home health 
beneficiaries more than doubled, and Medicare home health 
spending soared from $2.5 billion in 1989 to $18.1 billion in 
1996.
    This rapid growth in home health care spending 
understandably prompted Congress and the administration as part 
of the Balanced Budget Act of 1997 to initiate changes that 
were intended to make the program more cost-effective and 
efficient. There was widespread support for the provision in 
the Balanced Budget Act of 1997 which called for the 
implementation of a prospective payment system for home health 
care. Until this system can be implemented, home health 
agencies are being paid according to an interim payment system, 
or IPS.
    In trying to get a handle on costs, however, Congress and 
the administration created a system that penalizes lower-cost, 
efficient agencies and that may be restricting access for the 
very Medicare beneficiaries who need care the most--the sicker 
patients with complex chronic care needs, like diabetic wound 
patients or I.V. therapy patients who require multiple visits.
    I accompanied a home health care nurse on a home visit once 
when I was in northern Maine, and we visited an elderly couple 
who were living in their very modest home, both of whom were in 
their eighties. The woman was being treated for a surgical 
wound that was not healing well as a result of her diabetes. 
She was confined to a wheelchair. I could see what a difference 
home health care made in their lives. For one thing, it allowed 
them to stay together rather than having this woman be in a 
nursing home. I was offered by the nurse to observe her 
cleaning the wound, but I passed up that part of the visit.
    That visit brought home first-hand to me what an essential 
service good home health care is for our Nation's elderly.
    Unfortunately, the interim payment system is critically 
flawed. It effectively rewards the agencies that provide the 
most visits and spent the most Medicare dollars in 1994, the 
base year, while it penalizes low-cost, more efficient 
providers and, I fear, their patients.
    None of us should tolerate wasteful or fraudulent 
expenditures, but neither should we impede the delivery of 
necessary services by low-cost providers. Home health care 
agencies in the Northeast and the Midwest have been among those 
particularly hard-hit by the interim payment system. As The 
Wall Street Journal observed last year, ``If New England had 
just been a little greedier, its home health industry would be 
a lot better off now. Ironically, the region is getting 
clobbered by the system because of its tradition of nonprofit 
community service and efficiency.''
    Even more troubling, this flawed system may force our most 
cost-efficient providers to stop accepting Medicare patients 
with the most serious and complex health care needs.
    According to a recent survey by the Medicare Payment 
Advisory Commission, almost 40 percent of the home health 
agencies surveyed indicated that there were patients whom they 
previously would have accepted whom they no longer accept due 
to the IPS. Thirty-one percent of the agencies surveyed 
admitted that they had discharged patients due to the IPS. 
According to these agencies, the discharged patients tended to 
be those very patients with chronic care needs who required a 
large number of visits and were expensive to serve. As a 
consequence, these patients caused the agencies to exceed their 
aggregate per-beneficiary caps under the very complex formula 
in the law.
    I simply do not believe that Congress intended to construct 
a payment system that inevitably discourages home health 
agencies from caring for those seniors who most need the care. 
Last year's omnibus appropriations bill did provide a small 
measure of relief for home health agencies. While I am pleased 
that we were able to take some initial steps to address this 
issue, I am very concerned that the proposal did not go far 
enough to relieve the financial distress that cost-effective 
agencies are experiencing. As a result, I will soon join with 
my colleagues in introducing legislation in the hope of 
remedying the remaining problems.
    These problems are all the more pressing given the fact 
that the Health Care Financing Administration was unable to 
meet the initial deadline for implementing a prospective 
payment system. As a result, home health care agencies will 
struggle under the IPS for far longer than Congress envisioned 
when it enacted the Balanced Budget Act.
    Moreover, it now appears that Congress greatly 
underestimated the savings stemming from the BBA. Medicare 
spending for home health fell by nearly 15 percent last year, 
and the Congressional Budget Office now projects post-BBA 
reductions in home care spending at $48 billion in fiscal year 
98-02. This is a whopping three time greater than the $16 
billion CBO originally estimated for that time period.
    As a consequence, cost-efficient home health agencies 
across the country are experiencing acute financial 
difficulties and cash flow problems which will inhibit 
eventually, if not already, their ability to deliver much 
needed care, particularly to chronically ill patients with 
complex needs who need home health care the most.
    Some agencies have closed because the reimbursement levels 
under Medicare fall so short of their actual operating costs. 
Others are laying off staff or are declining to accept new 
patients with more serious health problems. This points to the 
most central and critical issue, and that is that cuts of this 
magnitude simply cannot be sustained without ultimately 
affecting care for our most vulnerable seniors.
    Moreover, these payment problems have been exacerbated by a 
number of new regulatory requirements imposed by HCFA, 
including the implementation of OASIS, the new Outcome and 
Assessment Data Set, sequential billing, IPS overpayment 
recoupment, and the new 15-minute increment home health 
reporting requirement. One home health nurse told me she felt 
more like a lawyer billing by the hour than a nurse taking care 
of essential health care needs because of that new requirement.
    Today's hearing will examine how payment reductions under 
the IPS, coupled with these new regulatory requirements, are 
affecting home health agencies' ability to meet their patients' 
needs, because that is the bottom line.
    I think the following quote which was provided to me by the 
director of a New York home health agency summarizes the 
problems faced by many providers. She wrote: ``I have to 
prepare for Y2K and have everything ready by August 1. That has 
cost me $100,000. My accounts receivable are now tied up for 4 
months due to sequential billing. HCFA has called a halt to 
sequential billing as of July 1, which is great. But I need 2 
months' notice to change my computer system, and the vendors 
are not responding. I implemented OASIS. The first year cost 
$100,000, and now it is $50,000 a year maintenance. I spent 
time trying to get a surety bond. The time and effort cost me 
$8,000 to $9,000. Had I been able to get one, it would have 
cost $216,000. I just spent $300,000 toward the payback of my 
recoupment of overcharges, which is $1 million. My rates have 
been cut by IPS by 30 percent, and my per-beneficiary cap is 
$2,200. And last but not least, the 15-minute increment will 
cost $20,000 to $30,000 to implement, and worst of all, I will 
probably lose all my good nurses.''
    This comment aptly reflects the concerns that I have heard 
from many home health agencies in my State as they struggle to 
cope with an onerous payment and regulatory system. I look 
forward to hearing the testimony of all of our witnesses today 
in our quest to better understand and then solve this problem 
which threatens the care that we provide to many of our elderly 
citizens.
    I would now like to call on Senator Cleland for any 
comments that he might have.

              OPENING STATEMENT OF SENATOR CLELAND

    Senator Cleland. Thank you very much, Madam Chairman. I 
cannot tell you how much I appreciate your having this hearing 
to flesh out some of the challenges that we in the Congress and 
HCFA and those involved in caring for our elderly citizens and 
our disabled have under the current system and under the 
current law.
    We have all read the stories about the toll that the 
Balanced Budget Act has taken on patients across the country, 
headlines like ``Medicare Cutbacks Prove Painful,'' ``Nursing 
Homes Shun Some Medicare Patients,'' ``Patients Face a Limit on 
Benefits for Therapy,'' and so on.
    Let me just say that the Balanced Budget Act of 1997 has 
produced some positive results. We do have a balanced budget, 
and Medicare's fiscal health has been extended for many years--
but at a cost. BBA has brought with it unintended consequences, 
and these consequences have a decidedly human face, as our 
distinguished panelists well know. It is the face of the 
Nation's most vulnerable elderly citizens, Madam Chairman, as 
you point out, and their caregivers. It is the face of the 73-
year-old cancer patient who relies on a feeding tube and I.V.s 
and who cannot find a nursing home that will accept her because 
her medical needs are too costly. It is the face of the 67-
year-old woman who lost her leg to diabetes complications and 
received an artificial limb but was stopped short of her goal 
of walking with only one cane, because she hit her $1,500 a 
year physical therapy limit. And as someone who spent a lot of 
time in physical therapy, I am a cosponsor with Senator 
Grassley to lift this limit, because I happen to believe not 
only in home health care but in physical therapy and 
rehabilitation as well. It is the face of children and parents 
of patients who must make the difficult choice of whether to 
care for their loved ones at home or seek care in a nursing 
home. It is the face of some of you in this room, the nurses 
and other dedicated employees of home health care agencies, who 
have devoted your lives literally to caring for the sick.
    I think many of you are really unsung heroes who serve in 
some of the most rural areas of the country--a place like my 
State, the State of Georgia, has so many rural areas in need of 
your care. Many of you manage the sickest and most frail 
patients with no means of payment other than Medicare.
    Last July, the Small Business Committee on which I serve 
held a hearing on home health care and whether it can survive 
the new BBA regulations. At that time, I stated that the 
government should allow us to make every effort to allow 
Medicare recipients to live in their own homes. I can remember 
after being wounded in Vietnam, I spent a year and a half in 
military and VA hospitals and rehabilitation facilities, but 
ultimately, I wanted to be in my own home. I guess that is what 
has made me a passionate devotee of home health care.
    However, despite good intentions, those of us in government 
can sometimes become part of the problem we seek to correct. I 
think the interim payment system is such an example. Congress 
enacted the IPS to encourage providers to cut costs while 
becoming more efficient--a very laudable goal. In practice, 
however, we are seeing efficient agencies being driven out of 
business while some less well-managed agencies have been able 
to survive. Many of you know that story.
    Last summer, we heard that 800 small and medium-sized home 
care agencies had been forced out of business by BBA 
regulations--that was just last summer. That number has now 
jumped to more than 2,000 agencies driven out of business.
    How many patients are being denied services now? How many 
patients are being forced into nursing homes, at a higher cost, 
I might add, to our government, because 2,000 of America's home 
health care agencies have been forced to close their doors? All 
of us--the Congress, agency owners and employees and HCFA--must 
work together on this critical issue. We all have the same 
objectives--to keep Medicare solvent, to weed out fraud and 
abuse in the system, and more importantly, to carry out 
Medicare's mandate to ensure that our most vulnerable citizens 
have access to the health care they need.
    Madam Chairman, I welcome this hearing, and I look forward 
to the information that will be provided today by the 
distinguished panelists, and I hope we can come to some kind of 
consensus here about the answers that are needed in the best 
interest of America's senior citizens. Thank you.
    [The prepared statement of Senator Cleland follows:]

                 PREPARED STATEMENT OF SENATOR CLELAND
    I want to thank the Chair and state how important this hearing is. 
All of us have read front page stories about the toll the Balanced 
Budget Act is taking on patients across the country. The headlines say 
it all: ``Medicare Cutbacks Prove Painful,'' ``Nursing Homes Shun Some 
Medicare Patients,'' ``Patients Face a Limit on Benefits for Therapy.'' 
Let me say that the Balanced Budget Act of 1997 has produced some 
positive results--we have a balanced budget, and Medicare's fiscal 
health has been extended by many years. But the BBA has brought with it 
unintended consequences--and these consequences have a decidedly human 
face.
    It is the face of the Nation's most vulnerable elderly citizens and 
their caregivers. It is the face of the 73-year-old cancer patient who 
relies on a feeding tube and I.V.'s--and who cannot find a nursing home 
that will accept her because her medical needs are too costly. It is 
the face of the 67-year-old woman who lost her leg to diabetes 
complications--who received an artificial limb, but was stopped short 
of her goal of walking with only one cane because she hit her $1,500 a 
year physical therapy limit.
    It is the face of the children and parents of patients who must 
make the difficult choice of whether to care for their loved ones at 
home or seek care in a nursing home. It is the face of some of you in 
this room today--the nurses and other dedicated employees of home 
health care agencies who have devoted your lives to caring for the 
sick. Many of you are unsung heroes, who serve in some of the most 
rural areas of the country, who manage the sickest, most frail 
patients, with no means of payment other than Medicare.
    Last July the Small Business Committee, on which I serve, held a 
hearing on home health care and whether it can survive the new BBA 
regulations. At that time, I stated that the government should make 
every effort to allow Medicare recipients to live in their own homes 
for as long as possible. However, despite good intentions, those of us 
in government can sometimes become part of the problem we seek to 
correct.
    The Interim Payment System is such an example. Congress enacted the 
IPS to encourage providers to cut costs by becoming more efficient--a 
laudable goal. In practice, however, we are seeing efficient agencies 
being driven out of business, while some less well managed agencies 
have been able to survive. Last summer we heard that 800 small- and 
medium-sized home care agencies had been forced out of business by BBA 
regulations. That number has now jumped to more than 2,000 agencies. 
How many patients are being denied service--how many patients are being 
forced into nursing homes--because 2,000 of America's home health 
agencies have been forced to close their doors?
    All of us--the Congress, agency owners and employees, and HCFA--
must work together on this critically important issue. We all have the 
same objectives: To keep Medicare solvent, to weed out fraud and abuse 
from the system, and most importantly, to carry our Medicare's mandate 
to ensure that our most vulnerable citizens have access to the health 
care they need. I welcome this hearing. I look forward to the 
information that will be shared today, and hope that we will get 
answers that are in the best interests of America's senior citizens.

    Senator Collins. Thank you very much, Senator Cleland.
    I am now pleased to yield to the Senator from New Mexico, 
Senator Domenici.

             OPENING STATEMENT OF SENATOR DOMENICI

    Senator Domenici. Thank you very much, Madam Chairman, for 
conducting this hearing. I wish I could stay longer, but I will 
just be able to be here for half an hour or so.
    I heard your opening remarks, and I would like to say that 
I think you have covered almost every issue that I would have 
covered, and I commend you for raising those and laying them on 
the table. Some of those issues must be resolved. Some involve 
overregulation by HCFA. I hope this hearing will send a signal 
to them that where changes can be made, they ought to do so.
    It is patent and obvious in my State, where I have a task 
force on health issues, that home health care, in an effort to 
save money, has become entangled in a web of new rules and 
regulations that for some who have spoken with me, it is almost 
impossible to deliver the kind of care that they want to 
deliver. In addition, costs are not coming down. As you place 
all those burdens on, the costs of keeping businesses going, 
whether they are nonprofits or profit-making, are going up, and 
payments are coming down.
    Obviously, in a State like mine and perhaps yours, Madam 
Chairperson, we have a lot of rural areas, and rural areas have 
a very difficult problem not only because there are so few 
patients and such big distances, but also payment was presumed 
to be an average of the high costs and the low costs, and 
essentially, most of the rural ones are high-cost and long-term 
need patients, so the rural home health care facilities, if 
they are isolated and have just rural areas, cannot make it 
because what we figured as a cost is just out of kilter with 
the reality of the abundance of high-cost patients.
    Obviously, we are going to have to resolve some of these 
things, and I look forward to working with you on that. Some, I 
think can be solved with this Subcommittee and others just 
telling HCFA in no uncertain terms that overregulation is not 
necessarily synonymous with better care or with lower cost. 
Quite to the contrary--in this industry, it is proving to be 
very, very much the opposite.
    Madam Chairman, I would ask that you put my remarks, which 
go into more detail, in the record.
    Senator Collins. We would be happy to. Without objection, 
they will be entered in full in the record.
    Senator Domenici. Thank you very much.
    [The prepared opening statement of Senator Domenici 
follows:]

             PREPARED OPENING STATEMENT OF SENATOR DOMENICI
    It is a pleasure to be here this afternoon and I want to start by 
commending the Chairwoman, Senator Collins for holding a hearing on 
this very important issue.
    I too have been working on the problems facing home health for some 
time now. I would also note that when I attended a recent meeting of my 
New Mexico Health Care Task Force, the concerns raised by home health 
care providers were identical to those being raised today.
    While the Balanced Budget Act of 1997 (BBA) has produced a number 
of positive results, I am concerned about the impact of the Interim 
Payment System (IPS) on seniors living in rural areas.
    More to the point, I am unsure whether the IPS adequately takes 
into account the unique needs of our rural areas. I would submit the 
premise of the IPS was sound: Home health agencies would have a blend 
of short term and long term patients whose costs would average out to 
the per beneficiary limit.
    However, home health agencies in rural areas often do not have a 
choice because these areas tend to have low volume and mostly high cost 
patients.
    For instance in New Medico, Catron County is almost 7,000 square 
miles in size, but has a population of less than 3,000 people. There is 
not even a home health agency in Catron County and for people living in 
Datil the nearest agency is 164 miles away in Silver City.
    Let's say this agency must see a patient in Glenwood, Datil, and 
Salt Lake that is a round trip of almost 400 miles that the IPS does 
not take into account. Moreover, with roughly less than one-half of a 
person per square mile, I would submit that a home health agency will 
have a hard time because they will have very few patients and no 
control over their condition.
    I think a recent GAO report reinforces this point: ``Low-volume 
agencies may have less ability to stay below their caps: A few high-
cost patients can affect them more because they have a smaller pool of 
beneficiaries over which to average their costs.''
    Again thank you, Madame Chairwoman, for holding this hearing and I 
look forward to participating.

    Senator Collins. I would now like to yield to the Ranking 
Minority Member of the Subcommittee, Senator Levin.

               OPENING STATEMENT OF SENATOR LEVIN

    Senator Levin. Thank you, Madam Chairman, for convening 
these hearings and for your continued leadership in a very 
critical area. Our constituents, American citizens, are very 
much looking to us for leadership in helping to make sure that 
they are provided with an essential service, and that is what 
home health care is.
    You again are playing a critical role in making sure that 
that happens, and I want to commend you for that.
    Today we are looking at how the home health care industry 
is surviving the so-called ``reforms'' of the Balanced Budget 
Act (BBA) of 1997. Having received some 1,500 letters in 1998 
from both providers and beneficiaries concerning problems the 
home health care industry is facing, I think the answer to that 
question is: ``Not well.''
    Not only is the Interim Payment System harming home health 
agencies in Michigan and other cost-efficient areas, but 
additional regulatory hurdles have been put in the way of 
agencies, making it difficult for these agencies to continue 
providing quality care.
    Home health agencies provide a critical service for our 
Medicare beneficiaries. According to the General Accounting 
Office, there are over 1.3 million Medicare beneficiaries in my 
State of Michigan alone. Well over 100,000 of those 
beneficiaries use the services of Michigan's 220 home health 
agencies. These beneficiaries receive much-needed services 
within the comfort and security of their own homes. It is 
common knowledge that most people prefer recuperating from an 
illness in their own home rather than in a nursing home and 
that the overall cost savings of home health care compared to 
nursing home care are dramatic.
    I think that probably each of us has had instances in our 
own families where this need, this very human need, to have 
care at home if possible has been proven. I know I have had 
such instances in my own family.
    In February 1998, I sat down with representatives from the 
home health agencies in Michigan to discuss the interim payment 
system, and the health care leaders, including one whom we have 
with us today, Linda Stock, voiced serious concerns about the 
interim payment system which penalizes cost-efficient home 
health providers while rewarding the higher-cost agencies.
    Let me just give you one example. In Michigan, the 1998 
average cost of receiving home health care services per patient 
was about $3,300, while the national average was about $4,000. 
Ms. Stock's agency, Home Health Outreach in Rochester Hills, 
Michigan, is operating under a per-beneficiary limit of about 
$2,500. This is more than $1,000 below the national average, 
and her agency is essentially being penalized for having been 
cost-efficient for the Medicare program in 1994.
    So we have that plus many other areas that we want to 
explore here today, including some of the new regulations which 
have been imposed by HCFA which are extremely burdensome.
    The Outcome and Assessment Information Set, OASIS, 
sequential billing, overpayment recoupment, and the 15-minute 
increment home health reporting requirement are simply too 
burdensome. I know that some of these regulations have been 
disbanded or suspended, but they have not all been, and in the 
process of preparing for the implementation of the ones that I 
have just described, a huge amount of time and effort has been 
wasted.
    So in our battle to protect Medicare from waste, fraud and 
abuse, we have to ensure that the great benefits of home health 
care are not lost. Yes, we need to have reasonable controls in 
place to avoid abuses, but at the same time, we have to make 
sure these critical services remain available to those who need 
them.
    I hope today's hearing will help to bring HCFA and the 
industry together to work on a payment system and on 
regulations that make sense for the people of the United 
States, for whom home health care is so important. Thank you.
    [The prepared statement of Senator Levin follows:]

                  PREPARED STATEMENT OF SENATOR LEVIN
    Today we are looking at how the home health industry is surviving 
the so-called ``reforms'' of the Balanced Budget Act (BBA) of 1997. 
Having received some 1,500 letters in 1998 from both providers and 
beneficiaries concerning problems the home health care industry is 
facing, I think the answer to that question is, ``not well.''
    Not only is the Interim Payment System (IPS) harming home health 
agencies in Michigan and other cost efficient regions, but additional 
regulatory hurdles have been put in the way of the agencies, making it 
difficult for these agencies to continue providing quality care.
    Home health agencies provide a critical service for our Medicare 
beneficiaries. According to the GAO, there are over 1.3 million 
Medicare beneficiaries in my State of Michigan. Well over 100,000 of 
those beneficiaries use the services of Michigan's 223 home health 
agencies. These beneficiaries receive much needed services within the 
comfort and security of their own homes. It is common knowledge that 
people prefer recuperating from an illness in their own home rather 
than in a nursing home and that the overall cost savings of home health 
care compared to nursing home care are dramatic.
    Some changes certainly needed to be made in the home health 
industry. From 1989 to 1996 Medicare home health payments grew at an 
average rate of 33 percent, while the number of home health agencies 
swelled from about 5,700 in 1989 to more than 10,000 in 1997. During 
this time, home health care was also one of Medicare's fastest growing 
benefits. Medicare spent $3.7 billion to pay for home health visits in 
1990 compared to $17.8 billion in 1997 according to the GAO. In 
response to this rapid cost growth and some concerns about alleged 
abuses, the Balanced Budget Act included a number of changes in home 
health payment policies.
    One significant change we made in that Act was requiring HCFA to 
move to a different payment mechanism, a prospective payment system 
(PPS), which under the Balanced Budget Act was supposed to have been in 
place by October 1, 1999. In the meantime, the Balanced Budget Act 
provided for a temporary payment mechanism, or interim payment system, 
which has turned out to be quite problematic.
    In February of 1998 I sat down with representatives from the home 
health industry in Michigan to discuss the interim payment system. 
These health care leaders voiced serious concerns about the interim 
payment system, which, they said, penalizes cost-efficient home health 
providers while rewarding higher-cost agencies. Michigan providers, on 
average, have lower per-patient costs than their counterparts in other 
regions. By paying home health agencies at rates calculated from 1994 
cost reports, the interim payment system penalizes those agencies that 
attempted to keep their costs down in 1994. The formula is regional as 
well as agency specific which penalizes those regions, like the 
Northeast and the Midwest, who were historically more efficient with 
their Medicare dollars in 1994.
    Let me give you an example. In Michigan the 1998 average cost of 
receiving home health care services per patient was $3,285 while the 
national average was $3,987. Linda Stock's agency, Home Health Outreach 
in Rochester Hills, Michigan, is operating under a per beneficiary 
limit of $2,531. This is more than $1,000 below the national average. 
Ms. Stock's agency is essentially being penalized for having been cost 
efficient for the Medicare program in 1994.
    With unfair reimbursement gaps such as that experienced by Ms. 
Stock's agency, no wonder the Medicare home health benefit has already 
experienced significant cost savings well beyond the amount 
anticipated. The original projected savings in 1998 to Medicare as a 
result of the changes in home health care was $16 billion over 5 years. 
Yet in March of this year, CBO baseline figures for home health 
projected a five-year savings of $48 billion. That's $32 billion in 
unexpected savings. While GAO says its review doesn't show that persons 
who deserve home health care services aren't getting them because of 
the Balanced Budget Act changes, that $32 billion is pretty good 
evidence that that may be the case. It is very possible that such 
savings are coming from people like Ms. Stock, at the expense of both 
Medicare beneficiaries and providers.
    On top of the severe reduction in payments, I am concerned that 
some of the new regulations being imposed by HCFA are too burdensome. 
Michigan agencies have been critical of the Outcome and Assessment 
Information Set (OASIS), sequential billing, overpayment recoupment, 
and a 15-minute increment home health reporting requirement. Some of 
these regulations have been disbanded or suspended, but in the process 
of preparing for their impolementaiton, time and effort has been 
wasted.
    In our battle to protect Medicare from waste, fraud and abuse, we 
have to ensure that the great benefits of home health care aren't lost. 
Yes, we need to place reasonable controls to avoid abuses, but at the 
same time, we have to make sure that these important services remain 
available to those who need them. I hope today's hearing can help bring 
HCFA and the industry together to work on a payment system and 
regulations that make sense for the people of the United States for 
whom home health care is so important.

    Senator Collins. Thank you very much, Senator Levin.
    Due to time constraints, the Subcommittee was unable to 
invite everyone who wanted to testify at this hearing. As you 
can imagine, we were beseeched with many requests. We will, 
therefore, leave the hearing record open for 30 days for anyone 
who wishes to submit a written statement. In that regard, we 
have already received a written statement from the Home Health 
Services and Staffing Association, and without objection, that 
statement will be included in the printed hearing record.\1\
---------------------------------------------------------------------------
    \1\ The prepared statement of the Home Health Services and Staffing 
Association appears in the Appendix as Exhibit No. 4 on page 174.
---------------------------------------------------------------------------
    I am now pleased to welcome our first panel of witnesses 
this afternoon. I am particularly pleased to welcome a 
constituent of mine, Maryanna Arsenault, who is the CEO of the 
Visiting Nurse Service in Saco, Maine, and who is also 
testifying today on behalf of the Visiting Nurse Associations 
of America.
    We are also pleased to have Mary Suther, who is both 
chairman of the board of the National Association of Home Care 
as well as president and CEO of the Visiting Nurse Association 
of Dallas, Texas.
    Also with us is Linda Stock, Senator Levin's constituent, 
who is executive director of Home Health Outreach of Rochester 
Hills, Michigan.
    Finally, we would like to express our appreciation to 
Barbara Markham Smith who is here with us today. Ms. Smith is a 
senior research staff scientist with the Center for Health 
Services Research and Policy at George Washington University, 
which is part of the School of Public Health at George 
Washington University Medical Center.
    I want to acknowledge that the Subcommittee is aware that 
Ms. Smith's testimony today is based on the findings of a study 
that she is conducting that has not yet been completed, so her 
findings are preliminary. It is not her usual practice to 
discuss her findings at this stage of her research, so I want 
to acknowledge that fact and express our appreciation to Ms. 
Smith's agreeing to share her very important preliminary 
finding with the Subcommittee today. It is my understanding 
that this will be the first public discussion of Ms. Smith's 
results.
    Pursuant to Rule 6 of the Subcommittee, all witnesses who 
testify are required to be sworn in, so at this time, I will 
ask that you all rise and raise your right hand.
    Do you swear that the testimony you are about to give to 
the Subcommittee will be the truth, the whole truth, and 
nothing but the truth, so help you, God?
    Ms. Arsenault. I do.
    Ms. Suther. I do.
    Ms. Stock. I do.
    Ms. Smith. I do.
    Senator Collins. Thank you.
    I am going to ask that each of you try to limit your oral 
testimony to about 5 minutes each. If you need to go a little 
beyond that, feel free to do so, but we want to make sure we 
have plenty of time for questions. We will be using a timing 
system this afternoon, so be aware that approximately 1 minute 
before the red light comes on, you will see the lights change 
from green to orange, and that will give you the opportunity to 
conclude your testimony.
    Your written testimony, however, will be included in the 
printed record in its entirety.
    Ms. Arsenault, we are going to start with you.

 TESTIMONY OF MARYANNA ARSENAULT,\1\ CHIEF EXECUTIVE OFFICER, 
VISITING NURSE SERVICE, SACO, MAINE, REPRESENTING THE VISITING 
                  NURSE ASSOCIATION OF AMERICA

    Ms. Arsenault. Thank you, Madam Chairwoman and Members of 
the Subcommittee. My name is Maryanna Arsenault, and I am chief 
executive officer of the Visiting Nurse Service which is 
located in Saco, Maine. The Visiting Nurse Service is an 
independent, Medicare-certified home health agency serving 
southern Maine and seacoast New Hampshire.
---------------------------------------------------------------------------
    \1\ The prepared statement of Ms. Arsenault appears in the Appendix 
on page 46.
---------------------------------------------------------------------------
    I am pleased to be here today to present the views of the 
Visiting Nurse Associations of America (VNAA), regarding the 
difficulties that VNAA members, including the VNS, are 
currently experiencing in meeting the health care needs of 
patients within the current Federal regulatory environment.
    We are grateful to you, Madam Chairwoman and Subcommittee 
Members, for your interest in determining how the Medicare home 
health Interim Payment System, IPS, and several new regulatory 
requirements are making it difficult for the VNS and other VNAs 
to meet our patients' health care needs.
    We believe that this hearing is being held at a critical 
time, because evidence of harmful effects on Medicare 
beneficiaries is beginning to emerge, particularly involving 
those with chronic health and disability conditions.
    VNAA believes that it is essential to look at the combined 
effect of IPS and regulatory requirements such as OASIS on 
providers and their patients. IPS alone has forced VNAs to cut 
costs by an average 20 percent to stay under the IPS per-
beneficiary and per-visit cost limits. On top of these cuts, 
new regulations have increased home health providers' costs 
significantly.
    For example, OASIS implementation has cost our agency more 
than $300,000. The combined effect of IPS cost limits and OASIS 
implementation has caused the VNS to exceed its per-visit cost 
limit for the first time ever.
    While the VNS had consistently maintained per-visit costs 
25 percent less than our per-visit cost limits, we are now over 
the limits by 3 percent in the aggregate. Our skilled nursing 
per-visit cost increased from $79 in 1998 to $91 in 1999 
because (1) IPS decreased the per-visit cost limit by 16.5 
percent; (2) OASIS increased our nursing per-visit cost by $7; 
(3) the IPS decreased our average per patient reimbursement by 
$600 in 1 year, causing utilization to drop and costs per visit 
to increase; and (4) because other time-consuming and costly 
regulations, including fraud and abuse initiatives, have added 
to overall costs.
    How has patient care been affected by the budget cuts at 
VNS? During this past year, the decreased number of staff has 
meant a decrease in staff continuity for patients because staff 
must now cover a greater geographic area. Elderly patients have 
had to adjust to new staff more frequently, which has 
jeopardized the establishment of a trusting relationship.
    Our monthly patient satisfaction surveys show a decreased 
level of patient satisfaction. This problem will be exacerbated 
in July when we close a branch office. In addition, four 
surrounding agencies have closed, affecting access and 
requiring further expansion and dilution of our services and 
discretionary moneys to meet community needs--once again 
increasing staff travel time and costs.
    In order to manage the per-beneficiary cost limit, our 
average number of visits per VNS patient has decreased from 56 
to 45 in 1 year. This reduction has been compounded by two 
significant recent changes in Medicare coverage which have 
severely curtailed access for patients with medically complex 
conditions.
    First, the criteria for whether Medicare will cover a 
skilled nurse's management and evaluation of a patient's plan 
of care are now being more stringently interpreted by the 
fiscal intermediaries. Medicare must approve a skilled nurse's 
coordination of extended interdisciplinary care in order for 
individuals with a multiplicity of functional needs to receive 
such care. Such coverage has increasingly been denied.
    Second, the Balanced Budget Act reduced the ``part-time or 
intermittent skilled nursing care'' eligibility criteria from 
56 to 35 hours per week, which has curtailed our ability to 
meet the needs of this patient population.
    The following two case examples provide a closer look at 
the access to care issue:
    Doris is an 85-year-old woman who lives alone in rural 
Maine with no indoor plumbing and no telephone. Her two living 
family members live outside the State. Doris is unable to 
manage her medications independently. However, her need for 
medication management no longer qualifies her for coordinated 
services by a registered nurse. The weekly service of an RN to 
assess Doris and assist with medication management had 
previously enabled Doris to live at home free of hospital 
admissions.
    Marjorie is also 85 and has received VNS services since 
1996. She has brittle chronic obstructive pulmonary disease, an 
anxiety disorder, and cardiac arrhythmia requiring regular 
venipuncture for coumadin management. Marjorie is homebound. We 
are planning to discharge her because she no longer qualifies 
for skilled RN services. Marjorie has also avoided 
hospitalization for several years. She does not qualify for 
Medicaid services and will lose her home health aide. Marjorie 
will be at high risk for continuous hospital admissions.
    As the costs to VNS increased due to IPS and new regulatory 
changes and interpretations, we were forced to curtail non-
Medicare services to patients. Discretionary moneys previously 
used to meet patient needs not covered by Medicare are now 
being used to subsidize Medicare.
    The VNS closed a much-needed personal care service that had 
been subsidized by discretionary funds. Family members of 100 
patients receiving care were forced to provide personal care to 
elderly patients and very sick children, which in turn affected 
their work schedules and job security.
    On July 1, home health agencies will have to comply with 
another costly and burdensome regulation mandated by the BBA--
the 15-minute increment recording requirement. The changes to 
billing forms and software will be costly, and the information 
collected may not be useful in terms of correlating clinical 
time with patient assessment and outcome information.
    VNAA believes that it is important to have standardized 
accountability of processes, but we feel that this information 
would only be meaningful if it captures total patient care time 
in relation to patient results. HCFA's proposed 15-minute 
requirement will not provide this information because it is 
encumbered by a stop-watch recording method and does not 
account for a clinician's activities outside the home that are 
directly related to patient care, and it ignores any travel 
time.
    It is my understanding that this provision will be 
implemented because OASIS has been suspended and may be used as 
a method to assess reimbursement. The home health industry 
cannot withstand one more change where the information may or 
may not be needed.
    Senator Collins. If you could conclude your statement in 
the next few minutes, that would be great. Thank you.
    Ms. Arsenault. Very quickly--I will not read the rest of my 
statement--we need relief regarding the cost limits, both the 
per-beneficiary and the per-visit. The 15-minute increment is 
going to be a terrible burden for home health agencies.
    That is about it. I thank you very much.
    Senator Collins. Thank you very much. Ms. Suther.

 TESTIMONY OF MARY SUTHER,\1\ CHAIRMAN OF THE BOARD, NATIONAL 
  ASSOCIATION OF HOME CARE, WASHINGTON, DC, AND PRESIDENT AND 
     CEO, VISITING NURSE ASSOCIATION OF TEXAS, DALLAS TEXAS

    Ms. Suther. Thank you very much for this opportunity to 
appear before you today to testify.
---------------------------------------------------------------------------
    \1\ The prepared statement of Ms. Suther with attachments appears 
in the Appendix on page 52.
---------------------------------------------------------------------------
    My name is Mary Suther. I am president and CEO of the 
Visiting Nurse Association of Texas, which is a 65-year-old 
charitable organization serving people in rural and urban 
areas. We serve about 50 counties, and that changes daily 
because we have had to close offices. In the past year, we 
eliminated one branch that served eight counties that we can no 
longer serve. I am also chairman of the board of the National 
Association for Home Care.
    We are deeply appreciative of the attention the Members of 
this Subcommittee have shown to the problems created by the 
home health provisions of the Balanced Budget Act and the 
regulatory burdens imposed by HCFA.
    The CBO originally reported that the effect of the BBA 
would be to reduce home health care expenditures by $16.1 
billion over 5 years. Revised projections indicate that 
reductions will exceed $47 billion. I am sure you remember that 
one reason Congress directed that the reductions had to be so 
great was because a two-thirds behavioral adjustment was made 
to the projection, and therefore required greater cuts than 
would normally be necessary.
    We look back now, and we think we were right to begin with, 
because the expenditure is along the lines had there been no 
behavioral adjustments. I am confident that Congress will 
restore home care for their constituents.
    The financial viability of home health agencies is now 
being threatened by the cost of legislative and regulatory 
changes, as you have heard. The access to beneficiaries is 
being greatly reduced. These changes include the line-item 
billings, increased medical review, itemized bills to patients 
on demand, billing in 15-minute increments, sequential billing, 
OASIS.
    You may have heard that sequential billing has been 
suspended. It is and it is not. You can still send the bills 
in, but they will not be paid until the claim in question has 
cleared medical review. Also, for the 15-minute increment, you 
may hear that that has been suspended, too, but only 
temporarily.
    These items have all increased costs due to increased staff 
requirements; computer programming; printing; upgrading 
computer hardware capacity; increased postage and shipping; 
increase in data line costs; and coupled with that, all of the 
Y2K compliance that we have to do in home care. HCFA got extra 
budget for their Y2K compliance, but we have had no additional 
add-ons for our Y2K compliance, and we do have to comply with 
Y2K. For my own agency, it cost $1.5 million for that 
compliance.
    Increased cost is only one aspect. Nurses have to complete 
on the average an additional 45 pages of paperwork per patient. 
I have copies of admission folders here if any of you would 
like to look at those. OASIS questions number more than the 
questions asked of a quadruple bypass patient being served by a 
hospital.
    Patients are angry that we are asking them these questions, 
especially some of the very personal information, and often, 
they are too sick to go through this entire questionnaire and 
assessment process. That is not to say that I do not believe, 
nor does our association, that we should be gathering unified 
data and certainly, data elements upon which we do base costs 
or should base costs in the future.
    An even more devastating effect of the increased 
administrative burden--and this is a recent finding--is that 
nurses are leaving nursing, but nurses are leaving home health 
at a greater rate because they say they did not go into nursing 
to be clerks or secretaries but to provide nursing care to 
patients.
    We are now experiencing nursing shortages. The weekend 
before last, our agency, which is the largest home health 
agency in the area, had to close admissions because we did not 
have staff. Baylor Health Care is the second-largest serving 
our area, and they had to close admissions.
    I spoke with someone at Johns Hopkins, and she said that 
several hospital home health agencies in the Baltimore area 
also had to close admissions because of lack of staff in that 
area. This is not in my written testimony, because I just found 
this out.
    Sequential billing has caused severe cash flow problems and 
duplicative handling of claims. Billing in 15-minute increments 
not only increases costs, but beneficiaries are going to be 
extremely angry if a nurse comes in, and after she has been 
there for 8 minutes, pulls her stopwatch out and starts turning 
it off and on if the patient gets a phone call during that time 
period--off; if the patient goes to the bathroom during that 
time period--off. Patients are going to be extremely angry with 
us because we will not be able to adequately explain to them--
think about trying to explain this to your grandmother. These 
changes coupled with IPS, which produced for most home health 
agencies a 14 to 22 percent decrease in the per-visit 
reimbursement--and in my own agency, that was 27 percent--at a 
time when costs are increasing--you heard the previous witness 
talk about the increase, and the costs in our agency have 
increased proportionately to those in hers--the low aggregate 
beneficiary limit with no provision for increased limits for 
medically complex, high-cost patients, and also the elimination 
of venipuncture as a qualifying benefit. In one county that our 
agency services, of all the patients discharged as a result of 
the elimination of this benefit, one-third were admitted 
directly into a nursing home on the day of discharge.
    Venipuncture patients were included in the base year for 
cost analysis; however, it changes the cost analysis when you 
take those patients out of the base year cost materials, which 
I do not think anyone has thought of. There are threatening 
letters going to physicians which cause them to decrease or 
eliminate referrals for patients. In our area, several doctors 
have sent a blanket letter to all home health agencies and to 
their patients, saying we will no longer admit you to a home 
health agency because it may subject us to criminal charges, 
and therefore, we cannot take that liability on.
    Alarming letters go to patients about their Medicare bills 
regarding fraud and abuse. In many areas, the Health Care 
Financing Administration's regional determinations regarding 
strict, archaic rules for branch offices, which increase costs 
and cause offices to close. In our area, we have had to 
eliminate one office already that served eight counties because 
of this rule, and we are threatened with having to close 
another one that serves 15 counties because of this. They do 
not understand that we have telephones and fax machines and 
computers to assist in running those offices.
    I would like to give you an example of some access 
problems--and I will submit this testimony for the record, 
because I did not have this information earlier. I found out 
that in Texas prior to BBA, there were 15 counties with no home 
health agency. Now, as of April 1, we have 40 counties with no 
home health agency in Texas. Two of those counties have areas 
greater than 4,500 square miles, and each of those is bordered 
by another county that has no home health agency. So, access is 
being severely affected in Texas.
    My time is up, so I will just conclude by saying that in 
many instances, the Balanced Budget Act has certainly 
lengthened the life of Medicare, but sometimes, the cure is 
worse than the disease. The effects of the BBA have produced 
many unintentional consequences. We are relying on your 
interest in this problem to help repair that damage. Thank you.
    Senator Collins. Thank you very much. Ms. Stock.

TESTIMONY OF ROSALIND L. STOCK,\1\ VICE PRESIDENT, HOME HEALTH 
   SERVICES, HOME HEALTH OUTREACH, ROCHESTER HILLS, MICHIGAN

    Ms. Stock. Chairman Collins, Senator Levin and Senator 
Edwards and the staff, thank you for this opportunity to 
discuss the effects of the 11 mandates of BBA on home health 
patients and their providers since October 1, 1997.
---------------------------------------------------------------------------
    \1\ The prepared statement of Ms. Stock appears in the Appendix on 
page 88.
---------------------------------------------------------------------------
    I am Linda Stock, vice president of Home Health Services 
and a director of the Michigan Home Health Association, and I 
speak for the majority of providers who want to be part of the 
solution and not part of the problem.
    Each mandate is unfunded if the provider is at, or above, 
their per beneficiary cost limits. Home health is the only 
Medicare benefit for which patients pay all the costs at the 
site of care. So any recurrent calls for copayments are 
unconscionable.
    As a home care provider for over 18 years, I am saddened to 
see peers close their doors or eliminate Center of Excellence 
programs for wounds, strokes, and diabetes in response to the 
severe cutbacks.
    Home Health Outreach is a system-affiliated home care 
agency, serving urban and rural areas. In 1998, we admitted 934 
Medicare patients. Because our per beneficiary limit is so low, 
we depleted our expenses and cut anything that was deemed 
nonessential to short-term survival. Staffing expenses were 
reduced by 19 percent.
    Our Y2K budget was cut to two PCs and their software, one 
fully dedicated to OASIS. Y2K has made that a very short-term 
decision.
    Just one of our home care patients with complex wound care 
costs us over $25,000 a year. Balancing these costs and patient 
service is next to impossible. I have personally seen the 
anxiety of an elderly patient being taught how to give their 
own intravenous care.
    Access to care is becoming a greater issue for Michigan. 
Over 10 percent of our agencies have closed, and others are 
limiting their admission criteria. We have case managers who 
will confirm that they are prolonging discharges from hospitals 
because they cannot find care for complex cases.
    Please eliminate the 15 percent additional reduction due in 
October of this year and mandate a rational PPS by October 1, 
2000.
    Hastily enacted surety bonds, sequential billing and OASIS 
mandates created serious operational and financial problems and 
then were suspended. What a waste of time and resources for the 
Federal Government and for providers.
    In April, HCFA implemented OASIS, and the 79 OASIS 
admission questions added 17 pages to our assessment. Separate 
data is also required on readmission, change of patient 
condition, recertification, transfer, discharge, and death.
    Protection of clients' right to confidentiality and 
participation in their care decisions has not been adequately 
addressed by OASIS. The benefits should not be denied if the 
patient refuses to answer the questions. Non-Medicare patients 
show greater resistance to the personal aspects of the 
questions. HCFA should not have the authority to mandate data 
collection for services they do not pay for.
    Here are some examples of OASIS-related situations. A 
patient with severe lung disease develops such shortness of 
breath during the OASIS assessment that the interview had to be 
suspended so the nurse could intervene.
    A confused elderly man was also unable to answer for 
himself, and his caregiver, a neighbor, knew nothing about him, 
so the assessment is meaningless.
    An elderly female patient hospitalized twice in the first 2 
weeks of OASIS was being subjected to her third OASIS 
interview. Weak and tired, she voiced her frustration by saying 
she would not go back in the hospital if she had to answer 
those questions again.
    During the nurse's first contact with the patient, asking, 
``Are you having thoughts of suicide?'' is a totally 
unacceptable entry into the psychological assessment of a 
patient. Will it be perceived as a suggestion? Will it trigger 
anger or rejection of service?
    Providers do not oppose collection of outcome measurements. 
We oppose inefficient data collection which jeopardizes patient 
rights and implements a system without adequate provider input 
or funding.
    For OASIS, HCFA prepared three manuals of instructions 
coming to 512 pages--just for OASIS. Our agency's projected 
OASIS cost for the first year is $126,000. In the last week 
before OASIS was suspended, our HCFA OASIS software froze, and 
all the data to date was lost.
    We recommend delaying the OASIS implementation until 
patient rights, funding, and data volume and frequency issues 
are addressed, and we also ask that OASIS not apply to non-
Medicare patients. The new 15-minute increment reporting 
mandate on home health care claims becomes effective in just 20 
days. Providers anticipated a simpler formula, and we knew we 
had to report visit time, but now our staff will need 
stopwatches to delete the items that HCFA arbitrarily 
determined do not constitute allowable time, such as charting 
and dishwashing by an aide.
    Now, the HIM 11 says both of these items are allowable in 
the content of a visit, but they are being eliminated. Even 
OASIS is being eliminated.
    Agencies will need to run concurrent time studies, one for 
payroll and one for the new mandate. They must revise their 
software and establish a new tracking system.
    Was it Congress' intent that the 15-minute increment be 
labor-intensive and micromanaged? I do not think so.
    Because of Y2K complications, we recommend delayed 
implementation of the 15-minute reporting until a simpler, less 
costly formula can be designed.
    In conclusion, I believe that mandates have already 
impacted patients by diverting limited resources away from 
direct care. Congress did not mandate this minutiae. There is 
provider support for practical, effective regulations for each 
of these mandates. My hope is that together we can replace 
reactive fixes for current problems with a more efficiently 
designed home care benefit.
    My thanks to those who helped me prepare for today's 
session and to this Subcommittee for addressing this critical 
issue.
    Senator Collins. Thank you very much. Ms. Smith.

   TESTIMONY OF BARBARA MARKHAM SMITH,\1\ SENIOR RESEARCHER, 
  CENTER FOR HEALTH SERVICES RESEARCH AND POLICY, THE GEORGE 
             WASHINGTON UNIVERSITY, WASHINGTON, DC

    Ms. Smith. Good afternoon, Madam Chairman, and Senators. 
Thank you for inviting me here today to testify on a matter 
that affects not only Medicare beneficiaries who may need home 
health services now and in the future but indeed affects the 
coherence and viability of the Medicare program itself.
---------------------------------------------------------------------------
    \1\ The prepared statement of Ms. Smith with attachments appears in 
the Appendix on page 132.
---------------------------------------------------------------------------
    My testimony, based on the preliminary findings of our 
study, will suggest today that as a result of the Balanced 
Budget Act of 1997, home health agencies in general are driven 
to change the case mix of their patients and alter the patterns 
of practice of the care they deliver to conform to 
reimbursement constraints. These constraints appear to be 
creating substantial tension with meeting the clinical needs of 
some patients. As a result, many seriously ill patients, 
especially diabetics, appear to have been displaced from 
Medicare home care. Other patients are experiencing significant 
changes in services, with effects on health status that are 
unknown, but suggest greater risk as a result of greater 
fragmentation of services.
    I am going to flip through my testimony in order to 
expedite it, but I think it is important to recognize that even 
though we are in the midst of this study now, I would say that 
the biggest methodological problem that we have is that it is 
still too early to fully assess all of the impact, so that 
these findings should be regarded as signals of greater effects 
yet to come.
    I want to put the findings in some context. We do have 
outcome studies that have been funded by HCFA recently, very 
large, that I would regard as flagship studies, on the effects 
of home care on patient health status. Basically, these studies 
show that patients with more home health care have better 
outcomes both in terms of improved functioning and reduced 
hospitalizations. These studies specifically warn that an 
attempt to force patients into a short-term care model could 
have very adverse consequences on the health status of 
beneficiaries.
    In addition, the studies show that the regional variation 
in home health utilization correlates to the health status of 
beneficiaries in home health care in those regions. For 
example, the mortality rates among beneficiaries in high-
utilization regions are 34 percent higher 30 days after 
discharge from home care than patients in low-utilization 
regions.
    This is not a reflection of the quality of care, because it 
happens 30 days after discharge; it is a reflection of the 
fragility of the patient's health status in the system.
    With those outcomes studies in mind, I would like to go 
straight to my specific findings. First, just to backtrack, 
what that means is that it is very important not to confuse low 
cost with efficiency. An agency can be low-cost and be 
inefficient because it has a very healthy patient mix, or it 
can be high-cost and be very efficient because it is taking 
care of critically ill patients. So I think it is important to 
bear that in mind throughout an analysis of this problem.
    The key preliminary findings of our studies suggest 
significant potential effects on beneficiaries, particularly 
those with unstable chronic illness or who have even short-term 
intensive needs. It appears that these patients are being 
displaced from home care or are experiencing significant 
changes in services. These changes appear to be driven by 
reimbursement policies and intermediary scrutiny, rather than 
clinical considerations. And let me just state the findings for 
you one by one.
    Home health agencies in general are moving fairly 
aggressively to adjust their case mixes and/or their practice 
patterns to conform utilization to reimbursement. While 
intermediary practices have also clearly had an effect on both 
utilization and case mix, reimbursement changes appear to be 
the dominant driver of practice in case mix changes.
    A number of agencies have achieved virtual reversals in 
their short stay/long stay ratios through changes in their 
patient mix. Other agencies with very sick patient mixes have 
significantly reduced visits and clinical staffing levels even 
as they dramatically increase their patient census, raising 
serious quality concerns.
    These significant reductions in care in agencies with very 
adverse patient mixes are driven almost exclusively by 
reimbursement considerations and are most notable among 
agencies operating under national median limits in 
traditionally high-cost areas.
    Both the interim payment system and fiscal intermediary 
policies have created a stratification of beneficiary 
desirability among providers. Orthopedic rehabilitation 
patients, particularly joint replacements, coronary artery 
bypass graft, also known as CABG patients, nondiabetic post-
operative wound care, pneumonia-type infectious disease 
patients have become the ``Brahmins'' of desirable patients and 
are the focus of competition among agencies.
    Diabetics, particularly brittle diabetics, appear to have 
experienced the most displacement from home care. The extent to 
which complex diabetics are even being admitted to home care 
has declined significantly among the study agencies. Among 
diabetics already in care, agencies report very aggressive 
efforts to discharge them.
    The extent of the decline in the home care diabetic census 
among the study agencies, as well as the reductions in care, 
raise concerns about the long-term health status and outcomes 
of this population.
    Similar patterns of aggressively seeking discharge or 
avoidance of congestive heart failure patients and chronic 
obstructive pulmonary disease also appear, although to a lesser 
extent.
    Patients who require two visits daily or even one visit 
daily, even for very short periods of time, seem to be 
experiencing significant displacement from home care. This was 
a surprising finding, and it has affected short-term I.V. 
therapy patients in particular, who need care for only 3 to 6 
weeks and whose care is unquestionably post-hospitalization and 
very acute. A number of agencies report overt screening to 
exclude or time-limit these patients specifically.
    Mental health services are also experiencing some exclusion 
and decline in services, either because they do not want to 
keep the patients in long enough to--I see my time has expired; 
I have a few more findings and some implications. Should I go 
ahead and proceed?
    Senator Collins. If you could summarize those quickly, that 
would be great.
    Ms. Smith. OK. Foley catheter patients do not appear to be 
experiencing displacement because while they are very long-
term, they are also low-intensity. Home care's perception of 
their mission has changed dramatically from preventing 
hospitalization and preventing acute exacerbation to 
discharging people as quickly as possible.
    Agencies appear to be applying eligibility standards in a 
manner to exclude patients rather than to include them, bending 
over backwards to exclude them from Medicare rather than 
bending over backwards to qualify them for Medicare. And a lot 
more patients are paying 100 percent out of pocket for services 
they previously received in Medicare as a result.
    The findings are listed in my testimony, and I am going to 
quickly flip to some myths and implications. One of the myths 
that I think is important to dispel is that these patients 
cannot go right into Medicaid and receive Medicaid services. 
The functional and financial qualification standards are very 
stringent, and even dually-eligible beneficiaries frequently do 
not qualify for these programs.
    For the home and community-based waiver programs, they do 
not often provide skilled services, and their limited services 
are provided on a queued basis, so that patients do not make a 
straight walk from Medicare home care into Medicaid services.
    The implications of this are profound, looking at the big 
picture. Among the study agencies, the number of Medicare 
beneficiaries in home care has declined 20 percent since 1997, 
but the number of Medicare beneficiaries since 1994 has 
expanded by 2 million beneficiaries. Those numbers alone should 
tell us that something is seriously wrong here.
    My main concern is that we are carving out a wedge of 
people who are chronically ill and have intensive service needs 
services who are not going to have a reliable source of care in 
any sector. They are becoming the health care system's 
untouchables.
    The other important consideration is that it should be 
clearly understood that many of the sickest patients may 
already be out of the system, and therefore, any PPS system 
which is based on the utilization data from 1998, I think, 
would be seriously flawed because I believe that that 
utilization data will not adequately express the needs of the 
population.
    I'll stop there and take questions. I appreciate your time 
and consideration.
    Senator Collins. Thank you very much, Ms. Smith.
    We now will start a 10-minute round of questions, but I 
want to start by thanking you all very much for your very 
insightful and illuminating testimony.
    As I mentioned in my opening statement, my primary concern 
is to evaluate what impact the changes in the payment system 
and in the regulatory system are having on our most vulnerable 
senior citizens. In that regard, your testimony is very 
interesting because it seems to contrast greatly with the 
testimony that we are going to hear later this afternoon from 
HCFA.
    I want to read you three statements from the written 
testimony that is going to be presented by HCFA later today.
    The first statement is: ``We are diligently monitoring the 
impact of these changes and thus far do not have evidence that 
access to care has been compromised.''
    The second statement is: ``Again, we have not seen 
objective evidence that closures have affected access.''
    And the third statement is: ``We to date do not have 
objective evidence that beneficiary access to care has been 
compromised.''
    In other words, three times in the testimony, HCFA 
officials are maintaining that our seniors are not experiencing 
any problems getting access to home care. That does not seem to 
be what I am hearing from any of you, nor is it what I am 
hearing from my home health agencies throughout the State of 
Maine.
    So to set the record straight on that issue, since you are 
out there on the front lines, I would like to hear your 
reaction to the three statements that I have just read, and I 
will start with Ms. Arsenault.
    Ms. Arsenault. From where my agency sits providing care, we 
are basically one of the only organizations providing care in a 
very large geographic area, and I would have to say that we do 
admit patients if we find them to be eligible, but 
interpretations have become much more stringent. So today, we 
are admitting fewer patients because we are willing to take the 
risk. We have already been under 50 percent review by Medicare. 
So whereas a year ago, we would have said yes, let us admit 
this patient; we believe we can fight and win, today we know 
that we cannot win, so we are indeed seeing patients with 
access problems.
    Senator Collins. So you would disagree with HCFA officials, 
and you believe that care and access have already been 
compromised. Would it be fair to say that you believe it will 
become worse if, for example, the 15 percent payment cut goes 
into effect?
    Ms. Arsenault. If the 15 percent payment cut goes into 
effect, it will definitely get worse.
    Senator Collins. Ms. Suther.
    Ms. Suther. In the area that I serve, access has been 
impaired in several ways. Many agencies in our area, rural and 
urban, have closed. It is not the agencies that have caused the 
access as much as other things. Base year, we provided over 
450,000 visits for Medicare clients. This year, we will provide 
under 200,000 visits at a time when other agencies are closing.
    The difference is that the patients we serve are getting 
and receiving care. We are not turning anyone away. Our agency 
has used donations to offset our losses and has subsidized the 
Medicare program, and even though Dallas and its surrounding 
counties are a very generous community, they said enough is 
enough, that they cannot continue to do this.
    So I do not know what we are going to do after this year. 
We are having to cut back on specialty care. For instance, we 
had seven enterostomal therapists who take care of very severe 
wound care patients, and it has been our experience that a 
wound care specialist can treat a patient for a shorter period 
of time, get out of the home, and the patient will have the 
same results as having a generalist treat the patient for a 
longer period of time. But we cannot do that under IPS because 
the per-visit limit is exceeded. We are over the per-visit 
limit, but we are $3 million under the per-beneficiary limit, 
but we cannot use our judgment in using a specialist--we have 
to use generalists in order to get reimbursed. So patients are 
not getting the best care.
    There are many agencies in our area that are asking us to 
see their long-term patients, and we are admitting them because 
we had a very low utilization rate before, and the way the 
formula is, we got a little piece of the State rate which had a 
high beneficiary limit, so therefore we can admit some of their 
patients.
    But this is all going to go away, and in fact, our board of 
trustees met yesterday, and if there is a 15 percent cut, we 
will probably go out of business--and we have been doing this 
for 65 years.
    Senator Collins. I think you have raised a very important 
point, because I am hearing from home health care agencies in 
my State, as well, that are turning to private fundraising to 
subsidize Medicare. Prior to that, the fundraising efforts were 
used to provide non-Medicare service to elderly people, but now 
we have a situation where private fundraising is being used to 
make up the deficit because of the problems with the regulatory 
rates and with the cost of regulation. So I think that is a 
good point.
    Ms. Suther. One more remark. I don't know the specifics of 
this case, but I believe there was a case in North Carolina in 
which HCFA even said they would pay for the care, but they 
could not find an agency that would provide it. And I cannot 
give the specifics, but I will get the specifics for you, 
because the patient was such a high utilizer.
    Senator Collins. Ms. Stock.
    Ms. Stock. I see the access issue in three areas that I 
know of in our State, and I think we are just at the tip of the 
iceberg, Senator, because the majority of the State is on the 
December 31 year-end for their cost reporting period and are 
just finishing their cost reports now, and when they see their 
bottom lines, they will be closing their doors in much, much 
higher numbers than we saw before.
    But I see access being affected in three ways. There are 
patients who are not being admitted to care. We are seeing 
that, and we can validate that with case managers at hospitals. 
There are also patients who are being discharged earlier and 
end up rehospitalized, end up in the emergency room, end up 
going to a nursing home.
    The third thing we are seeing is underutilization. We are 
skimping on the visits so much that patients are having to 
subsidize that with their own funds or private community 
resources to pay for services that they are entitled to by the 
Medicare benefit.
    Senator Collins. Ms. Smith?
    Ms. Smith. I think the evidence that contradicts that first 
and foremost is the fact that we have seen a negative growth 
rate of 15 percent in the claims in this industry. You really 
do not need to know anything else to know that you probably 
have an access problem when you see negative growth of 15 
percent in 1 year. It is unprecedented in recent health care 
history.
    The other evidence of course would come from the fact that 
agencies are overtly screening patients and admit to very early 
discharge of patients whom they would previously keep, 
describing this as discharging them at the first signs of 
stabilization, often precipitating readmissions to hospitals, 
readmissions to emergency rooms, and also applying these 
eligibility standards quite strictly.
    I think also the number of people who need skilled care and 
are being discharged into basically nonskilled environments 
would also tell you that there is a significant access problem.
    Senator Collins. Ms. Smith, I want to follow up on that 
point, because in your written testimony you mentioned that 
diabetics, particularly brittle diabetics, appear to be 
experiencing considerable displacement from home care.
    Ms. Smith. Right.
    Senator Collins. What do you think is happening to those 
patients? One of the issues here is that home care is a much 
more cost-effective way to care for people than hospitalization 
or nursing home care.
    Do you think that a lot of these people are going to get 
sicker because of the lack of home care and will end up having 
to be admitted into hospitals or nursing homes, ironically, 
costing the Medicare system far more than if we had cared for 
them adequately through the home care system?
    Ms. Smith. The short answer is that we do not know where 
these people are. I said to one person that if I were going to 
put this testimony to music, it would be, ``Where Have All the 
Diabetics Gone?''
    My suspicion is that what we are seeing is much more 
fragmentation of care, that they are basically bouncing between 
different types of health care providers and experiencing more 
periods of deterioration between getting care from those 
different types of health care providers.
    Senator Collins. Is there any tracking of patients who have 
been discharged from the system?
    Ms. Smith. I am not aware of any tracking, and I know that 
the GAO study specifically did not track specific patients.
    Senator Collins. My concern, for example, is the two 85-
year-old women who have been receiving services in Maine. What 
is going to happen to them? It seems to me that they are at 
risk of getting sicker, of being hospitalized. It is just of 
tremendous concern to me.
    I want to ask one final question on this round about the 
OASIS issue. Ms. Arsenault, I am going to direct this to you. 
In HCFA's prepared testimony, they state that once providers 
learn to use OASIS, it actually ``slightly reduces the total 
time it takes to conduct and document a thorough patient 
assessment.'' In your testimony, however, you state that OASIS 
has actually increased your agency's per-visit nursing cost by, 
I believe, an additional $7. Is that correct?
    Ms. Arsenault. That is correct.
    Senator Collins. That seems inconsistent with HCFA's 
statement that OASIS actually saves time--and maybe I will 
quickly go across the three home health agency representatives 
that we have here. Time is obviously money. You have actually 
quantified it in your agency. Do you disagree with HCFA's 
assessment?
    Ms. Arsenault. I disagree with the fact that it will take 
us less time to do an assessment with--and I can never remember 
if it is 92 or 102 extra data elements. But we already have an 
assessment, and we added data elements to that assessment. Some 
of them were the same questions, but most of them were not. No, 
I do not agree with that at all.
    As an example, for our organization, on the first visit, 
which is the visit when we admit a patient, we have always done 
an assessment and we begin our teaching. When patients began to 
fall asleep, we had to divide that and do the assessment on 
visit one and the teaching on visit two.
    Senator Collins. Very quickly, because my time has 
expired--Ms. Suther, do you agree with HCFA that once you get 
used to the system, it is going to actually save you money?
    Ms. Suther. I do not know what they mean by getting used to 
it. We were a test agency, and we were involved in the research 
on this, and we have been completing it for a long time, and 
time required has never decreased beyond about 10 minutes.
    Senator Collins. Ms. Stock.
    Ms. Stock. The only other thing I would like to add is that 
since you have to do it so many times in the intervention with 
the patient, it adds enormous volume. You cannot add 79 
questions and not take more time.
    Senator Collins. Thank you very much. Senator Levin.
    Senator Levin. Thank you, Madam Chairman.
    Ms. Stock, you said in response to the question about 
access being reduced, that you can demonstrate through 
experience that patients are not getting the benefits that they 
are entitled to under the Medicare system, that you can 
actually demonstrate that to HCFA. Are you saying that Medicare 
is refusing to pay for benefits that are rightfully covered by 
Medicare, or are you saying that even though Medicare will pay, 
nobody is willing to provide the service--or both?
    Ms. Stock. The latter, Senator. I think what we are saying 
is that we are more than willing to do what we have 
commissioned ourselves over the years to do. We cannot afford 
to do it for the money that we are being paid. We cannot offer 
the services. We cannot admit a patient unless we have adequate 
resources to provide that care, so that is deterring us from 
accepting or continuing needed care that is covered by 
Medicare.
    Senator Levin. Each of you, in response to the Chairman's 
question, indicated that access is indeed being impaired by the 
recent Balanced Budget Amendment changes, and the regulatory 
changes. The General Accounting Office and HCFA have said that 
the opposite has occurred. The headline of the GAO report is: 
``Closures Continue with Little Evidence Beneficiary Access is 
Impaired.''
    Some of their findings are, for instance, that ``The 
decline in visits per user between 1996 and 1998 is consistent 
with IPS incentives and does not necessarily imply a 
beneficiary access problem.'' And then, a few lines later, they 
say that ``Certain patterns are consistent with the IPS 
incentives to constrain the costs of care for each beneficiary 
but not necessarily the number of users.''
    There seems to be a real gap between your experience in the 
real world and what HCFA interprets is going on or what the GAO 
is interpreting is going on, because I have no doubt that you 
know what is going on. These studies are fine, and they are 
useful, but they have certain limits, and one of the limits is 
that if folks who are out there delivering services have a real 
world experience that is as yours has been, and where we have 
people who are entitled to benefits and need benefits and we 
want to have benefits for human reasons as well as for 
financial reasons so we can save the costs of having them in 
the hospital or in a nursing home, that we are not somehow or 
other connecting your experience with HCFA's, or with the GAO 
for that matter.
    What is your experience in dealing with HCFA? Why is there 
this apparent gap between what they see and transmit to us and 
what you know and transmit to us?
    Ms. Arsenault, maybe we could start with you.
    Ms. Arsenault. It is my understanding that the particular 
study that you are referring to was done early on when IPS was 
first implemented. I think a lot of what we are telling you 
today is the experience that we have out in the field in our 
home States, and I think it is too early to truly quantity in a 
study format what the two effects are going to be.
    Senator Levin. It is more than ``are going to be''; it is 
``already have been.'' That is my point.
    Ms. Arsenault. You cannot study only the first 3 months of 
IPS and project for the future or even know truly what is going 
on right now.
    We have a lot of experience with studies coming out that 
either used false methodology or concentrated in areas--for 
example, the fraud and abuse study, I think it was the GAO. 
They concentrated their assessment in a number of States that 
were known to have fraudulent providers and then extrapolated 
that to the entire Nation.
    Senator Levin. Ms. Suther.
    Ms. Suther. I think she is on the right track. I think it 
is that we are talking in real time, and the study was done 
right at the beginning of IPS. It was January 1, 1998, before 
you even knew what your cost caps were going to be, even though 
it was implemented October 1, 1997.
    Second, providers did not know what their per-beneficiary 
caps were. HCFA was not even directed that they had to do it 
before April 1. Many people were already into that year. And 
then, many agencies did not get their per-beneficiary limits 
for over a year after they were on IPS, so they did not know 
where they stood during that time period, and they are just now 
finding out where they stand, and they are just now beginning 
to turn patients way. I think there is a definite access 
problem, and all you have to do is be in the churches and the 
clubs and the community to see exactly what that access problem 
is. People who really need it are not being served.
    Senator Levin. And if you invited HCFA to come out and sit 
with you for a day and talk to people who are providing 
services, would their response be positive? Would they come out 
and sit with you and join you in the real world or not?
    Ms. Suther. I do not know, but I would love for them to 
come. We have a State senator who has been out doing visits 
because he is very concerned about this, and he looked at 
patients who were high-utilization patients to see what would 
happen to them over time, he has been following these patients 
over time, and we have been documenting for him the amount of 
care we are giving beyond what normally we could afford if we 
were not being subsidized by the community.
    Senator Levin. Thank you. Ms. Stock.
    Ms. Stock. Senator, your question regarding HCFA's 
willingness to work with the industry is really tantamount to 
the heart of the issue. They have waived the requirements for 
comment periods on some of these mandates. They have also 
underestimated the costs, especially of OASIS, and also, the 
Paperwork Reduction Act issues.
    They have had some meetings with us, Senator, but I do not 
think it is a two-way communication, and we have been working 
on PPS either through the work group or our State and national 
associations since 1993, always willing to give our input--you 
know how talkative we are--but it is not always a two-way 
conversation. We would be glad to fix the problems. We think 
there are some solutions.
    Senator Levin. For instance, Ms. Suther gave us the 
statistic that one-third of the people, as I wrote it down, 
after they are discharged from home health care are going to 
nursing homes within a matter of days, I think you said.
    Ms. Suther. This was a specific instance with venipuncture 
alone, and this is in one county in which we discharged the 
patients who no longer qualified for service because 
venipuncture was the sole qualifying service, and we discharged 
those patients specifically directly into nursing homes. That 
is not the case in every county, and that is not the case with 
all discharges from home care.
    Senator Levin. In that specific case, we surely lost a lot 
of money, I assume.
    Ms. Suther. Right.
    Senator Levin. Ms. Stock, let me ask you a question about 
the regional disparities that exist here. In your prepared 
testimony, and I think in your oral testimony as well, you 
indicated that your agency's per-beneficiary limit was $2,531 
for 1998, which is more than $1,000 below the national average 
of $3,987. The agency limits are based on 1994 cost reports, so 
I have two parts to my question.
    How did you keep costs low in 1994, because that now is 
causing you a big loss; and how much have your actual costs 
increased since 1994? Basically, are you being punished for 
being efficient in 1994, and if so, how did you do it in 1994, 
and what has gone on since then?
    Ms. Stock. Am I taking it personally? Yes. Because we have 
been involved in the PPS project since 1993, we have been 
planning for managed care, planning for PPS, and trying to 
limit our cost. It was intentional to be below the cost limits 
all along. We did not max our caps as some of the people in the 
industry went to seminars about, and I think very few providers 
try to do that.
    Actually, what we try to do is use good resources. We are 
business people, and we are trying to provide good care. What 
has happened since that reduction is that our resources are 
limited, and we now have less than we had in 1994. We are 
treating more highly technical patients than we did in 1994. We 
are seeing more early discharges from the hospitals, and those 
patients are intense and complex. The diabetics are an issue 
for us, wound care is an issue for us. So a lot of creative and 
really dedicated people have tried to cut what we really need.
    Senator Levin. But those who limited costs in effect really 
worked at it back in 1994 compared to those who did not, as you 
put it, maximize their caps in 1994. The ones who were careful 
to limit their costs are now in effect being punished for that. 
Is that accurate?
    Ms. Stock. That is correct, and eventually, we will be out 
of business. If we do not have relief, we will not survive to 
the year 2000.
    Senator Levin. And does HCFA understand, then, the negative 
incentive that that created, in effect, the reward for 
inefficiency or lack of constraints back in 1994? Is that 
something you have raised with HCFA, and if so, what is their 
response?
    Ms. Stock. I believe the issue has been raised. I do not 
know the conscience of HCFA about their response to that, but I 
would say that they think that because we are going to PPS, 
this is a temporary solution, but some of us will not make it 
to PPS.
    Senator Levin. I am reminded that that is a statutory 
matter, but if they agreed with you, HCFA could of course, make 
a recommendation to us for a statutory change.
    Ms. Stock. For which we would have been grateful.
    Senator Levin. My time is up. Thank you.
    Senator Collins. Thank you, Senator Levin.
    Senator Edwards, welcome. We are glad to have you with us.

              OPENING STATEMENT OF SENATOR EDWARDS

    Senator Edwards. Thank you, Madam Chairman. I am glad to be 
here.
    Ms. Stock, if I could just follow up on that last question, 
and then I have some general questions I want to ask. If I 
understand this correctly--and I have talked with a lot of 
folks about it--the bottom line is if you were efficient in 
1994, you are punished for that now--this is what Senator Levin 
just asked about. If you were inefficient, you are rewarded for 
it. Isn't that the bottom line?
    Ms. Stock. That is, as long as you make the distinction, 
Senator, that many agencies that had high costs per patient 
were treating a very complex population or were in rural areas 
where their expenses were higher. But yes, there were people 
who got more money.
    Senator Edwards. And that is the point Ms. Smith was making 
when she said low cost does not indicate efficiency. It depends 
on your patient.
    Ms. Stock. Right. Efficiency is efficiency. It may be high 
or low cost.
    Senator Edwards. I have three concerns, and I will address 
questions to a number of you. One is my concern about 
unnecessary and inefficient bureaucracy, and I have this OASIS 
questionnaire in front of me right now which I want to ask you 
some questions about.
    The second is loss of service--people who do not have 
access to home health care and so desperately need it, 
particularly diabetic patients, as Ms. Smith keeps making 
reference to.
    The third thing--and Senator Collins made reference to 
this--is when we are trying to be efficient in the spending of 
our Medicare dollars, which I think all of us are concerned 
about whether we are doing that or not, and particularly 
whether we are doing it when often prevention is in the long 
term the lowest-cost thing we can do, and home health care is 
the most efficient means of prevention.
    I presume most of you would agree with that; is that true?
    [Panel members nodding.]
    Senator Edwards. OK. Let me start with this OASIS form and 
ask a simple question first--and maybe this is too simple, but 
I feel like I need to establish it.
    Ms. Suther, I will start with you. Do you all need to fill 
out this big, long form in order to treat the patient?
    Ms. Suther. That is just part of it. That is the OASIS 
part. But there are other questions----
    Senator Edwards. Oh, there is more to it than this?
    Ms. Suther. There are other questions and information that 
must be collected in addition to that, plus information that 
you must share on advance directives and all sorts of other 
things with patients.
    No, you do not need all the information. Yes, we do need a 
data set that collects information that is relative to cost and 
can predict cost, but we do not need all of that information. 
That questionnaire had to be integrated into your regular 
assessment methodology, and that is what I was referring to 
when I said 45 additional pages, because 17 were on admission, 
and then there was readmission, and when I looked at the length 
of time in the program for the average patient, the average 
number of times that one had to complete that set, that is 
where I came up with the 45. And in our agency, that equates to 
over $1 per visit. The larger the agency, the less it costs per 
visit to do it because of the start-up costs in the first year.
    Senator Edwards. I understand.
    Ms. Stock, did I understand you to say that big notebook 
that you have in front of you is all of the manual, or is there 
more to it than that?
    Ms. Stock. Our agency has three manuals, 512 pages, and 
this is just the instructions. But HCFA did allow us $170 per 
patient to in-service our staff on it, so reading it would not 
cover $170.
    Senator Edwards. I presume all three of you would agree 
that all this information that you are gathering for purposes 
of OASIS is not all medically necessary for the treatment of 
your patients; is that true?
    Ms. Stock. That is correct.
    Senator Edwards. Now let me ask you a different question. 
Looking through this form, I see some things--for example, 
there is a question about life expectancy. Is life expectancy 
generally considered a medical diagnosis, and is that something 
that nurses are normally trained to offer medical opinions 
about? Any of you can answer that.
    Ms. Arsenault. That would be a question if someone had a 
terminal illness, and we were looking at them for hospice 
benefits, but not for normal treatment.
    Senator Edwards. How about you, Ms. Suther?
    Ms Suther. I do not have any nurses who are actuaries, nor 
do any of them pretend to be. [Laughter.]
    Senator Edwards. That is what I thought. Ms. Stock.
    Ms. Stock. We are often accused of practicing medicine 
without a license when we make recommendations to physicians, 
but that is not one I would make.
    Senator Edwards. In reading through some of these questions 
and forms and knowing less than you do, but knowing the real 
world and some of the concerns that I have had expressed to me 
by people in North Carolina--what do you do when patients 
either cannot or will not answer these questions? And I guess I 
will ask you a very practical question, do you find that 
sometimes your caregiver is put in the position of trying to 
figure out the answer themselves, even though they cannot get 
the patient to respond directly?
    Ms. Arsenault. No. We would document that the patient 
refused to answer the question.
    Senator Edwards. Do you know whether that occurs, Ms. 
Arsenault, what I just described?
    Ms. Arsenault. It does occur. I could not give you any data 
on that, though.
    Senator Edwards. Ms. Suther, how about you?
    Ms. Suther. I think it probably does occur. Our staff has 
been instructed that if patients refuse to answer the 
information, they must document that, and that if they do not 
document that and attempt to fill in the blanks, they will be 
fired on the spot, and we will turn them in to the Board of 
Nursing.
    Senator Edwards. Ms. Stock.
    Ms. Stock. I think the instructions say that you can answer 
some questions by observation, but I would hesitate to have my 
staff do that if they can get direct information from the 
patient.
    Senator Edwards. I am told that when HCFA did their study 
and demonstration on the answers to these questions on the 
OASIS form, they had folks out in the field with a laptop 
computer in place, answering the questions. Would I be correct 
in presuming that you all are not able to send out laptop 
computers with all of your health care providers when they go 
out to see their patients?
    Ms. Stock.
    Ms. Stock. I cannot afford that.
    Senator Edwards. How about you, Ms. Arsenault?
    Ms. Arsenault. We cannot afford to implement laptop 
computers.
    Senator Edwards. Ms. Suther.
    Ms. Suther. We do not have laptop computers. However, I had 
not heard that HCFA was doing that. I know some agencies do 
have laptop computers and do complete the forms that way, but I 
had not heard that HCFA had done that.
    Senator Edwards. I do not know whether it is accurate or 
not; it is just some information that I had.
    Let me go to another question, and Ms. Smith, this is an 
issue which is of tremendous concern to me, and I wish I could 
find the quote. You said that the home health care industry's 
perception of its mission has changed so that it is now 
discharging people as quickly as possible.
    Ms. Smith. Right.
    Senator Edwards. That is of tremendous concern to me, 
particularly if they are discharging folks who need ongoing 
home health care. I wish you would elaborate on that.
    Ms. Smith. Part of the study that we conducted--in addition 
to the survey, we do about an hour and a half telephone 
interview with the agencies--and they indicated that they no 
longer consider it part of their mission to provide preventive 
care or try to keep the patient out of the hospital; that their 
job is now an immediate, short-term perspective which is to 
stabilize for the condition at hand for which they were 
admitted at that moment, and then to get out.
    So I would describe the mission as one of getting patients 
out of home care as quickly as possible, as opposed to keeping 
them out of other sources of care.
    Senator Edwards. Ms. Stock, is that healthy?
    Ms. Stock. It is not healthy, but one more thing that 
impacts on that which we did not address in our testimony is 
that each patient is only counted once a year in aggregate, and 
if they are admitted 25 times a year, you still have to provide 
service.
    So to your issue, we close them if we can as precipitously 
as we can that is safe, so the next time they come that year, 
we have some resources to use for them on the aggregate. HCFA 
will say that that is not true for each patient, but you do 
have to take that into consideration when you are admitting a 
patient--if they are chronically unstable, they will be with 
you many times.
    Ms. Smith. If I could just respond to that.
    Senator Edwards. Absolutely.
    Ms. Smith. A couple of agencies have indicated that one of 
the things that they are doing in marketing for their referrals 
is to try to figure out a way to avoid readmission of patients 
to home care because they regard readmission as a marker, 
obviously, for more complex patients. So they are trying to 
direct their marketing to referring providers in a way that 
avoids their getting patients back.
    Senator Edwards. Let me ask this question--and I presume I 
know the answer to this question. It sounds like all of you 
believe that there are people who do not have access to home 
health care now who need it. is that a fair statement?
    [Panel members nodding.]
    Senator Edwards. And I also presume that if this 15 percent 
cut goes into effect in the fall, that would be dramatically 
increased; is that a fair statement?
    Ms. Smith. I think so, unquestionably.
    Senator Edwards. Ms. Stock.
    Ms. Stock. No question.
    Senator Edwards. And Ms. Suther?
    Ms. Suther. No question.
    Senator Edwards. Ms. Arsenault, do you agree with that 
also?
    Ms. Arsenault. I do.
    Senator Edwards. And finally, if I can ask a general 
question for each one of you to comment on, if I could get you 
to talk from your perspective about knowing that one of our 
responsibilities is to be efficient with taxpayer money and 
making sure that these Medicare dollars are being spent in the 
best way they can be, from your perspective, the way the system 
operates now and particularly if folks are not getting the kind 
of home health care that they need, how that impacts the long-
term Medicare/health care costs associated with that patient--
i.e., how can we most efficiently spend our Medicare health 
dollars?
    Ms. Smith, I want to start with you.
    Ms. Smith. I think the risk of creating greatly exacerbated 
costs in other sectors, particularly hospitals and skilled 
nursing facilities, is substantial. I would also point out that 
the Federal Government pays a very large share of Medicaid 
costs as well. So I think the attempted--and I think largely 
unsuccessful--cost-shift to Medicaid will have a similar 
effect.
    The other point I would like to make is that one of 
Medicare's missions is to assure a reliable source of care to 
sick people. If we are not doing that, then it seems to me we 
have failed in our essential mission.
    Senator Edwards. Thank you. Ms. Stock.
    Ms. Stock. I think I would limit it to two suggestions--
first, to try to direct HCFA to limit the scope of their 
regulations for your mandates to your intent; and second, to 
include providers in the development and implementation phases 
of those requirements to preclude some of the problems that we 
have seen, and then they got suspended, and we all paid the 
money.
    Senator Edwards. Those are very good suggestions. Ms. 
Suther.
    Ms. Suther. I have 35 years' experience in home care, and I 
feel like I know a little about this. I think there is a short-
term solution, and that is to make some corrections in the IPS. 
And then I think there is a long-term solution, and that is to 
make certain that PPS is properly done. Thus far, the providers 
have not had an opportunity to look at the provisions for 
implementing PPS to assure that appropriate information for 
making the decisions as to what the cost therefore 
reimbursement should be for the future.
    Senator Edwards. Thank you. Ms. Arsenault.
    Ms. Arsenault. I would say that it is foolish to skimp on 
home care. It is very foolish to eliminate seeing an 85-year-
old woman one time a week to manage her medications. That 
individual's health will deteriorate, and we have talked a lot 
about inpatient care, but none of us talked about how many 
times that 85-year-old woman will see someone in an emergency 
room--probably more frequently than the inpatient admissions. 
And we all know that emergency room care is very, very 
expensive.
    The accelerated rate that regulations are coming forward 
from HCFA has placed tremendous burdens on home health 
agencies. We could reduce the number of regulations, and we 
have all talked about them. Regulations come forward, then are 
suspended. This 15-minute increment--we have not even received 
regulations, and we have to implement that on July 1. We are 
working in a crazy world. Home health care can be very cost-
effective and can save the Nation tremendous amounts of money.
    Senator Edwards. I see my time is up. Let me just say that 
you all being willing to come here and tell us these stories is 
critically important so that the country and the Congress can 
hear what basically all of us have been hearing back home when 
we move across our States and talk to folks. What you have said 
today is completely consistent with what I have been hearing 
from people who are on the front line back in North Carolina. 
So I thank you very much for taking the time to be here.
    Thank you, Madam Chairman.
    Senator Collins. Thank you, Senator Edwards.
    I want to thank the panel also for your very valuable 
testimony. Both your written and your oral testimony it seems 
to me have suggested three very important issues for us to 
pursue.
    The first is the issue of the impact on our senior 
citizens, and the evidence you have given us suggests that 
Medicare beneficiaries with chronic conditions--those most in 
need of care--are going to be most hurt by this system, that 
they are already starting to feel the impact, and that is only 
going to get worse unless the administration and Congress step 
in and rectify the situation.
    Second, the current IPS system is clearly unfair to those 
historically low-cost agencies. In Maine, I am particularly 
sensitive to this issue because 85 percent of our home health 
agencies in Maine are below the national medium costs. So we 
have been hit very hard, and as with Ms. Stock's agency, and I 
am sure Ms. Suther's as well, we are penalizing those agencies 
which have been most prudent in their use of Medicare 
resources, so the system is truly perverse when that is the 
result.
    And third, it seems to me that we have a state of 
regulatory chaos at HCFA. Ms. Arsenault in her written 
testimony described a system of ``implement and suspend,'' a 
costly system where regulations are implemented by agencies, 
and the costs are somehow taken care of, only to be suspended 
later when the problems become evident. I think part of the 
reason for that is HCFA's failure to fully consult with the 
industry in developing these regulations.
    Those are three issues that I have taken from your 
testimony today, and I want to thank you very much for sharing 
your direct, front-line experience with us. And Ms. Smith, 
thank you again for sharing the preliminary results of your 
study. We hope that you will share your final findings with us 
as well.
    Ms. Smith. I look forward to that. Thank you, Senator.
    Senator Collins. Thank you very much.
    I would like to call up our second panel of witnesses this 
afternoon. Representing the Health Care Financing 
Administration are Kathleen A. Buto, who is deputy director of 
the Center for Health Plans and Providers, and Mary R. Vienna, 
the director of the Clinical Standards Group.
    I look forward to your testimony and your recommendations 
on how we can solve some of the problems that we have just 
heard described. Before you get too comfortable, I am going to 
ask that you stand, since I do need to swear you in.
    Do you swear that the testimony that you are about to give 
to the Subcommittee will be the truth, the whole truth, and 
nothing but the truth, so help you, God?
    Ms. Buto. I do.
    Ms. Vienna. I do.
    Senator Collins. Thank you.
    As you know, I had asked the previous witnesses to limit 
their testimony to 5 minutes, but I am going to give you 
additional time since a lot of issues have been raised. I would 
ask, Ms. Buto, that you limit your oral testimony to no more 
than 15 minutes--we are giving you three times as much--and we 
will be using the timing system, which I believe you are 
familiar with.
    It is my understanding, Ms. Buto, that you are going to be 
presenting the testimony, and that Ms. Vienna is available for 
questions but will not be presenting a formal statement. Is 
that correct?
    Ms. Buto. That is correct.
    Senator Collins. Please proceed.

 TESTIMONY OF KATHLEEN A. BUTO,\1\ DEPUTY DIRECTOR, CENTER FOR 
       HEALTH PLANS AND PROVIDERS, HEALTH CARE FINANCING 
 ADMINISTRATION, U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES, 
   WASHINGTON, DC, ACCOMPANIED BY MARY R. VIENNA, DIRECTOR, 
 CLINICAL STANDARDS GROUP, HEALTH CARE FINANCING ADMINISTRATION

    Ms. Buto. Thank you. I hope I can complete my oral 
statement in less than 15 minutes so we can get to the 
questions, because I sense that there are a lot of questions 
waiting to be asked.
---------------------------------------------------------------------------
    \1\ The prepared statement of Ms. Buto appears in the Appendix on 
page 148.
---------------------------------------------------------------------------
    Chairperson Collins, Senator Levin, and distinguished 
Subcommittee Members who have asked a number of questions that 
I hope we will get a chance to respond to, thank you for 
inviting us to discuss the impact of home health care payment 
reforms. I am accompanied this afternoon by Mary Vienna, from 
our Office of Clinical Standards and Quality. She is both a 
registered nurse and an expert in the new OASIS home health 
patient assessment system which will help us to improve the 
quality of care and pay for it accurately.
    Home health is an essential benefit for millions of 
beneficiaries. Unfortunately, as you have already pointed out, 
Madam Chairperson, the expenditures have been growing at an 
unsustainable rate, and several studies have documented 
widespread fraud, abuse and waste.
    Between 1990 and 1997 when the Balanced Budget Act was 
enacted, the number of beneficiaries receiving home care 
doubled from 2 to 4 million while expenditures more than 
tripled, from $4.7 billion to $17.8 billion. This is something 
that you have already pointed out.
    The Balanced Budget Act addressed these concerns by closing 
loopholes, raising standards and creating incentives to deliver 
care efficiently. The payment reforms require agencies to 
change past behavior and eliminate unnecessary and uncovered 
services. The incentive to supply virtually unlimited visits is 
gone. This should not mean that care is compromised for any 
patient.
    Home health spending is down for other reasons as well. 
Home health is one of the initial targets in our aggressive and 
highly successful fight against fraud, waste and abuse, and 
these efforts have had an enormous impact. We have focused on 
reducing erroneous Medicare payments and bringing down the 
error rate in this area of home health spending.
    Also, some apparent home health savings are temporary 
effects of slower claims processing. A September 1998 CBO 
report concludes that program integrity efforts, demographic 
changes, lower than expected inflation and other factors, not 
related to the BBA, account for the difference between savings 
projections when the BBA was enacted and the total spending 
since then.
    I understand that in testimony this morning before the 
Senate Finance Committee, the Congressional Budget Office 
projected annual increases of 7\1/2\ percent for home health 
agencies once the new prospective payment system is implemented 
on October 1, 2000. There has been an expected market 
correction in the total number of home health agencies serving 
Medicare, along with an increase in mergers among agencies. 
Most closures were in areas that had the sharpest growth in the 
number of providers and many areas where there were 
questionable billings before the Balanced Budget Act.
    Importantly, monitoring by us and by the General Accounting 
Office has not found that beneficiary access to care has been 
compromised, and I would also say, just to correct an 
impression, that the GAO report actually goes up through the 
beginning of 1999, so it covers most of 1998. It was not just 
the first couple of months of 1998.
    We are continuing to proactively monitor the BBA's impact 
on access. We have instructed our regional offices to gather 
extensive information. We are tracking the Bureau of Labor 
Statistics data on home health employment trends, and the 
Inspector General of the Department of HHS will survey hospital 
discharge planners to determine whether there are problems in 
finding home health placements.
    Last year, Congress raised the limits on costs somewhat in 
an effort to help agencies, and we are on a schedule to 
implement the prospective payment system in October 2000. But 
given the magnitude of the changes, it is understandable that 
concerns remain.
    We are committed to giving providers as much flexibility as 
our authority and responsibility allow. We are giving agencies 
up to a year to repay overpayments resulting from the interim 
payment system, interest-free. We have limited pre-payment 
medical reviews where appropriate, and we are ending a 
sequential billing policy which had raised cash flow concerns 
for some agencies. This is the policy, by the way, that was 
necessitated by the A/B shift in home health spending so that 
we could account for some of the BBA changes in home health.
    At the same time, we are implementing the Outcome and 
Assessment Information Set, now known as OASIS. We are required 
by law to monitor the quality of home care with a 
``standardized, reproducible assessment instrument.'' OASIS 
will help home health agencies determine what patients need. It 
will help improve the quality of care, and it is essential for 
accurate payment under prospective payment. Our entire payment 
system for PPS is really built on the OASIS system.
    We are committed to continuing our efforts to monitor 
access to care and to taking administrative steps to help 
agencies adjust to the BBA reforms and other changes.
    We appreciate this Subcommittee's attention to the issue, 
and we look forward to continuing to work with you to ensure 
that beneficiaries who qualify for Medicare's home care benefit 
receive efficient, high-quality care.
    I will stop there and take questions.
    Senator Collins. Thank you very much for your testimony.
    I want to start by actually commending, believe it or not, 
HCFA on its increased efforts to combat fraud in the Medicare 
program, particularly in the home health care area. As you are 
well aware, this Subcommittee has held several hearings on 
fraud in the Medicare program, and indeed next week, Senator 
Durbin and I are going to be introducing legislation that comes 
from the hearings we held last year on this area.
    I mention this because I think it is very important as we 
talk about this to distinguish between legitimate efforts to 
squeeze fraud, waste and abuse out of the program versus 
regulations and cutbacks that have the result of impeding the 
delivery of necessary services to our elderly by completely 
honest providers. And we know that the vast majority of health 
care providers in this country are honest and ethical and 
committed to serving the needs of their patients.
    In your written testimony, you said that a lot of the 
regulations that you have implemented come from the fraud 
effort, but unfortunately in the attempt, perhaps, to crack 
down on inappropriate payments, I think you have implemented 
regulations that are doing what none of us wants--which is 
making it very difficult for home health care agencies to 
deliver services and driving up their costs in complying with 
regulations at the very time that their reimbursement levels 
are being curtailed.
    One of the ways that could have been avoided is through 
more consultation with the industry. We have heard the example 
of numerous regulations that have been implemented and then 
suspended, creating, as I said, an environment of regulatory 
chaos.
    Why didn't HCFA spend more time consulting with the 
industry on how to do this job more effectively?
    Ms. Buto. Well, it is hard--and I do not want to sound 
defensive about this--but if you think back to the Balanced 
Budget Act, it was really enacted in August 1997. The interim 
payment system actually went into effect in October 1997, even 
though we were not required to issue regulations until January 
for the per-visit limits and then April for the per-beneficiary 
limits. The law actually did some things that we were not 
prepared for, to be quite honest.
    For example, it is very prescriptive about the blend in the 
per-beneficiary cap between the per-agency amounts back to 
1994, and with the regional amount. We did not have regional 
amounts. We had to gather the data and move very quickly in 
that respect.
    I can only say, having been at HCFA for a long time and 
working on most of the major changes in statute over the years, 
that the Balanced Budget Act presented the greatest challenge 
we have ever had to face, and particularly in home health, we 
had a very short turnaround time between August and April to 
get a lot of the rules written. And a lot of it was driven by a 
formula that said you had to come up with the 75 percent 
agency-specific and then 25 percent regional aggregate per 
beneficiary limit. We had to gather the data and synthesize it.
    On things like the home health agency bond issue, again a 
statutory requirement, there was a lot of pressure coming from 
the Operation Restore Trust effort to get a bond requirement 
out there. And I agree with you that it would have been better 
to take more time. We certainly recognize that now. The 
administrator, Nancy-Ann Min DeParle, asked us to suspend that 
rule and meet with the industry to talk about the very issues 
you are suggesting.
    There are some things that we definitely could have done 
better in that regard, but I have to say that the time frames 
for implementation for the IPS were extremely short for the 
complexity involved.
    Senator Collins. My response to that would be that HCFA was 
very involved in all those negotiations during the Balanced 
Budget Act. Many of the provisions that were in there came 
directly from HCFA.
    Ms. Buto. But not the biggest data gathering exercise, 
which is the regional blend. We did not have a data base, and 
we had to create that by pulling in the data. That was 
something that was added as part of the conference discussion 
and was not part of our proposal.
    Senator Collins. It is also HCFA's obligation to come back 
to us in Congress if you think something is not working. I have 
had a lot of conversations with Nancy-Ann Min DeParle about the 
problems with the formula penalizing the historically cost-
efficient agencies, which just seems like such a reverse of 
what it should be doing.
    I have talked with Secretary Shalala about it, I have yet 
to see a concrete plan from the administration on how to solve 
this problem. When might we receive the recommendations from 
you?
    Ms. Buto. Let me first address your concern and then talk 
about how we get from here to there.
    I think the concern comes from the fact that as in so many 
areas of Medicare, and it is also true in managed care, we have 
such variation in the spending patterns and utilization 
patterns around the country. I think the tough thing for 
Congress certainly in devising the formula for an interim 
system was do you take down, if you will, or try to average the 
utilization and the caps across the country, or do you try to 
keep people more or less where they are, with some reductions, 
which is what was happening, realizing that is going to have 
some inequities of its own. And I think that it is always a 
difficult thing when you also know that you are going to try to 
move to something else.
    It is hard to justify those kinds of issues when you have 
very conservative agencies that feel they have been especially 
penalized. But the alternative would have been to either spend 
a lot of money to bring them up to the national average or to 
bring down agencies around the country where the spending was 
higher. We sensed, and it was certainly discussed, there was 
not a willingness to do that. So that was very hard. I do not 
think it is easy to justify, but that is the way the formula 
works.
    What we obviously want to do is move to a formula that will 
reward agencies for the complexities of the individuals they 
actually see, so that they begin to get payment appropriately 
for higher-risk, higher-acuity patients. That is really what we 
need to move to, and again, we were going to do that by October 
2000 for a lot of folks. That is some way away, and we realize 
that.
    Senator Collins. We have heard very strong testimony today 
that those patients that you have just described, those with 
chronic conditions, with complex cases, who are most in need of 
quality home care, are being most affected by the problems in 
the current system. And that recommendation, or that finding, 
rather, is consistent across the board. GAO says that they are 
most at risk. Ms. Smith's findings are that they are most at 
risk. The recent MedPAC report expresses concern that the 
Medicare patients who are sicker and more expensive to care for 
are going to have the most difficulty. Every one of our 
witnesses agrees that that is the case.
    What is HCFA going to do about that? Are you going to 
develop some sort of system for outliers for the expensive 
cases--because we have heard very clearly today, and it is a 
unanimous finding, that if we do not take care of those 
expensive cases and in some way develop a system for 
recognizing them, home health care agencies feel that they have 
no choice but to essentially cherrypick and take the healthier 
patients to care for. And that is contrary to the whole purpose 
of the system.
    Ms. Buto. I totally agree with you. I think the 
difficulty--and this gets to another kind of unpopular topic, 
OASIS--is that we do not have a standardized system right now 
for being able to say that among the home health care 
population, these are the characteristics or the individuals 
whom we can identify and also associate a higher payment for. 
That is exactly what we are doing with the payment system--we 
are going to associate higher payment with individuals who are 
more clinically complex, who are more functionally complex, and 
who require more services.
    I would like to ask Mary to comment on that, because she is 
more of an expert on OASIS, but that is exactly where we are 
trying to go with the payment system.
    Ms. Vienna. I would agree with Ms. Buto. And I wanted to 
say that contrary to some of the other rules that we have 
promulgated around IPS, OASIS was developed with extensive 
consultation with the industry. It took about 5 years to 
develop through a contract with the University of Colorado and 
was developed by clinicians. It was also proposed as a rule, 
and we got extensive public comment on the instrument, and it 
has had, prior to the rule, at least, a broad base of support. 
As a matter of fact, the National Association for Home Care 
distributed it to home care agencies for their voluntary use 
back in 1996 and 1997.
    So it is an instrument that was developed by clinicians, is 
useful in determining what kinds of services patients need and 
what kind of quality of care and outcomes patients are 
experiencing. And serendipitously, it turned out to be very 
useful in predicting the types of services that patients would 
need under a prospective payment system.
    Senator Collins. Ms. Buto, I want to go back to the point 
that you made that you recognize that we do need to somehow 
take care of the outlier case or the complex, chronic case that 
is expensive to treat, so that we do not create these perverse 
incentives. But I think that what you are telling me is that we 
need to wait until the prospective payment system is in place, 
which will not be until October 1 of the year 2000, to take 
care of this.
    We have heard today from agencies that are providing low-
cost quality care, but they are not going to be around by 
October 1, 2000 if we do not remedy the system right now.
    What can we do in the interim to correct this problem?
    Ms. Buto. Senator Collins, I was listening very carefully, 
and in fact, I thought there were some very good comments about 
some of the burden issues, and we will certainly take a look at 
those.
    In terms of outliers, we really do not have a way to 
provide an outlier under the current structure. The statute is 
very specific. I think we do need to look at and continue to 
monitor the access issues.
    Although studies are remote, they are helpful. What we have 
also asked--and I would just suggest to the panelists who were 
here--is that anecdotes help us identify areas where we might 
be able to see if there are things that we can do under current 
authority or not.
    We have invited the National Rural Health Association and 
other providers to actually provide us with specifics so we can 
go out and look at particular cases for agencies that are 
experiencing trouble, and for beneficiaries who are having 
trouble. We are also working through our Center for Beneficiary 
Services, and we have State organizations that counsel Medicare 
patients.
    This has not been a big issue among the State agencies that 
are counseling Medicare patients, i.e., that they are being 
displaced, but we have asked them particularly to be alert to 
this, because we are concerned, and we are hearing of some 
anecdotes and some instances of individuals who are having 
difficulty and need help.
    So we have our antennae out there, and we would appreciate 
any intelligence these groups can give us, but yes, we are 
looking at the outlier issue in relation to the PPS system.
    Senator Collins. You have heard some pretty powerful 
testimony today from people who are on the front lines, who 
have told us, and told you, that there is a problem now and 
that it is only going to get worse. We also have the evidence 
of the MedPAC survey, and we have the preliminary findings of 
the George Washington University study.
    Has that changed your view on whether there is a problem 
here?
    Ms. Buto. I have never discounted that providers are having 
a problem and that some beneficiaries may be having problems. I 
have never ruled that out, and as I said, both through our 
regional offices, through the State counseling organizations 
and our 1-800 Medicare line, we are really trying to find out 
the extent of the problem and what is happening.
    We are also, as you are, looking at legislation and what 
kind of legislative changes we might want to suggest. We do not 
have those to give you today, but those are the kind of things 
that we are certainly looking at.
    Also, I think issues of burden are important. And if there 
are areas where we have some ability to loosen the burden, we 
should. We have taken some steps to do this, For example, the 
sequential billing requirement which led to claims processing 
hold-up, will be removed as of July 1. We have provided for the 
extended repayment plan which is interest-free for 12 months. 
That is unprecedented in Medicare. We want to give these 
agencies some breathing room to deal with the changes.
    So we are looking at changes, but I do not have a set of 
legislative recommendations that we could present to you today.
    Senator Collins. On the overpayment problem, I think it is 
important for the record to show that HCFA helped create that 
problem by being very slow in giving agencies their per-
beneficiary caps.
    Ms. Buto. Yes, we acknowledge that. There is no question, 
and we actually got started just about the time the Balanced 
Budget Act was enacted, and we started to get information about 
what we would have to do to get our systems ready. The 
coincidence of this year and last year with our Y2K renovation 
efforts was really unfortunate. We were trying to renovate and 
certify our systems at a time when we had to change them and 
get the intermediaries to start doing different things, and 
they were torn in several ways. So I agree with you; we wish we 
could have done that more quickly, but they were under 
unbelievable pressure last year.
    Senator Collins. I would like to ask you about some 
specific recommendations that our witnesses have made for 
reforms. All of our witnesses have said that if the 15 percent 
across-the-board cut is allowed to go into effect, the results 
will be devastating for home care agencies and their clients. 
Similarly this morning, at the Finance Committee hearing, Bill 
Scanlon of the General Accounting Office expressed support for 
some sort of adjustment in the planned 15 percent reduction. He 
also raised a very important point, which is that another one 
of these across-the-board approaches only further penalizes the 
low-cost agency once again.
    Since I know you share my concern about not hurting those 
agencies that have been conservative and prudent with their use 
of Medicare dollars, that did not have excessive visits, that 
did not overutilize the benefit, how can we implement a cut of 
this nature? We know it is unfair, we know it is wrong, we know 
it is going to hurt patients. Is the administration prepared to 
support the repeal of that provision?
    Ms. Buto. I cannot speak to that right now. That is part of 
the consideration we are now undergoing about the legislation. 
But if I could, there are two issues I want to bring back to 
your attention.
    One, it is a 15 percent reduction. It would not be, in a 
Gramm-Rudman-Hollings fashion, an across-the-board reduction of 
the type I think you are talking about. What we are talking 
about is that that reduction would be against the base that we 
use to compute the prospective payment rates.
    I do not think that makes it any easier to swallow, quite 
frankly, for agencies that it is not just an across-the-board 
reduction, but it takes money out of the base. I think that 
what everybody is considering whether it is a good idea to 
include a 15 percent reduction as part of the prospective 
payment system.
    Senator Collins. In that regard, CBO testified this morning 
that, ``The one policy for which CBO may have significantly 
underestimated savings is the interim payment system for home 
health agencies.''
    Since we know that the savings are far greater than 
Congress or the administration ever anticipated, why, given the 
problems we have heard about, would we impose a further 15 
percent cut on the system?
    Ms. Buto. I think that this is one of the issues that 
everybody is looking at, including the administration. As you 
are well aware, the CBO and our actuaries estimate savings and 
costs relative to the current law baseline. They do not adjust 
savings or cost estimates, either, from year to year, even 
after changes have been made, and say that we are either 
spending too much vis-a-vis what we thought or that we are 
saving too much vis-a-vis what we thought. They are usually 
making projections 2 or 3 years ahead of time. But it is an 
issue that is clearly important when thinking about this.
    Senator Collins. Another issue that has been raised in the 
written testimony of the VNAA is the recommendation that 
Congress reinstate the periodic interim payment system. There 
have been considerable cash flow problems caused by the 
sequential billing system--which I realize has been suspended, 
but it did a lot of damage in the meantime--and the PIP 
reimbursement, particularly for smaller agencies, has been 
important. Are you giving any consideration to reinstating 
that?
    Ms. Buto. We are looking at that in the context of 
everything else, but in the context of the 2000 budget and the 
prospective payment system, I think some of those issues really 
should be very different because of the way that payment will 
be made on a per-episode basis for the individuals who are 
being served, rather than on a claim-by-claim basis. So some of 
the cash flow problems may be ameliorated, but we obviously 
need to look at the whole package. In fact, I think we need to 
look at the interactions among the various proposals to see 
what makes sense.
    Senator Collins. Another recommendation made by our 
witnesses is to postpone or repeal the implementation of the 
15-minute interval rule. Would you comment on that as well--the 
stopwatch rule.
    Ms. Buto. That is clearly in the Balanced Budget Act, and 
we have been criticized for actually not implementing that 
provision on schedule. It was to go into effect in October 
1998. Again, because of the difficulties around the year 2000 
systems renovation and some proposals that were too complex 
were delayed. The uniform billing committee looks at making 
these kinds of billing changes for all insurers, and we got a 
late start. We could not come up with a proposal that was easy 
enough to do under our current system. So this ended up being 
delayed over its original effective date.
    This is an area where I heard some testimony that I had not 
heard about what is counted and what is not counted, and I 
certainly want to go back and look at that, but we really do 
not feel that we have the discretion to waive implementation of 
the 15-minute increment. We are going ahead with it.
    As people in the audience probably know, it goes into 
effect July 1, but there is basically a 3-month grace period so 
that agencies can fully come up-to-speed and use it, and we are 
giving them the extra time. But we are basically several months 
behind in implementing this provision.
    Senator Collins. There is no doubt that Congress shares in 
the blame for the problems that we have created here. However, 
HCFA has taken the statutory provisions to an extreme in almost 
every single case, whether it is the surety bond or the 
implementation of the 15-minute rule.
    What I am asking from you is to give us a specific set of 
recommendations so that we can work together in a bipartisan, 
cooperative, nonpartisan way to solve what is a very real 
problem for our cost-effective home health agencies, such as 
the ones that we have in Maine and that you apparently have in 
Michigan, as well as in many other States, and to ensure that 
we are not disrupting care for frail, vulnerable, sick, elderly 
people whom all of us care a great deal about.
    We need your help to do that job right. I have been 
disappointed that despite the many conversations I have had 
with administration officials at the highest levels of about 
this that we still do not have a proposal from the 
administration. We can learn from the mistakes that we both 
have made in this area. We can learn from the testimony we have 
heard today. We can learn by listening to the researchers and 
MedPAC and those home health agencies and nurses who are on the 
front lines. But we need your help to solve this problem, and 
we cannot wait until October 1, 2000 to do so.
    Ms. Buto. Well, we would like to work with you, Madam 
Chairman, and as soon as we have some proposals that we can 
discuss with you, we would be glad to do that.
    Senator Collins. Thank you. Senator Levin.
    Senator Levin. Thank you, Madam Chairman.
    I know you have already talked about the origin of the 
problem and the fact that there is some mutuality in terms of 
causation and who participated in the Balanced Budget Agreement 
and so forth. I do not think that that is really the issue now. 
The issue now is, as the Chairman said, what can we now do to 
correct the flaws in the Balanced Budget Agreement. There are 
obviously flaws, and whether they should have been foreseen or 
not is no longer the point. And by the way, even if Congress 
mandated it, which I am sure we did in many cases, HCFA can 
recommend changes in the law. You are able to make any 
suggestion just as any other American citizen.
    The administration could come forward and, if there is a 
mistake in the law, regardless of how it got there, suggest 
changes. It is equally important to work with the industry, 
with the providers, to understand what is happening at the 
grassroots level in the real world, and what are the real world 
impacts of what we have done. There seems to be a huge 
disconnect here between your conclusions and GAO's conclusions 
and what legitimate, honest providers of essential services to 
vulnerable people are facing in the real world.
    Since there is a vote on, I am going to be very brief. 
First, on Linda Stock's testimony that 10 percent of our State-
certified agencies have withdrawn from the Medicare program, 
why are so many agencies withdrawing in your judgment?
    Ms. Buto. Well, it is a combination of two things. Some are 
withdrawing because they think the payment system is not 
favorable to them to continue to participate. Some are merging. 
There have been a lot of mergers of home health agencies with 
other home health agencies--consolidations.
    A third reason is that also in the Balanced Budget Act is a 
provision that says that payments for services to individuals 
will be based on where they live as opposed to where the agency 
is. In some cases, the agencies have chosen to pull back some 
of their satellite offices that are in areas that would now be 
receiving lower payments. So it is a combination of things.
    Senator Levin. But some of those are very undesirable, I 
would assume, from your perspective; is that not true?
    Ms. Buto. Some of the pullouts are undesirable?
    Senator Levin. Yes. If these areas are underserved, would 
that not be undesirable?
    Ms. Buto. It would be undesirable if the areas were 
underserved, but we found, as GAO has, that most of the home 
health agencies are pulling out where there are lots of other 
home health agencies, and that it is where there has been the 
most growth over the last 2 or 3 years in agencies--in urban 
areas, actually--that is occurring to the greatest extent.
    Senator Levin. If you found that in a significant number of 
cases, people who are no longer eligible or are removed from 
eligibility immediately moved into nursing homes, would that 
trouble you?
    Ms. Buto. That would trouble me, but we do not have any 
evidence of that, including in our----
    Senator Levin. You heard this sort of evidence this 
afternoon.
    Ms. Buto. I heard the testimony, and I heard it was related 
to venipuncture. And of course, patients who were solely 
eligible because of the need for venipuncture are those who are 
now not eligible under the Balanced Budget Act for home health 
services.
    Senator Levin. I understand, but back to my question of 
moving them directly into nursing homes; would that then 
trouble you?
    Ms. Buto. It does trouble me, but again, we have not seen--
and the Inspector General is helping us do an analysis of what 
is happening with admissions to nursing homes with discharges 
from hospitals to see if we are seeing any of these patterns--
and we have not seen anything like this so far.
    Senator Levin. I am glad you were here this afternoon.
    Ms. Buto. Again, I welcome specifics, because I asked the 
last panel if they have got the specifics, we would like to 
have them so we can look into it further.
    Senator Levin. I hope that when you do look into it, and if 
you do find that information is accurate, your answer would 
then be that indeed you are troubled by it and that together we 
should try to see what the solution is. In any event, let me 
move on to the next question.
    I was very much struck by Ms. Stock's statement about sick 
people not getting benefits that they are entitled to under 
Medicare, not because Medicare will not pay for the service but 
because no agency would provide the service. I just want to 
make sure you heard that.
    Ms. Buto. I did hear that, but we are not finding that. 
Again, I would like to know where this happens.
    Senator Levin. Again, you heard this from a very credible 
source who will be happy to show it to you.
    Ms. Buto. I believe it.
    Senator Levin. I think it is important that you do see it 
and ask to see it and want to see it.
    Ms. Buto. Absolutely.
    Senator Levin. Would you agree with Ms. Stock's point that 
the interim payment system tends to penalize those who were the 
most efficient or the least costly in 1994--for whatever 
reason.
    Ms. Buto. I tried to address this a minute ago. The interim 
payment system, because it is what it is, when it was 
constructed, the decision was made not to move money from the 
higher-paying areas to the areas that were below the national 
average. Had we done that, that would have helped the areas 
that had held down their costs. It would have hurt home health 
agencies in other areas, and Congress just decided not to do 
that.
    Senator Levin. What was your recommendation at the time--
different from what we came up with?
    Ms. Buto. I will turn to our legislative staff to see 
whether we had one on that. We will have to get back to you for 
the record on that issue.
    Senator Levin. Would you let us know what your 
recommendation would be now in order to correct that negative 
incentive. This is not the way we want to deal with people, I 
would hope.
    Finally, if you have not already commented on it, what can 
you offer these agencies with respect to the 15-minute 
reporting regulation, if you have not already answered that 
question.
    Ms. Buto. Again, we have already delayed that. It is 
required under the Balanced Budget Act, and it is going into 
effect in July. What we have said is that we are going to give 
a grace period until the end of September to implement it----
    Senator Levin. Are you going to recommend to Congress that 
the 15-minute reporting be changed? Or is that a regulation?
    Ms. Buto. No. It is in the statute. We are looking at a 
whole package of issues around the statute, and we are also 
looking to see what can we do in areas of cash flow to provide 
relief. So we are really looking at the areas where we have 
some control.
    I think the issues that were raised by one of the panelists 
about what is counted in the 15-minute increment is something 
we could definitely look at, but not the----
    Senator Levin. You do not want folks with stopwatches, 
which is the way it would have to be under the existing 
regulations. It seems to me that that is what we are forcing 
people to do, or it is an absurdity which would have to be 
ignored. Neither one is acceptable, so I would hope you would 
come up with something which is workable. If it takes a change 
in law, let us know. That is our responsibility. But it is your 
responsibility, it seems to me, to make recommendations and to 
tell us what needs to be done to avoid those outcomes which are 
unacceptable. In the real world setting, they are either not 
going to do it or they are going to do it with stopwatches; 
neither one makes sense. You do not want someone with a 
stopwatch at each moment, and you do not want someone to 
pretend to be complying if they are not.
    Thank you.
    Senator Collins. Thank you very much, Senator Levin, for 
your usual excellent presentation in our oversight hearing.
    I want to thank all the witnesses for being with us today.
    Ms. Buto, I hope you will take back to your department our 
overwhelming concern about the impact of the system, and I hope 
that this Subcommittee will receive from the administration a 
concrete list of recommendations for statutory changes no later 
than the Fourth of July. I think Independence Day would be a 
good day for us to receive those changes.\1\
---------------------------------------------------------------------------
    \1\ See Exhibit No. 10 which appears in the Appendix on page 197.
---------------------------------------------------------------------------
    This is a serious subject, and we do need to take swift 
action to correct the problems that have been very eloquently 
described today. We need your partnership in doing that, we 
need to work together, and we need to get the job done this 
year.
    I want to thank all of our witnesses for their testimony 
today.
    Finally, I also want to thank my staff for their excellent 
work, particularly Priscilla Hanley, Karina Lynch, Lee Blalack, 
and Mary Robertson. They worked very hard to put this hearing 
together, and I thank them for their contributions as well. I 
also want to thank the minority staff for their excellent work 
on this hearing.
    Thank you. This hearing is now adjourned.
    [Whereupon, at 4:25 p.m., the Subcommittee was adjourned.]
                            A P P E N D I X

                              ----------                              

                PREPARED STATEMENT OF SENATOR TORRICELLI
    I would like to thank and acknowledge the distinguished Chairman of 
the Permanent Subcommittee on Investigations, Senator Collins, and the 
distinguished Ranking Member, Senator Levin, for holding this hearing 
to discuss the affect of Medicare cuts on the delivery of home health 
care services. This issue is of particular concern to the 100,000 
patients who rely on home health services in my State of New Jersey.
    Despite these times of unparalleled economic prosperity, home 
health care agencies located in New Jersey are on the verge of 
financial collapse. This precipitous economic decline is not the result 
of mismanagement or inefficiency. Rather, it can be attributed, in 
part, to the unintended consequences of the Interim Payment System 
(IPS) included in the Balance Budget Act (BBA) of 1997. Indeed, the BBA 
was vital to the long-term strength of the Medicare program; however, 
the original estimated reductions of $25 million which are now 
estimated to be much higher, that New Jersey home health agencies will 
ultimately face will be economically devastating. In fact, three 
separate agencies in New Jersey have already been forced to close and 
others will undoubtedly follow.
    The fundamental flaw in the IPS is the requirement that home health 
services be reimbursed based upon their average cost per visit and the 
average number of visits in FY 1994. For States such as New Jersey, who 
had an average 39.7 home care visits in 1994, this payment methodology 
penalizes them for being diligent and efficient in the delivery of 
services. This inequity is best illustrated when States like New Jersey 
are compared with other States whose average home health visits are 
over 100 for 1994. The result is that New Jersey home health agencies 
are receiving only slightly more than $2,500 per patient annually, 
instead of the $4,000 per patient which reflects the actual costs of 
providing services.
    Making matters worse, the Health Care Financing Administration 
(HCFA) has developed burdensome regulations to implement the IPS which 
are compounding the economic pain for home health agencies. These 
regulations include a new 15-minute visit increment reporting 
requirement, increased claim reviews, additional audits, post-payment 
reviews, and branch office restrictions. Perhaps most troubling is 
HCFA's decision to use the Outcome and Assessment Information Set 
(OASIS) requirements in the development of a case-mix adjustor for a 
home health prospective payment system (PPS). It appears that HCFA may 
have significantly underestimated the cost to home health agencies to 
implement these requirements. In New Jersey, home health agencies have 
already incurred OASIS related costs estimated at $100,000.
    These legislative and regulatory requirements are having a very 
real impact for thousands of patients in my State who rely on home 
health services because they are unable to care for themselves. Every 
day, I hear the stories of my constituents who are forced to go without 
needed care. These stories include Mr. Faltisco of Morris County, New 
Jersey, who at 93 and suffering from Alzheimer's disease, recently had 
his home health aide visits cut from 20 hours per week to 90 minutes a 
week. It is Mr. Faltisco's family who must now struggle to provide the 
care he desperately needs. In many other cases, however, patients have 
no family to provide care.
    Thus, it is imperative that Congress now seize the opportunity to 
provide relief to home health agencies in States like New Jersey where 
efficiency has been rewarded with payment reductions. Last year, the FY 
1999 Omnibus Appropriations Bill included some corrections to the 
inequalities created by IPS; however, we have a long way to go to 
reverse these dangerous trends. I look forward to working with the 
Committee and others in the Senate in supporting a legislative solution 
to home health care crisis.
    Again, I would like to thank Chairman Collins and Ranking Member 
Levin for their commitment and attention to this important issue.

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