[House Hearing, 107 Congress]
[From the U.S. Government Publishing Office]





    THE REGULATORY MORASS AT THE CENTERS FOR MEDICARE AND MEDICAID 
               SERVICES; A PRESCRIPTION FOR BAD MEDICINE

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

                                HEARING

                               before the

                      COMMITTEE ON SMALL BUSINESS
                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED SEVENTH CONGRESS

                             FIRST SESSION

                     WASHINGTON, DC, JULY 11, 2001

                               __________

                           Serial No. 107-17

                               __________

         Printed for the use of the Committee on Small Business



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                      COMMITTEE ON SMALL BUSINESS

                  DONALD MANZULLO, Illinois, Chairman

LARRY COMBEST, Texas                 NYDIA M. VELAZQUEZ, New York
JOEL HEFLEY, Colorado                JUANITA MILLENDER-McDONALD, 
ROSCOE G. BARTLETT, Maryland             California
FRANK A. LoBIONDO, New Jersey        DANNY K. DAVIS, Illinois
SUE W. KELLY, New York               WILLIAM PASCRELL, New Jersey
STEVEN J. CHABOT, Ohio               DONNA M. CHRISTIAN-CHRISTENSEN, 
PATRICK J. TOOMEY, Pennsylvania          Virgin Islands
JIM DeMINT, South Carolina           ROBERT A. BRADY, Pennsylvania
JOHN THUNE, South Dakota             TOM UDALL, New Mexico
MIKE PENCE, Indiana                  STEPHANIE TUBBS JONES, Ohio
MIKE FERGUSON, New Jersey            CHARLES A. GONZALEZ, Texas
DARRELL E. ISSA, California          DAVID D. PHELPS, Illinois
SAM GRAVES, Missouri                 GRACE F. NAPOLITANO, California
EDWARD L. SCHROCK, Virginia          BRIAN BAIRD, Washington
FELIX J. GRUCCI, JR., New York       MARK UDALL, Colorado
TODD W. AKIN, Missouri               JAMES R. LANGEVIN, Rhode Island
SHELLEY MOORE CAPITO, West Virginia  MIKE ROSS, Arkansas
BILL SHUSTER, Pennsylvania           BRAD CARSON, Oklahoma
                                     ANIBAL ACEVEDO-VILA, Puerto Rico
                      DOUG THOMAS, Staff Director
                  PHIL ESKELAND, Deputy Staff Director
                  MICHAEL DAY, Minority Staff Director




                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on July 11, 2001....................................     1

                               WITNESSES

Berkley, Shelley, Member, U.S. House of Representatives..........     3
Toomey, Patrick J., Member, U.S. House of Representatives........     5
Hulsebus, Michael, D.C., Hulsebus Chiropractic...................    12
Whitson, David, M.D., P.C., Medical Offices of David Whitson.....    14
Seeley, Brian, Seeley Medical, Inc., for the Power Mobility 
  Coalition......................................................    17
Chase, Phillip, The Chase Group, for the American HealthCare 
  Association....................................................    19
Goldhecht, Norman, Diagnostic Health Systems, for the National 
  Association of Portable X-Ray Providers........................    23

                                APPENDIX

Opening statements:
    Manzullo, Hon. Donald........................................    37
    Velazquez, Hon. Nydia........................................    40
Prepared statements:
    Toomey, Patrick J............................................    43
    Berkley, Shelley.............................................    47
    Hulsebus, Michael............................................    49
    Whitson, David, M.D..........................................    56
    Seeley, Brian................................................    60
    Chase, Phillip...............................................    70
    Goldhecht, Norman............................................    78
Additional Information:
    Statement of Steven M. Mirin, M.D., Medical Director, 
      American Psychiatric Association...........................    83

 
    THE REGULATORY MORASS AT THE CENTERS FOR MEDICARE AND MEDICAID 
               SERVICES: A PRESCRIPTION FOR BAD MEDICINE

                              ----------                              


                        WEDNESDAY, JULY 11, 2001

                          House of Representatives,
                               Committee on Small Business,
                                                    Washington, DC.
    The Committee met, pursuant to call, at 10:05 a.m. in Room 
2360, Rayburn House Office Building, Hon. Donald Manzullo 
[chairman of the committee] presiding.
    Chairman Manzullo. The Small Business Committee will come 
to order. Good morning.
    This is the Committee's second hearing to examine the 
regulatory problems at the centers for Medicare and Medicaid 
services, CMS, formerly known as HCFA. I will not recognize the 
new name until I am convinced that HCFA is the a new 
organization with a new operating philosophy. So I will not use 
the new name anymore. At that point when I no longer use HCFA, 
then the reforms we are seeking will have been implemented.
    In the previous hearing the Committee heard about the 
deluge of paperwork that health care providers towered under in 
the effort to provide service to the injured and the informed. 
Today's hearing will address the regulatory morass swamp in 
health care providers and potential solutions to the draining 
of that swamp. [Laughter.]
    It is like Pogo in that swamp down there? [Laughter.]
    Are you doing okay? We are having some fun today, are we 
not? You bet, you bet. The Committee's next hearing at the end 
of this month we expect to hear from Thomas Scully of the head 
of HCFA, and Sean O'Keith from the Office of Management and 
Budget, about administrative actions that they can take to 
resolve the problems identified by the Committee.
    The health care provider renders service to an eligible 
Medicare beneficiary and should be reimbursed at a rate that 
enables the health care provider to stay in business. That 
seems like a simple proposition. However, sometimes simple 
tasks are rendered unduly complex by excessive federal 
government procedure. In the case of Medicare, the simple 
proposition of reimbursing providers for services rendered now 
covers more than 130,000 pages of federal laws, regulations and 
informal guidance. The U.S. Court of Appeals, Judge Leon 
Higginbothim, once noted about Federal Milk Marketing Orders, 
``It is difficult to imagine a case intertwined with greater 
confusion and delay and a problem which but for the 
administrative process was not extremely complex.'' Well, what 
does that mean? It means you cannot understand it. Today's 
hearing will demonstrate that Judge Higginbothim's statement 
can be applied with equal, if not greater, force to the 
operation of the Medicare program.
    The regulatory morass of HCFA has spawned a hydro-headed 
monster feared by all and accountable to no one. This morass 
cannot last because the diversity affects the ability of small 
businesses to provide adequate health care to beneficiaries. I 
am interested in navigating through this, and I would like to 
thank Mr. Toomey and Ms. Berkley for their leadership on this 
issue. The ultimate beneficiaries will be patients and 
taxpayers because higher quality care will be offered at a 
lower overall cost to the economy. And I will recognize the 
Ranking Member of the Full Committee, the distinguished gentle 
lady from New York, for her opening statement.
    [Mr. Manzullo's statement may be found in the appendix.]
    Ms. Velazquez. Thank you, Mr. Chairman.
    Today we continue our examination of the Health Care 
Financing Administration system, known today as the Center for 
Medicare and Medicaid Services. During our last hearing, this 
Committee examined the main burdens CMS imposes on health care 
providers. Foremost among these are onerous and often 
contradictory paperwork requirements that doctors must go 
through simply to receive payment for services. Even more 
disconcerting, doctors can face unannounced audits for 
unintended errors. In addition, doctors are forced to pay the 
difference in disputed agency billings up front, before the 
dispute is resolved--effectively, they are considered guilty 
until proven innocent. Tragically, these impositions discourage 
doctors from caring for the most needing among us--the aged, 
and the poor.
    Today, Mr. Chairman, we focus on solutions to these 
problems. The Medicare Education and Regulatory Fairness Act, 
proposed by my colleagues Congresswoman Berkley and Congressman 
Toomey, goes far to overcome these challenges. First, this bill 
will reduce the administrative burden on doctors by easing 
complex billing requirements and creating an expedited system 
for dispute claims resolution. Second, doctors will get advance 
notice for any audit, so they are not caught by surprise when 
CMS comes knocking. Lastly, this bill bars up-front repayments 
in fee disputes, requiring the agency to prove the doctor has 
committed an error, rather than the other way around. This 
legislation addresses many of the inequities created by the 
most recent reforms, enforcing the fair play we expect from our 
government.
    Nevertheless, I hope we will be careful as we move forward. 
Unintended or unexpected consequences of our reform proposals 
could divert energy and funds away from the primary mission of 
CMS, which is to compensate fairly the doctors who provide 
services to the poor and elderly. For example, our attempt to 
level the playing field between doctors and CMS should not 
limit enforcement efforts against fraud or abuse. As a recent 
news report has suggested, there are still some people out 
there trying to bilk CMS for their own profit.
    In loosening the grip CMS has on providers, we need to 
avoid a return to our earlier system, which was rife with 
chronic mispayments or improper payments. CMS has reduced 
payment error rates from 14 percent in 1996 to 6.8 percent in 
2000--and we can encourage them toward their goal of a five 
percent error rate set for next year.
    Finally, the driving force for our reform remains the 
continued viability of Medicaid and Medicare. Thankfully, 
through strong fiscal discipline and good success in reducing 
fraud and errors, the Medicare Trust Fund will remain solvent 
through 2025. We can continue and improve on that success.
    To conclude, Mr. Chairman, CMS provides a vital service to 
those who most need medical are; our poor and our elderly. We 
will work together to build a system where doctors do not fear 
caring for their patients while we fight waste, fraud and 
abuse.
    Thank you.
    [Ms. Velazquez's statement may be found in appendix]
    Chairman Manzullo. Thank you very much.
    We have two panels. Our first panel consists of two 
members, Congresswoman Shelley Berkley from Nevada, and 
Congressman Pat Toomey from Pennsylvania.
    Congresswoman Berkley, please.
    Ms. Berkley. Thanks.
    Chairman Manzullo. And I am going to put on the five-minute 
clock. Normally members ignore red lights and green light, but 
let's take a stab at it anyway. Thank you.

STATEMENT OF THE HONORABLE SHELLY BERKLEY, A CONGRESSWOMAN FROM 
                      THE STATE OF NEVADA

    Ms. Berkley. Thank you, Chairman Manzullo, Ranking Member 
Velazquez, and Members of the Committee for this opportunity to 
speak before you today.
    Let me begin by telling you how pleased I am that the Small 
Business Committee is studying this problem of the regulatory 
burden in the Medicare system. I do not have to tell you that 
many health care providers are in fact small business people. 
Many of them have small practices with only a few staff 
members.
    They are finding it increasingly difficult, sometimes 
impossible, to keep up with the constantly changing regulatory 
obligations of the Medicare system. And to give you some idea 
of what they are contending with, I have with me the books that 
most doctors will tell you represents the core of their medical 
education when they are in medical school, and I have in front 
of you five cases of Medicare regulations that the doctors 
after they graduate medical school after having mastered what 
is in these books, then they have to master what is in those 
crates. It is not very balanced, I would say.
    Asking a small practice, or any practice for that matter, 
to deal with that massive amount of paperwork is unfair, 
unnecessary, and counterproductive. Finding a way to reduce 
this burden can mean the difference between helping small 
practices stay open, particularly in rural areas, or watching 
them shut down one by one.
    In order to help this important segment of the small 
business population, the Medicare regulatory burden must be 
addressed. And I want to share with you how I became involved 
in this.
    I received a telephone call from a friend of mine telling 
me about a problem that a fellow doctor was having. Apparently 
he had attended a HCFA seminar in Las Vegas and got into a 
debate with a HCFA representative who was talking about the 
different regulations. And in the exchange, from what I 
understand, it got very heated. Then, of course, the seminar 
ended. The doctor went home.
    Two weeks later he received a letter from HCFA advising him 
of an impending audit. He is absolutely certain that the reason 
that he got this letter was for retribution for having spoken 
out about some of the regulations that were being proposed, or 
initiated I should say.
    What happened to this doctor should not happen in America 
to anybody. HCFA came in. They totally disrupted his practice 
for months after months after months. His practice ground to a 
standstill while the auditors took over his office, went 
through hundreds of thousands of dollars of billings.
    A year later he received a letter, after almost the 
destruction of his practice, saying that he owed $900. There 
was never any question of fraud, never any question of abuse. 
What there was was a difference in the coding, and after 
hundreds and hundreds of thousands of billings being gone 
through by HCFA, totally disrupting the man's practice, they 
told him he owed $900, and it was terribly, terribly unfair.
    As I helped my constituent, I found myself wading deeper 
and deeper into the amazing amount of paperwork, regulation and 
explanation that health care providers must deal with on a 
daily basis. As time went on, I began to hear one story after 
another from hardworking providers who have had increasing 
problems working within Medicare.
    One letter I received from a constituent is particularly 
compelling. It was sent to me by a doctor who has fought his 
way, unsuccessfully, through the regulatory process. He writes, 
``Although I have spent my entire 30-year career dedicated to 
the care of my patients, I will be forced to retire. There is 
no way for me to express the pain and anguish that I feel at 
the prospect of this happening. At this point I can think of 
nothing else to do except to ask for your help. How can this be 
happening in our country?'' It is time to do something to 
protect our nation's community of law-abiding physicians from 
overly burdensome federal acts so that they can remain in the 
Medicare program, treating and caring for our nation's older 
Americans.
    This need is precisely the reason why Congressman Toomey 
and I introduced the Medicare Education and Regulatory Fairness 
Act, MERFA, last March. This important legislation seeks to 
provide regulatory relief to health care providers in the 
Medicare system. The bill achieves this goal by reforming some 
of the practices of CMS, clarifying current regulations and 
providing education about Medicare regulations to providers.
    MERFA responds to the problems health care providers face 
by reforming the audit practice to limit random audits, make 
the practice of returning overpayments to CMS more fair, and 
limit the use of extrapolation. MERFA provides basic rights 
concerning appeals and delays recovery of overpayments until 
the entire appeals process has been completed.
    MERFA also creates several effective education functions to 
ensure that billing and documentation errors are minimized. 
Finally, MERFA requires CMS to make sure that new documentation 
guidelines for physician services are pilot tested before 
implementation.
    Physicians and other health care providers do not want to 
spend valuable time on paperwork. They know there is some that 
must be done, but they more importantly want to save lives, 
ease sickness and serve their patients. MERFA will help them do 
that. Medicare needs to be user friendly, a user friendly 
system for both patients and providers. This bill is a step in 
that direction.
    Once again, I want to thank you for testifying and thank 
you for an opportunity appear in front of you. Thank you very 
much.
    [Ms. Berkley's statement may be found in appendix]
    Chairman Manzullo. Well, thank you. I presume you do not 
want those documents made part of the record.
    Ms. Berkley. In the interest of not overburdening with 
regulation, no.
    Chairman Manzullo. Thank you.
    By the way, statements of all witnesses and members of 
Congress will be made part of the official record without 
objection.
    Congressman Toomey.

  STATEMENT OF THE HONORABLE PATRICK J. TOOMEY, A CONGRESSMAN 
                 FROM THE STATE OF PENNSYLVANIA

    Mr. Toomey. Thank you, Chairman Manzullo. It is a pleasure 
to be here to testify today before the Committee. I want to 
thank you, Mr. Chairman, also Ranking Member Velazquez, and my 
fellow Committee members. Perhaps in light of the fact that I 
am member of this Committee, you will go easy on me during 
questioning.
    Mr. Chairman, first, I would like to thank you for one 
other thing, and that is your longstanding leadership on the 
need to reform Medicare for health care providers and the 
patients that they serve. I would also like to thank my fellow 
Committee members, many of whom are co-sponsors of this 
legislation. Representative Berkley and I introduced MERFA just 
four months ago, and today we will be announcing that we have 
over 220 bipartisan co-sponsors. Medicare reform for providers 
is indeed an issue whose time has come.
    As we heard in this Committee's hearing on May 9, health 
care providers of all kinds are suffering under excessive 
paperwork and regulations. In my view, Medicare's burdensome 
regulations are a symptom of the fundamental structural flaw in 
the program. As long as the federal bureaucracy attempts to 
dictate the circumstances under which it will allow, and the 
price it will pay for thousands of different individual medical 
procedures, Medicare will always be a maze of regulations and 
will not provide the effective, efficient medical insurance 
that our senior citizens deserve. Ultimately, we need to 
transform Medicare into a market-based system in which patients 
are also consumers. Patients should be in control of the money 
that is being spent on their behalf.
    Now, H.R. 868, the Medicare Education and Regulatory 
Fairness Act, is not nearly that ambitious. Fundamental, 
comprehensive reform of Medicare will take more of a consensus 
and more time. But, in the meantime, health care providers need 
relief now, and that is what our bill does. Congress needs to 
step in and restore some balance between HCFA and the health 
care providers. And if we do not step in, HCFA's practices will 
have serious detrimental effects on the quality of our seniors' 
medical care.
    I would like to outline what I believe are several 
unintended consequences of some of HCFA's current practices. 
First, a number of HCFA's practices are counterproductive. In 
an effort to try to lower the cost of health care, HCFA 
attempts to reduce fraud by imposing enormous paperwork burdens 
on all health care providers, including the overwhelming 
majority of whom are honest and would never commit fraud. 
Paradoxically, this burden actually increases the cost of 
providing health care for senior citizens. Second, HCFA's 
practices can be counterproductive when they reduce the amount 
of time health care providers have to spend with their 
patients. Third, seniors' medical records have become more of a 
way for physicians to communicate with Medicare bureaucrats 
than as a way to communicate with their colleagues. As Dr. 
David Whitson will testify in the next panel, sometimes these 
documents are no longer even clinically useful medical records. 
Rather than being medical records, they have become billing 
records. Fourth, and perhaps most disturbing, is the perverse 
incentive for health care providers to deliver ordinary care--
the service that will not raise eyebrows at HCFA--not 
necessarily the best care. For health care providers, the risks 
and costs of defending against HCFA are so great that it 
produces an incentive for them to bill Medicare for common 
services, which means providing patients with common services, 
even when the best care might call for more intensive or just 
different services. Finally, the shear complexity and 
associated costs of compliance are so great that solo and small 
group practices often simply cannot afford to comply.
    So what does MERFA do to correct these unintended 
consequences? MERFA reforms how HCFA issues new regulations and 
policies, for one. It ensures health care providers have a 
modicum of due-process rights when there is a dispute with 
HCFA, and it allocates administrative funding for the specific 
purpose of educating providers about proper billing and 
documentation. Our goal is to ease some of the regulatory 
burdens that health care providers face so they can spend more 
time with their patients and less time dealing with HCFA 
bureaucrats.
    Here are a few examples of some of the specific reforms in 
MERFA:
    MERFA will clarify that health care providers only need to 
comply with the regulation issued by HCFA when it is finalized, 
and that a regulation cannot be applied retroactively;
    it allows providers the option of entering into a repayment 
plan for overpayments rather than HCFA automatically offsetting 
future payments;
    it prevents HCFA from unilaterally recouping an alleged 
overpayment while an appeal is still pending;
    it would allow providers up to one year to return 
overpayments without penalty or audit if they discover the 
mistake before HCFA does;
    it requires funds to be used to educate providers about 
property documentation and billing. It creates a safe harbor so 
providers can voluntarily submit claims for education purposes 
without fear that that would trigger an investigation; and
    it would require HCFA to pilot test new Evaluation and 
Management Guidelines before mandating them for all physicians 
nationwide.
    I would like to point out that there are some new sheriffs 
in town--George W. Bush as President and our own Don Manzullo 
as Chairman of the Small Business Committee--provide the 
leadership that has made regulatory reform popular in 
Washington, and we need to make sure that health care providers 
do not miss out on that spirit and that momentum.
    A majority of House members now recognize the need to rein 
in some of HCFA's excesses. In the administration, Secretary 
Tommy Thompson and Administrator Tom Scully have made 
encouraging remarks. There are over 60 health care provider 
groups in support of our bill, and with the Small Business 
Committee's help, we can make HCFA reform a reality for our 
health care providers and the patients they serve.
    Thank you very much.
    [Mr. Toomey's statement may be found in the appendix.]
    Chairman Manzullo. Thank you for that excellent testimony.
    Congresswoman Berkley, if you want, you can give me the 
name of these people at HCFA that harassed your constituent, 
and we will write the story. We will put it up on web site, on 
the Small Business Committee web site.
    Ms. Berkley. I will check with the doctor. The one doctor 
in particular was so intimidated by what transpired that he has 
kept an amazingly low profile, and I have invited him to 
participate with me, and quite frankly, he is fearful of going 
public with his story for fear of additional retribution. But I 
will share this with him and see if he would not be more 
willing to go more public.
    Chairman Manzullo. In the next panel, you will listen to a 
fearless one, who is my chiropractor, who took in the entire 
system and----
    Ms. Berkley. He would have to be fearless to be your 
chiropractor. [Laughter.]
    Chairman Manzullo. That was pretty good.
    I do not have any questions. I am a co-sponsor on your 
bill. I wish you God speed on it, and I trust that we can do 
something with this organization. I had an incident yesterday. 
I was on the phone for 15 minutes with a HCFA carrier. The 
difference between Social Security where the people are in 
direct contact with people who work for the agency, and we have 
a relatively--in fact, a very good relationship.
    And the problem with HCFA is that it is one-step removed 
from these contracting organizations. But there is a lady who 
is dying of liver cancer who wanted to get--her husband wanted 
to get a lift chair, and for 30 days he had been arguing with a 
woman at one of thesecarriers who insisted that she was not 
going to violate the privacy and wanted an incompetent woman to sign a 
privacy release.
    And I got on the phone and I argued with her for 15 
minutes, and I finally said, ``Who is your supervisor?'' 
``Well, they are not available.''
    I said, ``Would you like to come before my Committee on a 
subpoena?'' I said, ``I am not kidding.''
    I have had it with these incompetent bureaucrats that waste 
all of our money instead of helping people.
    And, finally, it go to, she gave me the name of the 
executive of the organization, and he called and he was 
extremely apologetic because I finally got to a person who 
understood that a person who is incompetent cannot even sign an 
X, because if you move their hand for them, then you are guilty 
of a felony. And all that because they had no idea what they 
were doing, and fortunately it was an isolated incident with 
this one particular organization, but it is stories like that 
that build up and build up.
    Mr. Toomey, I would add another name to the new sheriffs in 
town besides George W. Bush and myself, and that is my 
distinguished ranking minority member, Mrs. Velazquez. At times 
she may appear to be very tame.
    Ms. Berkley. I wonder who her chiropractor is. [Laughter.]
    Ms. Velazquez. Thank you, Mr. Chairman.
    I have been historically--well, first of all, thank you for 
being here and we will work together with you in easing the 
burden of paperwork regulations and regulations.
    But, Ms. Berkley, all those books that you have, those are 
regulations?
    Ms. Berkley. No, no, these are the--these are the 
textbooks----
    Ms. Velazquez. Oh.
    Ms. Berkley [continuing]. Of medical school.
    Ms. Velazquez. Oh, okay.
    Ms. Berkley. Those are the regulations.
    Ms. Velazquez. And those are the regulations.
    So how do you--can you tell me how do you think those 
regulations got there in the first place?
    Ms. Berkley. I think the--the only thing I could think of 
is that through the years, through additional regulation upon 
regulation upon regulation, they just grow and grow.
    I suspect that much of what is in that cart--the 
container--probably contradicts what is in that container. And 
if I could share an anecdote.
    When I was first running for Congress, I started--my 
husband started courting me, and we were dating during my 
campaign. He is a doctor. He is a nephrologist. He used to 
bring--now this may not sound very romantic, but he used to 
bring HCFA regulations on our dates for me to read.
    And I am an attorney by profession, he is a practicing 
physician for many years, and he would show me these 
regulations that I could not make any sense out of. And you 
know, they keep getting promulgated and promulgated and 
expecting physicians and health care providers to not only 
digest the information, which is often contradictory, but to 
master it and to follow it until the next regulation comes, 
which may contradict the one that they are operating under, 
with no education, no opportunity to learn the new regulation 
before it is implemented. So I think a lot of the--many parts 
of MERFA addressed that particular problem as well.
    Ms. Velazquez. Yes, but the point that I just would like to 
make, if you allow me, is that, look, all those regulations 
that have been promulgated and that are reflected in those 
regulations are a result of the Health Insurance Portability 
and Accountability Act of 1996, the Balanced Budget Act of 
1997, the Balanced Budget Act of 1999, the Medicare/Medicaid 
Benefits Improvement and Protection Act of 2000.
    Passed by who? By us, Congress.
    Ms. Berkley. Yes.
    Ms. Velazquez. So we have to go to the root of the problem 
here, and it is not just HCFA, but also we need to recognize 
that this is a result of congressional mandates that we passed 
here in Congress.
    Ms. Berkley. I do not disagree with you, and I think what 
Congressmen Toomey pointed out is quite accurate, the 
unintended consequences often of what is done in Congress, this 
is the unintended consequence.
    Ms. Velazquez. Thank you.
    Ms. Berkley. Thank you.
    Chairman Manzullo. Congresswoman and Physician Christian-
Christensen.
    Mrs. Christian-Christensen. Thank you, Mr. Chairman, and I 
want to welcome my colleagues also this morning, and I want to 
thank you for the second in a series of hearings on HCFA. I 
think this Committee has a unique and very important 
perspective to bring to the issue of HCFA and the reform as it 
affects our small business health care providers.
    Like you, Mr. Chairman, I feel that a new name is not a new 
agency make, and I am awaiting real reform before I really 
adopt the name of Center for Medicare and Medicaid Services as 
well. Having been victimized myself by this agency, I am really 
proud to be a co-sponsor of your bill. We welcome the bill. I 
think it makes a real effort in addressing some of the issues 
and frustrations that physicians have been facing, and some of 
which we will hear about on the next panel.
    I think, among those reforms are the pilot testing. So many 
times our carrier would inform us of some new reg, and by the 
time we got used to it, it is changing, or it just wasn't 
working. So I think that pilot testing is very, very important.
    The repayment plan, it should not have taken legislation to 
have--to make that happen. It just makes good sense in the 
spirit of cooperation because, as even HCFA will tell you, most 
of the areas where they find discrepancies are not really 
deliberate fraud and abuse. They are mistakes. So it should not 
have had to take us, but we are glad that you are doing it.
    And I hope that--your bill is drafted, but the copy you 
showed me earlier this morning about the one particular. I took 
care of a lot of patients who were coming from low-income 
levels, and even the co-payment was difficult for them to meet. 
And I will admit here that--even though it is on the record--
that many times I just forewent the co-payment. Of course, I 
lived in absolute fear that I would be called up for the $2 or 
$5 or whatever it was, and be sanctioned and maybe be denied 
the ability to take care of Medicare patients. So I hope, 
Shelly, it is retroactive, and it covers any allowances that I 
have made.
    I just wanted to ask one question. [Laughter.]
    One of the purposes of MERFA is to make Medicare carriers 
and the intermediary audit process more equitable and increase 
Medicare education efforts. What is HCFA's and OIG's official 
position on this bill? Have they offered one? And hasthe 
private insurance agents industry offered an official position?
    Mr. Toomey. Not surprisingly, the OIG is not terribly 
supportive of this bill. They have made a series of 
observations, some of which we believe are valid considerations 
that ought to be taken into account. Others, we think are not. 
And, frankly, as we move forward in this process, both Ways and 
Means and Commerce have jurisdiction and what we ought to do, 
and I believe what they are doing, both of those committees, is 
taking input from those folks and balancing their concerns with 
the legitimate concerns of the providers.
    I will say in informal discussions with the new 
administrator of HCFA, he was very, very sympathetic to the 
intent. He observed that there might be some technical things 
that need to be adjusted as a practical matter, but that he was 
very open to this effort to end. I think that is going to be 
very helpful.
    Mrs. Christian-Christensen. Thank you. I have no further 
questions. Again, thanks for being here and thanks for the 
bill.
    Chairman Manzullo. Congresswoman Kelly.
    Ms. Kelly. Thank you, Mr. Chairman.
    Inasmuch as I just got here and have not heard the 
testimony, I am not going to ask any questions. I know where to 
find these two individuals at a later moment when I do have 
questions. Thank you.
    Chairman Manzullo. Thank you.
    Congressman Baird.
    Mr. Baird. Thank you, Mr. Chair. Thank you for convening 
this hearing and to the sponsors. I am also proud to be a co-
sponsor.
    I went to a little hospital called Morton General, way up 
in the hills, and they had been audited that very year. 
Activity had been found that they had 12 instances of 
overbilling, double billing, not overbilling. And I thought 
they should receive a award for their efficiency, 12 out of an 
entire year, and instead they got menacing and threatening 
letters. So I applaud this bill and that is part of why I co-
sponsored it.
    One quick question, and then--a specific detail question. 
In some of the summaries, it talks about providers covered in 
the bill, including physicians. It is my understanding that 
many other providers, including my own profession of 
psychology, face similar challenges, and I trust that they 
would also be protected under the provision of MERFA. Is that 
the intent?
    Ms. Berkley. It is our intent to be as inclusive as 
possible. And if there were any omissions of a health care 
provider, part of the profession, we are urging them to please 
to contact either one of our offices, and we will incorporate 
them.
    Mr. Toomey. And if I could just add, I completely agree 
with Representative Berkley, and we have manifested that with 
letters to the relevant committee chairs, that this should 
include all health providers.
    Mr. Baird. Terrific. I would like to follow up and make 
sure we get some others included.
    One sort of philosophical question, but it is important. I 
think the Chair raised an interesting point, the difference 
with dealing with formerly HCFA folks versus Social Security.
    In this intermediary, the so-called hired guns, there is 
somewhat of a paradox in that that is the very model of 
privatizing government services, which is--I am not trying to 
be partisan here, but that has been sort of the mantra of the 
majority party now, and yet it is that very privatization that 
in some cases has made it more difficult for us to deal with 
them.
    And I just wonder if there are comments from the sponsors 
of the bill about that.
    Mr. Toomey. We could probably have a discussion that would 
go on for a very long time on this topic.
    I think that the word ``privatization'' can, of course, 
mean many, many different things to different people. Having a 
private corporation to perform the functions within a very 
highly bureaucratic government structure may not necessarily 
provide great relief.
    However, I think if we move in the direction of empowering 
patients to make the decisions about the kind of insurance 
product they would have, the kind of coverage they have, and 
diminish the control that the government has, that, I think, 
would be extremely helpful.
    Mr. Baird. I appreciate that point. I think my concern is 
in the nature of trying to root out waste, fraud or abuse, we 
have basically created consultative gun slingers--these bounty 
hunters--that go out, and they effectively act like that 
towards practitioners, and the practitioners who have been on 
the receiving end have said essentially you have created a 
virtually unaccountable organization to investigate well-
intended practitioners with virtually no consequences.
    If we have a problem with Social Security, I think they are 
pretty receptive to us calling us and pulling their chain a 
little bit. Or frankly, what I do with Social Security, if I 
call them up, oftentimes I say good work when they do a good 
job----
    Chairman Manzullo. That is right.
    Mr. Baird [continuing]. Because so oftentimes they do 
excellent work and we need to commend it. But I am greatly 
concerned about this whole issue. I hope your bill addresses 
that in part. But I think separately this Committee or this 
body might want to evaluate whether it has been such a 
successful experiment to have these consulting bodies.
    I yield back my time. Thank you, Mr. Chairman.
    Chairman Manzullo. I appreciate that very much. We are in 
the process of obtaining some of these contracts between HCFA 
and the providers, and I am interested to see the so-called 
performance contracts, where they work on a cut of the money 
that they get from the providers.
    If any do not want to send those to me voluntarily, we will 
just issue a subpoena duces tecum. They can bring them to 
Washington and put them on my desk.
    Mr. Toomey. I applaud you, Mr. Chairman.
    Chairman Manzullo. So that is the role that we are going to 
take on this.
    I appreciate it very much.
    Ms. Berkley. Thank you.
    Chairman Manzullo. And let us know what more we can do on 
your bill.
    Ms. Berkley. Thank you.
    Chairman Manzullo. Thank you. Let us have the second panel, 
please.
    Okay, we have our second panel in place. You are going to 
share a microphone. We are going to start from the left and go 
all the way down this side here.
    Our first witness is Dr. Michael Hulsebus. Dr. Hulsebus is 
from Byron, Illinois, which is not too far from Egin, Illinois, 
and his father, Bob Hulsebus, pioneered chiropractic in the 
State of Illinois. He was one of the early pioneers, and Mike 
is here with his brother, Roger Hulsebus. The boys come in 
pairs to watch each other.
    And I am very proud to be their congressman. I would just 
state that they set the example of whenever a provider has a 
medical problem, a problem with HCFA, to immediately contact a 
member of Congress because we can do a lot of things here in 
Washington to help them out.
    So our first witness will be Dr. Hulsebus. The light in 
front of you will be green is go, yellow, you have got a minute 
to go, and then red. We will try to keep everybody's testimony 
to aboutfive minutes so we have plenty of time for questions.
    Michael.

      STATEMENT OF MICHAEL HULSEBUS, HULSEBUS CHIROPRACTIC

    Dr. Hulsebus. Thank you, Mr. Chairman and members of the 
Committee. As you stated, my name is Michael Hulsebus.
    Chairman Manzullo. Hang on a second. Are you having a 
problem with those--Michael, why do you not start over with 
your statement.
    Dr. Hulsebus. Okay. Well, thank you, Mr. Chairman and 
members of the Committee. My name is, like he said, Michael 
Hulsebus. I am a doctor of chiropractic from Rockford, 
Illinois.
    I appreciate the opportunity to address this Committee as 
it reviews the actions of the Health Care Finance 
Administration and it's dealing with the chiropractic 
profession. I am also speaking here on behalf of the American 
small business operators who must deal with a growing mountain 
of red tape and procedure wrangling to survive. It would seem 
in the best interest of the free enterprise system to simplify 
the processes dealing with small businesses, whose operators 
need an assist.
    I am glad to tell my story, but dismayed to think it is not 
unique.
    While there was an end to my situation, I know there are 
other chiropractic and health care professionals who have been 
forced out of the system because they could not assemble the 
forces necessary to fight this battle.
    After the Health Care Financing Administration removed Blue 
Cross and Blue Shield from administering Medicare in 1999, it 
then retained several contractors across the United States, 
including Wisconsin Physicians Service for services, who 
administers the program in my home state of Illinois. Since 
then there has been a clear pattern of targeting the 
chiropractic profession from elimination from the program.
    This happened even though the Office of Inspector General 
issued a report in September 1998 saying the chiropractic 
profession is not an area of major concern, and the limited 
resources of this program would be best served by focusing on 
other and more costly benefits.
    In post-payment reviews, like the one I went through in 
1999,the carriers issue a demand for records, along with threat 
of expulsion from the program. Then they contact an analysis of 
the records to determine whether the treatments are 
``medically'', not chiropractically, necessary or whether 
treatments constitutes maintenance care. If determined to be 
not medically necessary or to be maintenance care, the claims 
are rejected.
    Throughout this review process, the chiropractor is 
subjected to potential claims of criminal fraud, of a quasi-
criminal nature. The physician is provided minimal options from 
the outset, none of which recognize the fundamental principle 
with the Constitution that every citizen is innocent until 
proven guilty.
    In the usual course of the post-payment review process, the 
physician is provided with three options:
    Number one, admit guilt, and pay or agree to pay; number 
two, admit guilt, but seek the reexamination of the charts; or 
deny guilt, and be required to produce the records of every 
Medicare patient cared for by the clinic, subject them to 
review by the consultant and face the ultimate consequences.
    The ultimate consequence could be expulsion from Medicare 
program or possible criminal sanctions.
    Under the regulation, it is the physician, in conjunction 
with the patient, who is primarily responsible for the 
determination of the necessity and duration of care, including 
the existence of a subluxation, which the chiropractor is 
uniquely qualified to determine. However, Health Care Financing 
Administration and the provider have arbitrarily limited the 
number visits that will be compensated.
    Chiropractic methodology and patient input had been largely 
ignored. Making this even more complicated the previous 
admitted failure to properly communicate with the profession as 
to what is required under the guidelines, and what 
documentation is necessary.
    Since March 1999, when I first received a demand for 
documentation, I have been forced to engage in unjustified and 
substantial amount of work, efforts and expense, all to defend 
myself against alleged overpayments which were ultimately 
allowed after a costly two-year review process.
    Among my concerns at this points are the following: The 
methods--utilized for the identification of chiropractics for 
post-payment review, and the apparent efforts to target the 
chiropractic profession, in post-payment reviews and the 
adoption of guidelines that further restrict the scope of 
acceptable services, and the varied interpretation of policy 
from state to state and--consultant--and to consultants.
    The admitted failure to properly communicate and educate 
the profession----
    Chairman Manzullo. Michael, why do you have a sip of water 
there.
    Dr. Hulsebus. Sure. The admit failure to----
    Chairman Manzullo. Settle down a little bit. We will give 
you a little bit more time.
    Dr. Hulsebus. Sure. No problem.
    The admitted failure to properly communicate and educate 
the profession as to the guidelines and requirements imposed. 
My experience with the review process has been contravention of 
the Congressional intent and the directives that created the 
Medicare program. The processing and punishment rather than the 
creation ways to meet the goals of the program.
    With the new guidelines now in place, it would be expected 
that the situation will not improve without your intervention.
    And I want to thank you very much for everything you have 
done, and I appreciate that, and I will entertain any 
questions.
    [Mr. Hulsebus's statement may be found in the appendix.]
    Chairman Manzullo. Thank you for your testimony.
    Congressman Toomey, do you want to introduce your 
constituent, the next witness?
    Mr. Toomey. Mr. Chairman, thank you very much. I would like 
to do that.
    I am very grateful that Dr. David Whitson has taken time 
out of his practice and his busy schedule to be with us today. 
I would like to introduce him to the Committee.
    Dr. Whitson is a constituent of mine from Allentown, 
Pennsylvania in the Lehigh Valley where he was born and raised, 
educated, and has practiced as a solo family practitioner since 
1975, and I can assure my colleagues from personal experience, 
as well as the words of many friends back home, that Dr. 
Whitson is well known, not only for his medical expertise, but 
the compassion and genuine personal concern that he has always 
shown for his patients.
    Dr. Whitson is also kind enough to serve on a Health Care 
Advisory Council that I formed, and he has given me very 
valuable input on health care issues, in particular. It was any 
suggestions that he had made and the input that he had given 
with regard to Evaluation and Management guidelines that helped 
us to draft MERFA in the form that it has.
    So I am very grateful for all of his help, grateful that he 
is with us today, and I would like to introduce Dr. David 
Whitson.

 STATEMENT OF DAVID W. WHITSON, M.D., P.C., MEDICAL OFFICES OF 
                  DAVID WHITSON, ALLENTOWN, PA

    Dr. Whitson. Thank you, Congressman Toomey.
    Chairman Manzullo. We look forward to your testimony.
    Dr. Whitson. Thank you. I would like to thank you, Chairman 
Manzullo, Ranking Member Velazquez----
    Chairman Manzullo. Excuse me, Doctor. Could you pull the 
microphone a little bit closer, the other microphone. Thank 
you.
    Dr. Whitson. I would like to thank you, Chairman Manzullo, 
Ranking Member Velazquez and the other Committee members for 
the opportunity to testify.
    Most cancers start slowly and stay quietly hidden until 
they insidiously infiltrate an organ, a system, and then the 
entire person. Eventually when they have grown to sufficient 
power and size, they start their terrible destructive, 
destructive, crippling and often fatal course.
    Ladies and gentleman, there is a cancer growing in the 
health care system in the United States, and in my opinion, it 
has the power to cripple and destroy the best medical care 
available in the world.
    The cancer began at the seemingly innocent attempt to 
control costs for senior citizens when Medicare recruited 
physicians to participate in its program. Well-intentioned, it 
has mushroomed into a bureaucratic nightmare of paperwork, 
rules, regulations and reviewers whose job seems to be one of 
forcing physicians into decreased payments for their services 
cloaked under the evaluation and management guidelines. It is 
imperative that this cancer be controlled before our once proud 
medical system is crippled beyond repair.
    Mine is the story of living the American dream. From modest 
beginnings with considerable hard work and support derived from 
our government and other generous people I was able to achieve 
my dream, a solo family doctor, and have done so for 26 years.
    But my dream is in grave trouble. For the last five years, 
the business aspect of medical practice has become a nightmare. 
Medicare has mandated, and almost all other insurance companies 
have happily followed suit, that I must document ridiculous and 
excessive information regarding each and every patient 
encountered to the brink of absurdity.
    The feeling, if it is not written down, you did not do it, 
has ruined medical recordkeeping, turned medical records into 
fodder for malicious attorneys chasing lawsuits, Medicare and 
insurance companies whose folks are seeking refunds, and 
changed the focus of the physician from the patient to the 
record. It has to stop.
    It really doesn't matter economically what I do when I see 
a patient. It matters to the patient. But Medicare cares only 
about what I write down. If I examine a patient's eye, it is 
now inadequate to record the eye is normal. If I want proper 
reimbursement for the proper time and complexity of the exam 
and decisions I make, I must record almost every aspect of my 
exam and thinking process about why I think the eye is normal.
    So my record must say, ``Eyelid, normal cover; moves 
normally; surface of the eye has normal color, normal tearing 
and no evidence of injury; pupil reacts normally to changes in 
light and reactions normally when patient changes from looking 
near or farther away; front part of the eye appears quiet, 
suggesting no inflammation; lens is normal, suggesting no 
cataract or foreign body; back part of the eye is fine, showing 
no infallation; retina looks normal, including a normal nerve, 
artery, vein, and no evidence of detachment,'' et cetera.
    I am stopping out of consideration for your time and the 
clock.
    My point is if I know I ask the right questions of my 
patient and did a thorough eye exam on my patient, and I decide 
the eye is normal, my note in my chart that the eye is normal 
should suffice. I or another physician who might need to review 
my patient's chart should know it's normal. If on a second exam 
an abnormality is noted, we can safely assume it occurred in 
the interim.
    Under current E&M guidelines, I must include all the 
details I elucidated into the chart. This confuses the chart. 
It makes mountain of reading for myself or another physician 
should we need to review it, and really adds no useful 
information. It simply adds words.
    However, if one assumes the adage, ``If it isn't written, 
it wasn't done,'' any malpractice attorney or Medicare or 
insurance reviewer wishing to down code the visit starts to 
drool if he looks and my record and see it is concisely saying 
``eye is normal.''
    Ladies and gentlemen, I am tired. I am being beaten down. I 
am a very good family doctor who wants passionately to practice 
medicine and I would greatly appreciate your help. The private 
insurers follow Medicate. The absurdity of the E&M coding 
nightmare has to stop. Physicians like me who love family 
practice need your help before we become extinct like all the 
mom and pop businesses in this country.
    Huge corporations, who lack the tremendously valuable 
personal touch I feel is such an inherent assets to good 
medical care, will deliver medicine, rather than individuals 
who know and truly care about each person they see.
    Physicians and patients are not interchangeable as 
insurance companies would have you believe. It takes a long 
time to build trust with patients. Once established, it makes a 
physician much more efficient and effective in helping that 
patient, but there is no code for the time that it takes to 
build that trust.
    Congressman Toomey and his co-sponsors have attempted to 
initiate some positive reform. It is not enough, but it does 
represent hope for dedicated family physicians like me.
    In reference to my opening remarks, I truly hope someday 
medicine can cure all cancers. It is also up to you to help the 
possibility of that cure. Medical practice in this country is 
in trouble. Before medicine can cure anything, we must use the 
necessary time, effort and legislation to cure medicine of the 
cancers that threaten its quality, its providers and its 
longevity.
    Thank you for the kind attention.
    [Mr. Whitson's statement may be found in the appendix.]
    Chairman Manzullo. Thank you very much, Dr. Whitson.
    We are going to--there is a vote, we have to go vote and we 
will stand in recess until we return, probably about 10 or 15 
minutes.
    [Whereupon, a recess was taken.]
    Chairman Manzullo. Okay, we will reconvene our hearing.
    Our next witness is Brian Seeley, who has grown up in the 
home medical equipment industry; works at a family business 
located in Cleveland. In 1988, Mr. Seeley purchased a small 
company in Ormond Beach, Florida. It has grown into two 
location, selling appliance in north-central Florida, and it is 
considered a full-time home medical equipment and service 
company.
    Seeley Medical has 13 employees. He is a member of the 
board of directors for the Power Mobility Coalition where he 
works closely with industry leaders concerning 
reimbursementcriteria access and product document.
    We look forward to your testimony, Mr. Seeley.

STATEMENT OF BRIAN SEELEY, SEELEY MEDICAL, INC., ORMOND BEACH, 
           FLORIDA, FOR THE POWER MOBILITY COALITION

    Mr. Seeley. Thank you, and good morning, Mr. Chairman, 
distinguished members of the Committee.
    As was stated earlier, I represent the Power Mobility 
Coalition, which is a coalition of supplier and manufacturers 
who provide power mobility equipment and services, such as 
motorized wheelchairs and scooters for beneficiaries 
nationwide. The PMC members represent well over half of the 
nation's power mobility market in all regions of the country.
    According to HCFA's own Medicare data, more than 95 percent 
of all suppliers of durable medical equipment generate billings 
of less than $350,000 a year annually, and 99 percent generate 
less than five million annually.
    While HCFA has overall responsibility for the Medicare 
program, many of its responsibilities related to reimbursement 
and medical policy have been delegated by the agency to the 
carriers. These are the four regional DMERCs around the 
country.
    Unfortunately, the carriers have used this authority to 
create new policies, often in direct contrast to existing 
policy published by HCFA, developed by Congress. A deeper 
concern is that HCFA is aware that policies are not being 
adhered to by the carriers, and by omission are allowing these 
policies to stand. These actions and HCFA's lack of oversight 
of the carriers has lead to an erosion of the due process 
accorded to small businesses who choose to provide items and 
services to Medicare program beneficiaries.
    Three examples of these violations of our due process I 
would like to cover today are the audits, extrapolation and 
appeals.
    Medicare audits should be conducted base on good cause and 
adhere to established standards and guidelines. In fact, HCFA 
has told carriers, ``subject providers only to the amount of 
medical review necessary to address the nature and extent of 
the identified problem.''
    But one of HCFA's carriers that oversees 17 states uses the 
number of power wheelchairs sold by suppliers in that region as 
the reason for an audit. If you sell more than seven chairs per 
month in that reason as a provider, you will be audited by that 
carrier.
    This creates a chilling effect on the ability of small 
businesses to provide equipment and services to the patients 
who qualify for them.
    Mr. Chairman, the development of new technology in the 
power mobility industry has made this equipment available to a 
larger number of disabled persons. It is now possible for 
beneficiaries to obtain smaller, more light-weight and 
maneuverable motorized wheelchairs for use inside a patient's 
home. This is not an instance of over utilization. This is an 
instance of technology.
    The criterion used by HCFA's carriers is inconsistent with 
the policies set forth by Congress. Congress has established 
the Certificate of Medical Necessity, CMN, as a document which 
determines all medical necessity requirements for claims 
submitted to the Medicare system. When creating CMN forms, HCFA 
explicitly declared in writing, I quote, ``These forms contain 
medical information necessary to make an appropriate claims 
determination.'' Yet HCFA's carriers recently told suppliers in 
writing, and I quote, ``CMN represents nothing more than a 
Medicare pre-payment tool, and CMN itself does not provide 
sufficient documentation of medical necessity.''
    The suppliers complied with the rules established by 
Medicare program, but they are punished by the carriers which 
applies new and arbitrary criteria after the equipment has been 
delivered to the patient and after the claim has already been 
paid.
    An example of the lack of due process is the use of the 
extrapolation by HCFA's carriers in their calculation of so-
called overpayments. Let me explain extrapolation.
    A carrier may draw a sample of claims, sometimes it is as 
few as 10. All those claims are paid to the supplier. It is 
determined that 50 percent of them should not have been paid 
even though the patients' physicians certified the need for the 
equipment and the patient qualified for the equipment. We are 
talking about five claims.
    That amount is then extrapolated to the universe of claims. 
If there 100 claims in that universe, a small business will owe 
repayment of 50 electric wheelchairs rather than just five. 
That can represent up to $350,000 to a small proprietor. To a 
company like mine, that would put me out of business.
    The overpayment amount is due within 30 days of the 
carrier's determination, and even though the supplier wins, 
most, if not all, of the overpayment back on appeal the 
business is severely damaged. This process is creating 
hardships for dealers and has forced many businesses to face 
bankruptcy. This is unfortunate because, according to HCFA's 
own figures, 80 percent of the denials are reversed on appeal.
    When a Medicare carrier audits the power mobility supplier, 
a carrier/reviewer will make a determination as to whether he 
believes the equipment is medically necessary. If the 
determination is negative, the reviewer who has never examined 
the patient reverses the determination previously made by the 
treating physician. The suppliers must then go through a 
lengthy appeal process.
    I would like to thank you, Mr. Chairman, for providing the 
Power Mobility Coalition with the opportunity to bring these 
important issues to your attention, to the attention of the 
Committee. An audit process that targets class of suppliers 
rather than targeting abuse, extrapolations which can easily 
put a small supplier out of business, and a lengthy appeals 
process that withholds proper payments to supplier with an 
ultimate reversal rate of 80 percent.
    We look forward to working with you to achieve reasonable 
solutions to these issues. Our entire industry and tens and 
thousands of disabled beneficiaries are counting on you.
    Thank you.
    [Mr. Seeley's statement may be found in the appendix.]
    Chairman Manzullo. Mr. Seeley, I would suggest that if you 
are having continuing problem with this--what the acronym used 
for the carrier?
    Mr. Seeley. The regional carriers, the DMERCs?
    Chairman Manzullo. The DMERCs, if you feel that they are 
acting in violation of the law, you send us a letter. I will 
ask that the HCFA inspector general do an investigation. And if 
I believe that what they are doing is illegal, I am going to 
ask them to cancel the contract.
    Mr. Seeley. Thank you, Mr. Chairman. We will do that.
    Chairman Manzullo. That is what we have to do, every time 
there is a violation you bring it to our attention. We have 
within the Small Business Administration the Office of Advocacy 
that has a legal staff. We work with them. We have about a half 
a dozen lawyers on staff that are experts in the regulatory 
analysis. He does read regulations on Saturday night. 
[Laughter.]
    Not so much a social life, but use our Committee. We work 
on abipartisan basis. We were effective in canceling a contract 
when the Air force had decided they have 106,000 baseball caps made, 
and instead of giving--using it for procurement, they subcontracted 
with the Government Printing Office because they thought that hats were 
printed and not manufactured. And we called one individual and we 
stopped that contract. So we are not adverse to using any of our tools 
possible to raise as much hell possible, because you cannot afford to 
go to court with it, and that is why we are here to be your advocate. 
Okay?
    Mr. Seeley. I appreciate that, Mr. Chairman.
    Chairman Manzullo. Our next witness is Phillip Chase. Mr. 
Chase has been in the health care delivery business for over 30 
years, including both owner/operator as well as senior manager 
level position in one of the largest health care delivery 
systems in the country. He has a keen interest in health policy 
development and implementation, which has been a constant focus 
for him throughout his career.
    We look forward to your testimony, Mr. Chase.

  STATEMENT OF PHILLIP CHASE, THE CHASE GROUP, THOUSAND OAKS, 
      CALIFORNIA, FOR THE AMERICAN HEALTH CARE ASSOCIATION

    Mr. Chase. Thank you, Mr. Chairman.
    Chairman Manzullo, Ranking Member Velazquez, and members of 
the Committee, thank you for having the opportunity to appear 
before you this morning and share some insights in regards to 
effective reforms to the Health Care Financing Administration, 
now known as CMS.
    As the Chairman spoke, I am Phillip Chase. I am here today 
on behalf of the American Health Care Association. The American 
Health Care Association is a nonprofit association representing 
12,000 not-for-profit and for-profit health facilities for 
skilled nursing, assisted living, and subacute care, and 
facilities for the disabled.
    Let me briefly speak of myself. I have 30 years of 
experience as the owner and operator of skilled nursing 
facilities in California. Currently, I am the administrator of 
the Center at Park West, a 99-bed skilled nursing facility. I 
know firsthand the financial problems of the nursing home 
profession as an owner, as well as the day-to-day problems as 
an administrator trying to negotiate around complex CMS 
regulations to provide high quality care to my client 
residents.
    Before I begin my testimony, I want to say that from what 
my AHCA's representatives tell me in Washington, it is a new 
day at CMS, and with a new willingness to develop solutions to 
problems that face us. We are greatly encouraged by the 
statements of Secretary Thompson and by Administrator Scully.
    What I am going to do today is identify some systems that 
we believe deserve your oversight and attention.
    There is a dangerous storm now brewing over the long-term 
care horizon, Mr. Chairman. We have a demographic crisis that, 
if not addressed, will severely threaten the quality and 
availability of care for the wave of baby boomers who are about 
to enter in the long-term care system.
    Financially, skilled nursing facilities are, at best, 
treading water. We are facing a staffing crisis of epidemic 
proportions in every part of the U.S. Our turnover rates exceed 
80 percent annually and recruitment is nearly impossible. The 
staffing crisis is compounded exponentially by the regulatory 
system that forces caregivers to focus on extraordinary amounts 
of time on cumbersome paperwork at the expense of direct 
patient care.
    This is a burdensome system and it leaves a highly negative 
impact on patient care by driving good providers and caregivers 
to leave their profession.
    I am here today not to ask for less government--I am here 
today to ask for smarter government--government that works in 
the best interest of promoting and maintaining quality care for 
beneficiaries and work to create a positive and healthy 
environment for our caregivers.
    Since the Institute of Medicine study in 1983 and the 
Nursing Home Reform Act of 1987, facilities have been forced to 
work closely with HCFA's regulation to try to understand how to 
negotiate through that process. The system of oversight that 
exists today--although well intended--grew uncontrollably, as 
you heard earlier, and has evolved into an ineffective 
bureaucracy that needs major reform.
    Today, providers face a system of oversight that is 
entirely subjective and process-oriented, and focuses more on 
punishment, not on quality of care.
    The system bears little resemblance to the OBRA '87 that 
was envisioned. The current environment is a type of ``Catch-
22'' scenario in which the low number of citations is 
interpreted as poor oversight, while a high number of citations 
is determined to be poor care.
    The Institute of Medicine study, December of 2000, 
reinforces this conclusion. Therefore, the question before us: 
What reforms or changes can CMS make that would be more 
significant to improve its environment?
    They are of two types, Mr. Chairman. The first is the much-
needed administrative changes in how CMS carries out it 
regulatory process; the second, to address the issue of 
financing in terms of Medicaid and Medicare.
    With regard to the regulatory improvement, let me share 
with you a few insights.
    The first I would ask you to consider is to allow a 
consultative environment. Currently the language within HCFA's 
orders to state agencies is--there is a no collaboration 
policy. They are not permitted to collaborate with providers in 
terms of how to solve issues. We believe this is unfortunate. 
Their expertise and the nature of their job is seeing other 
providers and how they work gives them some opportunities to 
share with us successful programs and stories. So we believe 
that a change to the state operations manual where they could 
be consulted would be very useful in that regard.
    The second is to allow providers to follow physicians' 
orders. We recently had a survey in my facility wherein a state 
surveyor actually told me not to follow physicians' orders. 
This obviously is not appropriate, and we are caught in the 
middle because the surveyor is telling us to act a certain way, 
yet our regulations and our ethics require us to follow 
physicians' plan of care.
    The solution is to modify the CMS--I'm sorry--the State 
Operations Manual in a way that the surveyors clearly 
understand that physicians' orders should stand as the marking 
process in the care of our clients.
    The third issue is to stop CMS from holding nurse aide 
training programs. If you have a survey citation in which you 
have patients deficient care, your training program for CNAs 
may be suspended. And because of the length of time it takes 
for you to get adjudication to a proper hearing as to the 
fairness of that particular deficiency, in the meantime you 
have lost your ability to provide the training program for much 
needed staff as I mentioned earlier.
    Next, implement a fair and timely appeal process. 
Currently, providers who want to dispute citations they believe 
have been issued in error have first to appeal to the agency. 
That agency acts as the enforcer, the judge and jury, and often 
fails to render an objective ruling on a dispute. Only after 
the full administrative process has been pursued, the informal 
resolution process, the administrative law judge process, and 
finally the department appeals board, and then to the secretary 
can either the provider then go to the court system to seek a 
remedy. This is not verytimely. It can be anywhere from a year 
to a year and a half before that process is completed, and very costly 
to me as a small business provider.
    On the penalties that continue--one of the penalties that 
continue while I appeal this determination is this nurse aide 
training program, which is very vital to our sustaining our 
staff and maintain our level of care.
    A further ramification of this is that, although I have no 
claims, my liability record in terms of provider of care to my 
clients, my premiums for liability has skyrocketed from two 
years ago where I paid $60 a day in 1999, to this year paying 
$550 a day. That is almost a ten times increase.
    Chairman Manzullo. How are you doing in time? You are a 
minute 30 over.
    Mr. Chase. Thank you, sir.
    Chairman Manzullo. Can you finish in 30 seconds?
    Mr. Chase. Yes, sir.
    As a small provider, small business provider, the lengthy 
appeal process needs to be addressed and looked into.
    The next issue that I want to bring to your attention is 
the removal of disincentives to provide. I was able to take 
over from an existing provider who was about to be closed down, 
and part of the ``cost'' that I incurred was that I got stuck 
with his penalties and fines that he had experienced in his 
cooperation, and I as a successor in interest ended having to 
pay his fines and ended up having to pay for his cost 
settlement because I inherited his provider number.
    Today the Medicaid system pays for about 70 percent of the 
seniors in our nursing homes across the country, about 1.4 
million clients. CMS does have the ability to work with states 
in addressing that payment system in a way that we can bring 
that to a conclusion, bring that to a more positive resolution.
    In conclusion, Mr. Chairman, I think we have the 
opportunity at this point to work with members of the Committee 
and the new administration to seek ways in which the patients' 
needs and their care can be properly addressed in order to 
provide small business opportunity to provide a quality 
environment to these clients.
    Thank you.
    [Mr. Chase's statement may be found in the appendix.]
    Chairman Manzullo. So it is the superfund law that applies 
to succeeding owners of long-term health care facilities?
    Mr. Chase. I have not gone to HCFA directly to ask for some 
reconciliation to these issues, and they have not----
    Chairman Manzullo. Do they have authority to do that, the 
tacking of the fines of----
    Mr. Chase. Yes, they do.
    Chairman Manzullo [continuing]. That they screwed up in the 
first place?
    Mr. Chase. It is a part of the provider agreement contract.
    Chairman Manzullo. What I would like you to do is to send 
me a letter; put in there that provider agreement, and then ask 
in your letter what statutory or regulatory authority HCFA has 
in order to slap you with the penalties that were incurred by 
your predecessor.
    Mr. Chase. Yes, sir.
    Chairman Manzullo. We will take that letter and we will 
send it to HCFA, and we will get an answer from them.
    Mr. Chase. All right, thank you for your help.
    Chairman Manzullo. Okay?
    Mr. Chase. Thank you.
    Chairman Manzullo. You bet. This is amazing. My mother was 
in a nursing home for a period of time, and I could 
commensurate with what she had to go through on it.
    Our next guest is Norman, is it Goldhecht?
    Mr. Goldhecht. Correct.
    Chairman Manzullo. Mr. Goldhecht is currently the Executive 
Vice President of Diagnostic Health Systems, DHS, located in 
Lakewood, New Jersey, where he oversees operations, billing and 
cardiac services. I guess the cardiac services are related to 
the operations of billing?
    Mr. Goldhecht. That's true.
    Chairman Manzullo. Prior to joining DHS in 1985, Mr. 
Goldhecht worked for the Lovebright Diamond Company where his 
primary functions including invoice clients and tracking 
accounts receivables.
    We look forward to your testimony, Mr. Goldhecht.

   STATEMENT OF NORMAN GOLDHECHT, DIAGNOSTIC HEALTH SYSTEMS, 
LAKEWOOD, NEW JERSEY, FOR THE NATIONAL ASS'N OF PORTABLE X-RAY 
                           PROVIDERS

    Mr. Goldhecht. Thank you, Mr. Chairman, and members of the 
Committee. I appreciate the opportunity to appear before you 
today. My name, as you mentioned, is Norman Goldhecht, and I 
serve as the Regulatory Chairman of the National Association of 
Portable X-Ray Providers, and I also operate a mobile radiology 
company in New Jersey. I am particular pleased to have the 
opportunity to once again testify before this Committee as my 
company serves many patients in the New Jersey and New York 
area who are constituents of the members of this Committee.
    Mr. Chairman, I represent an industry predominated by small 
and micro businesses. Our companies provide services to our 
nation's elderly in a particularly safe, convenient fashion, as 
we, literally, provide care at the patient's bedside. Because 
the vast majority of our patients rely on Medicare, our 
industry is highly dependent upon HCFA and its regulatory 
processes and pricing.
    The regulatory process and specific policies of HCFA are 
critical to our ability to provide our much needed services. It 
is for this reason that we are so grateful to this Committee 
for, again, seeking to ensure that the small businesses of 
America are appropriately considered when HCFA policies and 
procedures are reviewed.
    I would additionally like to thank Chairman Talent, the 
immediate past Chair of this Committee for sponsoring 
legislation last year to assist our industry in providing 
quality care for the elderly and infirm. Although Chairman 
Talent, and fellow original sponsor, Chairman Crane, were 
unable to prevail in the much needed legislation, the NAPXP and 
all of its members greatly appreciate their efforts and the 
efforts of all the members and staff who assisted them.
    The negative effects of HCFA policy are first felt and most 
keenly in our rural and less prosperous communities. American 
small business provides the most cost-effective and thus 
available service in far-flung communities and other less 
profitable areas. While our federal agencies are most likely to 
hear and understand the well-financed perspectives of big 
business interests, the needs of our citizens living in regions 
offering lower profits to the small businesses who provide the 
only service available are frequently ignored.
    As I present our situation to the Committee, I must stress 
that our situation is grave. If we areunable to effect change 
upon the current HCFA policies, our industry will continue to shrink 
until only those patients fortunate enough to live in high density, 
high profit areas will find our services available. To the elderly 
patients in a facility in rural Illinois, or Colorado, or Texas, the 
need for an X-Ray or an EKG in February will require an ambulance ride 
to a hospital. There, the patient will be subject to all the of the 
waiting and discomfort we all associate with a trip to the hospital 
followed by another ambulance ride home. Contrast this with quality 
care offered in the comfort of the patients' rooms, surrounded by 
reassuring sights and sounds without concern of adverse weather 
conditions or road hazards.
    Fortunately, this Committee has already provided an 
appropriate mechanism for improving for most of our policy 
problems. Passage of the Regulatory Flexibility Act should have 
dramatically decreased the number and scope and type of 
problems our industry has experienced at the hands of HCFA. 
Unfortunately, while RFA presents a clear mandate for small 
business impact analysis in the regulatory process, it is all 
too often ignored. HCFA's failings in this area are cited 
directly by SBA Chief Counsel Glover in his annual report on 
RFA Fiscal 2000.
    If the NAPXP were to request one result from this 
Committee's actions, it would be that the RFA be vigorously 
employed and enforced.
    I would like to list three areas where HCFA's policies have 
failed to serve our industry or the Medicare system.
    Rural access: Portable x-ray providers service many skilled 
nursing facilities and homebound patients that reside in rural 
areas. The providers must travel considerable distances to and 
from these sites. Increasingly, our member companies are opting 
not to service these areas, and thus patients. We are, frankly, 
amazed that a policy which has the effect of creating a 
regional ``wrong side of the tracks'' disadvantage to millions 
of our nation's elderly is tolerated. By refusing to 
additionally compensate providers of rural services in response 
to their clearly higher costs and lower profits, HCFA is 
actively engaged in a policy which simultaneously denied equal 
patient care, and drives rural small business service providers 
out of existence.
    E.K.G. transportation: Currently, portable x-ray providers 
do not receive any additional reimbursement to travel to and 
from a skilled nursing facility while performing an EKG. The 
1995 GAO study of this situation showed an already 
disproportionate relationship between portable EKG services in 
rural versus urban settings. Which member of this Committee 
would wish to explain to their constituents that are receiving 
fewer diagnostic procedures simply because they reside in the 
wrong area of the country?
    Consolidated Billing: The Prospective Payment System for 
SNFs mandated by the Balanced Budget Act has been very damaging 
to our industry. While our industry initially offered cautious 
support of this policy in the interest of improving fiscal 
health to the system as a whole, enactment has caused many of 
our worst fears to be realized.
    Mr. Chairman, I recognize the challenges faced by the this 
hard working Committee in dealing with these often complex 
issues. Again, I, and all of the members of the NAPXP, pledge 
our support for the efforts and thank you for the opportunity 
voice our concerns.
    I would be happy to answer any questions of the Committee.
    [Mr. Goldhecht's statement may be found in the appendix.]
    Chairman Manzullo. I appreciate all of your testimony. 
There is a nursing home back in our district that got audited 
by HCFA, and they were cited and threatened with a fine because 
they did not serve parsley garnish on a plate even though it 
was on the menu, and also they served porkettes instead of pork 
chops for dinner.
    Now, I was discussing with my colleague here that, you 
know, we pass the laws, but there must be a bunch of people out 
there that have nothing to do but to walk around and harass 
people. I do not even know what a porkette is. I guess that is 
what happens when you raise beef cattle. I don't know.
    Dr. Hulsebus, the question I want to ask of you, you 
practice with your brothers; is that correct?
    Dr. Hulsebus. That is correct.
    Chairman Manzullo. And one of them is here.
    Dr. Hulsebus. Yes. Dr. Robert Hulsebus began practicing in 
1949, and my father is a chiropractor, as we stated earlier, 
and we have a large practice in Illinois.
    And when Medicare came in and--carrier, rather, and audited 
us, they said they randomly picked, they picked our 
chiropractic and some other chiropractic clinic down in 
Baulton, Illinois, by the name of Dr. Frank Beamus. We were all 
second generation chiropractors and we had large chiropractic 
facilities.
    And when we were audited, we have always cooperated and 
always tried to communicate with the carrier to try to comply 
with everything they have asked us to do. We have asked for 
guidelines and tried to cooperate, and our chiropractors, 
myself included, are on boards and past presidents of state 
organizations, and we are very, very active.
    And basically we are told by the carriers we couldn't talk 
to them. And we received letters from them and mandated 
payment.
    Chairman Manzullo. They would not sit down with you and 
explain to you what, if anything, you did wrong?
    Dr. Hulsebus. Not at all.
    Chairman Manzullo. And then they went after you and your 
brothers, and what is the total amount of fine that they wanted 
from----
    Dr. Hulsebus. Well, it is a quarter of a million dollars, 
and you have to understand that chiropractic care, the only 
paid benefit is that of chiropractic adjustments of the spine, 
which averages $35 a visit.
    Chairman Manzullo. So there is really one Medicare coding 
that that you could use; is that correct?
    Dr. Hulsebus. Correct.
    Chairman Manzullo. And that is to manipulate the spine?
    Dr. Hulsebus. Correct. Based on 80 percent of our care, 
roughly, not necessary. And it is the same care we have been 
doing to the patients for--ever since Medicare started.
    Chairman Manzullo. Now, we had these people come in our 
office in Rockford.
    Dr. Hulsebus. The program integrated people.
    Chairman Manzullo. That did not answer my letter for 90 
days.
    Dr. Hulsebus. Right.
    Chairman Manzullo. And they came in the office in Rockford, 
and tell us what happened there.
    Dr. Hulsebus. Well, basically, we sat down with them and 
told them we would like to dialogue and have open 
communication, and they said they reviewed our claims and they 
had a non-qualified person, a non-chiropractor that is, review 
the claims. And they just said we just find the claim is not 
necessary.
    And yet we had been audited by Blue Cross/Blue Shield 
before that, that said all the claims were payable. And we 
asked them how they came about their audit and how they came 
about their decision on whether it was necessary or not, and 
they said, well, they had a nurse, registerednurse review them 
and they also had the medical director.
    Well, we asked them, ``Well, did you review each claim? Did 
you look at the x-ray of each patient?'' because in 
chiropractic it is mandated that each patient must have an x-
ray to demonstrate the need of the care for supplementation.
    And they said ``No. We didn't look at the x-rays.''
    And I said, ``Well, how can you determine whether care is 
necessary or not if you don't use the criterion material in 
order to determine whether it is necessary or?''
    Chairman Manzullo. And that is when we came to the 
conclusion they do not know the difference between x-rays and 
the X-files.
    Dr. Hulsebus. Exactly. It was just so ridiculous, the whole 
thing was. They never looked at anything. They made their 
claims in January and they did not----
    Chairman Manzullo. They went from $250,000 down to zero.
    Dr. Hulsebus. Down to--basically, we went from $250,000 to 
about $40,000 down to nothing. In the end, we prevailed on the 
whole thing, and all the care was necessary and everything was 
great.
    Chairman Manzullo. Right at the end you got them down to 
$1,500, and then you took that to the administrative law judge, 
and then won, and then HCFA wanted to appeal that.
    Dr. Hulsebus. Correct. We went in front of a judge and he 
looked at the whole thing, and said there is nothing in here 
that should not be paid. The carrier makes no sense in the way 
they did this, and there is no reason for this at all. He 
recommended total payment. And then they wanted to appeal it 
again.
    And then your office stepped in, and asked what was going 
on and----
    Chairman Manzullo. Well, I think we did more than that.
    Dr. Hulsebus. Oh, yeah, I know you did a lot more than 
that.
    Chairman Manzullo. But the--if you had not had a 
relationship with a member of Congress----
    Dr. Hulsebus. Mr. Manzullo, we went to four different law 
firms. We spent a tremendous amount of money and we tried 
everything we could. You know what our research were, we do not 
even know what a post-hearing review is. There was no law firm 
that we could contact that could help us. And finally we went 
to yourself and asked for help and immediately--you know, you 
looked into it, and said there is something wrong here.
    You tried to contact them, I can vouch for that, and they 
would not even cooperate with you. And the carriers totally 
would not cooperate with us, tell us what we were doing wrong. 
All we want to do was correct the problem, if there was a 
problem. We could not find out what the problem was, even 
through your office.
    Chairman Manzullo. And to this date, there still are no 
guidelines----
    Dr. Hulsebus. There are no guidelines.
    Chairman Manzullo [continuing]. From HCFA as to what is 
expected of the chiropractors.
    Dr. Hulsebus. And there are no guidelines, and we still do 
not know if what we do is right or wrong, and we just continue 
to try to provide the services that is best for our patients 
and try to go along with it. We do not know what to do.
    Dr. Hulsebus. I appreciate your coming. I guess the lesson 
learned here is that we have to educate members of Congress on 
how to go about to deal with HCFA, and educate the medical 
profession that they should contact members of Congress in 
order to--in order to have us represent you before HCFA.
    What a story, huh? It is amazing.
    Ms. Velazquez.
    Ms. Velazquez. Thank you, Mr. Chairman.
    Mr. Goldhecht, oftentimes regulations that are required by 
a regulated community were not only required by statute, but 
required within a certain time frame. In other words, the 
statute passed by Congress was the problem.
    Do you believe that growing amount of CMS paperwork 
requirements are the result of congressional mandate?
    Mr. Goldhecht. That is part of the problem that our 
industry faces. A lot of the requirements and audits that we 
received are related to paperwork that is somewhat out of our 
control.
    For example, a lot of the procedures, when we performing, 
using Mr. Chase's example, Mr. Chase's facility, a nurse calls 
a facility--calls our facility or provider to order an x-ray to 
be performed. They get a physician order, and we go out and 
perform, and they will provide us with a slip.
    Yet we are obligated to document all of that to make sure 
that is done properly. If the audit comes, they will come and 
audit us to make sure that their doctor or the doctor that is 
on their staff performed what he needed to do, which we have no 
affiliation with, no control with, yet we are going to be 
liable, and we are going to get audited and have to document 
all that.
    But more so, some of the regulations that has recently been 
mandated are more troublesome. For example, in my testimony, 
the EKGs, the removal of EKG transportation, we basically are 
paid the same amount a physician is paid to perform an EKG. He 
performs it in his office. We perform it by traveling. We are 
not paid for that travel time. That expense is incurred, and 
the reimbursement that we get paid, what my company gets paid 
is a little bit less than $16.15. It is a major problem.
    Ms. Velazquez. Thank you.
    Mr. Chase, in the time that we have gone through the 
transitions of the BBA, BBIA, HCFA and BIPA, have you used the 
rule-making processing, and are you using the process to give 
you comments as to where you think there are problems?
    Mr. Chase. Yes, ma'am, we do. Our association is very 
active in dialoguing with the agency and providing our input 
brought on by providers in the field who are experiencing the 
real live issues and those these changes will impact us, and we 
do try to provide our perspective on those regulations.
    Ms. Velazquez. And do you think the agency listens to your 
comments?
    Mr. Chase. Not as successfully as we would like. It has to 
be told a number of times over and over again before it appears 
to finally click with them. It is frustrating.
    Ms. Velazquez. Mr. Goldhecht, in your experience, could you 
say that there is any major program, Medicare, Medicaid, 
private insurance, that stands out as being outstandingly 
better or worse than another in terms of providers?
    Mr. Goldhecht. Unfortunately, no one is better than the 
other. Medicaid for our industry is probably the one. Medicare 
and the private--the private insurance companies usually suit 
to what Medicare deems reasonable. The problem is what is 
reasonable and what is not, especially when you talk about a 
micro industry like ours. It is just overlooked in general, and 
that is the biggest obstacle that we have.
    Ms. Velazquez. Mr. Michael Hulsebus?
    Dr. Hulsebus. Yes.
    Ms. Velazquez. Regarding the legislation that was sponsored 
by Mr. Toomey and Mrs.Berkley, what is the difference between 
the operations that apply to the appeals and coverage process and the 
provisions contained in MERFA?
    Dr. Hulsebus. I am not sure if I understand your question 
correctly.
    Mr. Chase. Like, for example, should we be giving the 
agency time to promulgate the BIPA regs before we start 
reforming the system again?
    Dr. Hulsebus. Again, I am not real clear on your question.
    Ms. Velazquez. If anyone will comment on that.
    Dr. Whitson. I think part of what they are trying to do, 
what Congressman Toomey's bill is trying to do is basically 
stop--if an agency like Medicare finds me in violation and 
finds under an audit that I have done some things that they 
want to down code, they can then extrapolate that to a large 
amount of money, and demand that money from me within 30 days 
or it starts bearing interest, and then fine me even more.
    Part of the new regulations, I think that is in the new 
bill, would be that they would not be able to do that until I 
have had a chance to appeal it and I could indeed, if I were 
found negligent in my recordkeeping, I could take up to a year 
to repay that rather than basically have the ability to put me 
out of business, which they have at this point, even before I 
appeal it.
    Ms. Velazquez. Okay, Mr. Chairman, I do not have anymore 
questions.
    Chairman Manzullo. Thank you.
    Mr. Toomey.
    Mr. Toomey. Thank you, Mr. Chairman, and if I can follow-up 
on the last question. I agree with the way that Dr. Whitson has 
characterized the legislation, but I would point out that our 
legislation is broad in its scope in that it only applies to 
the first audit, and the subsequent audit would not limit HCFA 
the way the first one would be audited, which is part of why I 
find it very hard to imagine why people would disagree with us.
    I was hoping Dr. Whitson could just comment a little bit 
more about something that he touched upon during his testimony, 
and that is, is there any way that you could quantify for us, 
whether it is in dollars or in personnel time or your own time 
or the number of staff you have, the entire burden that you 
face in dealing with the regulatory environment, and especially 
if you could sort of characterize that in terms of the effect 
that you see that having on solo family practitioners.
    Do you see it having an effect on the number of solo 
practitioners in the Lehigh Valley where you practice medicine? 
And do you see it having an impact on the future of these small 
practices that so many patients so very much want to have?
    Dr. Whitson. I see it having--I see it having a huge 
impact. I am becoming a dinosaur. I cannot think of very much 
other solo family practitioners in the Allentown area, and 
there used to be a lot of us.
    I now get things in the mail like this all the time. I got 
two yesterday. I used to enjoy going to medical conferences. I 
enjoy going, but I used to enjoy it more because now a lot of 
the medical conferences are about coding. They are about 
documentation and coding guidelines.
    Yesterday, coincidentally, which is not an usual day, I got 
two. This one says, ``Certified professional coder Boot Camp.'' 
Okay, I can go for three days, and this is dedicated to the 
business of medicine.
    Ladies and gentlemen, Congressmen and Congresswomen, I 
continually want to be a better physician, but I do not want to 
be a better coder. Unfortunately, I am in a situation that if I 
do not do that I am the target. I have not done what my 
colleague here has done, and ask for help from Congressman 
Toomey, and perhaps I should have because I have been rather 
outspoken in my dislike of managed care.
    I have viewed health maintenance organizations as wealth 
maintenance organizations basically for insurance companies, 
and I think insurance companies have now been placed squarely 
between patients and doctors. Because they are placed between 
doctors and patients, it really does not enhance the care I can 
give them. It simply enhances what I have to give the insurance 
companies, and that is more and more reports.
    I can remember the good old days, I hate to sound that old, 
when the regulations were not that bad, and to take it to an 
extreme example, if we think about the three by five cards that 
the old family doctors used to use that are so often made fun 
of, I am not so sure we have not gone to the complete opposite 
extreme.
    The good old family doctor who knew each and every patient, 
he had that history, but he had it right up here in his memory, 
and he knew that patient personally. So when he saw something 
and put down a couple of words about what that office visit was 
about, the next time he saw the person he knew why he came in 
the last time, and he knew what he should be concerned about 
this time.
    Now, if I want to dictate into my record, I cannot write 
it, I have got to dictate it because I have got to put much too 
much down. I still want to dictate pertinent things. I want to 
know what was wrong with the person, what I might be concerned 
about, but also in my notes I want to put down if the person's 
husband is sick, or if something is really important in that 
person's life because it will impact on their medical care.
    The insurance companies could care less. For them I must 
dictate, as in my initial testimony, all the line by line, item 
by item things that really I know are normal and the patient 
knows are normal, but I have got to document for the insurance 
company or the insurance company will say I never should have 
gotten paid 40 or 50 dollars for that visit. I should have 
gotten paid $15 for that visit, and that would not pay my 
office overhead.
    Some doctors are starting to use templates. It is scary. 
They can have them in their palm computers or they can have a 
big computer system if it happens to be a big corporation with 
a lot of doctors, and a lot of them have even set their 
computers to default to normal findings.
    So when they see a person, they can just flip the mouse and 
it checks everything in all the review systems or medical 
things that should have been examined, and that does not prove 
they were examined, but it will certainly stand up very well if 
they are subject to an audit.
    I think this is a tremendous problem for the little guy, 
for the independent practitioner. In the past five years I have 
had my first malpractice claim that was over my head for two 
and a half years, dismissed by a jury in 10 minutes, because of 
an attorney who used the coding or inadequate documentation 
that they thought was inadequate because of this silly rule 
that if you did not write it down, you did not do it, which is 
just incorrect.
    And my concern is that Medicare--where Medicare goes 
everyone else goes. Malpractice attorneys, private insurers, 
Blue Cross and Blue Shield, I think it is having a tremendous 
deleterious effect. I doubt that there will be many solo 
practitioners or small practices left unless this is changed.
    Thank you.
    Mr. Toomey. Let me just say and then I will yield the 
balance of my time, Mr. Chairman, but I want to thank the 
witnesses all for their testimony. This has been extremely 
helpful. The Ranking Member made the point that many of the 
problems have grown out of legislation that Congress is guilty 
of. Others have grown out of regulations, I think, that is 
dreamed of its own. But together we have got to deal with this 
problem.
    It is an absolute tragedy that we have allowed health care 
in the United States to get to thepoint where wonderful family 
practitioners like Dr. Whitson are basically being forced out of 
business or becoming employees of large groups or hospitals, or losing 
a very, very important and valuable choice for patients. We have got to 
bring this to an end.
    I want to thank you all for your support for this 
legislation, and I yield the balance of my time.
    Chairman Manzullo. Thank you.
    Dr. Christian-Christensen?
    Mrs. Christian-Christensen. Thank you, Mr. Chairman.
    I too want to thank our panelists for being here and for 
not only being here yourself but for giving voice to all of the 
hundreds of thousands of health care providers and all of the 
years of the frustration that we have faced with HCFA.
    You have also not only been able to help us understand 
better what you face in dealing with HCFA, but you are 
preparing us for our next hearing, which we will be questioning 
the HCFA officials, so we thank you for the preparation that 
you have been able to lay down for us for that hearing. I 
probably have maybe about two questions.
    We recognize that Congress has created some of the problem, 
but how much of it can be addressed by more uniformity within 
the contractors and more monitoring of the contractors because 
it seems as though from one city, or one region to another what 
we have done has been interpreted differently and is 
administered differently?
    How much do you think we can fix the problem by addressing 
the contractors, the contractees?
    Mr. Chase. I will start. Certainly in the survey 
certification process where the state agencies are out to 
review our compliance, if you look at the 50 states and how 
they operate directly under the guise of HCFA, there are 
regional interpretations that are so significantly different 
than what happens in one area versus the other. And our ability 
to use or to bring our point to bear is limited because we are 
dealing with only our particular licensing agency, and they 
answer only to HCFA, and we have to deal with them on an 
ongoing basis.
    So the differences that occur and exist from region to 
region are very significant and they are frustrating for us. We 
worked very hard with Congress, firstly, and then with the 
agencies to develop reasonable and new regulations that is 
meaningful to the quality of care you will find in a facility 
and yet to have third party interpretations that are not 
consistent around the country is very, very frustrating and 
unfair.
    Mrs. Christian-Christensen. Okay. Do you think the MERFA 
begins to address the collaboration issue?
    I think that was also your issue, Mr. Chase, the 
collaboration issue?
    Chairman Manzullo. Donna, you are not on?
    Mrs. Christian-Christensen. Oh, sorry. The collaboration 
issue, do you think that MERFA begins to address that issue?
    Mr. Chase. I think it is a first step. It allows us to at 
least recognize that there is an issue that we need to work 
with together on behalf of the clients that we both are 
concerned with. We do not want to be in this environment that 
currently exists. We want to be able to work together for the 
benefit of the client. They are the ones that both Congress, 
HCFA, and ourselves should be concerned and focused on, and 
that is not yet the case. Hopefully, this will give us the 
first step in that process.
    Mrs. Christian-Christensen. Thank you. I really appreciate 
again all of you again for coming. I am revisiting all of my 
worst nightmares from practice, especially listening to you, 
Dr. Whitson, is it?
    Dr. Whitson. Yes.
    Mrs. Christian-Christensen. As a family physician myself, 
but we really appreciate your being here.
    Thank you. Thank you, Chairman.
    Chairman Manzullo. So you left the uncomplicated world of 
medicine to come to this easy place. [Laughter.]
    Appreciate your questions.
    Mr. Issa.
    Mr. Issa. Thank you, Mr. Chairman. And I apologize for 
missing a little bit of the testimony.
    Chairman Manzullo. Excuse me, Mr. Issa. You told me that 
several times.
    Mr. Issa. That's alright. You know, my grandfather's name 
was Dafanse Swanza Be Issa, so he decided to be big Dave Issa, 
and I have been living with this pronunciation for my whole 
life. I take almost any pronunciation, Mr. Chairman, especially 
from you. [Laughter.]
    Getting to a lighter note, your testimonies. I think I 
heard a consistent pattern in the time that I have been here 
and reading through your testimonies, and it seems to encompass 
two things: One, you are not terribly keen about any HMO.--
unless I misunderstood that. But there is a particular concern 
that the worst offender is the federal government when it tries 
to play HMO and/or health care provider.
    Is there anyone that is not going to nod yes on that?
    Okay, so assuming that is the case, we are looking at 
reform and helping you in this case, and, of course, Mr. 
Toomey's bill. It seems like in the case of HMOs, for the most 
part, patients that come to you, they and/or their employer 
have chosen that plan. In a sense the employee has decided to 
stick somebody between you and them to get a cheaper price. And 
we may not fully agree whether it is the employer or the 
employee, but between the two of them one of them has made that 
decision because in most cases they offer an HMO and a PPO and 
a POS, all of which you probably do not like, but you know, 
different flavors.
    I guess my question would be, is there any real potential 
for the government ever to be the best of the health care 
reimburses or is it an inevitability that they are always going 
to be the worst? Perhaps what we should be looking at is not 
reforming, but to a great extent trying to privatize, trying to 
move the dollars to the patient and then let the patient make 
the choice.
    And I put that out to you today in the hopes that you will 
come back and tell me is this viable? Is this a direction 
Congress should be looking, to put the dollars of the Medicare 
and Medicaid recipient back into their hands with the 
understanding that they are going to put it into some other 
plan, but a plan that would not be the federal government 
making the decisions. I would welcome any of your comments.
    Dr. Whitson. That is exactly the only way to answer this 
problem. I can remember years ago when the government first 
recruited physicians to join Medicare, and many of my older 
patients who then were going to be on Medicare would come and 
try to pay for their office visit, and I would say, ``No, no, 
now this is going to be paid for by the government.''
    They would say, ``No, we don't want that.''
    They were smarter than I was. Basically, what has happened 
is the patient has been taken out of the equation. Let the 
patients be the consumers. Let them have some financial stake 
and some financial risk in what care they decide to have.
    A lot of my patients were forced into HMOs. They did not 
have a choice. Unfortunately, health care became a benefit of 
employment. As technology increased, some people think 
doctorscharge too much. I think it was mostly technology. But as it 
increased, it became a very burdensome thing for the employers, and 
they wanted a cheaper way out. But they were not giving apples for 
apples. They were giving apples for oranges and patients were forced 
into that situation.
    But I think the only way out is the federal government 
giving the choice back to people and giving them some financial 
incentive to make choices. Do not go where it is really 
expensive. Do consider what treatment options are best for you, 
and do consider what they cost, and then that will trickle down 
to the private insured's.
    Mr. Chase. Let me add from my perspective dealing with the 
senior community. My concern has always been that that would be 
the long-term goal, but in the short term, we have the existing 
world as we know it, and the Medicare program, as managed by 
HCFA, set up by Congress in terms of the benefits to the 
beneficiaries, in my view is more fair to the client 
beneficiary than is the managed care system.
    Managed care system by definition is pay at a reduced rate 
by the government to the third party administrator, and then he 
has got to pay for his salaries and staff and advertising, 
promotions, et cetera, to the net cents available to--as you 
provide care, it is probably 65 cents on the dollar, where 
Medicare at least keeps the dollar whole and promulgates that 
service down to the continuum.
    So in dealing with seniors, I always encourage them to 
maintain their Medicare status because I believe they have a 
better shot at receiving a quality outcome than they do 
associate with managed care as their attempts to be more 
efficient in the process.
    Mr. Goldhecht. To further back up that point, the Medicare 
process as it is today as far as the skilled nursing facility, 
which my industry deals with, it is a much better system for 
that patient as it exists right now. The HMO that has tried to 
manage those patients has failed terribly, and specifically 
with our industry, they have not reimbursed certain codes 
because they just felt like they didn't need to, and this puts 
us in precarious situation because we are contracted with the 
nursing home to perform services to their residents regardless 
of their insurance.
    If that patient has an insurance that does not recognize 
some of our codes, we have to perform the service anyway. If a 
private insurance company all of a sudden decides, well, you 
know, we are not going to pay for this code, and we say, well, 
if you do not pay for it, you will have to put that patient on 
ambulance, they know we are going to go anyway because we have 
a contract with the facility. So therefore we are in a 
situation between the patient, the facility and the service.
    So unless there are these intrinsic things that, and this 
is just one example as our industry adhere to this, there is 
going to be massive fallout.
    Mr. Issa. I want to thank you. With respect to the 
Chairman's time, can I allow another answer?
    Chairman Manzullo. Sure.
    Mr. Issa. Please.
    Mr. Seeley. I was simply going to make the point, 
Congressman, that is a difficult question from my industry's 
perspective to answer. When I deal with the agency in my 
community as well, and when comparing HMOs, for most of the HMO 
plans, I have been contracted with HMOs to Medicare, I would 
say in concept----
    Chairman Manzullo. Would you excuse me just a second.
    Dr. Hulsebus has to catch a 1:30 in Baltimore. And Mike, it 
is nice seeing you, but you should leave now.
    Dr. Hulsebus. Okay. [Laughter.]
    Thank you.
    Mr. Issa. Thank you, Doctor.
    Chairman Manzullo. We know Rockford is not a straight shot. 
We will see you later. Thank you.
    Mr. Issa. Yes, Brian.
    Mr. Seeley. The only problem exists that if the Medicare 
system we are given the opportunity that is on paper to work 
the way it should be, the way we are told it should be. If HCFA 
would oversee its intermediaries the way Congress has 
instructed them to oversee, it might be a pretty darn good 
system. The problem is that on the intermediary level for our 
industry they act autonomously. HCFA knows they act 
autonomously. There is no consistency so we do not know how the 
system actually is working or should work.
    Mr. Issa. Well, I appreciate your comment. One odd thing 
when you notice that many were working at reforming the 
existing system, as a freshman who is going to be here for 
awhile, I am looking and saying, you know, I do not have the 
power to reform the system. I will go with my leadership and 
help them. But over the next several years I hope we will see 
you all again in the effort to find bigger, final solutions, if 
they exist, even if they are outside the box. And judging from 
the ascendancy of my Chairman, with a lot of hard work, I could 
end up chairing--what is it, eight years, six years?
    Chairman Manzullo. I do not know if you want that. 
[Laughter.]
    You know, there is something else to this place besides 
legislation. What the Hulsebuses did because of their tenacity 
is they took on the entire system, and HCFA said that there 
were no longer torture chiropractors nationwide. You saw his 
demeanor. He can barely talk about it, and I can barely talk 
about it myself. But these are people that are trained to heal. 
And those boys were tortured so much, that that became a cause 
celebre for me. The reason I'm asking you is to get letters to 
us. Get them to Barry Pineles. He's an expert on regulatory 
reform. He'll work with the Democrat minority staff. And if we 
go after these abuses one by one, that could set a standard for 
different areas.
    So, sometime I think that the law is the last thing you 
want to do. You pass laws to add more regulations. If we could 
find the abuse and uncover them one by one, we'll do that. 
That's why we're here. Ms. Velazquez.
    Ms. Velazquez. Yes, Mr. Goldhecht, I have one more 
question. What has been the effect on your industry of 
implementation of the prospective payment system?
    Mr. Goldhecht. How much time do we have today? [Laughter.]
    There are two major flaws that happened to our industry 
that has directly related. One is that in lieu of getting paid 
directly from part B, we are now paid from the SNF. The SNF 
have there own problems with their payments, but as it flows 
down to our level, they have negotiated prices with us that are 
below the HCFA fee schedule and in some cases, below what our 
costs are.
    In doing so, it has put a pressure on us. We have gone to 
HCFA many times and told them, ``you are putting us in a 
precarious situation'', here we are as a part A patient, we are 
doing this service for below cost and next door, the bed next 
door, there is a part B patient, and we are performing a 
service at the Medicare fee schedule. That is clearly a 
violation of kickback laws.
    They turned this to OIG and OIG says it is HCFA problem and 
we go around the revolving door.
    The second problem that is probably just as big, if not 
bigger, is that there is no prompt payment from SNF to any kind 
of vendor. They get paid from HCFA. They don't have any 
obligation to pay the provider timely. And in those several 
contracts that exist, HCFA's response to us is, well, that is a 
private relationship between you and the SNF, and I tend to 
disagree that we perform the service. They have collected the 
funds. Surely it is our funds. We have just--they are the 
vehicle for us to get it, and that is probably the biggest 
obstacle.
    Ms. Velazquez. Mr. Chase, as a nursing home owner, how 
current are you paying--are you paying these providers and how 
quickly do you get these payments out?
    Mr. Chase. We try to stay within about 90--between 90 and 
120 days. The issue is Congress showed some wisdom here, as you 
know, in April the PPS system was adjusted and that was some 
relief. And as that cash flows begins to become a reality in 
our bank accounts, I think we can make a concerted effort to be 
more appropriate and more timely in that payment. But the PPS 
system was a tremendous hit to the profession. About 20 percent 
of my colleagues across the country are in Chapter, and a 
certain number of others certainly are near being in Chapter 
because of the public program and what PPS did.
    And, finally, your wisdom in April, and hopefully you will 
have an opportunity here this year or next to continue that 
payment because there is a cliff on that fix that you put in 
place last year. It expires at the end of September of 2002, 
and we need Congress's support to continue that cash flow so 
that we can be a fair partner to our ancillary key members so 
we can provide that quality care and product to our clients.
    Ms. Velazquez. Thank you. No more questions, Mr. Chairman.
    Chairman Manzullo. Thank you. For the record, could 
somebody--was it you, Mr. Goldhecht, that used the word ``SNF''
    Mr. Goldhecht. Yes.
    Chairman Manzullo. Could you----
    Mr. Goldhecht. Skilled nursing facilities.
    Chairman Manzullo. All right. Okay.
    We are having this hearing involving the HCFA people in 
about two weeks. I would ask any of the groups that you would 
like us to ask a question of them--oh, I see a lot of pens 
going down--to get those in writing, get those to both staffs. 
We will take a look at them. It gives us ideas as to questions 
to ask, and it will be very interesting to hear. We have great 
expectations for Mr. Scully--I do not know why he would take 
that job. [Laughter.]
    But I admire him because he has gone into, I think, the 
worst managed agency in Washington, with an attempt to clean it 
up. We have talked to some of the people at HCFA. There are 
some marvelous physicians over there that are working very, 
very hard to try to do something, really dedicated public 
servants that have got into it because they were tortured by 
the system, and a lot of my colleagues have been tortured by 
that system. So we are looking forward to a great hearing.
    And again, I want to thank you for the tremendous 
testimony, traveling a good distance to come down here. I do 
not know who is taking care of your practice, David, as a sole 
practitioner. But again, thank you very much.
    This hearing is adjourned.
    [Whereupon, at 12:25 p.m., the committee was adjourned.]
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