[House Hearing, 107 Congress]
[From the U.S. Government Publishing Office]
H.R. 2768, THE ``MEDICARE REGULATORY AND CONTRACTING REFORM ACT OF
2001''
=======================================================================
HEARING
before the
SUBCOMMITTEE ON HEALTH
of the
COMMITTEE ON WAYS AND MEANS
HOUSE OF REPRESENTATIVES
ONE HUNDRED SEVENTH CONGRESS
FIRST SESSION
__________
SEPTEMBER 25, 2001
__________
Serial No. 107-45
__________
Printed for the use of the Committee on Ways and Means
U.S. GOVERNMENT PRINTING OFFICE
76-025 WASHINGTON : 2001
For Sale by the Superintendent of Documents, U.S. Government Printing Office
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COMMITTEE ON WAYS AND MEANS
BILL THOMAS, California, Chairman
PHILIP M. CRANE, Illinois CHARLES B. RANGEL, New York
E. CLAY SHAW, Jr., Florida FORTNEY PETE STARK, California
NANCY L. JOHNSON, Connecticut ROBERT T. MATSUI, California
AMO HOUGHTON, New York WILLIAM J. COYNE, Pennsylvania
WALLY HERGER, California SANDER M. LEVIN, Michigan
JIM McCRERY, Louisiana BENJAMIN L. CARDIN, Maryland
DAVE CAMP, Michigan JIM McDERMOTT, Washington
JIM RAMSTAD, Minnesota GERALD D. KLECZKA, Wisconsin
JIM NUSSLE, Iowa JOHN LEWIS, Georgia
SAM JOHNSON, Texas RICHARD E. NEAL, Massachusetts
JENNIFER DUNN, Washington MICHAEL R. McNULTY, New York
MAC COLLINS, Georgia WILLIAM J. JEFFERSON, Louisiana
ROB PORTMAN, Ohio JOHN S. TANNER, Tennessee
PHIL ENGLISH, Pennsylvania XAVIER BECERRA, California
WES WATKINS, Oklahoma KAREN L. THURMAN, Florida
J.D. HAYWORTH, Arizona LLOYD DOGGETT, Texas
JERRY WELLER, Illinois EARL POMEROY, North Dakota
KENNY C. HULSHOF, Missouri
SCOTT McINNIS, Colorado
RON LEWIS, Kentucky
MARK FOLEY, Florida
KEVIN BRADY, Texas
PAUL RYAN, Wisconsin
Allison Giles, Chief of Staff
Janice Mays, Minority Chief Counsel
______
Subcommittee on Health
NANCY L. JOHNSON, Connecticut, Chairman
JIM McCRERY, Louisiana FORTNEY PETE STARK, California
PHILIP M. CRANE, Illinois GERALD D. KLECZKA, Wisconsin
SAM JOHNSON, Texas JOHN LEWIS, Georgia
DAVE CAMP, Michigan JIM McDERMOTT, Washington
JIM RAMSTAD, Minnesota KAREN L. THURMAN, Florida
PHIL ENGLISH, Pennsylvania
JENNIFER DUNN, Washington
Pursuant to clause 2(e)(4) of Rule XI of the Rules of the House, public
hearing records of the Committee on Ways and Means are also published
in electronic form. The printed hearing record remains the official
version. Because electronic submissions are used to prepare both
printed and electronic versions of the hearing record, the process of
converting between various electronic formats may introduce
unintentional errors or omissions. Such occurrences are inherent in the
current publication process and should diminish as the process is
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C O N T E N T S
__________
Page
Advisories announcing the hearing................................ 2
WITNESSES
Centers for Medicare & Medicaid Services, Hon. Thomas Scully,
Administrator.................................................. 9
U.S. General Accounting Office, Leslie G. Aronovitz, Director,
Health Care-Program Administration and Integrity Issues........ 39
______
American College of Physicians-American Society of Internal
Medicine, William J. Hall, M.D................................. 47
National Association for Home Care, Connecticut Association for
Home Care, and VNA of Central Connecticut, Inc., Susan Wilson.. 53
______
SUBMISSIONS FOR THE RECORD
Advanced Medical Technology Association, statement............... 66
Alliance to Improve Medicare, statement and attachment........... 67
American Academy of Physician Assistants, Alexandria, VA,
statement...................................................... 76
American Clinical Laboratory Association, statement.............. 78
American Medical Association, Chicago, IL, statement and
attachment..................................................... 82
American Osteopathic Association, Chicago, IL, statement......... 87
Association for Ambulatory Behavioral Healthcare, Alexandria, VA,
Patricia L. Scheifler, statement............................... 90
Blue Cross and Blue Shield Association, statement................ 94
Medicare Administration Committee, Silver Spring, MD, statement.. 99
Power Mobility Coalition, statement.............................. 101
H.R. 2768, THE ``MEDICARE REGULATORY AND CONTRACTING REFORM ACT OF
2001''
----------
TUESDAY, SEPTEMBER 25, 2001
House of Representatives,
Committee on Ways and Means,
Subcommittee on Health,
Washington, DC.
The Subcommittee met, pursuant to notice, at 10:08 a.m., in
room 1100 Longworth House Office Building, Hon. Nancy L.
Johnson (Chairman of the Subcommittee) presiding.
[The advisory and revised advisory announcing the hearing
follow:]
ADVISORY
FROM THE
COMMITTEE ON WAYS AND MEANS
SUBCOMMITTEE ON HEALTH
CONTACT: (202) 225-3943
FOR IMMEDIATE RELEASE
September 4, 2001
No. HL-10
Johnson Announces Hearing on H.R. 2768,
the ``Medicare Regulatory and Contracting
Reform Act of 2001''
Congresswoman Nancy L. Johnson (R-CT), Chairman, Subcommittee on
Health of the Committee on Ways and Means, today announced that the
Subcommittee will hold a hearing on H.R. 2768, the bipartisan
``Medicare Regulatory and Contracting Reform Act of 2001.'' The hearing
will take place on Tuesday, September 11, 2001, in the main Committee
hearing room, 1100 Longworth House Office Building, beginning at 2:00
p.m.
In view of the limited time available to hear witnesses, oral
testimony at this hearing will be from invited witnesses only.
Witnesses will include the Honorable Tom Scully, Administrator of the
Centers for Medicare and Medicaid Services (CMS), independent program
experts, and representatives of provider groups. However, any
individual or organization not scheduled for an oral appearance may
submit a written statement for consideration by the Committee and for
inclusion in the printed record of the hearing.
BACKGROUND:
On August 2, 2001, Chairman Nancy Johnson and Ranking Member Pete
Stark (D-CA), joined by every member of the Subcommittee on Health,
introduced H.R. 2768, the ``Medicare Regulatory and Contracting Reform
Act of 2001,'' the first major bipartisan Medicare legislation
developed in the Committee on Ways and Means in the 107th Congress.
This package would extend important regulatory relief to our nation's
health care providers and modernize Medicare's contracting processes,
while protecting the program and taxpayers from potential fraud and
abuse.
H.R. 2768 is intended to create a more collaborative relationship
between the CMS and the providers who serve Medicare beneficiaries. The
legislation was developed through months of bipartisan consultation
with health care providers and with the officials at the U.S.
Department of Health and Human Services responsible for protecting the
financial integrity of the Medicare program. The bill includes
provisions related to the issuance of regulations and compliance with
changed policies, contracting reform, provider education and technical
assistance, a small provider technical assistance demonstration
program, the appeals system, recovery of overpayments and prepayment
review, a beneficiary assistance demonstration, and evaluation and
management guidelines.
In announcing the hearing, Chairman Johnson stated, ``Health care
providers have been overwhelmed by paperwork requirements that have
nothing to do with taking care of patients. Good, responsible
professionals are frustrated by a system that seemingly emphasizes
policing providers rather than helping them comply with Medicare's
rules and regulations. Our bill is designed to change all of that. We
want health care providers to spend their time with patients, rather
than paperwork, and we want to make Medicare simpler. Program integrity
must be protected--and so must provider time.''
FOCUS OF THE HEARING:
The hearing will give the Administration and other witnesses an
opportunity to comment on H.R. 2768. We will hear from independent
program experts as well as health care providers who would be directly
impacted by the bill's reforms.
DETAILS FOR SUBMISSION OF WRITTEN COMMENTS:
Any person or organization wishing to submit a written statement
for the printed record of the hearing should submit six (6) single-
spaced copies of their statement, along with an IBM compatible 3.5-inch
diskette in WordPerfect or MS Word format, with their name, address,
and hearing date noted on a label, by the close of business, Tuesday,
September 25, 2001, to Allison Giles, Chief of Staff, Committee on Ways
and Means, U.S. House of Representatives, 1102 Longworth House Office
Building, Washington, D.C. 20515. If those filing written statements
wish to have their statements distributed to the press and interested
public at the hearing, they may deliver 200 additional copies for this
purpose to the Subcommittee on Health office, room 1136 Longworth House
Office Building, by close of business the day before the hearing.
FORMATTING REQUIREMENTS:
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record or any written comments in response to a request for written
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Committee.
1. All statements and any accompanying exhibits for printing must
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pages including attachments. Witnesses are advised that the Committee
will rely on electronic submissions for printing the official hearing
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The above restrictions and limitations apply only to material being
submitted for printing. Statements and exhibits or supplementary
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and the public during the course of a public hearing may be submitted
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Note: All Committee advisories and news releases are available on
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The Committee seeks to make its facilities accessible to persons
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call 202-225-1721 or 202-226-3411 TTD/TTY in advance of the event (four
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* * * NOTICE--HEARING RESCHEDULED * * *
ADVISORY
FROM THE
COMMITTEE
ON WAYS
AND
MEANS
SUBCOMMITTEE ON HEALTH
CONTACT: (202) 225-3943
FOR IMMEDIATE RELEASE
September 17, 2001
No. HL-10-Revised
Hearing Rescheduled for Subcommittee
Hearing on H.R. 2768, ``the ``Medicare
Regulatory and Contracting Reform Act
of 2001'' Tuesday, September 25, 2001
Congresswoman Nancy L. Johnson, Chairman of the Subcommittee on
Health of the Committee on Ways and Means, today announced that the
Subcommittee hearing on H.R. 2768, the ``Medicare Regulatory and
Contracting Reform Act of 2001,'' previously scheduled for Tuesday,
September 11, 2001, will now be held on Tuesday, September 25, 2001, at
10:00 a.m., in the main Committee hearing room, 1100 Longworth House
Office Building.
DETAILS FOR SUBMISSION OF WRITTEN COMMENTS:
Any person or organization wishing to submit a written statement
for the printed record of the hearing should submit six (6) single-
spaced copies of their statement, along with an IBM compatible 3.5-inch
diskette in WordPerfect or MS Word format, with their name, address,
and hearing date noted on a label, by the close of business, Tuesday,
October 9, 2001, to Allison Giles, Chief of Staff, Committee on Ways
and Means, U.S. House of Representatives, 1102 Longworth House Office
Building, Washington, D.C. 20515. If those filing written statements
wish to have their statements distributed to the press and interested
public at the hearing, they may deliver 200 additional copies for this
purpose to the Subcommittee on Health office, room 1136, Longworth
House Office Building, by close of business the day before the hearing.
All other details for the hearing remain the same. (See
Subcommittee press release No. HL-10, dated September 4, 2001.)
Chairman Johnson. The hearing will come to order.
The Democratic Caucus is not quite over, and they will be
along shortly, so I will start with my opening statement and
provide Pete a chance when he arrives.
Before we start, it is important to acknowledge that
today's hearing on regulatory relief was supposed to have taken
place 2 weeks ago today. As we all know, on that day, our
country suffered an extraordinary tragedy, disrupting not only
the business of governing, but so much more importantly, the
lives of so many Americans--those tragically killed by
terrorists, their bereft families and friends, and all
Americans.
While we continue to grieve and prepare to respond to the
evils of terrorism, it is a sign of the strength of this great
Nation that we can also move forward with the work of
governing. I want to thank our witnesses for coming back today
to give us the benefit of their expertise.
Over the past several months, members of this Subcommittee
have been working together closely to better understand the
challenges facing providers who serve Medicare beneficiaries,
and on March 15, we held a hearing on the need to extend relief
from burdensome regulations to Medicare providers.
At that hearing, we heard from doctors and hospitals, from
home health agencies and nursing homes. Although examples
differed, the basic message from each group was the same--
providers are overwhelmed with paperwork. Instead of caring for
patients, health care providers are spending too much time
filling out forms.
These are good people; yet they are inundated with
paperwork, second-guessing, and heavy-handed oversight. If we
do not act, we risk losing the providers we need to ensure that
seniors have access to high-quality care.
Indeed, the U.S. General Accounting Office (GAO) study
documents the loud cries for help that we have been hearing.
Medicare is now such a complicated program that endless
directives and long explanations and articles are necessary to
explain facet after facet. Not only does the GAO report
document the volume of paper doctors and hospitals must digest
monthly, but the complexities are so great that even the
government cannot give clear answers.
In GAO's sample, only 15 percent of the answers to
physicians' questions were complete and accurate--15 percent.
Thirty-two percent were entirely incorrect. Having chaired the
Subcommittee that led the reform of the Internal Revenue
Service (IRS), I can tell you this is an absolutely shocking,
abominable, and unacceptable record of performance, although
just as the IRS problems did, it has its fundamental base in
the complexity of the law we passed and the rapidity with which
we have imposed changes on the system.
Nonetheless we must do better than providing only 15
percent accurate answers to physician questions.
So the challenge is great to those of us in the Congress,
to Administrator Scully, and to Secretary Thompson. We have,
however, as you well know, been working hard. Pete and I wrote
the Secretary, making a number of suggestions regarding
regulatory improvements the Department could make using
existing administrative authority, and many of those changes
they have made.
At the same time, we began developing a legislative package
which is the underlying substance of this hearing, and we will
have a chance to examine its provisions this morning and look
forward to your comments on how it can be altered or improved
to be made stronger or to serve better.
In addition, the Secretary has given the tools to manage
the Medicare Program operations more efficiently. For the first
time, the Centers for Medicare & Medicaid Services (CMS) will
be able to competitively contract with the best entities
available to process claims, make payments, and answer
questions. The Secretary will be free to promote quality
through incentives for Medicare administrative contractors to
provide outstanding services to seniors and health care
providers.
It is a pleasure to welcome Tom Scully here, the
Administrator of CMS. Mr. Scully will set forth the
administration's view on H.R. 2768 and talk to us about the
Department's current efforts to extend regulatory relief to
providers.
This is Mr. Scully's first appearance before the
Subcommittee in his capacity as administrator, and Tom, we
welcome you and look forward to working with you in the months
ahead. Mr. Stark.
[The opening statement of Chairman Johnson follows:]
Opening Statement of the Hon. Nancy L. Johnson, a Representative in
Congress from the State of Connecticut, and Chairman, Subcommittee on
Health
Before we start today, it seems important to me to acknowledge that
today's hearing on regulatory relief actually was supposed to have
taken place two weeks ago today. As we all know, history intervened, in
the form of unspeakable tragedy, disrupting not only our hearing but,
so much more importantly, the lives of so many American heroes. While
we continue to mourn, and to grieve, and to respond to the evils of
terrorism, it is a sign of the strength of this great nation of ours
that we can also move forward with the business of governing. I want to
thank our witnesses for coming back today to give us the benefit of
their expertise.
Over the past several months, members of this Subcommittee have
been working together closely to better understand the challenges
facing providers who serve Medicare beneficiaries. On March 15, we held
a hearing on the need to extend relief from burdensome regulations to
Medicare's providers.
At that hearing, we heard from doctors and hospitals, from home
health agencies and nursing homes. Although examples differed, the
basic message from each group was the same. Providers are overwhelmed.
Instead of caring for patients, health care providers are spending too
much time filling out forms. These are good people. And yet they are
inundated by paperwork, second-guessing, and heavy handed oversight. If
we do not act, we risk losing the providers we need to ensure that
seniors have access to high quality care.
After that hearing, we got to work. In May, Pete Stark and I wrote
Secretary Thompson making a number of suggestions regarding regulatory
improvements the Department could make using existing administrative
authority. Many of those changes have already been accepted.
At the same time, we began developing a legislative package to
address problems that could not be corrected administratively. We
examined the proposals set forth by Representatives Toomey and Berkley
in their bill, H.R. 868. They make important suggestions--many of which
we adopted. But we also were sensitive to objections raised by the
Office of Inspector General to provisions in H.R. 868 that put program
integrity at risk. We tried to assemble a bill that extends relief to
providers but protects taxpayers from waste, fraud, and abuse.
On August 2, Pete Stark and I introduced our bill, the Medicare
Regulatory and Contracting Reform Act of 2001. I am extremely pleased
that every member of the Health Subcommittee has joined us in
cosponsoring H.R. 2768, along with many of our colleagues from the full
committee.
The basic goal of H.R. 2768 is to create a more collaborative, less
confrontational relationship between providers and the Centers for
Medicare and Medicaid Services. Our bill will diminish the paperwork
load required to meet complex and technical regulatory requirements and
immediately free up for patient care time that providers now spend
completing and filing federal forms. H.R. 2768 streamlines the
regulatory process, enhances education and technical assistance for
doctors and other health care providers, and protects the rights of
providers in the audit and recovery process to ensure that the
repayment process is fair and open.
In addition, the Secretary is given the tools to manage Medicare
program operations efficiently. For the first time, the Centers for
Medicare and Medicaid Services will be able to competitively contract
with the best entities available to process claims, make payments and
answer questions. The Secretary will be free to promote quality through
incentives for the Medicare Administrative Contractors to provide
outstanding service to seniors and health care providers. Contractor
reform initiatives will eliminate artificial distinctions between
Medicare's Part A and Part B with regard to contracting practices.
Since introducing H.R. 2768, we have received useful input and
technical suggestions from a range of interested groups, and we will be
carefully evaluating those suggestions to see what good ideas we can
incorporate into our bill as we move to markup. In particular, I
continue to be interested in finding ways to allow providers to
challenge audit findings and the validity of probe samples before they
have to formally pursue an appeal.
Today, we will hear from Tom Scully, Administrator of CMS. Mr.
Scully will set forth the Administration's views on H.R. 2768 and talk
to us about the Department's efforts to extend regulatory relief to
providers. This will be Mr. Scully's first appearance before our
subcommittee in his capacity as Administrator. Tom, we look forward to
working with you at CMS.
On our second panel, providers will comment on the bill, and we
will hear from the General Accounting Office about its recent work on
physician documentation requirements. Again, I thank you all for being
here today.
Mr. Stark. Madam Chairman, thank you for calling the
hearing today on H.R. 2768, the Medicare Regulatory and
Contracting Reform Act of 2001 (MRCRA).
As I know you have said, this legislation shows that when
we do work together, we can accomplish some legislation. There
are, of course, other areas on which we disagree--Medicare
reform, payment to Health Maintenance Organizations, the Bush
discount card program, known as the ``rocket ranger
prescription card''--but when there is some agreement, we can
improve Medicare for beneficiaries, taxpayers, and providers.
As I understand it, this bill was written to address two
problems in Medicare--first, to improve outreach and assistance
to beneficiaries and to respond to certain other concerns
raised by physicians and other providers; second, some long
overdue contracting reforms that should improve beneficiary and
provider services and permit the consolidation of Medicare
claims processing.
I emphasize that because our legislation does not
compromise the government's ability to protect taxpayer dollars
from being inappropriately spent. Let me say that I am
concerned about several issues, however, raised by the Office
of Inspector General (OIG) concerning our bill, and I hope we
can resolve those before we proceed.
I do not think that CMS needs additional legislative
authority to improve its education and information for
providers. Instead, I think the agency needs additional
administrative resources. The GAO will testify today on serious
contractor oversight problems. These management problems need
to be addressed regardless of whether we enact this legislation
or provide additional resources.
While this legislation would reform Medicare administrative
contracting, permitting Part A and Part B contractors to be
combined, I want to emphasize that we in no way would agree
that this would imply any support for combining the Part A and
Part B trust funds or any other efforts to combine Medicare
Part A and Part B. And I am sure this side of the aisle
strongly opposes such consolidation.
To improve services to Medicare beneficiaries, we have
proposed that Medicare staff be stationed in Social Security
field offices.
The demonstration program will allow us to examine the
value of placing Medicare staff in all of those field offices,
and I hope it can be expanded; I hope it will work and can be
made permanent. Thank you.
[The opening statement of Mr. Stark follows:]
Opening Statement of the Hon. Fortney Pete Stark, a Representative in
Congress from the State of California
Madam Chairman, thank you for calling the hearing today on the
Medicare Regulatory and Contracting Reform Act of 2001 (H.R. 2768). I
look forward to hearing what the witnesses have to tell us about our
bill and ways to improve it.
Madam Chairman, as you know, you and I and other Members of the
Subcommittee introduced this bill to address two problems in Medicare.
First, the bill takes important steps to improve outreach and
assistance to beneficiaries and providers, and to respond to certain
other legitimate concerns raised by physicians and other providers. And
second, it includes long overdue contracting reforms that will improve
beneficiary and provider services and permit the consolidation of
Medicare claims processing.
Importantly, our legislation does not compromise the government's
ability to protect taxpayer dollars from being inappropriately spent
under Medicare. On this point, however, let me say that I am concerned
about several issues raised by the Office of Inspector General
concerning our bill, and I hope we can resolve those issues before we
proceed.
Madam Chairman, we need to improve the education and information
processes for providers. It is hard for even the most seasoned Medicare
analyst to keep track of all the payment and policy changes that have
occurred in Medicare in the last few years. We need to do a much better
job of educating and assisting physicians and other providers about
these changes.
But, Madam Chairman, CMS does not need additional legislative
authority to improve its education and information for providers.
Instead, CMS needs additional administrative resources. Two years ago,
in the January/February 1999 issue of Health Affairs, 14 of our
nation's leading Medicare policy analysts--ranging from conservative to
liberal--published an open letter titled, ``Crisis Facing HCFA &
Millions of Americans.'' The crisis they spoke about was the lack of
resources to administer Medicare. Their letter is even more relevant
today. As its administrative workload has increased, CMS (formerly,
HCFA) resources have not kept pace. The changes that we propose in our
legislation are important, but by themselves, they are not sufficient.
We simply must get more resources into Medicare administration.
Madam Chairman, important reforms of the Medicare appeals processes
were included in legislation enacted last year. However, our bill
includes additional improvements that are needed. Our bill would
provide an expedited review process similar to the one now used for
Provider Reimbursement Review Board (PRRB) decisions to permit
providers to seek judicial review when a review panel does not have
legal authority to make a decision. Our bill would also transfer
administrative law judges (ALJs) from the Social Security
Administration to the Department of Health and Human Services in order
to improve their expertise on Medicare issues. However, lengthy delays
in appeals will not be curtailed unless additional resources are
provided to hire more ALJs.
Madam Chairman, Medicare contracting processes have become outdated
in the face of all of the changes that have occurred in Medicare and in
information technology. Every President since President Carter has
proposed reforms to the administrative contracting provisions in
Medicare, yet they have never been enacted. I hope we succeed this
time.
Our bill reforms the Medicare contracting processes by
consolidating the contracting functions for Part A and Part B of
Medicare, permitting the Secretary to contract with separate Medicare
Administrative Contractors to perform discrete functions, making use of
the Federal Acquisition Rules (FAR) in Medicare contracting,
eliminating the requirements for cost contracting, and expanding the
kinds of entities eligible for contracting. Our bill would permit
consolidation of claims processing with fewer contractors, and it would
permit separate contracting along functional lines--for beneficiary
services, provider services, and claims processing.
But let me be clear, my support for combining the administrative
contracting functions of Part A and Part B in no way implies my support
for combining the Part A and Part B trust funds, or other efforts to
combine the Part A and Part B. In fact, I strongly oppose such a
consolidation.
Last, Madam Chairman, to improve services to Medicare
beneficiaries, we have proposed that Medicare staff be stationed in
Social Security field offices to help answer questions and provide
assistance for Medicare beneficiaries. There are 1291 SSA field offices
around the world, and I would like to see Medicare staff in most, if
not all, of them. I am pleased that the legislation we are introducing
today authorizes a demonstration program to examine the value of
placing Medicare staff in SSA field offices, and I hope it will be
expanded and made permanent if it is found to aid beneficiaries.
Chairman Johnson. Thank you, Mr. Stark. Mr. Scully.
STATEMENT OF THE HON. THOMAS SCULLY, ADMINISTRATOR, CENTERS FOR
MEDICARE & MEDICAID SERVICES
Mr. Scully. Thank you, Madam Chairman and Mr. Stark.
Thank you for having me here today. First, going back to
the subject of New York, since I have the opportunity, I would
like to thank all the health care providers in New York City,
especially Lower Manhattan. In the last couple of weeks, I
think a lot of people were unaware of the fact that in the
disabled community, people did not get home health services;
there were a lot of problems in Lower Manhattan beyond the
obvious ones from the World Trade Centers. I think the
providers there did a tremendous job of making sure that
seniors who did not have home health below 14th Street,
disabled folks who did not have their home health aides, and a
lot of other people got wonderful services. I think the
hospitals did a great job, and in particular the Visiting Nurse
Association of New York City. So I just want to publicly thank
them for doing a terrific job.
Thank you for inviting me here today. I have just one other
issue before I jump into regulatory streamlining, which I want
to flag for the Committee, because I am going to start putting
it at the front of all my speeches for the next year and all my
Committee appearances, and that is the Health Insurance
Portability and Accountability Act 1996 (HIPAA).
In my first 3 months on the job, I probably was not focused
as much on HIPAA as I should have been; in the last couple of
weeks, I have become totally aware that as of next October, we
have to have a standard billing and coding system nationwide
between all private and public insurers. And I have not seen a
lot of evidence that Congress is interested in changing the
law, so I have the responsibility to get it done by next
October.
The agency needs to step up to the plate; we need to focus
on it a lot more. We are creating a HIPAA Task Force in CMS.
And we are determined that absent other legislative guidance,
we will do our best to have the entire insurer and provider
world ready for HIPAA next fall. So I just wanted to flag that
as an issue of increased importance and increased focus for the
agency.
That said, let me turn to MRCRA. I want to thank you, Mrs.
Johnson and Mr. Stark, for introducing this legislation. I
would also like to thank your staff, who spent an awful lot of
time working with us to make sure it was drafted effectively
and worked out well. In particular, Jennifer Baxendell, Cybele
Bjorklund and Deb Williams spent a lot of time on this and I
think produced a terrific work product. And as Mr. Stark said,
when we work on these things in a bipartisan way, we frequently
get good results, and I think that generally this is a very,
very good bill. We have a couple of minor concerns that I will
express later, but they are very minor.
Clearly we have to balance at CMS the impact of Medicare's
laws and regulations on physicians and other providers with the
accountability that we have for $240 billion in Medicare
payments. In many areas, we can be a lot less intrusive to
providers, a lot more responsive to beneficiaries, and in many
cases, we can make these changes administratively. I will go
through some of those that we have tried to do.
However, there are a lot of important areas where we cannot
change things without your help. The Medicare contracting
system, which I think is antiquated and has been screaming for
reform for the last 20 years, is one, and we are very
appreciative of your efforts in this bill to fix it.
We have to fundamentally change our relationship with
Medicare's fee-for-service contractors. When I got in the first
Bush administration 12 years ago, we had around 90 contractors,
and everybody wanted to get those reformed and get them down to
10. We have made some progress, but 12 years later, coming back
in, we still have 51. It is a unwieldy process. The reins
between the agency and its contractors who are running the
program are not exactly tight, and I think a major goal this
year of both the Secretary and myself is to reform the
contractor system.
So far this year, actually, we have been very pleased,
working with the Committee and with the Blue Cross plans, who
tend to be our predominant contractors, that we have actually
worked out a lot of the issues that we had with the existing 51
contractors, and I think most of them are actually very
supportive of your reforms and the reforms that you have in
this bill, as are we.
In June, the President forwarded his proposal to Congress.
The goal in that CMS reform proposal was to provide CMS with
the flexibility to work with its contractors more effectively,
to promote greater competition among contractors, to give us
greater flexibility to negotiate contracts, with appropriate
incentives to reward our contractors. And basically, when you
look at your bill, I think it meets virtually all of those
goals and is soundly based on the bill we sent up, with some
significant improvements.
What have we done in addition to your bill to try to make
our relationships with contractors and carriers and providers
and beneficiaries better?
The first thing we did to improve agency responsiveness
outside legislation with internal CMS efforts is that I created
eight open door policy groups, two of which I chair--long-term
care and nursing homes, and rural health. There are also policy
groups for physicians, hospitals, health plans, nurses and
allied health professionals, home health and hospice, and End-
Stage Renal Disease and dialysis centers.
These groups basically meet with all the outside interested
groups once a month in person and once a month through a
nationwide conference call to find out what the problems are
around the country with beneficiary groups and providers and
try to do the best we can to work them out.
For example, in the nursing home group, which I chair
because I have a particular interest in fixing some of our
problems in long-term care, we have the for-profit and non-
profit nursing homes. It is co-chaired with me by the executive
director of the National Governors' Association; the Service
Employees International Union is involved--there are many
parties who do not always agree on things, but I think we have
found that there are a lot of common, nuts-and-bolts, day-to-
day problems in the program, and that if we focus on them, we
can fix them, and we are determined to do that.
The goal of these groups is not to overhaul Medicare. The
goal is to find a way to make our program work better on a day-
to-day basis and to solve the day-to-day operational problems
that we have.
On beneficiary education efforts and outreach, as you know,
we are launching a $30 million advertising campaign this fall.
We are significantly increasing the 1-800-MEDICARE number
budget, and it will operate 24 hours a day, 7 days a week, with
a great deal of local information. The ad campaign has been
delayed a little bit, obviously, by the disaster last week, but
I think you will see it up and running in mid-October.
Establishing key contacts for the States--this is more
relevant to Medicaid than Medicare--but we have appointed one
person in the Baltimore office and one person in each region to
be responsible to the Governors, so when the States and
Governors have problems with Medicaid, we have folks with
direct responsibility in the States who are responsible to me
and the Medicaid operation to make sure the Governors and the
States get quick turnaround and quicker response in the
Medicaid program.
The Secretary has also formed a new regulatory reform group
to identify regulations that prevent hospitals and providers
and physicians from serving Medicare beneficiaries in the most
effective possible way. To support this group, I have started
to go around and do public listening sessions around the
country. Yesterday I was in Kentucky; I have already gone to
Chicago with Mr. Crane--I hope that was a good trip--and also
to Montana and Arkansas, and we are determined to go around the
country and meet with more of the providers and beneficiary
groups and really try to drive the agency, both in Washington
and Baltimore and also in the regional offices, to be much more
responsive.
In addition to these efforts, we are taking concrete steps
to streamline Medicare's regulatory process. We have developed
a quarterly compendium of all changes in Medicare that we will
send out to all physicians and providers. As of January 1, we
will have a listing of each quarter; before the quarter begins,
we will put out a listing of all regulations. And our goal, at
least for now, working with the Federal Register--we are trying
to get them to agree to let us publish all our regs 1 day a
month, so every reg coming out of CMS would come out and be in
a compendium at the beginning of the quarter--if it is not on
there, it will not come out--and then, once a month, you will
see all the regs coming out of the agency on 1 day. The goal
here is to try to make the process more predictable and
manageable for the providers who perceive our regulatory
process to be kind of random. We are trying to fix that as best
we can.
We have a significantly enhanced effort on both physician
and provider education and also on beneficiary education.
So in summary, in addition to your bill, we are doing the
best we can internally to try to educate providers and
beneficiaries and be more responsive all across the program.
If I could just for a second raise a couple of very minor
concerns that we have with the bill that we would like to work
with you on in the next couple of weeks, one is that there is a
provision in the bill--and there are really only two things
that I have any concerns about--there is a provision in the
bill that says that after CMS promulgates a new policy, there
can be no enforcement for 30 days. While I understand that from
the providers' point of view, from our point of view, we are
concerned that if we have no enforcement for 30 days, most
providers are wonderful, honorable people, but if we cannot
have any enforcement for 30 days, it is an invitation for
people to take advantage of the program from a billing
perspective for the first 30 days after a new policy is issued.
Second, from the point of view of the Blue Cross plans,
which we have spent a lot of time working on this bill with,
current liability for the Medicare carriers and Fiscal
Intermediaries (FI), the standard is gross negligence, and the
bill changes that to negligence, which is a much lower standard
and would subject them to much greater liability.
At least in the 11th Circuit, in fact, right now, they have
found that there is no liability for carriers for Medicare
problems. So I think gross negligence is an appropriate
standard--as I said, in the 11th Circuit, there is no
liability--but lowering that to negligence would open the door
to a lot more legal issues for carriers. We are trying to draw
in new carriers and better carriers and FIs, and I think it
would present a significant problem for us if you actually
raised the level of liability for the carriers. So we would
like to work with you on that as well.
In summary, Madam Chairman, we think the bill is excellent;
we are very supportive of it. We would like to work with you,
and we are very, very grateful that, on a bipartisan basis, the
Subcommittee has moved forward on this bill.
Thank you for having me.
[The prepared statement of Mr. Scully follows:]
Statement of the Hon. Thomas Scully, Administrator, Centers for
Medicare & Medicaid Services
Chairman Johnson, Representative Stark, distinguished Subcommittee
members, thank you for inviting me to discuss our efforts to streamline
the Medicare program. Many physicians, health plans, providers, and
Members of Congress, have raised concerns about Medicare, particularly
Medicare's regulatory and paperwork burden and the cost of doing
business with the Medicare program. We appreciate these concerns, and
are making every effort to identify and address areas where
improvements can be made. Physicians and other health care providers
play a critical role in ensuring that Medicare beneficiaries receive
quality health care. We know that in order to ensure beneficiaries
continue to receive the highest quality care, we must streamline
Medicare's requirements, bring openness and responsiveness into the
regulatory process, and make certain that regulatory and paperwork
changes are sensible and predictable. In addition, we must reform the
way we contract with the private entities that process and pay Medicare
claims.
We also know how important these issues are to this Subcommittee.
We have worked with you for months now to make Medicare a more ``user-
friendly'' program. I especially want to commend you, Chairman Johnson
and Representative Stark, as well as the other members of Subcommittee,
for your leadership and dedication to improving the Medicare program.
Your demonstrated commitment to the best interests of our nation's
seniors and disabled is laudable, and I applaud the bipartisan manner
in which you have approached modernizing Medicare's management. In
particular, I appreciate your introduction of the bipartisan Medicare
Regulatory and Contracting Reform Act of 2001 (H.R. 2768), which is
intended to streamline the Medicare program. This Subcommittee has
clearly dedicated a great deal of thought and energy toward these
issues, and this bill represents a good first step toward improving
Medicare and reforming the way Medicare contracts with entities to
process and pay claims. I look forward to continuing to work with you
to achieve this critical goal. As we discuss legislative efforts to
improve Medicare, I also appreciate the chance to discuss the
aggressive administrative actions that we have already begun taking to
improve the program. As we work to reduce Medicare's regulatory and
paperwork burden and further improve our provider education efforts, we
look forward to our continued partnership with Congress and the
physician and provider community.
BACKGROUND
This year, Medicare will pay approximately $240 billion for the
health care of nearly 40 million beneficiaries, involving nearly one
billion Medicare claims from more than one million physicians,
hospitals, and other health care providers. CMS strives to ensure that
Medicare pays only for the services allowed by law, while making it as
easy as possible for qualified health care providers to treat Medicare
beneficiaries. We have to carefully balance the impact of Medicare's
laws and regulations on physicians and other providers with our
accountability for billions of dollars of Medicare payments.
Medicare's requirements, as outlined in the law, generate many of
the concerns that our constituents bring to your attention and to mine.
Of course, there is a genuine need for clear rules in a program this
large and complex. But rules should exist to help, not hinder, our
efforts to assist seniors and the disabled, help control costs, and
ensure quality, while remaining consistent with our obligation and
commitment to prevent fraud and error. When regulations, mandates, and
paperwork unnecessarily hinder the services providers are trying to
give, those rules should be changed. And so I am working with the
Secretary to reform the way Medicare works, making it simpler and
easier for everyone involved. We are listening closely to Americans'
concerns and learning how we can do a better job of meeting patients'
and providers' needs to serve beneficiaries in the best way we can. In
many areas, we can be less intrusive to the providers who participate
in Medicare and more responsive to the beneficiaries who depend on
Medicare. Many of these changes can be achieved administratively;
however, there are other important areas, such as reforming Medicare's
contracting system, where we need your help.
REFORMING MEDICARE'S CONTRACTING SYSTEM
I am pleased that the Medicare Regulatory and Contracting Reform
Act of 2001 includes provisions to improve Medicare's outdated
contracting requirements, which make it more difficult for providers
and beneficiaries to work effectively with the Medicare program. In
order to continue to manage the Medicare program efficiently and
effectively and to fully implement our business strategy, we must
fundamentally change our relationship with the Medicare fee-for-service
contractors. I firmly believe that the Medicare fee-for-service
contracting work should be awarded competitively to the best-qualified
entities, using performance-based service contracts that include
appropriate payment methodologies. This is something that current law
does not allow.
I believe these contracts should result in contractors receiving
returns that reflect their relative performance. We must be able to
maximize economies of scale and improve the level of service to our
beneficiaries and providers. We are working cooperatively with our
existing contractors to get to this goal, but these changes still
require legislative action. I know you recognize this, too, and I want
to work with this Committee and the contractors, including the Blue
Cross plans, who have been very responsive to our requests for reform,
to reach a consensus for a better contracting system.
In June, we forwarded our contracting reform proposal to Congress.
Through these legislative changes, CMS hopes to accomplish the
following:
Provide flexibility to CMS and its contractors to work
together more effectively and better adapt to changes in the
Medicare Program.
Promote competition for contractors, leading to more
efficiency and greater accountability.
Establish better coordination and communication
between CMS, contractors, and providers.
Provide CMS flexibility to negotiate contracts with
incentives that reward Medicare contractors that perform well.
These changes will enhance the Agency's ability to more effectively
manage claims processing for the Medicare program in the future, and
ensure that the future changes to the Medicare program's operating
structure are free from unnecessary constraints. The Medicare
Regulatory and Contracting Reform Act of 2001 is designed to accomplish
these same goals.
We are continuing to proceed with the implementation of our long-
range business strategy under our current authority. To capture the
benefits of integrated data processing, we have begun to consolidate
our claims processing workload among our existing contractors, and are
moving to consolidate and standardize contractor claims systems. Our
goal is to have one system for intermediary claims, one for carrier
claims, and one for durable medical equipment claims. And we will
continue to establish more direct control of our data centers, which
should reduce costs and improve efficiency. This consolidation will
allow us to make changes efficiently and consistently, and help
streamline our information technology infrastructure. As we implement
this long-range plan, I look forward to continuing to work with you to
achieve this important legislative goal.
IMPROVING AGENCY RESPONSIVENESS
The other major elements of the Medicare Regulatory and Contracting
Reform Act of 2001, is to provide regulatory reforms to the Medicare
program while ensuring accurate and timely payments to providers and
preserving our ability to collect overpayments and pursue fraud. I also
share this goal of regulatory reform, and I believe changes in how we
time the development and publication of regulations can best be
addressed through administrative flexibility. As I mentioned, we
already are taking aggressive steps to improve CMS's responsiveness. In
June, Secretary Thompson announced that, as a first step in reforming
the Medicare program, we were changing the Agency's name to the Centers
for Medicare & Medicaid Services. The name-change is only the beginning
of our broader effort to raise the service level of the Medicare
program and bring a culture of responsiveness to the Agency. These are
not hollow words: creating a ``culture of responsiveness'' means
ensuring high-quality medical care for beneficiaries, improving
communication with providers, beneficiaries and Congress, and
redoubling our education efforts. To promote improved responsiveness,
the Agency is:
Creating Open Door Policy Forums to interact directly
with beneficiary groups, plans, physicians, providers, and
suppliers, to strengthen communication and information sharing
between stakeholders and the Agency. I recently designated
senior CMS staff members as the principal points-of-contact for
eight ``Open Door Policy Forums,'' including physicians,
hospitals, rural health, nursing homes, health plans, nurses
and allied health care professionals, home health and hospice,
and ESRD and dialysis centers. These open forums will
facilitate information sharing and enhance communication
between the Agency and its partners and beneficiaries. I chair
two of these forums, nursing home and rural health, and they
will focus on fixing obvious problems.
Enhancing Outreach and Education to beneficiaries,
providers, plans, and practitioners, by building on the current
educational system with a renewed spirit of openness, mutual
information sharing, and partnership. We will start by
educating seniors through a $30 million advertising campaign
this fall to engage seniors in the program, combined with a
massive enhancement of the 1-800-MEDICARE number. The toll-free
lines will be expanded to 24 hours a day, seven days a week and
the information available by phone will be enhanced, so that
beneficiaries can obtain specific information about the health
plan choices and costs. The Agency also is developing and
improving training for physicians and providers on new program
requirements and payment system changes, increasing the number
of satellite broadcasts available to health care industry
groups, and making greater use of web-based information and
learning systems across the country.
Establishing Key Contacts for the States at the
regional and central office level. Paralleling the senior staff
contacts for industry and beneficiary groups, these staff
members are assigned to work directly with the Governors and
top State officials to help eliminate Agency obstacles in
obtaining answers, feedback, and guidance. Each State now has
one Medicaid staff member assigned to their region, and another
in Baltimore, both of whom are accountable for each State's
specific issues.
Responding More Rapidly and Appropriately to Congress
and External Partners by promptly responding to their
inquiries. We are developing an intra-Agency correspondence
routing system, and timeliness standards, to respond more
efficiently and promptly to congressional inquiries. We also
are also exploring ways to make data, information, and trend
analyses more readily available to our partners and the public
in a timely manner. In addition, CMS will make explicit, and
widely publicize, the requirements for obtaining data and
analyses from us, including protecting the confidentiality of
the data.
EASING THE REGULATORY & PAPERWORK BURDEN
A culture of responsiveness alone will not alleviate the regulatory
and related paperwork burdens that for too long have been associated
with the Medicare program. Thus, the Secretary has formed a new
regulatory reform group to identify regulations that prevent hospitals,
physicians, and other health care providers from serving Medicare
beneficiaries in the most effective way possible. This group will
determine what rules need to be better explained, what rules need to be
streamlined, and what rules need to be dropped altogether, without
increasing costs or compromising quality. To support this group, we
have developed a program, focusing on listening and learning, to get us
on the right track. This methodical, sector-by-sector approach will
enable us to administer our health care programs as effectively and
efficiently as possible.
Under the first aspect of the plan, CMS will conduct public
listening sessions across the country. We want to hear directly from
physicians and health care providers away from Washington, DC, and away
from Baltimore--out in the areas where real people live and work under
the rules we produce and with people who do not have easy access to
policymakers to voice their legitimate concerns. Most of you in
Congress have these kinds of regular listening sessions with your
constituents. We want to hear from local seniors, large and small
providers, State workers, and the people who deal with Medicare and
Medicaid in the real world. We want to get their input so we can run
these programs in ways that make sense for real Americans in everyday
life. We hear from some of these people now, but we want to get input
from many, many more.
The second aspect of the plan, as I have already discussed, is to
meet in open forums with the various health-sector representatives and
beneficiary groups here in Washington. These forums provide us with an
opportunity to hear ideas about how we can improve our interactions
with physicians and providers and reduce regulatory complexity and
burden. Regular input from providers can help to improve our oversight
and management of Medicare, so that health care professionals can spend
more time delivering the care for which they were trained, and so that
beneficiaries can spend more time with their doctors and other
caregivers.
Like the physicians, providers, and beneficiaries who live and work
with Medicare every day, CMS staff have worked with managing the system
for years, and they too have suggestions about how Medicare can operate
more simply and effectively. So, the third aspect of our plan is to
form a group of in-house experts from the wide array of Medicare's
program areas. I have asked a full-time practicing emergency room
physician to chair this group and challenge our in-house experts to
suggest meaningful changes. We will ask them to think innovatively
about new ways of doing business, reducing administrative burdens, and
simplifying our rules and regulations, without increasing costs or
compromising quality. The complexity of the program even makes it
difficult for those of us who administer it to keep up. It is difficult
to educate beneficiaries, providers, and our business partners when
there is so much complex information to explain. This group of in-house
experts will look to develop ways that we can reduce burden, eliminate
complexity, and make Medicare more ``user-friendly'' for everyone.
This will in no way diminish our interest in fighting waste, fraud,
and error in the Medicare program. The vast majority of physicians and
other health care providers are honest and want only to be fairly
reimbursed for the quality care they provide. But for the small
percentage of those who take advantage of the system, we will continue
our aggressive efforts to protect the funds that taxpayers have
entrusted to our use. It is important that the provisions of this
legislation remain consistent with our efforts against fraud, waste,
and abuse.
These outreach efforts will allow us to hear from all types of
people who deal with our programs. We are going to listen and we are
going to learn. But we also are going to take action. I am committed to
making common-sense changes and ensuring that the regulations governing
our program not only make sense, but also are plain and understandable.
This will go a long ways in alleviating providers' fears and reducing
the amount of paperwork that, in the past, has all too often been an
unnecessary burden on providers.
In addition to these efforts, we are taking concrete steps to
streamline Medicare's regulatory processes. We have developed a
quarterly compendium of all changes to Medicare that affect physicians,
and other providers, to make it easier for them to understand and
comply with Medicare regulations and instructions. The compendium will
be a useful document for predicting changes to Medicare's instructions
to physicians and providers, and will contain a list of all regulations
we expect to publish in the coming quarter, as well as the actual
publication dates and page references to all regulations published in
the previous quarter. By publishing changes in the compendium,
physicians and other providers will no longer be forced to sift through
pages and pages of the Federal Register--or pay someone to do it for
them--for proposed rules, regulations, and other changes that may
affect them. There will be more notice and predictability. The
compendium will generally include all program memoranda, manual
changes, and any other instructions that could affect providers in any
way. Additionally, we are moving towards the publication of all our
regulations once a month, barring statutory deadlines. This monthly
publication, along with the quarterly compendium, will provide
predictability and ensure that physicians and other providers are fully
aware of Medicare's changes so they have time to react before new
requirements are placed on them.
We also are looking into developing a system of electronic
rulemaking to make the rulemaking process more efficient and to reduce
the flow of paper between providers and CMS. Today, in an effort to
make updated regulations more readily accessible, we routinely post
them on our website, www.cms.gov.
These postings coincide with the display of these documents in the
Federal Register and have been well received by providers and other
interested parties. Over the next six months, we will further explore
the use of emerging technologies and the electronic exchange of
information, such as posting proposed rules and taking comments on-
line. We will work closely with beneficiaries, physicians, providers,
and plans, as well as with Congress and other parts of the executive
branch, to better understand their needs as we move towards an
electronic rulemaking environment.
IMPROVING PHYSICIAN AND PROVIDER EDUCATION
As part of our efforts to reinvigorate the Agency and bring a new
sense of responsiveness to CMS, we are enhancing our provider education
activities and improving our contractors' communications with
physicians and providers. The Medicare program primarily relies on
private sector contractors, who process and pay Medicare claims, to
educate physicians and providers and to communicate policy changes and
other helpful information to them. We have taken a number of steps to
ensure the educational information our contractors share with
physicians and providers is consistent, unambiguous, timely, and
accurate.
We recognize that the decentralized nature of our educational
efforts has, in the past, led to inconsistency in the contractors'
communications with physicians and providers, and we have recently
taken a number of steps to improve the process. We have centralized our
educational efforts in our Division of Provider Education and Training,
whose primary purpose is to educate and train the contractors and the
provider community regarding Medicare policies. We also are providing
contractors with in-person instruction and a standardized training
manual for them to use in educating physicians and other providers.
These programs help ensure consistency so that our contractors speak
with one voice on national issues. For example, in coordination with
the Blue Cross/Blue Shield Association, we developed train-the-trainer
sessions for implementing both the Hospital Outpatient and Home Health
Prospective Payment System regulations, which included a satellite
broadcast that was rebroadcast several times prior to the effective
date of the regulation. Following these sessions, we held weekly
conference calls with regional offices and fiscal intermediaries to
enable us to monitor progress in implementing these changes. We are
continuing to refine our training on an on-going basis by monitoring
the training sessions conducted by our contractors, and we will
continue to work collaboratively to find new ways of communicating with
and getting feedback from physicians and providers.
We also are working to improve the quality of our contractors'
customer service to physicians and providers. Last year, our Medicare
contractors received 24 million telephone calls from physicians and
providers, and it is imperative that the contractors provide correct
and consistent answers. Now that we have toll-free answer-centers at
all Medicare contractors, the need is even more pressing. We have
performance standards, quality call monitoring procedures, and
contractor guidelines in place to ensure that contractors know what is
expected and so that we can be satisfied that the contractors are
reaching our expectations. This year, for the first time, Medicare
contractors' physician and provider telephone customer service
operations are being reviewed against these standards and procedures
separately from our review of their beneficiary customer service.
During these weeklong contractor performance evaluation reviews, we
identify areas that need improvement and best practices that can be
shared among our other Medicare physician and provider call centers. As
a result of the reviews, performance improvement plans will be
instituted when needed, and CMS staff in our Regional Offices will
continue to monitor the specific contractor throughout the year.
We also want to know about the issues and misunderstandings that
most affect provider satisfaction with our call centers so that we can
provide our customer service representatives with the information and
guidance to make a difference. To improve our responsiveness to the
millions of phone calls our call centers handle each year, we are
collecting detailed information on call center operations, including
frequently asked provider questions, the call centers' use of
technology, and the centers' training needs. We will analyze this
information so we can make improvements to the call centers and share
best practices among all our contractors. We also developed a new
Customer Service Training Plan to bring uniformity to contractor
training and improve the accuracy and consistency of the information
that contractor service representatives deliver over the phone. In
addition, we are holding regular meetings and monthly conference calls
with contractor call center managers to ensure Medicare's customer
service practices are uniform in their look, feel, and quality.
Just as we are working with our contractors to improve their
provider education efforts, we also are working directly with
physicians and other health care providers to improve our own
communications and ensure that CMS is responsive to their needs. We are
providing free information, educational courses, and other services,
through a variety of advanced technologies. We are:
Expanding our Medicare provider education website,
www.hcfa.gov/medlearn. The Medicare Learning Network homepage,
medlearn, provides timely, accurate, and relevant information
about Medicare coverage and payment policies, and serves as an
efficient, convenient provider education tool. The MedLearn
website averages over 100,000 hits per month, with the
Reference Guides, Frequently Asked Questions and Computer-Based
Training pages having the greatest activity. I encourage you to
take a look at the website and share this resource with your
physician and provider constituents. We want to hear feedback
from you and from your constituents on its usefulness so we can
strengthen its value. In fact, physicians and providers can
email their feedback directly to the medlearn mailbox on the
site.
Providing free computer and web-based training courses
to doctors, providers, practice staff, and other interested
individuals can access a growing number of web-based training
courses designed to improve their understanding of Medicare.
Some courses focus on important administrative and coding
issues, such as how to check-in new Medicare patients or
correctly complete Medicare claims forms, while others explain
Medicare's coverage for home health care, women's health
services, and other benefits.
Creating a more useful Agency website through a new
website architecture and tailoring it to be intuitive and
useful to the physician user. We want the information to be
helpful to physicians and their office and billing needs. The
same design is being used in creating a manual of ``Medicare
Basics'' for physicians. We just completed field-testing the
first mock-ups for the project at the recent American Medical
Association House of Delegates meeting. Once this new website
is successfully implemented, we will move to organize similar
web navigation tools for other Medicare providers.
IMPROVING AND EXPANDING BENEFICIARY EDUCATION
As Medicare requirements frustrate plans, physicians, and
providers, beneficiaries also have difficulty understanding the
program's benefits and options. We know, from our research and focus
groups, that far too many Medicare beneficiaries have a limited
understanding of the Medicare program in general, as well as their
Medigap, Medicare Select, and Medicare+Choice options. We firmly
believe that we must improve and enhance existing outreach and
education efforts so beneficiaries understand their health care
options. In addition, we will tailor our educational information so
that it more accurately reflects the health care delivery systems and
choices available in beneficiaries' local areas. We know that educating
beneficiaries and providing them more information is vital to improving
health care and patient outcomes.
With that goal in mind and in an effort to ensure that Medicare
beneficiaries are active and informed participants in their health care
decisions, we will expand and improve the existing Medicare & You
educational efforts with a new advertising campaign. We will launch a
multimedia campaign using television, print, and other media, to reach
out and share information and educational resources to all Americans
who rely on Medicare, their families, and their caregivers. We are
also:
Increasing the Capacity of Medicare's Toll-Free Lines
so that the new wave of callers to 1-800-MEDICARE generated by
the advertising campaign receives comprehensive information
about the health plan options that are available in their
specific area. By October 1, 2001, the operating hours of the
toll-free lines will be expanded and made available to callers
24 hours a day, seven days a week. The information available by
phone also will be significantly enhanced, so specific
information about the health plan choices available to
beneficiaries in their state, county, city, or town, can be
obtained and questions about specific options, as well as costs
associated with those options, can be answered. Call center
representatives will be able to help callers walk through their
health plan choices step-by-step and obtain immediate
information about the choices that best meet the beneficiary's
needs. For example, a caller from New Britain, Connecticut
could call 1-800-MEDICARE and discuss specific Medigap options
in Connecticut. Likewise, a caller from Fremont, California,
could call and get options and costs for Medigap or
Medicare+Choice alternatives in their areas. If requested, the
call centers will follow up by mailing a copy of the
information discussed after the call.
Improving Internet Access to Comparative Information
and providing a new decision making tool on the Agency's award
winning website, www.medicare.gov. These enhanced electronic
learning tools will allow visitors, including seniors, family
members, and caregivers, to compare benefits, costs, options,
and provider quality information. This expanded information is
similar to comparative information already available, such as
Nursing Home Compare and ESRD Compare websites. With these new
tools, beneficiaries will be able to narrow down by zip code
the Medicare+Choice plan options that are available in their
area based on characteristics that are most important to them,
such as out-of-pocket costs, whether beneficiaries can go out
of network, and extra benefits. They also will be able to
compare the direct out-of-pocket costs between all their health
insurance options and get more detailed information on the
plans that most appropriately fit their needs. In addition, the
Agency will provide similar State-based comparative information
on Medigap options and costs.
CONCLUSION
Physicians and other providers play a crucial role in caring for
Medicare beneficiaries, and their concerns regarding the program's
regulatory and paperwork burden must be addressed. We share these
concerns. We have already taken some critical first steps to address
these concerns and bring openness and responsiveness into the process.
We also must make certain that regulatory changes and requirements are
sensible and predictable. I want to commend the efforts of this
Subcommittee in developing the Medicare Regulatory and Contracting
Reform Act of 2001. This legislation represents a good first step in
improving Medicare and reforming Medicare's contracting system. We look
forward to continuing to work with Congress and we will continue to
seek input from the health care community, our beneficiaries, and
partners in reaching our goals. I appreciate the opportunity to discuss
these issues with you today, and I am happy to answer your questions.
Chairman Johnson. Thank you very much, Tom.
I appreciate your concern about the 30-day no-enforcement
policy. Unfortunately, we are the prisoner of our own past, and
the past has seen extraordinarily complex regulatory provisions
coming down very, very frequently, with very unclear
information.
I was very interested in the GAO's testimony that looked at
how much paper flowed into various practices, and only 12
percent of the paper is from Medicare, but it is so unclear
that the providers have to rely on others to interpret it.
So while one could say that they could ignore 88 percent of
the paper, they cannot, because the directives coming down are
so unclear. So I am very pleased that you are moving ahead on
some of the things you talked about at the very beginning,
putting regulations out at a set time, and the task forces.
Through those means, I think we can improve the clarity of the
directives to the point where there will not have to be so many
industries that spend their time clarifying and interpreting
the directives.
But the 30-day delay in enforcement is specifically related
to the lack of clarity in the directives and the massive
numbers that are coming down and the situation of particularly
small providers in trying to integrate that material.
So I would be happy to talk about this with you and your
staff further, but there is a very significant problem that is
going to be pretty clearly documented in the GAO testimony that
we are trying to respond to.
Mr. Scully. Well, I would hope that maybe we can come up
with some slightly higher standard for the first 30 days, but
my concern is that obviously, if everybody in the provider
world knows--and as I have said repeatedly, I think 98 percent
of providers are trying to be good partners to the program, but
if the 2 percent who may not be are aware that for the first 30
days after a program change, there is not going to be any
enforcement, it is a problem.
Chairman Johnson. I do appreciate that. Unfortunately, I
think we have been legislating to the small number who are bad
actors, and that, in my estimation in the long term, will have
the effect of killing off the small providers. So we will talk
about that further.
I just want to ask you one more question and then I will
move on to the rest of the panel, because I am very pleased
that we have almost the full Subcommittee here.
We have really struggled with the issue of trying to help
physicians deal with the normal audit process. Extrapolation
has been an issue, and there are many other aspects to the
issue. But one way in which our bill does not go far enough, in
my estimation, in reflecting upon this since we have written
it, I just want to mention to you. That is, it requires that
your auditor explain to the physician his evaluation of the
cases.
Not so long ago, I and Jim McDermott and some of the staff
had a conversation with some of your staff, and we were talking
about the difference between a Level 5 office visit and a Level
3 office visit. The Level 5 office visit requires documentation
of a comprehensive physical. The Level 3 office visit requires
documentation of a detailed physical. No one can clearly tell
you the difference between those physicals.
So this is an underlying problem, and it is the kind of
problem that requires more than that the auditor just explain
to the physician why he thinks their coding was off, or the
mistake was there, or whatever the problem is. It really
requires that the physician have some level of right of appeal
at that point, because if the sample is wrong, the
extrapolation is going to be very wrong, and ordinary practices
simply cannot tolerate the alternative of a full review of
everything. It closes down their office for a week, and so on.
It is very, very difficult to bear.
So particularly small practices in rural areas simply do
not have that choice. So I am looking at strengthening that
provision in the bill, and I have not talked with Pete about
this yet, either, so I am putting this before the whole
Committee at the same time. But our goal in requiring the
auditor to explain his interpretation of the chart to the
physician was to allow the physician to then bring information.
But the physician has to have the right to say before some
neutral body, ``This is a Level 5. This is not a Level 3.'' And
this issue of down-coding has been just as bad on both sides of
the issue--both the administrative people coming in and looking
at things with hindsight, and physicians coding inaccurately.
So I do want to strengthen that point because it is such an
important point and has so many ramifications through the rest
of the system that I think physicians deserve more than simply
an explanation of why they are wrong. They are sitting there
saying, ``Yes, but you are wrong.'' So that sometimes, there is
going to need to be a right of appeal of that sample so the
sample is agreed to at some level.
That is just something that I am thinking about and wanted
to lay out to you, because I think this business of moving
ahead without a good base of information is one reason why
providers are getting terribly discouraged with the Medicare
system.
Mr. Scully. I agree with you. It is a tough balance to
find, and we are certainly happy to sit down and try to fine-
tune that provision. We have already spent a lot of time
talking to your staff about it.
Chairman Johnson. Yes. Pete, would you like to proceed?
Mr. Stark. I have just a couple of issues. The OIG is
concerned about giving up the right to conduct random
prepayment reviews. Do you share their concern?
Mr. Scully. I think that is tied closely to what Chairman
Johnson is talking about. We agree that we need to have
prepayment reviews. I think the issue is really under what
circumstances, and what are the provider rights. But I think
that giving up prepayment reviews altogether would be a
mistake, yes.
Mr. Stark. OK. We have talked about major problems with the
information and assistance provided by the contractors, and I
think we will hear testimony about these monthly bulletins
which are close to undecipherable or hard to understand.
Do we have any reason to believe that the contractors are
providing any more clear information to the beneficiaries? And
as we are looking at the information that is given to providers
by these contractors, would it be in order for you to review
the information given to beneficiaries, which might be equally
complex and bureaucratic in its nature?
Mr. Scully. It is complex, and our stated goal is to get
down to 20 to 22 good, solid contractors in 4 or 5 years that
are reliable and that are more predictable and are giving more
common information out. One of the goals there is to make sure
that----
Mr. Stark. What I am talking about is that in the bulletins
that we are talking about, the providers are given so much
information about rule changes all the time, and the GAO is
going to suggest that all of this information is sent out in
complex language, poorly written. But we would anticipate that
most providers can read without moving their lips and get to 20
with their shoes and socks on.
I think our experience has been that when you get to be my
age, you have to simplify the language some and spell it out in
one-syllable or two-syllable words. So I guess my question is
should we not be looking at the clarity of information we are
giving to our beneficiaries that is provided by these
intermediaries at the same time that we are looking at the
information given to the providers?
Mr. Scully. Yes, absolutely. I hope we are.
Mr. Stark. I hope so, too, and as I said, I hope that that
does not get lost in the process.
On 1-800-MEDICARE, you said that you want to enhance that.
We have 27 pages of phone numbers; is there any reason why we
cannot just use one phone number over the country and, worst
case scenario, have people type in their own phone number to
get the local one so they do not have to look through a
bulletin to find the right phone number?
Mr. Scully. Well, one of the goals of this whole fall
campaign, which has been delayed a couple of weeks, is to do
exactly that--to have a 1-800-MEDICARE number where all seniors
could call that number. We have almost tripled the number of
operators we have; as I said, it is 24 hours a day, 7 days a
week. The goal basically is that, whether you are in Oakland or
in Connecticut or wherever, you can call to get detailed
information about your area that you cannot get now on picking
a nursing home, a dialysis center, Medigap versus
Medicare+Choice versus fee-for-service--much more credible
localized information--and also, you can be referred to the
contractor. The 27 pages of phone numbers are generally the
carriers and the FI numbers, and if you want to be referred to
one of those, you can certainly be transferred through that
line. But the goal is--I think we get something like 35 million
calls a year, so I am not sure that it is going to replace the
carrier and FI phone systems, but the idea is to give one
standardized access point for seniors.
Mr. Stark. Do you have the money for that?
Mr. Scully. Yes, thank goodness. The appropriators were
very nice and gave us the money for that.
Mr. Stark. The National Association for Home Care is going
to talk to us later about the 15-percent reduction in home
health payments now in the law. As I recall, we anticipated
when we went to the Prospective Payment System (PPS) that the
level of services would drop by at least 15 percent. And we are
now hearing that indeed that has happened, that they have
reduced services under the PPS perhaps even more than 15
percent.
So I guess my question is can we assume that the quality of
care has not been reduced and that indeed that 15-percent
reduction in services has occurred? Are you aware of that, or
is that something that you do not have information on?
Mr. Scully. I am sorry. I am a little under the weather.
Did you say home health, with PPS?
Mr. Stark. This is under home health care. We anticipated
when the PPS payment system was put into effect that their
level of services would drop by about 15 percent. We are
informed that that has happened. GAO has suggested that it has
dropped by at least 15 percent and perhaps by even more.
My question is does that comport with your information, and
as far as you know, has the quality been maintained at the same
time this level of services has been reduced?
Mr. Scully. Yes, I think it has. In 1992, home health
spending was $3 billion; as you know, by 1997, it went up to
$18 billion. Now I think it is back at around $12 billion. We
probably could have done without that spike.
I think the home health PPS system has worked reasonably
well. There were obviously some significant bumps in the road.
I think the OASIS data we collect--while some people do not
like all the data that we require--is a very good quality
measurement, and we are hoping to use it to more effectively
put together quality measurements on home health and have it do
an even better job.
But I think the evidence that we have seen so far is that
home health quality has actually been pretty stable.
Mr. Stark. Insofar as you know, has the evidence supported
what GAO is telling us, that is, that the level of services or
the number of services has been reduced by about 15 percent?
Mr. Scully. I am not sure, but I am sure that is probably
about right.
Mr. Stark. Somebody is going to whisper in your ear.
Mr. Scully. We have not heard that number.
Mr. Stark. You have not?
Mr. Scully. Only from GAO.
Mr. Stark. OK. Well, I hope you look at it, because this is
going to be an issue in the sense that, arguably, if it has
been reduced, we can continue with present law, which calls for
the 15-percent reduction in the payments.
Mr. Scully. I think the 15-percent reduction in the
payments, if I remember correctly, is because of the way the
baseline works. The actual reduction in payments is 15 percent,
but the actual spending would still, even if you did that, go
up. That is not to say we should not get rid of the 15 percent,
or implement or not implement the 15-percent reduction, but I
believe the 15 percent reduction, even if you did it, you would
still have a 2 or 3 percent increase in home health spending.
It is a reduction in the rates, but spending would still go up.
Mr. Stark. But it would still be interesting to know if the
amount of services went down or up, because under PPS, that
would of course be important to whether the amount we were
paying was correct.
Mr. Scully. Yes.
Mr. Stark. Thank you.
Chairman Johnson. Mr. Camp.
Mr. Camp. Thank you, Madam Chair.
Chairman Johnson. Excuse me. Before you start, if some of
you would like to go vote, and we will rotate, so we do not
have to have a break, that would be useful.
I will recognize Mr. Camp and then Ms. Thurman, and back to
this side, hopefully before the last of us go vote. Mr. Camp.
Mr. Camp. Thank you.
Mr. Scully, when this legislation was introduced, the
President said that it reflected important elements of his
framework for Medicare legislation, which included simplifying
Medicare's regulations and administrative procedures and
updating and streamlining them, and also trying to reduce the
instances of fraud and abuse.
My question is this. Obviously, we take the protection of
the Medicare program very seriously in this Committee. I think
it is one of the most important responsibilities you have as
well. But as it relates to the provider payment audit process,
wouldn't it be possible to protect program spending while at
the same time creating a more collaborative audit process,
giving a greater opportunity for providers to discuss findings
and provide additional information where conclusions are
reached?
Mr. Scully. I think we are trying to find that balance
where we aggressively make sure that program payments are
appropriate but that we work more closely with providers so
that they are not--I think there has been a perception in the
last couple of years that they are all scared to death of the
Medicare program--we need to find that balance, and we are
certainly trying to do that.
Mr. Camp. I know that some of our witnesses that will come
later will discuss some issues, and the Chairman in her opening
remarks mentioned that GAO has found that of 60 phone calls
recently made to call centers to test the accuracy of responses
to frequently asked provider questions, 85 percent of the GAO
responses were incomplete or inaccurate.
Obviously, you believe that this is unacceptable as well,
and I wonder how we can correct this.
Mr. Scully. Well, hopefully, one of the ways that we will
correct it is through contract reform. We have 51 contractors,
fiscal intermediaries and carriers, and some are better than
others. Right now, we do not have the ability to narrow those
down. We would like to be able to identify the best, probably
around 18 to 22 contractors, and work with them to have much
better services.
I was in Kentucky yesterday, and I heard a lot of
complaining about their fiscal intermediary and carrier. I was
in Arkansas 2 weeks ago, and they were relatively happy. So I
can tell you that the service with the contractors varies
significantly by State and by region, and we have very little
ability to really fix that until we have contract reform.
If we can find the ability to have contractors compete
again every 4 to 5 years, which is what we are talking about in
the bill, and have the ability to incentivize contractors
appropriately with financial incentives--right now, they are
cost-based contracts--there are a lot of carriers and FIs that
are slowly getting out of the program anyway. We would like to
speed that up and narrow it down to 20 to 22 contractors, and
right now, we have very little ability to make sure that the
guys who are screwing up 85 percent of the phone calls are no
longer in the program.
Mr. Camp. I appreciate your efforts here, because
obviously, there have been problems with what was the Health
Care Financing Administration (HCFA) and is now CMS for many
years, and I know that you are trying to step in and make some
needed reforms and changes there, and I look forward to working
with you as we go through that process and appreciate the
effort that you are already putting forward on this. Thank you.
Mr. Scully. Thanks. Hopefully, I will come back without the
flu someday to testify and have better answers for you.
Mr. Camp. Thank you. You are doing fine.
Chairman Johnson. Congresswoman Thurman.
Mrs. Thurman. Mr. Scully, still on the same idea with
Congressman Camp--because as you can imagine, we are hearing
from our districts about this very issue as far as the
contracting part of it--and particularly what I am hearing from
my physicians is that this is probably costing them 20 to 25
percent more in their offices to keep up with all this stuff,
which is obviously going to have a direct impact on increases
in health care costs.
Maybe you can clarify this or somebody can tell me why, but
the physicians have actually told me that they will have their
staff call their provider or contractor and say, ``I do not
know, because of all the changes, and what you told me today is
different than what you tell me tomorrow on codings'' or
whatever. And they are saying, ``So I will ask them, well, if
it is 26(a), 26(b), whatever those numbers are, in fact, they
will say, `Well, we cannot tell you that.' ''
And then they will say, ``Well, could you tell me if it
is--'' and they will say, ``Well, if you mention it, maybe we
could tell you.''
Why would that be?
Mr. Scully. I am sorry--if you mention it, then what?
Mrs. Thurman. That if you mention the number or the coding,
``maybe we could tell you,'' but if you do not mention it, they
just do not give you any information.
Is there a reason for that?
Mr. Scully. I am not sure what the--I think your question
is if you call a provider--most providers are worried that if
they give the carrier detailed information, they will be
flagged for additional audits--is that what you are saying--so
they cannot give them too much information?
Mrs. Thurman. They will not give them the information to
help them work through this. And as we know, over the last
couple of years, we have continued to change this whole system
over and over and over again, so what was today might not be
tomorrow, so they are getting frustrated because when they call
these folks, they are not willing to really help them through
the system; they are more like, ``Well, it is not that, and it
is not this,'' but they will not really say, ``Based on the
information that you are giving me, this possibly will be what
the model should be'' or whatever.
Mr. Scully. Well, that is something we clearly need to fix,
because there is no question that physicians--I spent 3 hours
with a physicians group in Louisville yesterday, and they were
not real happy with this process. So we need to find a way to
get them clear, straight answers. They might not always like
the answers. Generally, people do not like the answers unless
you are allowing them to bill more than they want. But I do
think that providers are entitled to clear, straight answers,
and we need to keep pushing the contracts so they do that.
Mrs. Thurman. The other thing that the contractors actually
mentioned to me was that over the last couple of years, because
of the changes, we have also had to reduce the amount of
education that has been done, both through bulletins--they used
to do it once a month; now they are doing it quarterly. They
used to bring together providers and their office staffs, bring
them in, walk through the system, what the new issues are, what
the changes have been, and that they have been dramatically cut
in those areas because of some of the things that we have done.
Can you respond to that at all?
Mr. Scully. I do not think they have been--I am not sure of
the numbers--the carriers actually asked us for $47 million
last year, and I think we gave them $42 million. Could they
have used more for beneficiary education? Sure. I think that
overall, when you are looking at a $240 billion program--and I
think our administrative budget is about $2.3 billion, and the
contractor budget is about $1.5 billion--it is run on a pretty
thin budget, so it is understandable sometimes, with the volume
of claims we have, that not everybody is happy with the
services.
But on the provider education side--and I will have to
check--but I think the amount of money they asked for last year
was relatively close to what they got.
Mrs. Thurman. The other issue on competitive bidding--and I
know that GAO and others have talked about that as being
something that we needed to do--but on the other side of that,
is there a way to develop a system where we can review and look
at what the provider or a contractor is doing versus just
upsetting the whole system, based on the amount of claims that
they have?
My guess is that their infrastructure, what they put in
place to help, has got to be an enormous cost, and if we start
switching around just because, or we go through the bidding
process--is there another way that you might suggest that we
could do that?
And then I have just one other question that I need an
answer to, because I am going to be doing some town hall
meetings on Friday on the TriCare for Life issue with our
veterans. They have been raising the question to me--and I do
not know if you will have the opportunity to do this or not--
for many people who particularly have gone through the
Veteran's Administration (VA) system, they have never signed up
for Medicare, there is a penalty for them not being in
Medicare. I was told that there potentially was a waiver, and
are we looking at this, and are we potentially looking at
giving these folks who would have been in VA did not take
Medicare, a waiver of the penalty that they would have been
given if they were to go into the Medicare Program now?
Mr. Scully. I was not aware of that. I have talked a lot
with the American Legion lately about VA subvention, which is
obviously billing the Medicare program for services in VA
hospitals. But I have not heard anything about the waiver, to
be honest with you. I would be happy to look into it before
Friday and call your staff with an answer.
Mrs. Thurman. I would appreciate it, because this is
becoming a big issue for those veterans who just never signed
up for Medicare because they were always in the VA system; and
of course, with the VA system, part of it was to bring closer
to their homes. So they are very concerned about this.
Mr. Scully. I will get you an answer today.
Chairman Johnson. If the gentlelady will yield, Ben Cardin
has a bill to this effect. We have just had it analyzed by the
Congressional Budget Office (CBO), and we will try to make sure
that option is available to our veterans.
Mrs. Thurman. I would appreciate it. Thank you.
Chairman Johnson. I am going to turn the chair over now to
Mr. McCrery, but let me just make one comment in response to
the dialog that has gone on with the two preceding questioners.
One of the recommendations in the Medicare Education and
Regulatory Fairness Act driven by providers was that they
wanted a written response to questions. This does reflect not
only their frustration and anger, but liability exposure to the
fact that if they follow directions that they are given, and
they are not in writing, and later, the government comes in and
says, ``Oh, no, those were not the right answers, so you are
liable, and you have penalties.'' We did not put the written
response requirement in our proposal, but you should know that
it is hanging out there very hard, and if we do not do a lot to
improve our ability to offer concrete, specific, and true
answers, we will sometime have to get to that.
I appreciate the load that it would place on the
contractors, and therefore we backed off from it. I think the
simplification task forces that you have got going--and I
really commend you in your testimony for all the things that
you are doing to drive the system toward a new opportunity to
serve in a more collaborative way with the providers--are all
important. But that demand for a written response came from a
very, very broad body of experience and is a very intense
desire. So it is not in this bill, but we should never forget
that it is hanging out there.
I am going to turn the gavel over to Mr. McCrery and go
vote. Thank you.
Mr. McCrery. [Presiding.] Well, Mr. Scully, I understand
that you are under the weather, and you have my sympathies, so
I will try to be easy on you. You also have my sympathies for
being in the position that you are in--although, having said
that, I am very pleased that someone of your character and
capability and experience has agreed to take on this job. It is
a job that nobody should have, in my opinion--which leads me to
my first question.
While I am cosponsoring this legislation, and I am all for
regulatory reform, couldn't we negate the need for this if we
went to a premium support system for Medicare that was proposed
by the Medicare Commission, voted a majority vote by the
Medicare Commission, and is embodied in legislation in the
Senate in the form of Breaux-Frist? Couldn't we avoid a lot of
this rancor about who pays what, when, where, and all that?
Mr. Scully. Yes, I think you probably could. As you know,
philosophically, not just me, but I think the administration's
general view is that Medicare is a wonderful program, and
seniors love it, but having the government fix prices for $240
billion in payments a year and having us do it the way we do it
is probably not as efficient as having us buy insurance and
operate more like the Federal Employees Health Benefits Plan.
Philosophically, some day, we would like to be there, but as it
is now, I just try to be the best price-fixer I can.
Mr. McCrery. And I appreciate that. We are not there, and
it does not appear that we are going to get there very soon, so
in the meantime, we have to concern ourselves with these kinds
of questions that we are dealing with in the hearing today--and
for that, you do have my sympathy, but I do appreciate your
willingness to take this on.
There has been a lot of discussion about the audit process.
I do think it is a necessary evil. Our providers, particularly
physicians, do not like it. They do not think it is fair. They
have to hire extra people to staff their offices to try to deal
with these things. And frankly, a lot of them yearn for a day
when they do not have to practice, and they do not have to put
up with all that, because of HCFA or CMS and these kinds of
concerns.
I know that you, like this Committee, are very concerned
about the financial integrity of Medicare, and I think most
physicians are concerned about the financial integrity of
Medicare. However, there has got to be a better way than this
combative process that we engage in.
Have you looked at and would you provide us information on
any changes to that process that you think could make life
better for the providers in the system, some kind of
collaborative process that would involve them more at the
initial stages so they do not have to go to the hearing level
and all that?
Mr. Scully. I think one thing that would help--and it is in
your bill, and it was in our proposal--is to have a Medicare
ombudsman. One of the frustrations that people have is that
they are calling, trying to find out what coding problems they
have, what legal problems they have, and what compliance
problems they have, and usually, they have to hire some lawyer
like me and pay him ``x'' dollars an hour to give them legal
advice. I think that is frustrating.
So I think that one thing we could do is create a Medicare
ombudsman as a provision of this bill to do that so that
providers who have problems can call and get an answer from
somebody who is working closely with the Department but is not
employed by the Department and have kind of a third party
information system on legal and compliance issues. I think one
of the great frustrations that physician practice groups have
is the expense for small practice groups of having compliance
programs. I actually think that most physicians are
relatively--I will not say happy--but the Resource Based
Relative Value Scale (RBRVS) system works significantly better,
I think, than a lot of the other reimbursement systems in
Medicare. I think the hassle factor is what drives physicians
crazy, and I think that getting straighter, quicker, better
answers that they can rely on, because they are usually not big
practices that have significant ability to pay legal fees,
would be a good step forward.
Mr. McCrery. I appreciate the concept of the ombudsman, and
I hope that they get better answers than they do from calling
the contractors. The GAO is going to testify in a few minutes
that they made 60 phone calls to contractor call centers, and
85 percent of the responses that GAO received were either
incomplete or inaccurate. So I hope we can find a system that
is a little better at providing accurate information.
Mr. Scully. That is a stunning number, and we can certainly
improve and have to improve on that.
Mr. McCrery. Yes.
I have just one more question, and then I know Mr.
McDermott wants to inquire. In the bill that is before the
Committee, we require CMS to competitively bid for contractors
and intermediaries at least every 4 years; whereas in Secretary
Thompson's draft reform proposal, he would have allowed renewal
of contracts of those entities which met or exceeded certain
performance requirements.
Both of those provisions go to the same goal of improved
service for the customers. Have you thought about which way is
better? Do you have some thoughts on that you can share with
us?
Mr. Scully. The Federal Acquisition Regulation for other
Federal contracting I think has competitive bidding every 5
years. I think 4 or 5 years, either one--we are somewhat
flexible on that. I think the real issue is that we would like
to have the flexibility that we can identify good contractors
that we do not want to rebid. There are some carriers, some
FIs, that have a long, good track record; they have a great
track record. In some rural States, for example, there are some
carriers who probably are not going to change. For instance,
Blue Cross of Montana is probably going to be the carrier in
Montana most likely. There may not be too many others there.
Rather than have us, staff-wise, spend an enormous amount of
time rebidding contracts and going through the process, which
is a long, lengthy process, I think we would like to have the
flexibility or the presumption that we have to rebid every 4 or
5 years, but have the flexibility with some high standard of
service to not have to rebid certain contracts, because it is
time-consuming. We are hoping to get it down, but if you start
with 51 or even 30, rebidding one-quarter of those every year
is obviously more than cumbersome for the staff. So I think
that some people intuitively probably do not need to be
recontracted.
Mr. McCrery. So you would recommend that we change the
legislation to give CMS the flexibility to renew contracts if
the intermediary or contractor has reached a high level of
performance standards or----
Mr. Scully. Yes--they show sustained excellent performance,
and there is no--under some circumstances, we may not want to
recontract every time.
Mr. McCrery. Thank you. I hope you get well soon.
Mr. Scully. Thanks.
Mr. McCrery. Mr. McDermott.
Mr. McDermott. Thank you, Mr. Chairman. When you start your
renal task force, give me a call.
Mr. Scully. Which one?
Mr. McDermott. The renal task force to talk about renal
dialysis.
Mr. Scully. I think actually, it has already started; but
we would be happy to get you involved.
Mr. McDermott. I would like to know about it.
Mr. Scully. I think the first meeting was about 2 weeks
ago.
Mr. McDermott. Listening to Mr. McCrery made me think--I
think it was Yogi Berra who was sent in to replace somebody who
had made a bunch of fielding errors, and he immediately made
another error and when asked about it, said, ``Well, the last
guy in here messed this position up so bad there is no way you
can play it right.'' I suspect that may be the position that
you are in.
But I find myself--and others may have already asked this
question; one problem with getting it broken up this way is
that you do not know what was asked before--I find it very hard
to find the equity. And I think we always struggle for equity.
I do not usually push the American Medical Association's side
of anything, but the equity issue around extracting a payment
after you have had the contractor review and having extended
periods--I think with the Administrative Law Judge (ALJ), more
than a year is the average time it takes; and then, more than 2
more years on the Departmental reviews--to make somebody pay up
front when more than 60 percent are rejected in the end means
that they have had their money out there for 3 years, and then
they get it back.
The weight is all on the physician, and I am not sure that
is fair. I think it ought to be the other way, and I would like
to hear you talk about the equity of the provider.
Mr. Scully. I generally agree with you. I hope we can fix
that in the bill. I have had a lot of discussions with staff,
and I think there are some changes in the bill on that.
My view is that it should be more like the IRS, that is, if
you lose, you pay interest. But there is no reason for us to
have money up front and then people have to wait for 3 years. I
think there is some version of that in the bill----
Mr. McDermott. Is that in this particular----
Mr. Scully. Yes, I think it is--yes, for the first level of
appeal, anyway. I would be happy to talk to you about it more,
but to the first level of appeal, you do not have to put the
money up in the bill. That is one of the changes in the bill.
So at least for your first level of appeal, you have the
ability not to pay, and if you lose, you pay with interest,
which is more like the IRS provision for taxes.
Mr. McDermott. Why don't you wait until the end of the
appeals process and make it appeals plus interest--well, your
penalty plus interest at the end?
Mr. Scully. If you do not prevail, yes.
Mr. McDermott. All the way to the end, not--when do you
have to pay them?
Mr. Scully. At the end of the first appeal, if you lose,
you have to pay with interest--the first-level appeal.
Mr. McDermott. That is inside the company that just put you
on notice in their audit anyway; right?
Mr. Scully. That is right. I am sorry. I was going to read
all of this last night, but I was not feeling up to it.
Mr. McDermott. OK, I will give you some slack.
Mr. Scully. The concern was--and to be honest with you, I
kind of agree with you; I think this is significantly better
than current law--the concern was the incentives for people--
this is more, I think, from the IG and the Justice Department
and our own lawyers--that people would have an incentive to
string out the appeals and wait and wait and wait and appeal
and appeal and appeal, as opposed to getting a decision at the
first level. But I agree with you--I think this is the first
step. As it is right now, you pay up front, and you do not get
the money back until you win the appeal. So I think this is
half-a-fix, from your point of view.
Mr. McDermott. So you are not against fixing it more by
pushing it one more level?
Mr. Scully. Well, as you know, I do not get to set all the
administration's policies. We have discussed this, and this is
what we came up with in the administration. There is a lot of
concern about creating extra incentives for extended appeals,
and I share your view that in certain cases, it is not
appropriate for us to have the provider pay, and then we keep
their money while they appeal.
Mr. McDermott. I do not have any problem going after
corrupt physicians. That is not the problem. The problem is
that when we throw this net, it is clear that we catch far more
fish than really--there is a lot of ``by-catch'' as we say in
the Northwest--it is not the ones you really want. And those
people get hurt badly by having to come up with a cash amount.
They have got to go out and borrow it in most cases and then
continue fighting the appeal.
So it seems to me that we should move it back further, and
I hope we can have an amendment to that point.
Mr. Scully. I think the bulk of those appeals, just looking
at the numbers--5.7 million claims out of 6.7 million claims at
that first level. I am not saying it is a perfect fix, but the
bulk of the appeals, or a significant number of the appeals are
resolved at the first level, and unlike today, they would not
have put the money up front. So I think it will be of
significant help.
Mr. McDermott. But not as much as we----
Mr. Scully. Not as much as your idea.
Mr. McDermott. OK. The other thing is the whole business of
extrapolation. Explain to me why you think extrapolation is a
good way to go.
Mr. Scully. When I was on the provider side until 4 months
ago, I thought extrapolation was terrible. Then I came to the
agency and talked to the people on the program integrity side
about why they do it, and now I think there are two sides to
it.
I think providers are angry that they get extrapolation and
then get action taken based on that. Our program integrity
folks' attitude is that we only check 1.5 percent of all
claims, and then we have no idea what is going on for the other
98.5 percent of claims, and that the only way to really
identify trends is extrapolation, and that since we check so
few claims, you do not have any choice but to use
extrapolations. I think there are arguments on both sides. Now
that I have been inside the agency, I understand why they do
it; I also understand why it drives providers crazy.
Mr. McCrery. Mr. Crane.
Mr. Crane. Thank you, Mr. Chairman.
First of all, Mr. Scully, I want to congratulate you for
your participation in our health care conference at
Northwestern Medical School; I had nothing but compliments
about your presentation. We were grateful that you were able to
be there with us.
Back when this bill was introduced in early August, the
President issued a statement saying that the legislation was an
important step toward strengthening Medicare for seniors and
for future retirees and that it reflects important elements of
his framework of Medicare legislation.
I would like to ask you specifically--President Bush's
principles for Medicare reform state that Medicare regulations
and administrative procedures should be updated and
streamlined, while the instances of fraud and abuse should be
reduced.
How would you intend to try to implement the principles of
President Bush's proposal?
Mr. Scully. I think we have done a lot already. I was in
the hospital business until 4 months ago, and I was one of the
angry providers, or represented angry providers, and I think we
have tried in the agencies as much as we can--I think I told
you this before, that when Secretary Thompson came to
Washington, he was one of the great HCFA-haters of all time; as
Governor of Wisconsin, he had had a lot of frustrating
experience with Medicaid waivers, so he was not a big fan of
the agency. Once he spent a week in Baltimore learning more
about the agency, he realized as I have that there are a lot of
very smart, hardworking people up there. But for the most part,
largely because they get pounded by providers, Congress, and
lots of other people, they were pretty defensive and pretty
insular.
So I have really tried to get people at the agency to go
out and talk to the industries that they regulate and that they
pay and try to understand them better. These eight working
groups are a piece of that effort to try to get people to deal
with home health agencies and talk more with the home health
agencies; to get the people who regulate hospitals to actually
spend some time in hospitals, because it is easy to get stuck
in Baltimore and not do that. As much as I possibly can, I have
been driving people to the agency to understand the parts of
the health care system they regulate better, and so far, they
have been pretty responsive. I do not think that will fix all
the problems, but I think better communication will solve about
90 percent of the problem.
I had a great relationship when I was in the hospital field
with the HCFA hospital staff because I went up there a couple
times a week and got to know them all, and I kind of broke the
code. The average Chicago hospital administrator has a tougher
time doing that. So I am trying to get the regional offices,
the Baltimore people and the Washington people to make a bigger
effort to go out and understand the people they regulate, and
so far, we have not fixed everything yet, but I hope the people
in the provider community feel like we have made a big effort
to turn that relationship around.
Mr. Crane. Thank you, and we look forward to working with
you.
Mr. McCrery. Mr. Kleczka.
Mr. Kleczka. Thank you, Mr. Chairman.
Mr. Scully, I have a couple of quick questions. I believe
that in answer to Mr. McCrery, you indicated your support for
the provider ombudsman contained in the bill.
Mr. Scully. Yes, sir.
Mr. Kleczka. And briefly, restate for me what you believe
the functions of this person will be within the agency.
Mr. Scully. I think the basic idea is that they be kind of
a quasi member of the agency. There are a number of ways that
you could do it. I think the most likely way is for the agency
to contract out with someone in the National Association of
Health Lawyers or some party that would be closely connected
with the agency and would have a lot of information about the
agency's regulations and compliance efforts, but independent.
Mr. Kleczka. So you do not view this person as an employee
of CMA?
Mr. Scully. It could be an employee, it could be a
contractor. My personal preference would be to hire somebody
like the National Health Lawyers Association on contract,
because what you do not want people to do is call from
Wisconsin, ask opinions, and feel bound by--it could be an
employee of the agency as long as it is clear to the person
calling and asking for the guidance that no one is going to
launch an enforcement action based on that phone call.
Mr. Kleczka. I would think they would have to be an
employee of the agency if they are going to have access to
certain information that would respond directly to an inquiry
from, say, a hospital or a doctor's office.
Along that same vein, what is your position on providing
for a patient's ombudsman or ombudsperson?
Mr. Scully. I would be all for it. I do not think it is in
this bill----
Mr. Kleczka. No.
Mr. Scully. But I think that better communication with
beneficiaries and providers is important. I am not sure--I
cannot say that for the administration.
Mr. Kleczka. Perhaps between now and markup, Madam Chair,
we could possibly explore that. It was in legislation last
year, I think, the drug legislation, and if we are going to
provide sort of a quarterback, someone to run interference for
providers, with 30 million-plus beneficiaries, maybe a person
helping them a little bit might be in order.
Thank you very much, Mr. Scully.
Chairman Johnson. [Presiding.] Mr. Ramstad.
Mr. Ramstad. Thank you, Madam Chair, and thank you for your
leadership.
Mr. Scully, I join my colleagues in expressing our
gratitude that a person of your caliber is in this important
position and appreciate working with you.
Let me just say that in my meetings with health care
providers back home in Minnesota, every time I meet with them,
I hear about the crushing paperwork burden they face. It was
certainly brought home to me very vividly recently when I went
to a skilled nursing facility, and they told me they had just
hired two registered nurses to do nothing but paperwork.
Obviously, we cannot afford to divert those kinds of
resources from care for the sick, so we need these reforms, and
I appreciate my colleagues on both sides of the aisle working
in a bipartisan way to craft this legislation.
One glaring concern that I have concerns local coverage
flexibility, something that we have discussed before. According
to a recent study with which I am sure you are familiar--and
virtually every health care provider and Medicare beneficiary I
speak with--the local coverage process is absolutely vital to
Medicare's continued quality improvement because the local
process is the way that patients can best gain access to the
many innovative technologies that otherwise would encounter
incredible coverage delays at the national or CMS level. We
have all seen too many examples of those unconscionable delays
in the past.
One example cited in this recent study, ``Breakthrough
Technology in Women's Health,'' which is used to diagnose
osteoporosis--it took Medicare over 7 years--this is obviously
before you came aboard--but it took Medicare over 7 years to
cover this technology at the national level. But because many
local Medicare contractors approved local coverage during that
time, most women were able to gain access to the technology who
otherwise would not have been able to receive it.
These unconscionable delays cannot stand. My question is
this, Mr. Scully. If contractors are regionalized and
consolidated, how can you assure us that you will maintain the
necessary flexibility at the local level to allow new
procedures and new technologies to be available as they are
currently in selected localities? I am really concerned about
this if we nationalize it.
Mr. Scully. Hopefully, it will be better. If you took the
51 contracts that we have now in Part A and Part B and
consolidated them into a combined A and B contract, you would
have about 30. And we are talking about going from 30 to
probably 20 or 22, somewhere in that range.
So our goal is to find the best contractors and the best
partners who are going to provide the best services and make
good, sound, rational, well-thought-out local coverage
decisions, among many other things.
So I would guess that the localized trends and coverage
decisions would not change that much. You would have 20
contractors, roughly, instead of 30 making those decisions. And
I think that probably 75 percent of coverage decisions are made
locally, and about 25 percent are made nationally, and I think
that kind of flexibility is a good idea and is likely to
remain.
Mr. Ramstad. It is very reassuring that you plan to
preserve the local coverage decision process. From what I
understand from talking to people in your office, it is about
75 percent----
Mr. Scully. I hope the national coverage process is getting
faster and better as well.
Mr. Ramstad. Well, certainly, Minnesotans appreciate the
ability to work with the local medical community, so this local
flexibility, I am glad to hear will continue, because if
contractors are regionalized and consolidated, the fear is that
it will become more nationalized, with less emphasis on local
coverage decisions, which is absolutely imperative to get these
breakthrough technologies especially to Medicare beneficiaries.
I am sure you share the judgment that Medicare
beneficiaries should have the same access to medical
technology, life-saving, life-enhancing medical technology,
that every other health care consumer has. Do you share that
judgment?
Mr. Scully. Sure, absolutely. I think that in some cases,
we are faster than private insurers, and in some cases, we are
slower; but absolutely.
Mr. Ramstad. Thank you again, Mr. Scully. I appreciate
working with you and look forward to continuing that working
relationship, and I yield back.
Chairman Johnson. Mr. English.
Mr. English. Thank you, Madam Chair.
Mr. Scully, since you have landed in the administration,
you have been a breath of fresh air at gale force, and we
appreciate it.
As someone who used to be an internal auditor myself, I was
wondering if you could don your green eyeshade for a moment and
talk about some of the mechanics. Implicit in some of the
things you have said about awarding contracts more based on
performance is a very strong system of performance measurement.
Also critical in addressing waste, fraud and abuse is a strong
system of auditing.
I wonder if you could comment on what improvements you
anticipate in the audit process and specifically, do you
anticipate that audits could become more collaborative working
with Medicare contractors. Specifically, do you think it is
possible in audits to create more opportunities for discussion,
for exploration of findings, and allowing providers to provide
more information?
None of these ideas is new. They are embedded in generally
accepted auditing standards. But too often in the past in your
agency, I do not get the sense that these kinds of approaches
were tried.
Would you care to comment?
Mr. Scully. I certainly think we have to improve the
interaction between the providers and the auditors, and I think
we can certainly work on doing that.
Getting back to your core question, though, about cost-
based contractors, I think the fundamental change that you are
going to see in the program is that cost-based payment for
anything, in my opinion, does not work. It did not work for
inpatient hospital payments in the early eighties, and we
switched to Diagnosis Related Groups. The 51 contractors that
we have now are paid on cost. If they cannot make a margin,
they have no incentive to perform better, they are reimbursed
for their costs, and I have never seen a cost-based system that
provides the right incentives.
So what we would like to do, basically, is give--
theoretically, if you are a Blue Cross plan, Blue Cross of
Pennsylvania, right now, you do not make any margin on your
Medicare contracts. Now, the reality is that people like it
because they can shift the costs of some of their systems and
other things on the private side over, and they are kind of a
good building base for the rest of your insurance business. But
you are theoretically not allowed to have any margin.
We believe pretty firmly that if we actually find 20 to 22
good contractors and incentivize them appropriately and give
them the right incentives, and also give the providers the
ability to rate them, which we have talked about doing, give
the hospitals and the physicians the ability to come and give
us feedback on who we compete the contracts with, that we will
have good contractors who are sensitive to the needs of the
providers and who are obviously sensitive to the fraud and
abuse issues, but also provide more aggressive and better
services for us, because right now, their incentives are
minimal.
Mr. English. Do you anticipate any changes--going back to
the other part of my question--do you anticipate any changes to
make the audit process more collaborative, more interactive,
giving the service providers an opportunity to respond to
findings before they are made public, and provide additional
information to put the audit findings into context?
Mr. Scully. I hope we are doing that more recently, and I
spent some time talking with our program integrity people about
that, and I believe the carriers and the FIs are doing that,
and it sounds from the tone of your question like we need to
make a better effort. But I thought we were heading in that
direction and trying to make it a more cooperative and not
quite as adversarial a process.
Mr. English. Very good. As my final line of inquiry, with
your emphasis on performance evaluation, how do you develop the
performance standards that you use for that? You referenced the
standards in your testimony. What kind of process do you have,
and if it is more appropriate, I would welcome you providing a
written answer to the last part of that question rather than
tie us up here this morning.
Mr. Scully. I would be happy to provide you with a written
answer, but I think there are some guidelines in the bill we
set up and our proposal for how we do evaluations, and a lot of
it is through feedback from the providers and ratings from the
providers. That is certainly something that providers want.
Mr. English. Very good. Thank you. Thank you, Madam Chair.
[The following was subsequently received:]
Centers for Medicare & Medicaid Services
Washington, DC 20201
Contractors currently are evaluated through a Contractor
Performance Evaluation (CPE) process, which evaluates their performance
of specific responsibilities defined in the Medicare contract, law,
regulations, and general instructions. The CPE process is structured
into five broad criteria: claims processing, customer service, payment
safeguards, fiscal responsibility, and administrative activities. Each
of these criteria contains business functions that may be reviewed,
such as medical review, beneficiary and provider customer service,
benefit integrity, and provider enrollment.
The law requires that we formulate criteria and standards to
determine whether contracts with fiscal intermediaries and carriers
should be entered into, renewed, or terminated. Additionally, the law
requires us to publish the CPE criteria and standards in the Federal
Register. On September 7, 1994, in the Federal Register we specified
all standards that are mandated by law or court decision and have
provided examples of others. Some mandated standards include paying 95
percent of clean electronic claims within 14 to 30 days and 95 percent
of clean paper claims must be paid within 27 to 30 days; as well as
writing review determinations at an appropriate reading level.
In addition to the mandated standards, CMS expects contractors to
meet performance requirements issued to them in program instructions or
in connection with their annual budgets. Examples of these are
requirements to:
respond to telephone inquiries within specified
timeframes;
conduct audits or specified percentages of cost
reports from specified types of providers;
conduct quality monitoring of the telephone service
provided by customer service representatives;
increase over the prior year the amount of automated
medical review conducted; and
issue bulletins/newsletters with program and billing
information to providers each quarter.
Medicare contractors perform a wide range of activities as part of
each business function, and CMS evaluates contractor performance on an
annual basis. Additionally, other types of reviews are performed at
contractors outside of CPE, including reviews of contractors' internal
controls as required by the Federal Managers Financial Integrity Act,
and reviews of financial operations in connection with the annual Chief
Financial Officer audit of CMS.
Chairman Johnson. Mr. Johnson.
Mr. Johnson of Texas. Thank you, ma'am.
I would not call it a ``gale force''; that is what he
called it. I have not seen that coming out of your agency. All
I have seen is a name change, which I cannot remember to save
my soul, so if I call you ``HCFA,'' please do not worry about
it.
What I would like to know is what are you doing to help the
people out there, because all I see is in Dallas, Texas, two of
our providers have stopped or say they are going to stop
providing Medicare+Choice.
So could you tell me what you are doing to stop that?
Mr. Scully. Well, I think I was about as aggressive as I
could be in stopping Medicare+Choice--too aggressive for some,
since I----
Mr. Johnson of Texas. We do not want you to stop it. We
want you to----
Mr. Scully. No, no--to stop the people dropping out.
Mr. Johnson of Texas. OK.
Mr. Scully. I have been a pretty strong advocate of
Medicare+Choice for a variety of reasons, including the fact
that demographics show that lower-income people like
Medicare+Choice because they have lower premiums and more drug
coverage. So we certainly want to keep as many people in as we
possibly can. We had about 5.6 million people in last year, and
it will probably be down to a little under 5.1 million for next
year.
We moved the adjusted community rate filing date back,
which is the date for the plans for file, from July 1 to
September 17, which I was sued for, and we worked with the Gray
Panthers and the other plaintiffs and the court, and I think we
have worked that out. We are sending out additional mailings
next month to educate seniors. But we tried to give the plans
more time to decide what their finances were for last year. We
tried to give them a better opportunity to make the financial
decision whether they are going to stay in or not; and to be
honest with you, that led to the ad campaign and understanding
that we are going to have to start educating seniors later,
because of the later filing date. We thought we had better bend
over backward to give them a lot of information, and that is
largely where the idea for the ad campaign came from, that if
we were going to start September 17 instead of July 1 to
educate seniors, we had better give them a lot more information
about their program.
I think most of the health plans--I regret that there was
one that pulled out of Dallas--but I think I spoke with almost
every chief executive officer of a major plan in the country,
and I personally pleaded with a bunch of them to stay in the
hope that Congress would fix the program this year. I
personally think and the administration feels that the
Medicare+Choice funding formula is broken and is not working
and that it is pure economics as to why people are dropping
out, and that if we do not fix it, a lot more people will drop
out before next year. At many, many, many plans that I talked
to, the chief executive officers asked, ``Do you think Congress
is going to fix this, because I may stay in for one more
year,'' and in many cases, I pleaded with them to stay in----
Mr. Johnson of Texas. If we could do one thing to fix that,
what you think that should be?
Mr. Scully. I think that with the best intentions in 1997,
the urban and suburban areas were doing very well in
Medicare+Choice, and there was an effort to push money into the
rural areas, and largely what has happened is that you have had
3 years in a row of 2 percent--the payments in the Medicare+
Choice program have capped at 2 percent the last 3 years in a
row, and cost growth has been 10, 12 percent. So when you look
at it, it is pure economics--the plans have gotten squeezed
out. They have had to cut their drug benefits, raise their
premiums, and the numbers just do not work.
So I think we could revisit the formula. Some would argue
you should put more money back into the program. I think you
could put some money back into the program and revisit the
formula, and I can tell you the administration thinks that is a
very top priority for this year, because we are down to a
little over 13 percent of people in the Medicare+Choice
Program.
I cannot imagine that I could have been any more aggressive
than I was in trying to keep people in, so I regret that you
lost some providers in Texas, but I talked to a lot of
providers, including a couple of Mrs. Johnson's in Connecticut
who dropped out as well despite my effort, and I think we did
everything we could to send the signal to people that we were
trying to make the program flexible. We are very big fans of
the program and would like to get as many people back in as we
can.
I think the people who are in for 2002 are probably in for
2002. I think the most appropriate thing to do would probably
be to put some financing in and fix the formula for 2003.
Mr. Johnson of Texas. Thank you. I think part of the
problem also is the paperwork issue that was brought up here
previously. I just do not know how you can stop that.
Mr. Scully. In fairness, we made a number of changes that
the health plans complained about to reduce their paperwork
burden. I hope that if you ask them----
Mr. Johnson of Texas. What are you doing for the individual
doc? You were in the hospitals; you know what a problem they
have with paperwork.
Mr. Scully. Yes. Well, one thing we did--and again, it was
not universally popular--we had a major risk adjustment
collection mechanism--physicians do not always love managed
care, but the one thing they like about it is they generally do
not have to provide a lot of very detailed billing information.
Mr. Johnson of Texas. Have you stopped changing the Codes
every month?
Mr. Scully. Yes. We suspended the physician requirement for
risk adjustment for one year; if we do not find a better one,
we are going to reinstate it next year. A lot of the things
that the managed care plans and the physicians in managed care
plans asked for, we did, to try to make their lives simpler
this fall. I cannot think of too many stones I left unturned
that I could do without getting sued, and I did get sued,
although we worked that out in a reasonable way. But I think we
are pretty aggressive in trying to keep people in the plans.
Mr. Johnson of Texas. Thank you, sir.
Chairman Johnson. I would rather not let your statement
about 203 lie, because many of the plans are telling us that
they will stay in for next year if, before December 31, it is
clear to them what the terms will be, and if there are more
realistic levels of reimbursement and some greater regulatory
relief.
The whole goal of changing the date--and this Committee is
eventually going to have to deal with this--you cannot make
people make business decisions when they have no idea what they
are going to be paid for their product. And the whole system of
the plans saying whether they are going to be in or out and at
what price has to be better aligned with our appropriations
process.
So one of the ways we got into this trouble was that they
decided to stay in, thinking that we were going to help them at
a higher level than 2 percent--even last year, this Committee
recommended 4 percent, and in the end, it was pulled down to 3
percent, and so on and so forth. So you cannot have people
trying to make economic decisions about products in the market
when they do not know what they are going to get paid. We need
to realign that whole system of provider bidding and consumer
education so seniors can have a good chance to know what their
choices are, but we maximize the continuity and stability of
the program by putting the choices out there once people know
what the Congress and the administration have done to address
their problems.
In closing off, let me say thank you very much for being
here, Tom. I know you do not feel very well today, and I
appreciate your staying true to your commitment under really
adverse circumstances to be with us.
I want to conclude by reading a small passage from the
testimony by the American College of Physicians and the
American College of Internal Medicine, because I want your
staff to look at this before we get through this process,
because I know Jim McDermott raised some issues here, and we
just have to take more seriously the crisis that we are
creating in physician offices.
This testimony says: ``In internist carefully reviewed the
1997 guidelines and calculated the number of decisions that a
physician must make before selecting a level of Evaluation and
Management Services (EM) in billing Medicare. It includes 11
decision points and categories to consider before selecting the
EM code. Each decision point requires several choices. There
are 42 choices a decision must consider before selecting the
proper EM service. There are 6,144 possible combinations
representing the number of ways an office visit for a new
patient can evolve and be classified.''
It has gotten to be extraordinarily ludicrous, and we have
to do something about how physicians bill and what code they
select. If we do not do that, in the end, we will erode the
quality of medical care in America because we will erode the
quality of care that physicians are able to offer and the kind
of people who go into medicine.
So this is a big issue. In this testimony, two or three
important points are brought up that we had not really
considered, and we need to talk about, and Pete and I need to
talk about and the members of the Committee need to look at
what more along that line we can do even in this bill.
Thank you very much for being here, Tom. We look forward to
working with you. You have been very willing to work with us on
a lot of complicated issues, and I thank you.
I also thank you for starting out your testimony by talking
about HIPAA. We too are being deluged with HIPAA concerns, and
we need to come to some conclusion about how best to handle
that.
Thank you very much.
Mr. Scully. Thanks.
Chairman Johnson. I would now like to welcome the next and
final panel. We will hear from all the experts and then open
the floor for questions.
Leslie Aronovitz is from the Health Care Program Integrity
division of the GAO. She will testify on behalf of two
different people, so she will be allowed to go a little longer
than the 5 minutes and make a 10-minute presentation.
Bill Hall is president of the American College of
Physicians and the American Society of Internal Medicine; and
Susan Wilson is vice president, Clinical Operations, and chief
operating officer of the VNA of Central Connecticut and is
speaking here on behalf of the National Association of Home
Care.
Thank you all for being with us, and Ms. Aronovitz, if you
could start.
STATEMENT OF LESLIE G. ARONOVITZ, DIRECTOR, HEALTH CARE PROGRAM
ADMINISTRATION AND INTEGRITY ISSUES, U.S. GENERAL ACCOUNTING
OFFICE
Ms. Aronovitz. Madam Chairman and members of the
Subcommittee, I am pleased to be here today as you discuss
modifications to the Medicare Program as set out in the
proposed MRCRA.
This Act addresses two key problems that we have recently
studied. First, physicians have expressed growing concern that
Medicare is creating a blizzard of complicated, unclear, and
inconsistent information about program requirements, and
because the rules change frequently, they cannot stay current.
Second, observers of Medicare operations have for a long
time questioned whether Medicare could be run more effectively
if its claims administration contractors were selected through
full and open competition and paid based on their performance.
With regard to the first problem, Medicare's communications
with providers, our findings, as you noted, were quite
disturbing. For example, carriers issue bulletins to physicians
as a primary source of information about Medicare rules. For
the 10 carriers we looked at, some bulletins were more than 80
pages long, with over 50 pages being the norm. They often
contained long articles, written in dense language and printed
in small type. Some of these had no table of contents while
others did not identify topics by specialty.
We also found a number of instances in which the
announcement of program changes came out after the changes had
taken effect. Among carriers with multi-State bulletins, some
developed separate State inserts; but others required that the
physician read the entire article to determine if the change
was apropos in his or her State.
In addition to periodic bulletins, carriers rely on their
websites to provide another avenue of communication, but these
also have many shortcomings. In our review of 10 carrier
websites, we found that most lacked basic organization and
navigation tools, like site maps and search functions that
increase a site's user-friendliness. Further, five of the eight
sites that had a required schedule of upcoming workshops or
seminars were out-of-date. Although one site contained a
potentially useful ``What's New?'' page, the page contained a
single document of regulations that went into effect in October
2000, 8 months prior to the date of our website review.
A third communication vehicle for physicians billing
Medicare is the carrier call center. I want to clarify
something that we have talked about in our testimony. Call
centers answer two general types of questions. One type is on
the status of a specific claim. The other is questions that
pertain to coding and billing the program in specific
instances.
We did not test the adequacy of the call centers in
responding to the status of specific reimbursement questions.
But we did perform a limited test of approximately 60 calls to
provider inquiry lines of five carrier call centers on coding
and billing issues. The three test questions, all selected from
the ``Frequently Asked Questions'' on carriers' websites,
concerned the appropriate way to bill Medicare under different
circumstances.
The results of our tests, which were verified by a CMS
coding expert, showed that only 15 percent of the answers were
complete and accurate; 53 percent were incomplete, and 32
percent were entirely incorrect.
We found that CMS has established few standards to guide
these three types of activities. While CMS requires contractors
to issue bulletins at least quarterly, it requires little else
in terms of content or readability.
Requirements for web-based communication generally focus on
legal issues that do nothing to enhance providers'
understanding of Medicare policy.
In regard to telecommunications, contractor call centers
are instructed to monitor up to 10 calls per quarter for each
customer service rep--but CMS' definition of what constitutes
accuracy and completeness in call center responses is neither
clear nor specific. Moreover, the assessment of accuracy and
completeness counts for only about 25 percent of the total
assessment score, with process issues like phone etiquette
accounting for the rest.
CMS conducts much of its oversight of contractor
communications through contractor performance evaluations--we
call them CPEs. While these reviews have not focused on the
quality or usefulness of contractor bulletins or websites, CMS
has begun to focus on call center service to providers.
But again, the CPE reviews focus mainly on process rather
than on the more difficult issues involving an assessment of
response accuracy.
CMS officials noted a lack of resources for monitoring
carrier activity in this area--and this is not just Mr. Scully,
but everyone that we have talked to at the high levels in CMS.
Their own data show that there are fewer than 26 full-time-
equivalent staff assigned to oversee all carrier-provider
relations efforts nationwide, and these people are typically
stationed at the regional offices which provide the contractor
oversight.
We have noted in the past that under its tight
administrative budget, CMS runs the Medicare program on a
shoestring. Provider relations activities currently have to
compete with most other contractor functions in the allocation
of these scarce administrative dollars.
We started this study under the premise that physicians
were being inundated with paper from their carriers, CMS, and
U.S. Department of Health and Human Services agencies.
Actually, we found that only a small percentage, about 10
percent, of the mail the seven physician practices that
participated in our study sent us were from those sources.
However, given the poor performance of CMS in its
communications activities, we could understand why physicians
seek materials from other sources, which were primarily their
medical and specialty societies and other private
organizations.
Despite the scarcity of resources, we did find some bright
spots, and I think Mr. Scully enumerated many of them. CMS is
working to expand and consolidate training for the customer
service reps. Its MedLearn website offers computer-based
training, manuals, and reference materials. CMS is developing
satellite broadcasts to hospitals and educational institutes.
And we also applaud CMS' efforts to establish the Physicians'
Regulatory Issues Team, the PRIT, which works with the
physician community to address its most pressing Medicare-
related problems.
But I would like to emphasize that no matter how impressive
these individual initiatives are, they cannot replace the need
for consistently reliable and timely information provided to
physicians on a regular basis.
We believe that the provisions in section 5 of H.R. 2768,
the MRCRA--which I am going to use as shorthand for your bill--
square place responsibility on CMS to upgrade its provider
communication activities.
For example, it calls on CMS to centrally coordinate the
educational activities provided through Medicare contractors
and to offer technical assistance to small providers through a
demonstration program.
The bill would also channel additional financial resources
to Medicare provider communications activities.
Although we have not determined the specific amount of
additional funding needed for these purposes, we believe that
the current level of funding is insufficient to effectively
inform providers about Medicare rules and payment changes.
I would now like to take a minute and turn to our findings
related to Medicare's contracting for administrative services.
Several key provisions of your bill address elements of
Medicare contracting that have limited CMS' options for
selecting claims administration contractors and that frustrate
efforts to manage Medicare effectively.
First, MRCRA would establish a full and open procurement
process that would provide CMS with express authority to
contract with any qualified entity for claims administration,
including entities that are not health insurers.
Second, the bill would provide for CMS to use incentive
payments. For example, a cost-plus incentive contract adjusts
the level of payment based on performance.
Finally, MRCRA would modify longstanding practice to
specifically allow for contracts limited to one component of
claims administration process, such as processing and paying
claims or providing provider education and technical assistance
activities.
To summarize, the scope and complexity of the Medicare
Program makes complete, accurate, and timely information of
program information vital to providers who need to be kept up-
to-date on Medicare's rules. While CMS acknowledges that
improvements are needed, we believe it needs to do so through
establishing a more skilled, standardized and centralized
approach. It is also clear that more resources need to be
devoted to these activities. The backers of this bill clearly
recognize this need, and we believe that the funding provisions
will go a long way toward ensuring that more attention is paid
to provider relations activities.
The bill also contains provisions that would provide a
statutory framework for Medicare contracting reform. We believe
that CMS can benefit from this increased flexibility and that
many of the reform provisions will assist the agency in
providing for more effective program management.
Madam Chairman, this concludes my prepared statement. I
will be happy to answer any questions that you or the other
Subcommittee members have.
[The prepared statement of Ms. Aronovitz follows:]
Statement of Leslie G. Aronovitz, Director, Health Care Program
Administration and Integrity Issues, U.S. General Accounting Office
Madam Chairman and Members of the Subcommittee:
I am pleased to be here today as you discuss modifications to the
Medicare program proposed in the Medicare Regulatory and Contracting
Reform Act (MRCRA) of 2001.1 Providers have raised concerns
that while the Medicare program has become increasingly complex, the
education and outreach services needed to comply with Medicare coverage
and billing policies are inadequate. Others have raised questions about
whether the program could benefit from changes to the way Medicare's
claims processing contractors are selected and paid for the functions
they perform.2 To address some of these issues, Members of
this Subcommittee and others in the Congress have introduced
legislation, and the Administration has proposed several new
initiatives.
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\1\ H.R. 2768, sponsored by Reps. Nancy Johnson, Pete Stark, and
others, was introduced on August 2, 2001.
\2\ Medicare claims are processed by private organizations that
contract to serve as the fiscal agent between providers and the federal
government.
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We are currently conducting, or have recently completed, work on
several operational and structural elements of the Medicare program
that frustrate providers and hamper effective management. Specifically,
we are reviewing how the Centers for Medicare and Medicaid Services
(CMS) works with its contractors to facilitate communications with
Medicare providers.3 We have also evaluated ways in which
CMS contracting for claims payment and provider and beneficiary service
activities could be modified to promote better performance.
Accordingly, you asked us to focus our remarks today on our findings
related to (1) Medicare provider education and communications, and (2)
Medicare contracting for claims administration services. Several of the
reforms outlined in the MRCRA proposal address aspects of both issues.
---------------------------------------------------------------------------
\3\ In June of this year, the Secretary of Health and Human
Services (HHS) announced that the agency's name would be changed from
the Health Care Financing Administration (HCFA) to CMS. Our statement
will continue to refer to HCFA where our findings apply to the
organizational structure and operations associated with that name.
---------------------------------------------------------------------------
In summary, our ongoing work for the Subcommittee shows that
physicians often do not receive complete, accurate, clear, and timely
guidance on Medicare billing and payment policies. We found
shortcomings in print, electronic, and telephone communications that
Medicare contractors use to provide information to physicians and
respond to their questions. To substantially improve Medicare
contractors' provider communications, we believe that CMS needs to
develop a more centralized and coordinated approach. This is consistent
with several provisions in MRCRA, which require CMS to centrally
coordinate contractors' provider education activities, establish
communications performance standards, appoint a Medicare Provider
Ombudsman, and create a demonstration program to offer technical
assistance to small providers. MRCRA would also require contractors to
monitor the accuracy, consistency, and timeliness of the information
they provide.
Further, our analysis of Medicare contracting reform issues has
found that the rules governing CMS contracts with its claims processors
lack incentives for efficient operations. Medicare contractors are
chosen without full and open competition from among health insurance
companies, rather than from a broad universe of potentially qualified
entities. In addition, CMS almost always uses cost-only contracts,
which pay contractors for costs incurred but generally do not offer any
type of performance incentives. MRCRA would broaden CMS authority so
that entities of various types would be able to compete for claims
administration contracts and their payment would reflect the quality of
the services they provide.
Background
The operation of the Medicare program is extremely complex and
requires close coordination between CMS and its contractors. CMS is an
agency within HHS but has responsibilities for expenditures that are
larger than those of most other federal departments.4 Under
Medicare's fee-for-service system--which accounts for over 80 percent
of program beneficiaries--physicians, hospitals, and other providers
submit claims to receive reimbursement for services they provide to
Medicare beneficiaries. In fiscal year 2000, fee-for-service Medicare
made payments of $176 billion to hundreds of thousands of providers who
delivered services to over 32 million beneficiaries.
---------------------------------------------------------------------------
\4\ Medicare ranks second only to Social Security in federal
expenditures for a single program.
---------------------------------------------------------------------------
About 50 Medicare claims administration contractors carry out the
day-to-day operations of the program and are responsible not only for
paying claims but also for providing information and education to
providers and beneficiaries that participate in Medicare. Contractors
that process and pay part A claims (i.e., for inpatient hospital,
skilled nursing facility, hospice care, and certain home health
services) are known as fiscal intermediaries and those that administer
part B claims (i.e., for physician, outpatient hospital services,
laboratory, and other services) are known as carriers.
Contractors periodically issue bulletins that outline changes in
national and local Medicare policy, inform providers of billing system
changes, and address frequently asked questions. To enhance
communications with providers, the agency recently required contractors
to maintain toll-free telephone lines to respond to provider inquiries.
It also directed them to develop Internet sites to provide another
reference source. While providers look to CMS' contractors for help in
interpreting Medicare rules, they remain responsible for properly
billing the program.
In congressional hearings held earlier this year, representatives
of physician groups testified that they felt overwhelmed by the volume
of instructional materials sent to them by CMS and its contractors.
Following up on these remarks, we contacted 7 group practices served by
3 carriers in different parts of the country to determine the volume of
Medicare-related documents they receive from the CMS central office,
carriers, other HHS agencies, and private organizations. Together,
these physician practices reported that, during a 3-month period, they
received about 950 documents concerned with health care regulations and
billing procedures. However, a relatively small amount--about 10
percent--was sent by CMS or its contractors. The majority of the mail
reportedly received by these physician practices was obtained from
sources such as consulting firms and medical specialty or professional
societies.
Congress has also held hearings on management challenges facing the
Medicare program. We recently testified that HHS contracts for claims
administration services in ways that differ from procedures for most
federal contracts.5 Specifically:
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\5\ Medicare Contracting Reform: Opportunities and Challenges in
Contracting for Claims Administration Services, (June 28, 2001, GAO-01-
918T).
there is no full and open competition for these contracts,
contracts generally must cover the full range of claims
processing and related activities,
contracts are generally limited to reimbursement of costs
without consideration of performance, and
CMS has limited ability to terminate these contracts.
Since 1993, HCFA has repeatedly proposed legislation that would
increase competition for these contracts and provide more flexibility
in how they are structured. In June 2001, the Secretary of HHS again
submitted a legislative proposal that would modify Medicare's claims
administration contracting authority.
Substantial Improvement Needed in Medicare Provider Communications
CMS relies on its 20 carriers to convey accurate and timely
information about Medicare rules and program changes to providers who
bill the program. However, our ongoing review of the quality of CMS'
communications with physicians participating in the Medicare program
shows that the information given to providers is often incomplete,
confusing, out of date, or even incorrect.6 MRCRA provisions
establish new requirements and funding for CMS and its contractors that
could enhance the quality of provider communication.
---------------------------------------------------------------------------
\6\ In our study, we reviewed selected contractors' bulletins and
Web sites and evaluated them for consistency, timeliness, clarity, and
completeness. In addition, we visited three contractors to observe
their call center operations and examined their approaches to
monitoring the performance of customer service representatives. To test
the quality of contractors' responses to physicians' phone inquiries,
we posed ``frequently asked questions'' that appeared on contractor Web
sites to customer service representatives and assessed the accuracy and
completeness of the responses.
---------------------------------------------------------------------------
CMS Information Was Confusing and Often Inaccurate
We found that carriers' bulletins and Web sites did not contain
clear or timely enough information to solely rely on those sources.
Further, the responses to phone inquiries by carrier customer service
representatives were often inaccurate, inconsistent with other
information they received, or not sufficiently instructive to properly
bill the program.
Our review of the quarterly bulletins recently issued by 10
carriers found that they were often unclear and difficult to use.
Bulletins over 50 pages in length were the norm, and some were 80 or
more pages long. They often contained long articles, written in dense
language and printed in small type. Many of the bulletins were also
poorly organized, making it difficult for a physician to identify
relevant or new information. For example, they did not always present
information delineated by specialty or clearly identify the states
where the policies applied. Moreover, information in these bulletins
about program changes was not always communicated in a timely fashion,
so that physicians sometimes had little or no advance notice prior to a
program change taking effect. In a few instances, notice of the program
change had not yet appeared in the carriers' bulletin by its effective
date.
To provide another avenue for communication, carriers are required
to develop Internet Web sites. However, our review of 10 carrier Web
sites found that only 2 complied with all 11 content requirements that
CMS has established. Also, most did not contain features that would
allow physicians and others to readily obtain the information they
need. For example, we found that the carrier Web sites often lacked
logical organization, navigation tools (such as search functions), and
timely information--all of which increase a site's usability and value.
Five of the nine sites that had the required schedule of upcoming
workshops or seminars were out of date.
Call centers supplement the information provided by bulletins and
Web sites by responding to the specific questions posed by individual
physicians. To assess the accuracy of information provided, we placed
approximately 60 calls to the provider inquiry lines of 5 carriers'
call centers. The three test questions, all selected from the
``frequently asked questions'' on the carriers' Web sites, concerned
the appropriate way to bill Medicare under different circumstances. The
results of our test, which were verified by a CMS coding expert, showed
that only 15 percent of the answers were complete and accurate, while
53 percent were incomplete and 32 percent were entirely incorrect.
We found that CMS has established few standards to guide the
contractors' communication activities. While CMS requires contractors
to issue bulletins at least quarterly, they require little else in
terms of content or readability. Similarly, CMS requirements for web-
based communication do little to promote the clarity or timeliness of
information. Instead, they generally focus on legal issues--such as
measures to protect copyrighted material--that do nothing to enhance
providers' understanding of, or ability to correctly implement,
Medicare policy. In regard to telecommunications, contractor call
centers are instructed to monitor up to 10 calls per quarter for each
of their customer service representatives, but CMS' definition of what
constitutes accuracy and completeness in call center responses is
neither clear nor specific. Moreover, the assessment of accuracy and
completeness counts for only 35 percent of the total assessment score,
with the representative's attitude and helpfulness accounting for the
rest.
CMS conducts much of its oversight of contractor performance
through Contractor Performance Evaluations (CPEs). These reviews focus
on contractors that have been determined to be ``at risk'' in certain
program areas. To date, CMS has not conducted CPE reviews focusing on
the quality or usefulness of contractors' bulletins or Web sites, but
has begun to focus on call center service to providers. Again, the CPE
reviews of call centers focus mainly on process--such as phone
etiquette--rather than on an assessment of response accuracy.
CMS is Making Efforts to Improve Provider Communications
CMS officials, in acknowledging that provider communications have
received less support and oversight than other contractor operations,
noted the lack of resources for monitoring carrier activity in this
area and providing them with technical assistance. Under its tight
administrative budget, the agency spends less than 2 percent of
Medicare benefit payments for administrative expenses. Provider
communication and education activities currently have to compete with
most other contractor functions in the allocation of these scarce
Medicare administrative dollars. CMS data show that there are less than
26 full-time equivalent CMS staff assigned to oversee all carrier
provider relations efforts nationwide, representing a just over 1 full-
time equivalent staff for each Medicare carrier. This low level of
support for provider communications leads to poorly informed providers
who are therefore less likely to correctly bill the Medicare program
for the services they provide.
Despite the scarcity of resources, CMS has begun work to expand and
consolidate some provider education efforts, develop venues to obtain
provider feedback, and improve the way some information is delivered.
These initiatives--many in the early stages of planning or
implementation--are largely national in scope, and are not
strategically integrated with similar activities by contractors.
Nevertheless, we believe that these outreach and education activities
will enhance some physicians' ability to obtain timely and important
information, and improve their relationships with CMS.
For example, CMS is working to expand and consolidate training for
providers and contractor customer service representatives. Its Medlearn
Web site offers providers computer-based training, manual, and
reference materials, and a schedule of upcoming CMS meetings and
training opportunities. CMS has produced curriculum packets and
conducted in-person instruction to the contractor provider education
staff to ensure contractors present more consistent training to
providers. CMS has also arranged several satellite broadcasts on
Medicare topics every year to hospitals and educational institutions.
In addition, CMS established the Physicians' Regulatory Issues Team to
work with the physician community to address its most pressing problems
with Medicare. Contractors are also required to form Provider Education
and Training Advisory groups to obtain feedback on their education and
communication activities.
MRCRA Provides Needed Statutory and Financial Support
We believe that the provisions in Section 5 of MRCRA can help
develop a system of information dissemination and technical assistance.
MRCRA's emphasis on contractor performance measures and the
identification of best practices squarely places responsibility on CMS
to upgrade its provider communications activities. For example, it
calls on CMS to centrally coordinate the educational activities
provided through Medicare contractors, to appoint a Medicare Provider
Ombudsman, and to offer technical assistance to small providers through
a demonstration program. We believe it would be prudent for CMS to
implement these and related MRCRA provisions by assigning
responsibility for them to a single entity within the agency dedicated
to issues of provider communication.
Further, MRCRA would channel additional financial resources to
Medicare provider communications activities. It authorizes additional
expenditures for provider education and training by Medicare
contractors ($20 million over fiscal years 2003 and 2004), the small
provider technical assistance demonstration program ($7 million over
fiscal years 2003 and 2004), and the Medicare Provider Ombudsman ($25
million over fiscal years 2003 and 2004). This would expand specific
functions within CMS' central office, which would help to address the
lack of administrative infrastructure and resources targeted to
provider communications at the national level. Although we have not
determined the specific amount of additional funding needed for these
purposes, our work has shown that the current level of funding is
insufficient to effectively inform providers about Medicare payment
rules and program changes.
MRCRA also establishes contractor responsibility criteria to
enhance the quality of their responses to provider inquiries.
Specifically, contractors must maintain a toll-free telephone number
and put a system in place to identify who on their staff provides the
information. They must also monitor the accuracy, consistency, and
timeliness of the information provided.
Contracting Reform Could Improve Program Management
Current law and long-standing practice in Medicare contracting
limit CMS' options for selecting claims administration contractors and
frustrate efforts to manage Medicare more effectively. We have
previously identified several approaches to contracting reform that
would give the program additional flexibility necessary to promote
better performance and accountability among claims administration
contractors.
Current Contracting Law and Practice Limit CMS' Management Options
CMS faces multiple constraints in its options for selecting claims
administration contractors. Under these constraints, the agency may not
be able to select the best performers to carry out Medicare's claims
administration and customer service functions. Because the Medicare
statute exempts CMS from competitive contracting requirements, the
agency does not use full and open competition for awarding fiscal
intermediary and carrier contracts. Rather, participation has been
limited to entities with experience processing these types of claims,
which have generally been health insurance companies. Provider
associations, such as the American Hospital Association, select fiscal
intermediaries in a process called ``nomination'' and the Secretary of
HHS chooses carriers from a pool of qualified health insurers.
CMS program management options are also limited by the agency's
reliance on cost-based reimbursement contracts.7 This type
of contract reimburses contractors for necessary and proper costs of
carrying out Medicare activities, but does not specifically provide for
contractor profit or other incentives. As a result, CMS generally has
not offered contractors the fee incentives for performance that are
used in other federal contract arrangements.
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\7\ According to CMS, requirements of the Social Security Act that
call for the use of cost-based reimbursement contracts preclude the
program from offering financial incentives to contractors for high-
quality performance.
---------------------------------------------------------------------------
Medicare Could Benefit From Open Competition and Increased Flexibility
Medicare could benefit from various contracting reforms. Perhaps
most importantly, directing the program to select contractors on a
competitive basis from a broader array of entities would allow Medicare
to benefit from efficiency and performance improvements related to
competition. A full and open contracting process will hopefully result
in the selection of stronger contractors at better value. Broadening
the pool of entities allowed to hold Medicare contracts beyond health
insurance companies will give CMS more contracting options. Also,
authorizing Medicare to pay contractors based on how well they perform
rather than simply reimbursing them for their costs could result in
better contractor performance.
We also believe that the program could benefit from efficiencies by
having contractors perform specific functions, called functional
contracting. The traditional practice of expecting a single Medicare
contractor in each region to perform all claims administration
functions has effectively ruled out the establishment of specialized
contracts with multiple entities that have substantial expertise in
certain areas.8 Moving to specialized contracts for the
different elements of claims administration processing would allow the
agency to more efficiently use its limited resources by taking
advantage of the economies of scale that are inherent in some tasks. An
additional benefit of centralizing carrier functioning in each area is
the opportunity for CMS to more effectively oversee carrier operations.
Functional contracting would also result in more consistency for
Medicare-participating providers.
---------------------------------------------------------------------------
\8\ This has recently started to change in response to new
contracting authorities granted by the Health Insurance Portability and
Accountability Act of 1996, which resulted in the selection of 12
Program Safeguard Contractors that perform specific payment safeguard
activities.
---------------------------------------------------------------------------
Several key provisions of MRCRA would address these elements of
contracting reform. MRCRA would establish a full and open procurement
process that would provide CMS with express authority to contract with
any qualified entity for claims administration, including entities that
are not health insurers. MRCRA would also encourage CMS to use
incentive payments to encourage quality service and efficiency. For
example, a cost-plus-incentive-fee contract adjusts the level of
payment based on the contractor's performance. Finally, MRCRA would
modify long-standing practice by specifically allowing for contracts
limited to one component of the claims administration process, such as
processing and paying claims, or conducting provider education and
technical assistance activities.
Concluding Observations
The scope and complexity of the Medicare program make complete,
accurate, and timely communication of program information necessary to
help providers comply with Medicare requirements and appropriately bill
for their services. The backers of MRCRA recognize the need for more
resources devoted to provider communications and outreach activities,
and we believe the funding provisions in the bill will help assure that
more attention is paid to these areas. MRCRA also contains provisions
that would provide a statutory framework for Medicare contracting
reform. We believe that CMS can benefit from this increased
flexibility, and that many of these reform provisions will assist the
agency in providing for more effective program management.
Madam Chairman, this concludes my prepared statement. I would be
happy to answer any questions that you or other Subcommittee Members
may have.
GAO Contact and Staff Acknowledgments
For further information regarding this testimony, please contact me
at (312) 220-7767. Jenny Grover, Rosamond Katz, and Eric Peterson also
made key contributions to this statement.
Related GAO Products
Medicare Management: CMS Faces Challenges in Safeguarding Payments
While Addressing Provider Needs (GAO-01-1014T, July 26, 2001).
Medicare: Successful Reform Requires Meeting Key Management
Challenges (GAO-01-1006T, July 25, 2001).
Medicare Contracting Reform: Opportunities and Challenges in
Contracting for Claims Administration Services (GAO-01-918T, June 28,
2001).
Medicare Management: Current and Future Challenges (GAO-01-878T,
June 19, 2001).
Medicare: Opportunities and Challenges in Contracting for Program
Safeguards (GAO-01-616, May 18, 2001).
Major Management Challenges and Program Risks: Department of Health
and Human Services (GAO-01-247, Jan. 2001).
High Risk: An Update (GAO-01-263, Jan. 2001).
Medicare: 21st Century Challenges Prompt Fresh Thinking About
Program's Administrative Structure (GAO/T-HEHS-00-108, May 4, 2000).
Medicare Contractors: Further Improvement Needed in Headquarters
and Regional Office Oversight (GAO/HEHS-00-46, Mar. 23, 2000).
Chairman Johnson. Thank you very much for your testimony
and for the work that GAO has done on this issue. Dr. Hall.
STATEMENT OF WILLIAM J. HALL, M.D., PRESIDENT, AMERICAN COLLEGE
OF PHYSICIANS--AMERICAN SOCIETY OF INTERNAL MEDICINE
Dr. Hall. Thank you very much, Chairwoman Johnson, and
other members of the Subcommittee for holding this important
hearing to discuss MRCRA.
My name is William Hall. I am a practicing internist and
geriatrician in Rochester, New York, and currently, I serve as
president of the American College of Physicians--American
Society of Internal Medicine (ACP-ASIM), representing 115,000
physicians, the largest medical specialty society and the
second-largest medical organization in the country, and also a
group of members who supply a major proportion of all EM to
Medicare recipients throughout the country.
In the course of my travels this year, the most frequent
complaint by far that I hear from my colleagues is that
internists are subject to excessive paperwork and as a result
do not have enough time to devote to patients.
In our work, time is by far the most valuable resource in
diagnosing and caring for older adults, but it is also in the
shortest supply, largely due to a growth of unnecessary
paperwork. Fortunately, this bipartisan legislation has been
introduced to address paperwork hassles.
ACP-ASIM appreciates the opportunity to comment on H.R.
2768. This is a very good start, but more needs to be done. I
would like to briefly touch on a few specific points in the
bill, actually, all of which have been mentioned in prior
testimony, but I would invite the Subcommittee to review our
written testimony which contains more detailed comments, such
as you already mentioned, Congresswoman.
First, the issue of extrapolation. As you know, auditors
use extrapolation to look at a very small sample of Medicare
claims and apply the results to a broader universe of claims
that the auditors did not review. This process is simply
unfair. Congress would certainly not allow the Internal Revenue
Service to extrapolate a calculation error in a taxpayer's tax
return from 1 year to other years without actually reviewing
the returns in those years. And Congress should not allow the
broad use of extrapolation either.
In order to strengthen H.R. 2768, we strongly encourage the
Subcommittee to develop report language to define a ``high
level of payment error'' to justify extrapolation. Without such
a definition, problems with extrapolation could potentially
continue.
We also recommend that carriers conduct a documented
educational effort before a provider receives an overpayment
demand letter.
Now a word about appeals. ACP-ASIM is pleased that H.R.
2768 precludes carriers from requiring physicians and other
health care providers to repay an alleged overpayment until
after the first level of appeal. However, ACP-ASIM believes
that repayment should not occur until the administrative
appeals have been exhausted. It simply is unfair that Medicare
providers are compelled to repay money to Medicare contractors
when the dispute has not even been settled. We would quickly
add, however, that any appropriate interest and penalties
should accrue if the provider is unsuccessful in his or her
appeal.
Next, on evaluation and management documentation
guidelines, ACP-ASIM strongly supports H.R. 2768's provision
that requires the Department of Health and Human Services to
initiate three or four pilot projects to test EM documentation
guidelines. We are particularly interested in the peer review
pilot method. Another pilot that ACP-ASIM believes should be
explored is documentation of encounter time with patients and a
simpler, one-page document as an alternative to more lengthy
documentation requirements such as the 1997 guidelines. These
are more than 40 pages long and lead to, as you already
mentioned, thousands of individual decision points.
ACP-ASIM strongly agrees that pilot project participants
should not be targeted for post-payment audits or overpayment
demands. This stipulation should actually enhance the viability
of these pilot tests.
It is our understanding that the Department of Health and
Human Services Office of the Inspector General in the previous
administration had some concerns regarding recommendations to
improve the Medicare audit and appeal process. Essentially, the
OIG was concerned that changes in the audit process could
unintentionally allow unscrupulous health care providers to
submit false claims to Medicare. The suggestions that we have
outlined were developed in consideration of this concern.
ACP-ASIM believes that it is time for Congress to introduce
more due process rights and fairness into the Medicare claims
payment review system. The overwhelming majority of physicians
and other health care providers are honest and law-abiding and
should no longer have to suffer from onerous and unfair
Medicare rules.
In conclusion, ACP-ASIM is pleased that the Subcommittee is
addressing the serious problems that the Medicare regulatory
burden poses for physicians. We strongly urge the Subcommittee
to report H.R. 2768 to the full House Ways and Means Committee
with some of the enhancements that we have presented. We would
also ask the Subcommittee to consider provisions from other
pending regulatory relief legislation such as H.R. 868, MERFA,
which we have endorsed.
I thank you very much, and I would be happy to answer any
questions that you might have.
[The prepared statement of Dr. Hall follows:]
Statement of William J. Hall, M.D., President, American College of
Physicians--American Society of Internal Medicine
I am Dr. William J. Hall, president of the American College of
Physicians--American Society of Internal Medicine (ACP-ASIM). ACP-ASIM,
representing 115,000 physicians and medical students, the largest
medical specialty society and the second largest medical organization
in the United States, congratulates the Subcommittee for holding this
hearing. Internists provide care for more Medicare patients than any
other medical specialty. The most frequent complaint received by ACP-
ASIM is that internists are subject to excessive paperwork and, as a
result, do not have enough time to devote to patients. ACP-ASIM thanks
Congresswoman Nancy L. Johnson (R-CT), Chair of the Subcommittee on
Health of the Committee on Ways and Means, for holding this important
hearing to discuss H.R. 2768, the ``Medicare Regulatory and Contracting
Reform Act of 2001.''
Impact of Medicare Paperwork on Clinical Practice
Time is the most valuable resource in diagnosing and caring for
older adults, but it's in short supply due to unnecessary paperwork.
Research breakthroughs, new pharmaceuticals and improved diagnostic
equipment are of limited value if doctors lack the time to spend with
patients.
Visits from Medicare patients typically begin a surprisingly
complex and time-consuming paperwork process. Medicare requires that
the physicians and their staffs complete a claim form with diagnosis
and service codes, as well as authorizations for necessary equipment
such as wheelchairs and services such as home health care. The Medicare
program assumes physicians know what it will and will not cover. There
is no single place to find Medicare's rules, however. The regulations
are more than 100,000 pages long and different carriers, who process
paperwork for Medicare across the country, have their own rules.
Once a claim is filed, Medicare might delay payment because it
tripped some random criteria. If Medicare finally pays the claim,
carriers have four years to change their minds and demand that the
physician repay it. Appeals require more paperwork and more importantly
staff and physician time to present the case.
Medicare can also sample physician's records to determine if
certain services, such as office visits, were paid incorrectly. If a
certain percentage were paid wrong, the carrier will demand repayment
for similar claims--without looking at the records.
To keep their practices running, many internists simply repay these
claims. Opening their practices to a post-payment audit can tie the
physicians' practices up for days--essentially shutting down patient
care activities. One physician tells of spending over $50,000
challenging an audit and in the final determination owing the
government a mere $400.
Medicare patients are the ones who suffer when physicians and their
office staff are diverted from patient care activities to unnecessary
paperwork. The result can be longer waiting time before being seen by
the physician, because he or she is busy answering a demand from
Medicare for more information at a time that could have been spent with
patients. It can result in the physician seeing fewer patients each
day--meaning a longer time for a patient to get an appointment. It can
mean having less time to assess elderly patients and less time to
answer questions and discuss new treatments with them. And in the worst
cases, it can literally shut down a practice for days.
H.R. 2768--A Good Start, but More Should Be Done
Fortunately, bipartisan legislation, H.R. 2768, the ``Medicare
Regulatory and Contracting Reform Act of 2001 has been introduced into
the House of Representatives and we are waiting for a similar measure
in the Senate. ACP-ASIM appreciates the opportunity to comment on this
bill.
Extrapolation
Although ACP-ASIM requests the elimination of extrapolation of
alleged overpayment amounts to other non-audited claims the first time
a physician or other health care provider is assessed an alleged
overpayment, unless fraud is suspected, the H.R. 2768 provision on
extrapolation is a step in the right direction. H.R. 2768 indicates
that in either consent settlements or larger audits, carriers cannot
recoup or offset payments based on extrapolation unless it is sustained
by a high level of payment error, as defined by the Secretary of Health
and Human Services, or documented educational intervention has failed
to correct the payment error (as determined by the Secretary). ACP-ASIM
strongly encourages the Subcommittee to develop report language to
define a high level of payment error. Without such a definition,
problems with extrapolation could potentially continue. ACP-ASIM also
recommends that carriers should conduct a documented education effort
before a provider receives an overpayment demand letter.
Physicians have always been concerned about the extrapolation
process because it is a mechanism that auditors use to look at a small
sample of Medicare claims and apply those results to a broader universe
of claims that the auditors did not review. Under the extrapolation
process, auditors have the ability to take a small sample of 15 claims,
determine that the Medicare contractor made an overpayment of several
dollars per claim, then extrapolate that finding to hundreds of claims
per year over several years and demand repayment of tens of thousands
of dollars without following the due diligence of looking at those
other claims. This process is simply unfair. Congress wouldn't allow
the Internal Revenue Service to extrapolate a calculation error in a
taxpayer's tax return from one year to other years without actually
reviewing the returns from those years. Congress shouldn't allow the
broad use of extrapolation either.
Appeals
ACP-ASIM is pleased that H. R. 2768 precludes carriers from
requiring physicians and other health care providers to repay an
``alleged'' overpayment until after the first level of appeal. However,
ACP-ASIM believes that repayment should not occur until the
administrative appeals have been exhausted. It simply is unfair that
Medicare providers are compelled to repay money to Medicare contractors
when the dispute has not been settled. We agree that interest should
accrue if the provider is unsuccessful in appealing.
Repayment plan
ACP-ASIM suggests that Medicare carriers and fiscal intermediaries
give physicians who have received overpayments the option of either a
three year repayment plan or offsetting overpayment recoupments against
a percentage of the physicians' future Medicare claims reimbursements.
ACP-ASIM is pleased that H.R. 2768 stipulates that the Secretary of
Health and Human Services must promulgate regulations that would allow
physicians and other health care providers to enter into a repayment
plan of no more than 3 years, however we are concerned that as written
this provision gives the Secretary the latitude to keep the 30-60 day
repayment process intact without making any change to the program at
all. ACP-ASIM urges the Subcommittee to change this provision to a
period of not less than 3 years if the aggregate amount of overpayments
exceeds 10 percent of Medicare revenues for the previous calendar year.
The current repayment process is particularly onerous to physicians
and other health care providers with small practices. A large repayment
requirement over a short period of time could potentially bankrupt a
physician practice and force it to close. This in turn would deny
Medicare beneficiaries access to medical care from that practice. For
practices in rural and underserved areas where patients have little or
no choice of provider, such a repayment request could literally
devastate access to health care in a community.
ACP-ASIM agrees with the provision that would prohibit repayment
plans in cases where the Secretary suspects that the provider would
file for bankruptcy to avoid repayment, cease to do business, or has
committed fraud. ACP-ASIM also agrees that if a provider fails to make
a payment installment, there should be an acceleration in the repayment
plan or immediate offsets.
Consent Settlement Process
ACP-ASIM believes that H.R. 2768 should afford physicians the
ability to appeal a probe sample of claims without having to undergo a
``statistically valid random sample'' (SVRS). A probe sample is a
sample of a small number of claims. H.R. 2768 indicates that when a
provider appeals this probe, they must agree to a larger, time
consuming, onerous audit (the SVRS). This process encourages physicians
to settle, even when they believe the probe sample findings are
inaccurate, because in many cases the hassle involved with complying
with the SVRS audits are more costly to the physicians practice than
the cost of settling with a probe sample. The current consent
settlement process is ironic in that there is no true incentive for the
auditors conducting the probe sample to perform the audit accurately
because the penalty of appealing in many cases is more than the penalty
of settling.
Limit on Random Prepayment Audits
ACP-ASIM believes H.R. 2768 would be improved if the bill were
changed to state that Medicare carriers could not demand additional
records or documentation prior to paying a claim absent cause except
when developing contractor-wide or program-wide claims payment error
rates. Random prepayment audits are troublesome to health care
providers because they can disrupt cash flow in the practice and hinder
the delivery of medical services to patients if the practice does not
have the cash on hand to order supplies and equipment or pay its staff.
Random prepayment audits are particularly irksome to physician
practices because it has long been recognized that the overwhelming
majority of Medicare providers are honest and therefore these audits
will randomly delay payment for legitimate services provided to
Medicare beneficiaries.
In addition, prepayment review should no longer potentially occur
indefinitely after physicians and providers have submitted properly
coded claims. ACP-ASIM agrees with the H.R. 2768 provision that limits
contractors to using random prepayment audits for developing
contractor-wide or program-wide claims payment error rates.
Evaluation and Management (E/M) Documentation Guidelines
ACP-ASIM strongly supports the H.R. 2768 provision that requires
the Department of Health and Human Services initiate three or four
pilot projects to test
E/M documentation guidelines. ACP-ASIM is particularly interested in
the peer-review pilot method. Another pilot that ACP-ASIM believes
should be explored is documenting encounter time with the patient and
the ``CPT basics/General Principles of Medical Record Documentation''
(a one page document) as an alternative to other onerous documentation
requirements (such as the 1997 guidelines which are more than 40 pages
long). ACP-ASIM is encouraged by the stipulation that pilot
participants cannot be targeted for post-payment audits or overpayment
demands. This stipulation should enhance the viability of the pilot
tests.
Although ACP-ASIM is encouraged that the Centers for Medicare and
Medicaid Services (CMS) is attempting to work with medical societies to
improve the documentation guidelines for evaluation and management (E/
M) services, the guidelines that were released in 1997 and currently in
place dramatically increase the administrative burden for physicians.
The guidelines require physicians to spend a significant amount of time
selecting which code to bill and documenting extensively to satisfy the
comprehensive guidelines. An internist who carefully reviewed the 1997
guidelines calculated the number of decisions that a physician must
make before selecting a level of E/M service and billing Medicare
include 11 decision points in categories to consider before selecting
an E/M code. Each decision point requires several choices. There are 42
choices a physician must consider before selecting the proper level of
E/M service. There are 6,144 possible combinations representing the
number of ways an office visit for a new patient can evolve and be
classified. A physician must spend time documenting in the patient's
record in addition to spending time deciding what is the appropriate
level of service to bill. The guidelines put an undue excessive
documentation burden on physicians for the sole purpose of billing, not
for quality medical care. The guidelines force physicians to spend less
time with their patients and more time with the patients' charts.
Carrier Responsiveness
ACP-ASIM is pleased that H.R. 2768 requires Medicare contractors
to: (1) respond in a clear concise and accurate manner to specific
billing and coding and cost report questions; (2) maintain a toll-free
telephone number which provides information regarding billing, coding
and other appropriate information; (3) maintain a system for
identifying who provides referred information; and (4) monitor
accuracy, consistency and timeliness of the information provided. ACP-
ASIM suggests that these provisions be further strengthened by
requiring a written response within 30 days from the contractor to
physicians and other providers who submit billing, documentation,
coding and cost reporting questions to carriers or fiscal
intermediaries. Additionally, these written responses from the carrier
must be adhered to during provider audits; health care providers should
be held harmless from having claims denied by carriers in subsequent
audits when the provider is simply following the original advice of the
Medicare carrier. It is unfair and unreasonable for physicians and
other health care providers to be held accountable for mistakes made by
Medicare contractors.
Ombudsmen Program
ACP-ASIM understands that the H.R. 2768 ombudsman program is
designed to ``provide assistance on a confidential basis to physicians
(and others) about complaints, grievances, and requests for information
about Medicare, resolve unclear or conflicting guidance given by the
Secretary and Medicare contractors to physicians.'' The program would
also recommend to the Secretary how to respond to ``recurring patterns
of confusion including suspending sanctions in these areas, and would
recommend how to provide appropriate and consistent responses including
not providing for audits where the self identified overpayment is
returned.'' This provision will be helpful in resolving conflicting
statements and may be an outlet for confidential complaints about
carriers.
Effective Balance Between Appropriate Claims Payment and Burdensome
Paperwork
It is our understanding that the Department of Health and Human
Services Office of Inspector General (OIG) in the previous
administration had some concerns regarding recommendations to improve
the Medicare audit and appeal process. Essentially, the OIG was
concerned that changes in the audit process could unintentionally allow
unscrupulous health care providers to submit false claims to Medicare.
The suggestions above were developed in consideration of this concern.
ACP-ASIM believes that it is time for Congress to introduce more due
process rights and fairness into the Medicare claims payment review
system so that the overwhelming majority of physicians and other health
care providers, who are honest and law abiding, no longer have to
suffer from onerous and unfair Medicare rules.
Conclusion
ACP-ASIM is pleased that the Subcommittee is addressing the serious
problems that the Medicare regulatory burden poses for physicians and
others attempting to care for Medicare beneficiaries. We strongly urge
the Subcommittee to report H.R. 2768 to the full Ways and Means
Committee with the enhancements we have presented. We also ask the
Subcommittee to consider provisions from other pending regulatory
relief legislation, such as H.R. 868, the Medicare Education and
Regulatory Fairness Act (MERFA), which ACP-ASIM has enthusiastically
endorsed.
Chairman Johnson. Thank you very much, Dr. Hall.
Ms. Wilson, it is a special pleasure to welcome you here to
this hearing. I have worked with Ms. Wilson extensively in my
hometown of New Britain, and her leadership at the State level
as well as the national level in solving some of the difficult
problems we have been facing in the home care reimbursement
area have really been appreciated. Welcome.
STATEMENT OF SUSAN WILSON, VICE PRESIDENT, CLINICAL OPERATIONS,
AND CHIEF OPERATING OFFICER, VNA OF CENTRAL CONNECTICUT, INC.,
NEW BRITAIN, CONNECTICUT; PRESIDENT, BOARD OF DIRECTORS,
CONNECTICUT ASSOCIATION FOR HOME CARE, WALLINGFORD,
CONNECTICUT; AND MEMBER, NATIONAL ASSOCIATION FOR HOME CARE
Ms. Wilson. Thank you, Madam Chairman and members of the
Subcommittee, for allowing me to testify regarding MRCRA.
I am Susan Wilson, vice president and chief operating
officer of VNA of Central Connecticut, president of the board
of directors of the Connecticut Association for Home Care, and
a member of the National Association for Home Care.
In March of this year, I had the honor of addressing this
panel regarding regulations and policies that impact a
provider's ability to deliver efficient, high-quality care. I
am pleased to be here today to personally extend my deepest
appreciation for the many efforts by you, your staff, and many
others to ease these burdens. You are to be commended in
particular for the development of H.R. 2768 which, if enacted,
will ease the impact of some of the most troublesome policies.
It has been proposed that any final regulation that is not
a logical outgrowth of proposed regulation cannot take effect
until there has been an opportunity for public comment. Your
bill generally prohibits retroactive application and extends
protection against compliance actions for 30 days. Home care
has suffered greatly by the retroactive impact of issued
policies, and this provision should help to prevent a
recurrence of this.
Your bill also protects providers against sanctions when
they have followed the guidance of a Medicare contractor.
Further clarification is needed, however, regarding what
constitutes a sanction. Does it relate to possible fines, or
does it extend to other obligations that may result from the
faulty guidance of the contractor?
Home health agencies have reported that despite adherence
to written guidance from intermediaries specifically regarding
cost reports, the intermediary has later rejected its own
approval, which has led to unfounded allegations of
overpayment. We hope that these circumstances are included in
the provision.
Also, your proposal provides for education through
technical assistance and program information, and certainly
this will help to create a better understanding of the Medicare
Program.
A similar provision applicable to Medicare's contractors
for survey and certification would further secure this intent.
Providers are delighted, Madam Chairman, that your bill
prohibits recoupment of a perceived overpayment until after a
decision has been made on an appeal that is under
reconsideration. Denied claims are frequently reversed on
appeal, and nearly all denials taken to the ALJ are overturned.
Please consider taking this provision one step further so that
providers are protected until their appeals are exhausted.
It appears to limit, however, the postponement of
overpayment recovery to circumstances in which the provider has
initiated the appeal. I might say that the provider frequently
does not have the right of direct appeal and must act on the
beneficiary's behalf. Language of this provision must be
modified to provide pre-recovery protection in all instances.
Also, a majority of denied home health and hospice claims
are rejected because they do not meet one or more technical
requirements. The agency's only recourse is to undergo a costly
appeal, and this delays final payment and unnecessarily burdens
providers and intermediaries. Your legislation provides an
opportunity to correct any errors or omissions in a most
efficient manner.
I would be remiss in my testimony if I did not touch upon
the 15 percent cut scheduled for October of 2002. The CBO
estimated that an additional 15 percent cut would be needed to
meet the targeted $16 billion savings from home health care. It
has become increasingly clear that these calculations are
dangerously inaccurate.
According to the latest figures, the 5-year total in
reductions will exceed $70 billion. Home care providers have
met the challenge of Interim Payment Services and PPS; however,
we continue to struggle under the financial burden of other
related issues. The proposed technical panel regarding the
mandated Outcomes Assessment Information System (OASIS)
assessment has not yet been convened, so I would like to take
this opportunity to state that this process alone, the OASIS
assessment, has cost my agency well over $100,000. Only a
minuscule percentage of that will ever be compensated.
A letter recently written by a home care nurse in
Connecticut stated: ``I am disheartened by the paperwork burden
which is stealing time away from needed patient care.'' She
goes on to say: ``My supervisor is also diverted from helping
me with patient care by the third-party liability paperwork,
copying, and the review of records going back 3 years.''
Several States, Connecticut in particular, are struggling
to maintain viability under the burden of the Third Party
Liability initiative. Records are requested for retrospective
review for payment of duly eligible clients, and current
interpretations are applied to past care. My agency soon must
begin the duplication of over 15,000 pages of records which
must be sent to the FI, and this only accounts for a very small
portion of the review year. One large Connecticut agency
reported that their costs will exceed $1 million just for the
review process.
H.R. 2768 addresses the burden of the escalating request
for documentation. It is my hope that the provision will limit
their request to what is necessary rather than reaffirm their
current practices.
While Home Care is well aware of the Nation's dwindling
surplus, in light of the savings to date, the additional
financial burdens home care faces, as well as a growing
staffing shortage, we urge you to eliminate the 15 percent cut.
Madam Chairman, the issues addressed by H.R. 2768 may seem
quite technical in nature, but they will make a tremendous
difference in the day-to-day operations. We in home health and
hospice will work diligently to work with you for their
enactment.
I thank you for your longstanding efforts on behalf of the
Nation's home health providers and the patients and families
they serve. On behalf of the National and Connecticut
Associations of Home Care, I thank you and the members of this
Committee for the bipartisan action that you have taken.
Thank you.
[The prepared statement of Ms. Wilson follows:]
Statement of Susan Wilson, Vice President, Clinical Operations, and
Chief Operating Officer, VNA of Central Connecticut, Inc., New Britain,
Connecticut; President, Board of Directors, Connecticut Association for
Home Care, Wallingford, Connecticut; and Member, National Association
for Home Care
Thank you, Madame Chairman, Representative Stark, and Subcommittee
members, for inviting me to present testimony on ways to bring
regulatory relief to beneficiaries and providers, and specifically to
discuss the many benefits that would result from enactment of HR 2768,
the ``Medicare Regulatory and Contracting Reform Act of 2001.'' My name
is Susan Wilson. I am Vice President of Clinical Operations and Chief
Operating Officer of the Visiting Nurse Association (VNA) of Central
Connecticut. I am also the President of the Board of Directors of the
Connecticut Association for Home Care (CAHC), the voice of home care in
Connecticut, and a member of the National Association for Home Care
(NAHC).
NAHC is the largest national organization representing home health
care providers, hospices, and home care aide organizations. Among the
nearly 6,000 organizations NAHC represents are every type of home care
agency, including nonprofit agencies like the VNA, for-profit chains,
public and hospital-based agencies, and free-standing agencies. CAHC
represents 61 providers that collectively deliver more than 75 percent
of all home health and hospice services provided in the state.
In March I had the honor of being called before this panel to
provide testimony on a number of the regulations and policies that
impact a provider's ability to deliver high-quality patient care in an
efficient manner. I am pleased to be back here today to personally
extend my most sincere thanks for the many efforts that you, members of
this Subcommittee, your staff, and others have made to ease burdens on
home care and other providers.
Madame Chairman, you and all of the members of the Subcommittee,
particularly, are to be commended for developing HR 2768, the
``Medicare Regulatory and Contracting Reform Act of 2001.'' This
legislation will go a long way toward easing the impact of some of the
most troublesome policies of the Medicare program. You have included a
number of provisions that address specific problems that hospices and
home health agencies have struggled with in recent years, including:
New Requirements for Regulatory and Policy Issuances
Among the changes that would be enacted as part of HR 2768, you
have included several provisions related to regulatory or policy
issuances that will be of tremendous help to providers. First, the
legislation prohibits any provision published in a final regulation
that is not a logical outgrowth of the proposed regulation from taking
effect until after appropriate opportunity for public comment.
Additionally, your bill generally prohibits retroactive application of
substantive changes in regulations or other policies, and extends
protection against compliance actions relative to the change until 30
days after issuance of the change. Home care has faced great
difficulties in the past with policy issued with retroactive impact,
such as the revision in standards for allowable branch offices. The
bill should prevent this in the future.
The bill also protects providers against sanction in cases where
they have followed written guidance from one of Medicare's contractors.
NAHC believes that it would be helpful if, with respect to this
particular provision, the Subcommittee could provide clarification
regarding what would constitute a ``sanction''--does this mean that a
provider would not be subject to fines for wrongdoing, or would the
protections extend to other obligations that resulted from the faulty
guidance of the contractor? Home health agencies have followed written
guidance from intermediaries on cost reporting only to find the
intermediary later rejecting its own approval. This led to unfounded
allegations of overpayments. We hope that these circumstances are
included under this provision.
Contractor Accountability
NAHC applauds your efforts as part of HR 2768 to improve Medicare
contractor compliance and accountability through development of
specific performance measures. We also believe that the emphasis you
have placed on provider education is a sound foundation for improved
provider relations with the contractors and greater understanding of
the Medicare program. Of particular note is the bill's establishment of
provision of technical assistance and program information to providers
as one of the contractors' key functions. The availability of program
information is so vital to the ability of providers to operate in
compliance with the program that NAHC recommends inclusion of a similar
provision applicable to Medicare's contractors for survey and
certification, the state survey offices. An educational role for state
survey offices is a key way to secure quality of care for patients.
Section 6 of HR 2768 establishes a Small Provider Technical
Assistance Demonstration Program. We believe that this is an excellent
approach for evaluating billing and other practices of small providers
to ensure compliance with Medicare law. As you know, Madame Chairman
and members of the Subcommittee, the vast majority of home health
agencies and hospices are small businesses that could greatly benefit
from participation in such a demonstration. We support this effort
wholeheartedly. We also would ask that the definition of ``small
providers of services or suppliers'' be clarified to be certain that it
would include providers of care such as hospices and home health
agencies as it currently references ``institutional'' providers.
Medicare Provider Ombudsman
Your establishment, under Section 7, of a Medicare Provider
Ombudsman is a concept that NAHC has long advocated, and is very much
in keeping with the spirit of your efforts and those of others who are
working to ease regulatory burdens.
Recovery of Overpayments and Prepayment Review; Enrollment of Providers
We have several comments and questions regarding the provisions in
HR 2768 that relate to overpayments. As you are well aware, Madame
Chairman, the Balanced Budget Act of 1997 (BBA) imposed deep and swift
cuts on Medicare home health providers. Many providers operated for as
much as one full year without knowing what the limits on their payments
would be. As a result, a great number of agencies throughout the
country found themselves in situations where they owed such significant
amounts of money to the Medicare program that even a 36-month payment
plan was too short a time. In such cases it was not unusual for the
provider, contractor, and Medicare to establish a 60-month repayment
schedule. We would urge that your legislation create sufficient
flexibility so that repayment schedules of more than 36 months might be
allowed under such special circumstances.
Similarly, your establishment of a ``bright-line'' test for
``hardship'' for overpayment obligations at 10 percent of the
provider's Medicare income is understandable. However, and particularly
in the case of home health agencies and hospices that are not heavily
capitalized, ``hardship'' may occur with overpayment obligations at
less than 10 percent. We would, once again, urge that some
discretionary authority be extended so that special circumstances are
considered for exceptions to the rule.
We are delighted, Madame Chairman, that your bill would prohibit
any recoupment of an overpayment until after a decision on a
reconsideration has been rendered. Under the home health and hospice
programs, significant numbers of denied claims are reversed on appeal,
and nearly all denials taken to the administrative law judge level are
overturned. We would encourage you to consider taking this particular
provision one step further so that providers would be protected from
overpayment recoupment until after their appeals are exhausted.
The bill also appears to limit the postponement of the overpayment
recovery to circumstances where the provider has initiated the appeal.
In many of the appeals, the provider does not have a direct appeal
right and must proceed as the beneficiary's representative in order to
have the dispute reviewed. For example, a claim denial based on an
alleged failure to submit a document can only be appealed by the
beneficiary even though the provider suffers the financial
consequences. We would suggest that the language of this provision be
modified to provide the pre-recovery protection in all instances where
the issue in dispute is under appeal.
Under the Subcommittee's bill, Medicare contractors would be
permitted to request the periodic production of records or supporting
documentation for a limited sample of submitted claims to ensure that
the previous practice is not continuing. As I have discussed with you
and your staff, Madame Chairman, the duplication of records can be
costly and time consuming. It is my hope that this particular provision
was designed to encourage contractors to limit their requests to what
is absolutely necessary, rather than to affirm some of the contractors'
current practices.
Use of statistical sampling by Medicare's contractors has been a
significant problem for home health agencies at times, and we applaud
your efforts to limit its use only to cases in which there is a
sustained or high level of payment error or where documented
educational interventions have failed to correct the payment error.
This should ensure that sampling is used only in appropriate
circumstances.
Ability to Correct Minor Errors and Omissions on Claims
The vast majority of home health and hospice claims that are denied
are rejected because they do not meet one or more of the technical
requirements set out by the Medicare program. Under current practice,
if an agency fails to meet a technical requirement in developing and
filing claims--examples of which are failure to record the verbal order
date on the plan of care, secure physicians' signatures on all verbal
orders prior to billing (including minor treatment changes), or date
the receipt of signed orders if the physician has not dated his or her
signature--the claim is denied and the agency's only recourse is to
undergo a costly and lengthy appeals process. This can delay payment to
the agency for up to a year and a half, and unnecessarily burden
providers and intermediaries. Your legislation would address this long-
standing problem by establishing a process under which health care
providers would be given an opportunity to correct these minor errors
or omissions without having to initiate an appeal. We consider this
change in the law as a significant advance for providers, patients, and
the Medicare program that will achieve great savings while providing
Medicare payment for necessary care.
Additional Action to Shore Up the Home Health Program
Madame Chairman and members of the Subcommittee, the issues
addressed by your legislation may seem quite technical in nature, but
they will make a tremendous difference in day-to-day operations of all
types of providers. We in the home health and hospice world have sought
a number of these solutions for many years and will work diligently for
their enactment.
I would be remiss in my testimony if I did not at least touch upon
one additional issue that weighs heavily on home health providers
nationwide---that of the 15 percent cut currently scheduled for October
2002. As you will recall, the Congress included the additional 15
percent cut in home health payments as part of a series of cuts under
the Balanced Budget Amendment at the recommendation of the
Congressional Budget Office (CBO). At the time, CBO estimated that the
additional 15 percent cut would be needed in order to meet the targeted
$16 billion in savings from home health for fiscal years 1998 through
2002. With each passing year since BBA's enactment, it has become
increasingly clear that those calculations were dangerously off the
mark. According to the latest numbers from CBO, the five-year total in
reductions for home health will exceed $70 billion--a far cry from the
$16 billion goal.
We in home care are painfully aware of the state of the nation's
dwindling surplus. However, we respectfully urge that you take steps
this year to eliminate the 15 percent ``Sword of Damocles'' that has
hung over our heads these past few years.
In closing, I cannot thank you enough, Madame Chairman, for your
long-standing efforts on behalf of our nation's home health providers
and the patients and families they serve. On a more personal note, it
is a source of great pride for me to be able to call you ``my
Representative'' in the Congress. Many thanks, again, for your
exemplary advocacy.
This concludes my formal remarks but I would be happy to answer any
questions that any members of the panel might have.
Chairman Johnson. I thank the panel for their extensive
testimony and for your detailed suggestions. We will review all
of them carefully.
Let me just say for the education of my colleagues on the
Subcommittee that this third party liability problem that we
have in Connecticut and in a few other States is going to
spread like a disease. It is a way that States can maximize
Medicare reimbursement, move people from Medicaid onto
Medicare, reduce the States' costs and increase our costs. What
it results in is the State or some contracted agency requiring
review of documentation on every, single patient.
We had one agency in Connecticut, just a very small agency,
who wrote that it was going to cost them $37,000 just to xerox
the first round of requests. That is unconscionable, and any
government that allows that kind of squandering of national
resources is irresponsible and derelict in their duty.
So we have made a lot of progress in negotiating an
agreement on this, but we may need to include some language in
this bill or another to ratify the resolution of that problem
before it truly destroys particularly the small providers.
But the provider that Ms. Wilson referred to that says it
is going to cost them $1 million, it is $1 million for that one
agency, just this first set of reviews, and it is big because
they are the last agency that now serves inner-city folks
needing home care. So it would be catastrophic if we wiped them
out through utterly irrational regulatory requirements.
Mr. Crane, would you like to question the panel?
Mr. Crane. Thank you, Madam Chairman.
Ms. Wilson, in your testimony, you urge us to amend H.R.
2768 to postpone recovery of alleged overpayments until all
provider appeals are exhausted. As you know, the OIG strongly
opposes that proposal, arguing that the likelihood of
successful recovery diminishes dramatically the longer the
process is drawn out.
H.R. 2768 tries to find a compromise by permitting recovery
only after the first level of appeal is exhausted, which would
filter out the majority of denials that will be overturned on
appeal.
I understand that you would like us to go further. How can
we do so and still be sensitive to the real concerns outlined
by the Inspector General?
Ms. Wilson. I believe that what needs to be done is to take
a look at what has happened historically. The recoupment does
take place after the first round of appeals; however, the
continued look at the particular issue by going through
additional appeals is lengthy, extremely costly, and I believe
the history has been that a great many of those have been
overturned in the long run.
Essentially what has happened is that the agency has been
paid a certain amount of money for service. It may be recouped
at a certain time. However, the appeal process needs to
continue. We are talking about many agencies, whether not-for-
profit or for-profit, that at this point are working under very
tight constraints regarding costs. So that essentially, we are
removing moneys from the agency necessary in order for them to
continue the care that they are providing. Agencies are
extremely hard-pressed to be able to do that.
Mr. Crane. Thank you.
Ms. Aronovitz, I would like to ask you to expand on some
very important statements that you made in your testimony.
Don't you think that competition will improve the operations of
the Medicare contractors, and specifically, will it improve
services for seniors and for health care providers?
Ms. Aronovitz. Absolutely. The Federal Acquisition
Regulation, which requires full and open competition, we think
is essential; it is a real foundation to the way that most
government entities contract for most goods and services. We
think this is a very important principle even with claims
administration contractors. I know there is some discussion of
developing a system where CMS could be excused from ever
conducting full and open competition where a contractor is
performing very, very well.
I personally have a lot of skepticism about that, because
we have found that CMS has a lot of work to do before they
develop the kind of performance system for claims
administration contractors that could justify that kind of
flexibility.
Clearly, this is an extraordinarily large endeavor, and we
do not expect that CMS would be able to do this in record time.
It takes time to develop statements of work and to develop this
type of contracting. But we think that CMS should develop these
contracts, and there should be some time definite where all
these contracts would be competed.
Mr. Crane. Thank you. Thank you, Madam Chairman.
Chairman Johnson. Mr. McDermott.
Mr. McDermott. Thank you, Madam Chair.
Dr. Hall, since you are the designated hitter for the
medical profession, I want to ask you a couple of questions. I
was just thinking about the fact that this country is going
through an awful experience, and it is my view that there will
be a national epidemic of post-traumatic stress disorder in
this country. So I was just thinking, well, now, all those
doctors are out there, and they are going to have to document
this, and they have to find sleep disturbance, and they have to
find irritability, and they have to find that it has lasted for
more than 90 days. All of those are parts of the diagnostic
criteria for making that diagnosis.
And I was having some trouble remembering exactly what the
diagnostic indicators were, so I was thinking to myself, what
is it about this scheme that is out there of coding and
documentation that, if you could change a couple more things in
this bill to make it work better, what would you do--because I
think physicians are overwhelmed with a lot of stuff coming at
them, and I do not start with the premise that they are doing
it on purpose, but on the other hand, we do need some
documentation.
So if you were looking at this, what else would you change?
Dr. Hall. Thank you, Congressman McDermott.
If I were czar of the universe--and I certainly recognize
that I am not--I guess there are a couple of things I would
change.
As internists and particularly with evaluation and
management services, which are the bulk of our business,
particularly where older adults covered by Medicare are
concerned, often our ability to tell you what you do not have
is more important than our ability to tell you what you do
have. I have very few patients, if I spent adequate time after
a work-up sitting with them and saying, ``I have to tell you
that we did not find that you have life-threatening cancer,''
very few of them say, ``Aw, shucks, I am not going to pay your
bill because you did not make that diagnosis.''
On the other hand, that is what I deal with constantly when
I deal with CMS. If I go through the same, identical,
exhaustive work-up, but it turns out that I have not diagnosed
a more classic disease, I am very likely to have my payment
rejected or at least down-coded. This is one of the problems
that we face in a very complex system which, I agree with you,
is going to get increasingly complex as the population ages,
bringing with it a baby boomer level of demand, intellectual
inquiry and access to the Internet.
Internists are more and more going to be providing services
to say to patients, ``I understand where you are coming from.
This is not what you have. Here is how we can get your life
back into a certain amount of order,'' which is really what the
post-traumatic stress syndrome is. Add to that the fear of bio-
terrorism, and we are facing an amazing and I think formidable
challenge in the next couple of years in our own country.
So, what would I change? Well, I think the things that I
hear the most include, first of all, the appeals process. This
is felt to be inherently quite unfair to internists. More
importantly, it has some very serious practical implications.
We know that after the first appeal, very, very few of
these claims turn out to be anything, as has already been
mentioned, individual fraud is extremely rare, but some
overpayment is unfortunately going to occur, just like
underpayment. Then, let us get it right the first time. Let us
put our resources at CMS into first of all being much more open
and forthright in telling physicians and their staffs what they
have to do right. Let us not have a situation where, if we call
for advice, the person giving us the advice refuses to give us
his or her name. Let us not have a process where, if we send
our staff to various intermediary or regional carrier
orientation sessions and they ask the wrong question, they are
going to be targeted for review. This is not a healthy
environment.
I graduated from medical school the same year that Medicare
was enacted, and I have never known anything else throughout my
30-plus-year career. I happen to like it. I think it is a good
system. But I think we have now reached the point where we are
discouraging physicians.
So what happens with this appeal process? Physicians toward
the latter half of their careers are the people who are
dropping out. They just do not want to have to deal with this
problem and be considered guilty until proven innocent. If we
then look at rural communities and what is happening in terms
of physicians moving out, I am very much panicked about how we
are going to take care of this bulge in the demographics
without getting on top of it.
Do it right. Set up a system that creates much more of a
partnership between CMS and physicians, and let us not have
physicians have to settle claims that they know are absolutely
wrong just in order to stay in business, which is what is
happening in a lot of places.
Second, I guess I would take a very careful look, as you
already have and as other people have testified to, at the
whole extrapolation process. This just does not make any sense.
It is all re-work. Let us do it right the first time. Let us
get the educational guidelines set up.
I file one income tax return a year--in fact, I file it for
two of us, because my wife and I file together. I understand
the need for some kind of random audit there, because I only do
it once a year. But if I take care of 2,000 frail elderly
people, I am submitting 6,000 claims a year. Wouldn't it be
better to look at the claims that are being submitted already
and say, ``Dr. Hall, compared to your peers in the community,
your billing practices are not very right, and we think that we
had better take a look at that.'' Why would we just pick a
random audit sample out of those 6,000? It just does not make
sense in terms of getting at the real problems. Thank you.
Mr. McDermott. Would you let me have a little extension on
that, Madam Chair?
Chairman Johnson. Is that all right with you, Mr. Johnson?
Mr. Johnson of Texas. Yes.
Chairman Johnson. Yes, that would be fine, Jim.
Mr. McDermott. We use the term in our bill ``a high level
of payment error.'' I would like to know how you would define
that. That triggers a bunch of bad things for a doc. So how
would you define ``a high level of payment error'' for HCFA, or
whatever that agency is called now?
Dr. Hall. CMS. Well, I would be the wrong person to ask
that, because whatever I said could be subject to some bias.
But if someone were to ask my opinion on how it should be set
up, I would say that within every region, there are standard,
acceptable practices and there are frequencies of coding that
are very much keyed to the specific population that is being
taken care of.
If I am practicing in Sun City, Arizona, my distribution of
billing codes and my levels of care are going to be very
different than if I am practicing in some other area where
there is not such a high concentration of retirees.
I think that the definition should be based on some kind of
statistical cut point that says you should be within 95 percent
of the spread of diagnostic codes and of billing codes, or
whatever is the right number, but let us decide on that number
that makes some sort of sense in the context of practice--and I
agree there has to be some kind of accountability here. The
last thing we are asking for is decreased accountability.
Mr. McDermott. Thank you.
Chairman Johnson. Thank you.
I would note that Gail Wilensky testified to this point at
our very first hearing, that the whole system needs to move to
that kind of oversight so you can identify patterns early and
can use that pattern process to get at providers who are either
making errors or exploiting the system. I do not know that we
can move that into this specific bill, but we are going to have
to get into that much more deeply.
I just want to clarify something before I go to Mr.
Johnson. Did you say that if you do not diagnose a serious
illness, the visit is then down-coded? We have heard this many
times.
Dr. Hall. The likelihood is that with an EM service, if we
do not have a piece of paper that has a lab test attached to it
that says a certain disease was diagnosed, that claim has a
much higher probability of being down-coded.
Chairman Johnson. Are your people having trouble with Level
5, which says ``comprehensive physical,'' versus Level 3, which
says ``detailed physical''?
Dr. Hall. There are problems there, but I think it runs
through the entire spectrum of the coding levels.
Chairman Johnson. Thank you.
Mr. Johnson.
Mr. Johnson of Texas. Thank you.
Ms. Aronovitz, would you talk to me about how you have
said, I believe, that there is a lack of accuracy in the
information that Medicare contractors make available? Are the
pressures of the system forcing that on them, or were your
questions trick questions?
Ms. Aronovitz. They were clearly not trick questions, and
we were very disturbed by our findings. We did not expect to
have such a high error rate.
Our questions were actually taken from contractors'
websites under their ``Frequently Asked Questions'' section, so
these are questions that should have been answered correctly.
We think that there is a lot of pressure for customer
service representatives to answer questions quickly and well,
and there is no excuse for having such a high error rate. We
think that the training and the oversight that is given to
customer service representatives and other activities that are
conducted at the contractor level need to be more standardized,
and they need to be increased.
Mr. Johnson of Texas. Is it the fault of the system that
makes the paperwork level almost extreme? Most of the doctors,
I think, have to hire one or two people just to keep track of
what is going on. Is that part of the problem?
Ms. Aronovitz. Well, there is some concern that the program
is so complicated that customer service representatives have
trouble figuring out the correct answers. But in this case,
these three questions were ones that had been asked so many
times that the answers were very straightforward and very clear
and had been discussed with customer service representatives
several times.
So we do not think that our questions in any way indicate
the kind of complexity where the expectation is that they
should not have been able to answer correctly. They clearly
should have been able to answer these questions.
Mr. Johnson of Texas. Do you think that they are answering
truthfully in their own minds and just did not get the question
right, or what?
Ms. Aronovitz. Yes, I really do. I think maybe it could
have something to do with training or oversight or monitoring
or feedback. There are lots of things they have to worry
about--not just answering the question correctly, but there are
a lot of process questions. They need to make sure that they
ask a follow-up. There is a lot of phone etiquette that they
also have to engage in. And to their credit, they also answer a
lot of questions that pertain to reimbursements on specific
claims. We have not tested those, but we do not hear complaints
from physicians when they call up about those kinds of things.
So we think they need a lot more training, and they need to
have more feedback in terms of how their performance is
measured.
Mr. Johnson of Texas. Did I just hear you say that
physicians are not griping about their reimbursements?
Ms. Aronovitz. No, no, no. I did not say they are not
griping about their reimbursement at all. What I said was that
we have not heard the same level of concern when a physician
calls one of these call centers and asks, ``What is the status
of my reimbursement?'' In other words, when is it coming? They
seem to be satisfied that they get an answer; whether they are
happy with that----
Mr. Johnson of Texas. OK. Did you pursue HCFA at all as to
why they do not trust the providers and the docs when they are
giving them information? That has been my experience in dealing
with them. Did you pursue that at all?
Ms. Aronovitz. Why the physicians do not trust the answers?
Mr. Johnson of Texas. Why HCFA will not take information
from the hospitals, docs, and associations as real; they have
to go out and do their own studies, which are always about 10
years late. Did you pursue that at all?
Ms. Aronovitz. We did not really pursue that, but it is an
interesting point. I think that CMS is starting to reach out
more, and we are very encouraged by their interactions with
physicians, trying to get feedback on their concerns. But you
are right, they do a lot of their independent studies, and they
feel they really need to to get the kind of evidence they need
to make program changes.
Mr. Johnson of Texas. Well, I think it is a waste of time
and money on their part, frankly. Thank you, Madam Chairman.
Chairman Johnson. I just want to pursue one brief question
with Dr. Hall and one with Ms. Aronovitz.
Dr. Hall, it was very helpful to hear you follow up on Dr.
McDermott's questions, but in your testimony, you said
something about instead of all this documentation, a one-pager.
Have you thought through what that one-pager would be, or would
you be interested in having your people begin thinking through
what is--because this is something that actually I have
proposed and we have in our bill, sort of a demonstration
possibility for people outside the government, without any
background or without any attachment to the bureaucracy and the
IG, to come up with what they think in the real world is
sensible documentation, and then we can go through the process
of rectifying it.
But right now, we are trying to rectify a process that is
extraordinarily detailed and intrusive with a generalized
payment system and with an IG who has the right to require
things that even the IRS does not have the right to require.
So there are other steps beyond this bill, but I wonder if
you would be interested in sort of giving body to that comment
that you made in the course of your testimony.
Dr. Hall. Congresswoman Johnson, I thought you would never
ask. I think there is a start. Within the Current Procedural
Terminology documentation, there is such a document that is
much more contracted than what we have had before. One of the
proposals for a pilot study would be to combine that with the
element of time, the actual commodity that we are really
talking about in an office setting. We could supply some of
that information to the Subcommittee. We would be able to get
that to you right away, right from our own Washington office.
Chairman Johnson. We would appreciate your getting that to
us right way, and then we can flesh out that particular pilot
idea, because in the long run, I personally believe that we
will not be able to continue to attract the quality of mind or
heart to medicine if we do not do something about the fact that
they are paid on the basis of an RBRVS formula which is so
extraordinarily complex, and nobody understands it, not even
the people who implement it, a coding system that now is almost
unworkable, and a practice expense formula that is also
controversial, complex, and in my estimation, unworkable.
So when you look at the three systems supporting physician
reimbursement, frankly, it is not the future, and we have to
find radical ways to break through and find another basis on
which to restore an honest and responsive relationship to a
medical community that has to increasingly deal with complex
illnesses, complex methods of diagnosis and treatment. This is
also true in the home health area and in many other areas, but
if you will get that to us, we will work on that.
Dr. Hall. We will do that. Could I just make one comment in
relationship to that?
Chairman Johnson. Yes.
Dr. Hall. The medical chart for most physicians is more
than a legal document. It is really the record of the clinical
transaction that goes on behind closed doors with the patient.
It often contains, if it is a proper chart, information that
maybe some people would not even share with their spouses. It
is very, very important to the continuity of care.
What we have now done is taken that record and used it as
the sole basis for determining the quality and quantity of the
interaction that occurred behind those closed doors. It was
never meant for that, so what we are finding is that I
personally and all the people we work with spend an inordinate
amount of time recording what is quite frankly nonsense--it has
nothing to do with what is important for that patient--in order
to justify and provide the documentation that is necessary.
To be sure, there has to be some metric for that
documentation that is understandable and allowable, but I think
the bureaucracy has just gotten away from us. We need to
reestablish this dialog between the medical profession and CMS
and just come up with a better way.
Chairman Johnson. Thank you. We invite your participation
in that dialog, and we hope to push that dialog ahead very
aggressively from this Subcommittee.
Ms. Aronovitz, I was surprised at your response to Mr.
Johnson's comment--or another of my colleagues; I am not quite
sure--about giving CMS the flexibility to renew contracts
without a bid process. This business of setting standards is
not rocket science. Just because the government has not
bothered to do it does not mean it is not quite regularly done
throughout the private sector and is not a process that we know
a lot about.
I would like to preserve that right, because the bidding
process is very expensive, and it is going to take a while to
get this first round, and I think there needs to be some
flexibility to recognize high performance. So one possibility
might be to require a report to the Committee on the standards
once they have been set so we can have a dialog about that; we
could even have hearings on it if we think the standards are
too low or not well enough developed, and then a report when
the decision is made by the government not to go to bid, so
that we can follow this.
But I think that at the time we are giving flexibility, we
need to give broad flexibility, because we are going to make
really radical changes in the system. Do you have any comment
on that?
Ms. Aronovitz. Sure, I do. First of all, I totally agree
with you. We believe that performance standards is one of the
most important principles in any type of contract. Setting up
expectations and then providing oversight and monitoring and
feedback is essential to understanding whether you are getting
your money's worth for any goods or services you would have.
So we definitely believe that that is critical. It is just
that CMS does not have really strong performance measures. I
think they are getting there, and in their program safeguard
contractor efforts, it is coming along.
In terms of the expense involved in doing full and open
competition, we agree that this could be very expensive, but we
think the expense really comes in the first round. CMS really
does not have experience on claims administration contracts, in
writing statements of work, in developing this process. We
believe, though, that once it does that for several
contractors, it could use the same approach or the same
statement of work for competing in future years or even
competing with other contractors or doing one big competition.
So we think that the expense that they are going to incur
up front is going to be a fixed cost that could apply across
the board. We do not think there would be that much saved in
exempting one contractor down the road from having full and
open competition, and there are some real benefits to it down
the road. That is, no matter how well you are performing, it
forces you to look around and make sure that you are improving
because you know you do have competition.
The last thing I want to say is that we agree that we would
not want to push CMS into doing this in a time frame that would
be unreasonable. I think that if all competition would have to
be completed by 2006 or 2007 or 2008, or whatever amount of
time would be reasonable to give CMS a chance to do this well
and to do it in a phased approach, we are not in any way
opposed to that. It is just that ultimately, these contracts
should be completed because there are a lot of benefits that
could be derived.
Chairman Johnson. Thank you very much. Mr. McDermott.
Mr. McDermott. Madam Chair, I wonder if it would be
possible--I keep thinking about the IRS, and they do not make
you pay in advance; what they do is they charge interest when
you finally settle up--I wonder if we could not consider an
amendment to move it up a layer in the appeals process before
people have to pay, knowing that they would have to pay
interest. Is there some compromise that we could work out in
there to make it a little less onerous to hit somebody right up
front and make them pay for what then takes sometimes as much
as 3 years to pay--and you may not in fact wind up paying at
the end of the 3 years. That seems unfair to me.
Chairman Johnson. I certainly would be happy to look at it
with you. First of all, I take the interests of the
Subcommittee members very seriously, and in addition, there are
some data that say that particularly for physicians on that
second level of review, 60 percent--on the first level of
review, 40 percent have changed, and on the second level of
review, the remaining 60 percent are reviewed.
We have found that there is some disagreement about those
figures and whether they really hold up, but I think we would
be happy to look at it with you and see if we can--I know that
for all of you, that second level of review is important.
Mr. McDermott. When do you anticipate having a markup?
Chairman Johnson. We anticipate resolving these kinds of
issues this week, so we will be talking about this directly
this week, and hopefully will be able to have a Subcommittee
markup in 2 weeks.
Mr. McDermott. Two weeks?
Chairman Johnson. Yes.
Mr. McDermott. OK.
Chairman Johnson. Unless there are other time frames that
are beyond our control that require us to move it up more
rapidly.
Mr. McDermott. Thank you.
Chairman Johnson. Thank you.
Thank you very much, members of the panel. I so appreciate
your joining us and giving such serious consideration to the
proposal that we put out a month and a half ago.
Thank you very much.
[Whereupon, at 12:22 p.m., the hearing was adjourned.]
[Submissions for the record follow:]
Statement of the Advanced Medical Technology Association
AdvaMed is pleased to provide this testimony on behalf of our
member companies and the patients and health care systems we serve
around the world. AdvaMed is the largest medical technology trade
association in the world, representing more than 1100 medical device,
diagnostic products, and health information systems manufacturers of
all sizes. AdvaMed member firms provide nearly 90 percent of the $68
billion of health care technology products purchased annually in the
U.S. and nearly 50 percent of the $159 billion purchased annually
around the world.
AdvaMed would like to thank Chairwoman Johnson, Ranking Member
Stark, and the members of the Subcommittee for their bipartisan effort
to make the Medicare program more efficient and effective for providers
and Medicare beneficiaries. Medicare is a critical program for some 40
million Americans, and we greatly appreciate the way that the Committee
has reached out to the health care community to develop legislation to
make the program easier to understand, comply with, and participate in.
Contracting Reform
While some reforms to the contracting process are warranted,
AdvaMed strongly believes that any reforms that would result in changes
in local carriers or consolidated areas for carriers should maintain a
process for making coverage decisions locally, and for securing input
from the local medical community.
AdvaMed strongly supports Medicare's local coverage process as a
vital route for timely patient access to the vast majority of
innovative medical technologies. The local coverage process offers an
important alternative to national coverage decision-making by the
Centers for Medicare and Medicaid Services (CMS), which runs Medicare
and oversees local contractors. Currently, Medicare patients face
delays of 15 months to five years or more in gaining access to
technologies at the national level.
Consolidation of the number of local Medicare contractors that make
coverage decisions would severely constrict or eliminate the local
coverage route and create significant new delays in patient access to
important new medical technologies and services. AdvaMed appreciates
the work of Congress and CMS to examine Medicare contractor operations
in areas such as accountability and performance incentives. However, as
Congress addresses this issue, we urge it to avoid steps that would
undermine the local coverage process as a route to early patient access
to new medical technologies.
The local coverage process provides the flexibility and timeliness
needed to keep pace with rapid advances in medical technology. Current
flexibility at the local level very efficiently incorporates the
majority of new procedures and technologies into the existing Medicare
payment systems. This flexibility includes:
timely access to local contractor decision-makers
an active relationship with the local medical
community and understanding of local medical practice, and
the ability to make case-by-case determinations.
Local decision-making authority provides Medicare beneficiaries
access to new procedures and technologies without having to wait until
these innovations have been disseminated nationally.
A recent report by the Lewin Group, a prominent health care policy
research firm, also highlighted the value of the current local Medicare
coverage process. According to the Lewin Group, ``the local coverage
process remains a critical avenue for obtaining coverage'' for the vast
majority (90%) of new technologies and services.
Preservation of the local coverage process is particularly
important, the Lewin Group found, because it offers a way for patients
to gain access to many innovative technologies that otherwise would
encounter significant coverage delays at the national (CMS) level.
Lewin cites the example of a breakthrough technology in women's health,
dual x-ray absiorptiometry, which is used to diagnose osteoporosis. It
took Medicare more than seven years to cover this technology at the
national level. However, coverage decisions by local Medicare
contractors during that time enabled many women to gain access to this
technology who otherwise would not have been able to receive it.
Recommendations
AdvaMed strongly believes that, despite any contracting reforms, a
process for making coverage decisions locally, and for securing input
from the local medical community (through the local coverage advisory
committee) should be maintained.
Local authority to make decisions. One approach to
maintaining local decision-making is to require contractors to
grant local physicians (such as state medical directors) direct
authority to make coverage decisions, in consultation with
their peers in the local medical community. This includes the
authority to make claims-level case-by-case decisions in a
timely manner.
Local carrier advisory committees (CACs). Local CACs
should be continued in each state to assure that local medical
review policy reflects the consensus of the local physician
community. Changes in local coverage decisions should be
subjected to the normal review and comment process with the
local CAC.
Local codes. Occasionally, to implement a local
decision, it may be necessary to issue a new temporary local
code, and so we recommend that contractors continue to have the
authority to issue and recognize local codes.
Accessibility and Responsiveness. Contractors should
require their medical directors to be readily accessible and
responsive to local physicians, providers, beneficiaries, and
manufacturers, and to continue to respond and render decisions
in a timely manner.
Open Participation in Decision-making. Last November,
CMS issued a program memo instructing contractors to post their
draft coverage decisions on their websites for comment. We
suggest extending this to include additional information
earlier in the process, similar to the national level, where
the local medical director would post to the website the intent
to make a coverage decision, what information will be reviewed,
the names of the members of the coverage advisory committees
who will be reviewing the information, and acceptance of input
from interested parties during the various stages of this
process. This would apply to any changes in local coverage
policy, including those that may result from a change or
consolidation of contractors.
Conclusion
AdvaMed thanks the Subcommittee members again for their
collaborative efforts to improve and strengthen the Medicare program.
We look forward to working with this Committee, the Congress and the
Administration on this important legislation, as well as additional
ways to improve the quality of care available to seniors through
Medicare and foster the delivery of innovative therapies for patients.
Statement of the Alliance to Improve Medicare
The Alliance to Improve Medicare (AIM) is the only organization
focused solely on fundamental, non-partisan modernization of the
Medicare program to ensure more health care coverage choices, better
benefits (including prescription drug benefits), and access to the
latest in innovative medical practices, treatments and technologies
through the Medicare system. AIM coalition members include
organizations representing seniors, hospitals, small and large
employers, insurance plans and providers, doctors, medical researchers
and innovators, and others.
AIM recently released the attached report outlining regulatory
burdens on both Medicare beneficiaries and providers and recommending
administrative remedies. The report, ``Improving Medicare Management
for Everyone'', identified areas of complexity for both senior citizens
and providers including health plans, hospitals, and medical technology
innovators. AIM identified beneficiary concerns including the lack of
clear information on benefits and eligibility, access to prescription
drug benefits, and difficulties understanding Medicare paperwork. The
report also outlined provider regulatory burdens including inconsistent
Medicare program policies, slow responses to provider concerns and
inquiries, and an inflexible Medicare bureaucracy.
Complexity in Medicare's rules governing beneficiary and provider
participation has resulted in increasingly bipartisan support to
improve the fairness of the system for all participants. AIM applauds
Subcommittee Chairwoman Nancy Johnson and ranking member Pete Stark for
their bipartisan efforts in the discussion of necessary regulatory
reforms to the Medicare program. We hope the Subcommittee will consider
the recommendations in the attached report as they continue their
discussions on this issue.
Improving Medicare Management for Everyone
Improving Medicare Management Through Reducing Regulatory Burdens on
Both Providers and Beneficiaries
A Report by the Alliance to Improve Medicare
June 2001
The Alliance to Improve Medicare (AIM) is a coalition of
organizations representing seniors, doctors, hospitals, patients,
medical researchers and innovators, insurance plans and providers,
small and large businesses and others who believe that Americans need
and deserve a better Medicare program. AIM is the only organization
focused solely on fundamental, non-partisan reform of the Medicare
program to ensure more coverage choices, better benefits (including
prescription drug benefits), and access to the latest in innovative
medical practices and treatments though the Medicare system.
The structure of the traditional Medicare program has changed
little in more than three decades, and, consequently, has not kept pace
with many of the dramatic improvements in the delivery of health care.
AIM is dedicated to comprehensive modernization of the traditional
Medicare program. By focusing on benefits and services rather than
excessive government regulation, and injecting competition and choice
into the program, AIM believes we can have a better Medicare program
and one that will be financially healthy well into the 21st century.
AIM is working to achieve Medicare modernization through policy
research and educational programs for Members of Congress and staff,
the media, and the American public.
Key AIM Principles
Improve coverage through better coordination of care
and health promotion and disease prevention efforts.
Improve coverage choices by providing Medicare
beneficiaries with the power to choose from a range of coverage
options similar to those available to Member of Congress,
federal employees and million of working Americans under age 65
who are covered by private plans.
Improve coverage through increasing market competition
and availability of basic, affordable coverage to Medicare
beneficiaries.
Provide access to prescription drug coverage as part
of comprehensive, market-based modernization and improvement.
Improve traditional Medicare's basic benefit package
and provide the flexibility to make new health care innovations
more accessible.
Reduce Medicare's excessive complexity and rigid
bureaucracy.
Establish a solid foundation upon which to improve
Medicare by ensuring appropriate and timely payments to health
plans and providers.
ALLIANCE TO IMPROVE MEDICARE
COALITION MEMBERS
60 PLUS ASSOCIATION
AdvaMed--ADVANCED MEDICAL TECHNOLOGY ASSOCIATION
AETNA U.S. HEALTHCARE
ALZHEIMER AID SOCIETY OF NORTHERN CALIFORNIA
AMERICAN BENEFITS COALITION
AMERICAN HOSPITAL ASSOCIATION (AHA)
AMERICAN MEDICAL GROUP ASSOCIATION (AMGA)
AMERICAN ASSOCIATION OF HEALTH PLANS (AAHP)
AMERICAN SMALL BUSINESSES ASSOCIATION
BELL SOUTH CORPORATION
BLUE CROSS BLUE SHIELD ASSOCIATION
CITIZENS AGAINST GOVERNMENT WASTE
COMMUNICATING FOR AGRICULTURE
COUNCIL FOR AFFORDABLE HEALTH INSURANCE (CAHI)
COUNCIL FOR GOVERNMENT REFORM
COUNCIL ON RADIONUCLIDES AND RADIOPHARMACEUTICALS
THE ERISA INDUSTRY COMMITTEE
FEDERATION OF AMERICAN HOSPITALS
FOOD MARKETING INSTITUTE
HEALTHCARE DISTRIBUTION MANAGEMENT ASSOCIATION
HEALTHCARE LEADERSHIP COUNCIL (HLC)
HEALTH POLICY ANALYSTS
HISPANIC BUSINESS ROUNDTABLE
KIDNEY CANCER ASSOCIATION
MEDICAL IMAGING CONTRAST AGENT ASSOCIATION (MICAA)
NATIONAL ASSOCIATION OF HEALTH UNDERWRITERS (NAHU)
NATIONAL ASSOCIATION OF MANUFACTURERS (NAM)
NATIONAL RESTAURANT ASSOCIATION (NRA)
NATIONAL RETAIL FEDERATION
NATIONAL FEDERATION OF INDEPENDENT BUSINESS (NFIB)
PHARMACEUTICAL CARE MANAGEMENT ASSOCIATION (PCMA)
PHARMACEUTICAL RESEARCH AND MANUFACTURERS
ASSOCIATION (PhRMA)
PREMIER
SENIORS COALITION
THIRD MILLENNIUM
UNITED SENIORS ASSOCIATION
US CHAMBER OF COMMERCE
VHA INC
IMPROVING MEDICARE MANAGEMENT FOR EVERYONE
Improving Medicare Management
Through Reducing Regulatory Burdens on Providers and Beneficiaries
Background
Medicare, the world's largest health insurance program, serves
approximately 40 million beneficiaries today and is projected to serve
nearly double that number when the baby boom generation fully enters
the program. Increasing dissatisfaction, however, from both
beneficiaries and providers has forced policy makers to consider
whether Medicare can survive for these future beneficiaries. AIM
members applaud the Administration and Congress for their work to
strengthen and improve the Medicare program for today's beneficiaries
and for future generations but urge a continued focus on a solid
administrative infrastructure geared toward beneficiary interests.
Most important is the vision that Medicare was created to serve
senior citizens and disabled individuals, to ensure that these
individuals are provided with quality, appropriate health benefits.
Since the program's creation, however, Medicare benefits have not kept
pace with private health coverage. In addition, both Medicare
beneficiaries and providers have been subjected to more and greater
regulatory and administrative requirements for participation. These
requirements have harmed providers and caused some health plans to
leave the program entirely while others have been forced to reduce
benefits in order to maintain financial solvency. Beneficiaries have
also suffered through a scarcity of information and confusing coverage
issues.
Complexity in Medicare's rules governing beneficiary and provider
participation has resulted in increasingly bipartisan support to
improve the fairness of the system for all participants. AIM applauds
the bipartisan efforts of House Ways & Means Committee members to
develop and recommend changes to the current program. Like the
recommendations contained in the May 14, 2001 letter from House Ways &
Means Health Subcommittee Chairman Nancy Johnson (R-CT) and Ranking
Minority Member Pete Stark (D-CA) to U.S. Department of Health and
Human Services (HHS) Secretary Tommy Thompson, many of the
recommendations contained in this report can be achieved through
administrative actions.
AIM urges Congress and the Administration to work together to
achieve these regulatory reform goals this year and to strengthen and
improve the Medicare program for both beneficiaries and providers.
Report
This report identifies primary beneficiary concerns as well as some
of the major administrative problems and regulatory burdens facing
health care plans and providers in the Medicare program. Further, the
report makes recommendations to improve Medicare coverage through
reduction of regulatory burdens on both beneficiaries and plans and
providers.
The beneficiary recommendations are based on surveys of Medicare
caseworkers in Congressional District offices conducted in May 2001.
The surveys, sent to field offices of all Member of the U.S. House of
Representatives and U.S. Senate, requested input on the most common
concerns raised by beneficiaries in their attempts to understand and
comply with Medicare paperwork. AIM received completed surveys from
over 100 Congressional district offices in 40 states.
The health plan and provider regulatory burden relief
recommendations are based upon responses from a variety of AIM member
organizations representing a range of industries.
SECTION ONE:
Medicare Modernization: Beneficiary Regulatory Concerns
AIM surveyed Medicare caseworkers in Congressional district offices
to compile the recommendations included in this section. Generally, the
caseworkers reported that constituents' Medicare concerns rank second
or third in sheer volume of inquiries to their offices. Caseworkers
overwhelmingly reported that the biggest concern raised by constituents
is obtaining information about Medicare eligibility and benefits and
understanding that information. Caseworkers specifically cited
difficulty obtaining basic information on Medicare eligibility and
understanding enrollment opportunities. Further, beneficiaries appear
to have great difficulties understanding Medicare claims and appeals
procedures. Ranking second among beneficiaries, according to
caseworkers, is obtaining coverage for prescription drugs and
assistance in paying for prescription drugs. Understanding and
responding to Medicare paperwork, particularly for beneficiaries with
supplemental coverage, ranked third among beneficiary inquiries to
Congressional offices.
Beneficiary Benefit and Compliance Concerns
Recommendation: Provide Better Information on Beneficiary
Eligibility and Covered Services including Claims and Appeals
Procedures (Administrative)
Medicare beneficiaries are often confused about basic eligibility
and benefits requirements despite efforts by the Centers for Medicare
and Medicaid Services (CMS--formerly known as the Health Care Financing
Administration) to improve and expand communications. Many Medicare
beneficiaries continue to have trouble obtaining clear explanations of
their benefits. Beneficiaries appear to lack clearly identified
customer service representatives who can provide assistance by
explaining coverage and benefit information and options.
Beneficiaries also appear to need additional assistance
understanding Medicare claims and appeals procedures. Beneficiaries
contacting Congressional offices frequently raise concerns about denial
of payment for services previously covered. For example, coverage for
ambulance services and chiropractic care were specifically cited on
nearly 10% of all responses. Beneficiaries are confused about what is
covered and report to Congressional caseworkers they have been told by
their physician that a service is covered but they are later informed
that Medicare has denied coverage for that particular service.
(Medicare makes coverage determinations only after services are
provided.)
Caseworkers responded that many beneficiaries are unaware of
existing opportunities for assistance from such organizations as State
Health Insurance Assistance Programs and other medical hotlines or
simply lack access to opportunities such as the Internet and the
www.Medicare.gov web site. Beneficiaries clearly need such information
to be more easily accessible.
AIM applauds the Medicare Patrol Project grants recently announced
by HHS Secretary Thompson. The grants will fund programs to train
senior volunteers help other seniors learn to read Medicare notices and
how to obtain answers about billing and claims questions. HCFA should
expand such efforts to provide better and more easily accessible
information to beneficiaries and their family members to outline basic
eligibility and benefits. Separately, more detailed information to
clearly explain claims and appeals procedures should be provided to
beneficiaries and providers. HCFA should also consider greatly
expanding Medicare customer service operations through additional
hotlines and marketing efforts.
Recommendation: Provide Prescription Drug Coverage (Statutory)
Beneficiaries contacting Medicare caseworkers report the lack of
prescription drug coverage to be a significant concern.
AIM members believe all Medicare beneficiaries should have basic
prescription drug coverage and encourages Congress and the
Administration to work toward a bipartisan solution. AIM supports
efforts to strengthen and improve the existing Medicare benefit package
through inclusion of prescription drug benefits.
AIM believes an integrated benefit is necessary to ensure the long-
term viability of the Medicare program. Congress should not simply
layer a new, stand-alone drug program onto the traditional Medicare
program without addressing the program's outdated and inadequate
financial and structural systems.
Recommendation: Reduce Paperwork Burden on Beneficiaries
(Administrative)
Beneficiaries report enormous difficulties understanding Medicare
and its paperwork. Further, beneficiaries with supplemental coverage
receive, and must respond to, paperwork and information from multiple
coverage sources. Specifically, beneficiaries contacting Congressional
caseworkers cite the monthly Medicare Summary Notice as a source of
great confusion.
SECTION TWO
Improving Medicare Management: Provider Regulatory and Compliance
Concerns
This section illustrates outdated or burdensome regulatory business
practices which the Center for Medicare and Medicaid Services (CMS--
formerly known as the Health Care Financing Administration) should
eliminate or streamline to improve the delivery of health care through
the Medicare program. All of the recommendations could be achieved
through administrative action.
This report shows that CMS does not currently operate as a good
business partner with private sector providers. AIM members believe
that CMS must refocus its goals to emphasize cooperative relationships
with providers including health plans, hospitals, doctors, technology
innovators and other private sector partners. AIM believes CMS must
replace the current rigid and outdated bureaucracy with the flexibility
to make new health care innovations more accessible and to reduce
excessive complexity of federal rules, regulations, and guidelines.
Further, CMS should seek health plan and provider input prior to
making or changing policies, and should establish a process for the
responsible department within CMS to certify to the Administrator its
readiness before changing over to a new system or policy. Because plans
and providers are on the front line of health care, they are best
positioned to gauge the administrative burden of proposed policy
changes, as well as the likely impact on patient care. In addition,
plans and providers often can propose potentially less burdensome and
more effective alternatives. Thus, by consulting health plans and
providers before changing policies, CMS can increase efficiency, limit
or reduce regulatory burdens, and potentially improve health care
quality and patient outcomes. Similarly, requiring CMS to certify its
readiness to implement a change before doing so potentially saves the
enormous time, effort and expense that result when plans and providers
are required to follow a new policy before CMS, itself, is prepared for
the policy.
Additionally, advanced medical technology is playing an
increasingly important role in the delivery of quality health care.
However, Medicare has not kept pace with advances in medicine. In fact,
many of the policies and procedures CMS uses to incorporate new
technologies into Medicare reflect the science and health care system
of 1965, when the program was created.
Today, advances in areas such as DNA-based testing,
microelectronics, tissue engineering and molecular imaging are
transforming health care--and patients' lives. Frequently, cutting-edge
medical technologies are supplanted by new breakthroughs in two years
or less, yet Medicare can take 15 months to five years or more to make
these advances available to seniors and people with disabilities. The
recommendations below will help make timely patient access to 21st
century medical technology a part of CMS's new mission.
AIM supports CMS Administrator Thomas Scully's recently stated
goals to improve the Medicare+Choice (M+C) program by improving and
increasing information about M+C options to eligible beneficiaries and
by examining administrative simplification of the program. Mr. Scully
stated his goal to increase the enrollment of beneficiaries in
Medicare+Choice plans and we look forward to working with his agency to
achieve this goal.
AIM also looks forward to working with HHS Assistant Secretary for
Planning and Evaluation Bobby Jindal and the Task Force on Regulatory
Reform to review these and other recommendations for relief.
Provider Regulatory Relief Recommendations
Recommendation: Publish Guidelines for Beneficiary Materials
(Administrative)
CMS should halt efforts to standardize written materials for
Medicare beneficiaries. The current requirement for CMS approval of all
documents and CMS's long term objective for standardizing many more
communications is problematic. Health plans need to tailor their
communications to their own programs. CMS's current review of
communications creates constant revisions and delays for plans and
there is inconsistency among reviewers. Even implementation of the
standardization of the document called the ``Summary of Benefits'' has
resulted in approvals of inaccurate documents, as the ``standard'' may
not allow for specific plan benefit designs.
CMS should provide a checklist for plans of the information
required to send to beneficiaries. CMS should also develop marketing
and communications guidelines and require compliance with such
guidelines on the contents of beneficiary communications. Violations
could then be determined from on-site reviews similar to state market
conduct audits when a plan is reviewed for compliance with state
regulations.
Recommendation: Improve and Consolidate CMS Oversight of M+C
Program (Administrative)
CMS's fragmented approach to policy making has been a major barrier
to success of the M+C program. Authority for the M+C program is
currently divided among three CMS Centers: the Center for Health Plans
and Providers; the Center for Beneficiary Services; and the Office of
Clinical Standards and Quality. The result is a complex and inefficient
policy making process.
For example, issuance of the Quality Improvement System for Managed
Care (QISMC), developed by the Office of Clinical Standards and
Quality, created further confusion about CMS's standards, because it
overlapped with and differed from regulatory requirements developed by
the Center for Health Plans and Providers and the Center for
Beneficiary Services.
AIM members are pleased that CMS Administrator Scully has announced
the creation of the new Center for Beneficiary Choices to focus on
Medicare beneficiaries in private plans. We urge CMS to designate an
official who reports to the CMS Administrator and has responsibility
for overall program oversight. This will allow for greater efficiencies
and streamline requirements that now may be developed within different
offices.
Recommendation: Coordinate Release of Federal Regulations
(Administrative)
The duties of the Office of Information and Regulatory Management
(OIRA) at the Office of Management and Budget should be enhanced to
allow for the orderly release of regulations from federal agencies.
Such coordination should recognize the tremendous burden placed on
providers who must simultaneously implement multiple, complex
regulations from agencies like CMS, HHS, OSHA and EPA. For example, in
the last two years, even though CMS delayed implementation of some
statutory provisions to address potential Y2K system problems,
hospitals have still had to make significant changes to their patient
data collection, coding and billing systems to implement prospective
payment systems for Medicare skilled nursing care, home health care,
outpatient care, and transfers of inpatients. This is in addition to
other regulations hospitals are currently in the midst of implementing,
such as uniform electronic transactions standards, privacy standards,
ergonomics standards, and prospective payment for rehabilitation
services. The implementation of regulations should be better
coordinated so that providers' administrative and information systems
are not overwhelmed.
Recommendation: Create a Medicare Office of Technology and
Innovation to Improve CMS Accountability, Openness and Coordination in
Making Timely Decisions (Administrative)
Many important new medical technologies and services must go
through three sequential stages of Medicare decision-making--the
initial coverage decision, assignment of a procedure code, and
determination of a payment amount--before they are widely available to
patients. This process has suffered from a lack of coordination and
long delays in patient access to new treatment options.
Congress should create a new Office of Technology and Innovation at
CMS to improve coordination among the agency's offices involved in this
process and facilitate a shift in CMS's culture to one that supports
the development and dissemination of beneficial new technologies.
Recommendation: Develop Consistent Policies Throughout the Program
(Administrative)
M+C organizations across the country frequently
receive different instructions and policy interpretations from
the 10 CMS Regional Offices and the CMS Central Office.
Regional Office Administrators and CMS Center Directors report
directly to the CMS Administrator. Regional offices and centers
are not required to maintain program-wide consistency for
instructions or policies.
For example, the CMS Central Office has issued model language
for beneficiary communications and stated that use of the
language by plans is discretionary: if a plan chooses to use
the language as issued, it will not be subject to change by the
Regional Offices and will receive expedited review. Contrary to
Central Office instructions, however, some Regional Offices
have required rather than permitted use of the model language
and required plans to make changes in the Central Office model
language in order to obtain Regional Office approval.
CMS should adopt consistent policies for Part A and
Part B. Examples of inconsistency include: advanced beneficiary
notices (ABNs) and medical necessity determinations for Part A
and Part B; Medicare secondary coverage determinations for Part
A and Part B, including reference labs, etc.
Requiring consistency in administration of Part A and Part B
will simplify and streamline compliance both for providers of
Part A services and providers of Part B services (and
especially for providers of both types of services), as well as
promoting fairness by leveling the health care playing field.
Recommendation: Reduce CMS Decision Making Delays (Administrative)
CMS's decision making process typically involves many different
parties at varying levels of seniority and in different Centers.
Despite creation of cross-Center task forces, the complexity of this
process and the lack of clear decision making authority below the level
of the Administrator's office results in delays that are frequently
costly to plans and disadvantageous to beneficiaries.
For example, the Medicare+Choice payment rates for 2001 were issued
as required on March 1, 2000. However, the instructions for filing 2001
plan rate and benefit proposals were issued in early June only a short
time before the July 1 submission deadline. Plans were required to
submit by July 15, 2000 proposed Summaries of Benefits using previously
issued mandated CMS language in order to assure timely approval.
However, in some cases the mandated language did not accurately
describe plan benefits. To address these and other problems, changes in
the mandated language began shortly after the July deadline and were
still being made in early September.
Recommendation: Establish Decision Deadlines to Improve CMS
Accountability (Administrative)
CMS took steps to improve the timeliness and openness of its
national coverage process in April 1999. However, for technologies
subject to national coverage decisions, the agency has no deadlines for
total ``time to patient access''--the amount of time the agency takes
to set coverage, coding and payment policy on a new technology and make
it available to beneficiaries.
To ensure timely patient access, CMS should take action on a
timeline similar to those in place for FDA review decisions. Patients
should not have to wait more than six months for CMS to make coverage
decisions, assign codes and implement reimbursement for technologies
that do not have to be referred to outside experts. In cases where CMS
must seek advice from external advisory bodies, patients should wait no
more than 12 months.
Recommendation: Stop Extensive Data Collection Efforts
(Administrative)
CMS issues requirements that fail to take into
consideration the practical steps necessary for implementation
of regulations, rather than working with health plans to
determine the most efficient way to achieve the desired result.
For example, implementation of CMS's risk adjustment approach
is making excessive demands on health plan resources that are
not necessary to achieve the initiative's purpose. The approach
is based on collection of 100% encounter data from inpatient
and outpatient settings and requires plans to develop all of
the systems and staffing necessary to process claims in the
same way as the fee-for-service Medicare program. An
alternative approach that meets the goals of risk adjustment by
building on the existing data systems capabilities of plans can
achieve the same results.
Plans currently must submit claims and data encounter reports
for hospital, physician and outpatient medical services for
Medicare+Choice beneficiaries even if the services are not
covered under Medicare. Extensive data collection is burdensome
and costly and greatly impacts on plan administrative costs as
well as plan relationships with providers. HHS Secretary
Thompson recently suspended through July 2001 the burdensome
collection of outpatient physician and hospital data. AIM
members urge Secretary Thompson to permanently end this
burdensome data requirement.
With fewer and fewer hospital services being
reimbursed on the basis of costs, the Medicare program should
adopt a simplified cost-reporting program to reflect the
reduced importance of these reports. The cost-reporting system
was designed and developed during an era of cost-based
reimbursement. Medicare should adopt a single, streamlined cost
reporting system based upon generally accepted accounting
principles, and eliminate the voluminous regulations dealing
with cost-based reporting, such as related party transactions,
depreciation expense, interest expense, interest income
offsets, change of cost finding, etc., where Medicare payment
is no longer based upon costs.
The complex and burdensome hospital cost-reporting process
developed over decades, at a time when Medicare payments were,
to a significant degree, based on their costs. Now that
Medicare has largely eliminated cost-based payments for
hospital services, the primary purpose of hospital cost
reporting has disappeared, and thus the process should be
correspondingly reduced and simplified. By comparison, the cost
reporting process for skilled nursing facilities was recently
substantially simplified in the wake of their conversion from
cost-based reimbursement to prospective payments. Hospitals are
entitled to similar regulatory relief.
CMS should ease the paperwork burden placed on
beneficiaries and providers by revising the Medicare Secondary
Payor (MSP) Provisions. The MSP form is intended to identify
other insurance coverage a beneficiary might have. Currently,
hospitals must fill out an MSP form every time a patient comes
to the hospital for a procedure. Beneficiaries are annoyed at
being asked the same questions each time they return for
services. For example, a patient taking the anti-coagulant drug
Coumadin (warfarin) may require weekly or daily monitoring due
to internal bleeding risks. The hospital must fill out the form
each and every time. In addition, hospitals that act as
reference laboratories (to which doctors' offices forward
specimens for analysis) are being told to track down a
beneficiary whose specimen might have been sent in, and collect
information about possible other insurance coverage.
Independent labs are not subject to these requirements.
Hospitals should not have to collect MSP information more than
once per month for patients that require recurring services,
and should not be responsible for MSP information for non-
patients.
Since June 1998, CMS has required skilled nursing
facilities (SNFs) to collect and submit patient assessment data
in a standard format known as the Minimum Data Set (MDS). The
assessment instrument that serves as the basis for collecting
MDS data was originally developed as a comprehensive care
planning tool, but the information it generates is now also
used to classify patients into SNF payment categories, and to
measure the quality of long-term nursing home care. Providers
are required to collect the data elements as many as five
separate times during a patient's Medicare-covered stay. The
current version of the MDS includes some 300 elements, but only
108 of them are needed by CMS to pay providers. These
requirements are overly burdensome for providers. The MDS
should be scaled back to require only data that can be
justified on the basis of payment and quality.
Recommendation: Select a Sound Methodology for Risk Adjustment
(Administrative)
CMS implemented on a limited basis in January 2000 a risk adjusted
payment methodology for Medicare+Choice plans containing practical and
methodological problems resulting in payments that are neither
equitable nor valid. Further, the risk adjustment payment methodology
substantially reduces aggregate payments to plans while adding
additional administrative requirements and expense.
In order to improve efficiencies in payment, CMS needs to select a
methodology for risk adjustment with a public comment period of no less
than 18 months prior to implementation. The methodology must be
financially sound and provide for an efficient system for data
collection. Risk adjustment, in turn, needs to be phased in over a 10-
year period, beginning in 2004, in order to stabilize payments to
plans. Current law calls for risk adjustment to have an 8-year phase-
in, with 100% of payments risk adjusted in 2007. This schedule is not
adequate to preserve stability in plan payments.
The Principal In-Patient Diagnostic Cost Group (PIP-DCG) risk
adjuster should remain at this year's level of 10% until a more
appropriate and less burdensome methodology is agreed upon.
Recommendation: Compare Diagnosis Codes to Verify PIP-DCG Risk
Adjuster Assignment (Administrative)
Medical record review is one Medicare+Choice encounter data
validation activity used to validate the accuracy of the encounter data
submitted by plans to CMS. Encounter data can more easily be validated
by merely comparing the diagnosis code submitted by the hospital to the
plan with the diagnosis code submitted by the plan to CMS. Medical
record review requiring retrieval of inpatient medical records is
costly and of questionable value. Further, there are no standards for
inpatient medical record review in the Medicare fee-for-service
program.
In the Medicare fee-for-service environment, hospital medical
record review is the responsibility of the CMS contractors and the Peer
Review Organizations (PROs). The costs of medical record review are
covered in the contract that CMS has with the PRO.
Recommendation: Simplify Accreditation Procedures (Administrative)
CMS should revise its rules to accept a plan's accreditation by a
nationally recognized accreditation organization as meeting quality
assurance and quality requirements in Medicare+Choice. This would allow
for ``deeming'' of a Medicare+Choice organization in accord with
Congressional intent. CMS's requirements for deeming status should
match and not exceed accreditation standards.
Recommendation: Allow Plans to Select Quality Improvement Projects
and Rewards Plans for Quality Improvements (Administrative)
CMS should permit plans to select and implement their own quality
improvement projects. Plans may already have existing quality
improvement activities designed to best serve their specific
populations and meet requirements for accreditation.
Further, CMS should reward plans that demonstrate continual quality
improvement and report higher than average performance, when compared
with fee-for-service performance, in their HEDIS reports. CMS should
reward plans with additional compensation to encourage maintenance of
high levels of performance.
Plans that also wish to participate in quality improvement
activities generated by the Professional Review Organizations (PROs) in
their area should be compensated on an individual plan basis for any
work that enhances the objectives of a PRO-initiated quality
improvement project. Implementation of this recommendation would allow
plans to recover expenditures for their efforts and strengthen
cooperation between plans and the PROs in achieving national quality
improvement objectives.
Recommendation: Formalize the CMS Advisory Opinion Process
(Administrative)
CMS should offer a more formal process for providers to obtain
answers to Medicare questions. Typically, providers are unable to
obtain timely, clear and final answers to their questions, in part
because answers require certain level of authority and may cut across
departments within CMS, or draw interest from OIG and DOJ, FDA or other
agencies.
It is often impossible to obtain clear, timely and final answers
from CMS on complex billing issues. Thus, providers must take a best
guess at the answer, which leaves them vulnerable to second-guessing
and charges of incorrect billing. Creating a formal process for
obtaining answers to these types of questions would provide greater
certainty and consistency, and reduce billing and payment errors.
Receiving a written advisory opinion would also permit the provider to
rely on the advice received. Many other Federal agencies have similar
programs (e.g., the SEC, the IRS, the DHHS OIG) and they are enormously
helpful.
Recommendation: Incorporate Regulatory Cost Estimate into the
Medicare Update (Administrative)
The cost of caring for patients continues to increase as a result
of complex regulations such as the Health Insurance Portability and
Accountability Act (HIPAA) and greater technological advances in such
areas as pharmaceuticals and blood products. MedPAC should be required
to aggregate, on an annual basis, the estimated impact of a regulation
on the provider community's payments and costs. MedPAC should
incorporate this aggregated impact into the Medicare inflationary
market basket update.
Recommendation: Treat All DRG Corrections Equally (Administrative)
There should be equal treatment for correcting DRGs, whether the
correction results in higher or lower reimbursement. Appropriate
adjustments to DRGs should be allowed in all cases. This is a matter of
simple fairness. CMS's goal should be to pay providers, correctly and
accurately, the amount they have earned for the services that they have
provided to beneficiaries. CMS should not seek to pay less than what is
due by setting a shorter timeframe for correcting underpayments than
for correcting overpayments.
Recommendation: Fix the PRRB Process and Denial of Cost Report
Reopenings (Administrative)
There are significant problems with the Provider Reimbursement
Review Board (PRRB) process that need to be addressed, including
inordinate delays caused by an enormous backlog of cases. The Supreme
Court issued a ruling in Your Home Visiting Nurse Services, Inc. v.
Shalala, which involved interpreting statutory and regulatory
provisions regarding PRRB review of a fiscal intermediary's decision to
deny reopening of a cost report at the request of the provider. In the
decision, the Court held that the statutory and regulatory provisions
do not require the intermediary's decision to be subject to review,
even if clearly erroneous. The PRRB should have full authority to
review intermediary decisions to deny reopening of cost reports.
The process must be streamlined and accelerated. Alternative
resolution methods should be considered. This is a matter of simple
fairness. Erroneous intermediary decisions should be subject to review
and correction.
Recommendation: Interpret and Enforce EMTALA According to
Legislative Intent (Administrative)
The current interpretation and enforcement of the Emergency Medical
Treatment and Labor Act (EMTALA) far exceed legislative intent. This
has had two significant adverse results: (1) it is seriously disrupting
the provision of good care in hospitals; and (2) it is making the
burden of uncompensated emergency care unsustainable. Note: There are a
number of changes with regard to EMTALA that could be done
administratively.
The law should be interpreted and enforced in accordance with its
legislative intent to prevent the current disruptions and financial
burdens arising from the regulatory and administrative expansion of
EMTALA.
Statement of the American Academy of Physician Assistants, Alexandria,
Virginia
On behalf of the more than 41,000 clinically practicing physician
assistants (PAs) in the United States, the American Academy of
Physician Assistants (AAPA) is pleased to submit comments on H.R. 2768,
the Medicare Regulatory and Contracting Reform Act of 2001. The AAPA
commends Chairman Nancy Johnson, Ranking Member Pete Stark, and the
entire Subcommittee for their efforts to create a more collaborative
relationship between the Centers for Medicare and Medicaid Services
(CMS) and the health care professionals who provide services to
Medicare beneficiaries. We are particularly appreciative of the
Subcommittee's interest in reducing Medicare's regulatory and paperwork
burden.
The operation of the Medicare program is extremely complex, and
H.R. 2768 goes a long way to assist health care professionals in
complying with Medicare's rules and regulations. Although not addressed
through H.R. 2768, the AAPA regards Medicare coverage policy,
particularly as it relates to medical services provided by PAs, as
unnecessarily complex and ultimately limiting to Medicare
beneficiaries' access to care. We ask that the Subcommittee also
consider this issue in the context of H.R. 2768.
The AAPA is the only national organization representing PAs in all
medical specialties. The Academy educates the general public about the
PA profession, assures competency of PAs through active involvement in
the development of educational curricula and accreditation of PA
programs, provides continuing education, and conducts PA-related
research. PAs conduct an estimated 150 million patient visits per year;
many of these encounters are with Medicare beneficiaries.
The AAPA believes that H.R. 2768 provides a unique opportunity to
improve the Medicare program and substantially benefit beneficiaries
and the health care professionals who serve them. Problems in the
administration of Medicare that lead to overly burdensome requirements
for participating health professionals, as well as overly restrictive
coverage policy, affect access to care for all Medicare beneficiaries;
however, they disproportionately affect access to care in medically
underserved communities because there are fewer health care resources.
Unless these problems are addressed, they may create even greater
access to care challenges in the coming months as rural and other
medically underserved communities lose PAs and other health care
professionals who are called to serve in the National Guard and
Reserves.
Medicare's Regulatory and Paperwork Burden
PAs, like other health care professionals who provide covered
services to Medicare beneficiaries, would prefer to spend their time
delivering medical care, not mired in paperwork that is often confusing
and viewed as unnecessary. The paperwork requirements' impact on
clinical practice is even more keenly felt in medically underserved
communities where staffing resources are scarce. Similarly, other
problematic administrative requirements disproportionately affect the
ability of practitioners in underserved communities, including PAs, to
provide care to Medicare beneficiaries. Some of these problems include
excessive costs incurred by practices for random prepayment audits,
onerous documentation requirements for Evaluation and Management, and
required repayment of purported overpayments before the appeals process
is complete.
The AAPA is very pleased that the H.R. 2768 attempts to address the
impact of Medicare regulations and paperwork requirements on the
delivery of care to Medicare beneficiaries. We are particularly
concerned with the increased impact of burdensome requirements on the
delivery of care in medically underserved communities.
Full Coverage of Medicare Services Provided by Physician Assistants
As Members of the Subcommittee are aware, Medicare coverage was
originally extended to physician assistants (PAs) through the 1977
Rural Health Clinic Services Act. Congress acknowledged the educational
preparation of PAs to provide a wide range of primary care services to
Medicare beneficiaries living in areas experiencing a shortage of
physicians. Congress' aim was to extend medical services to Medicare
beneficiaries, and subsequent Congresses steadily expanded Medicare
coverage for services provided by PAs. In 1997, the 105th
Congress passed the Balanced Budget Act (BBA). The BBA expanded the
ability of PAs to provide medical and surgical services that would
otherwise be provided by physicians, if allowed by applicable state
law.
Unfortunately, the former Health Care Financing Administration
determined that the BBA's Medicare provisions regarding coverage of
services provided by PAs did not apply to ordering home health care,
hospice care, or skilled nursing facility care following
hospitalization. Other medically necessary services that the Medicare
program arbitrarily prohibits PAs from performing are screening
colonoscopies and supervising diagnostic testing. PAs are not optimally
utilized by the program. The restrictions on PAs' ability to order care
limit beneficiaries' access to care, particularly in medically
underserved communities where a PA may be the only on site provider.
The American Academy of Physician Assistants recommends that
Congress direct the Centers for Medicare and Medicaid Services to
revise national Medicare coverage policy to fully recognize the ability
of PAs to provide medical care in accordance with state law. The CMS'
role in administering the Medicare program is most certainly a sizeable
one. However, the AAPA does not believe that CMS' administrative
responsibilities legitimately extend to determining physician
assistants' scope of practice. That responsibility rests with the
states, and the Medicare statute wisely defers to state law in
determining which physician medical services may be provided by PAs. We
ask that Congress address this problem H.R. 2768.
The AAPA is very appreciative of the Subcommittee's efforts to
relieve Medicare's regulatory and paperwork burdens for the physician-
PA team and other health care professionals who provide services to
Medicare beneficiaries. We look forward to an improved Medicare
program, which is more responsive to the beneficiaries and the health
professionals who serve them.
Thank you for the opportunity to present the AAPA's views.
Statement of the American Clinical Laboratory Association
The American Clinical Laboratory Association (``ACLA'') is pleased
to have this opportunity to present its views to the Subcommittee on
Health of the House Ways and Means Committee in connection with the
Subcommittee's hearings on H.R. 2768, the Medicare Regulatory and
Contracting Reform Act of 2001.
ACLA is an association of federally regulated, independent clinical
laboratories and represents national, regional, and local laboratories
throughout the United States. All ACLA members furnish services
reimbursed by the Medicare program and interact regularly with CMS and
its Medicare contractors. As a result, ACLA has had the opportunity to
observe CMS's performance and that of its carriers.
ACLA is pleased that in recent years, in particular, the industry's
relationship with CMS has improved significantly. The agency has
developed greater expertise in laboratory issues and has attempted to
respond to issues that the industry has raised. Nonetheless, like all
health care providers, laboratories face a complex web of confusing--
and often inconsistent--rules and regulations, many of which result
from the way the laboratory payment system is currently structured.
In our testimony, ACLA would like to focus particularly on ways
that the administration of the Medicare Program could be improved,
through greater uniformity and simplification. Laboratories face
payment and coverage policies that differ from carrier to carrier. As a
result, ACLA believes that it is imperative to develop more uniform
policies that apply consistently, regardless of carrier jurisdiction.
Congress began that task in the Balanced Budget Act of 1997 (``BBA
'97''), when, as discussed below, it required CMS to reduce the number
of carriers processing lab claims to no more than five and to convene a
negotiated rulemaking to develop uniform national policies. That work
is still uncompleted. A recent study by the Institute of Medicine
(``IOM''), which was mandated by Congress, also recommended greater
uniformity in payment for laboratory services. ACLA believes that the
implementation of the IOM study and the completion of the BBA '97
mandates should be a top priority for CMS and Congress.
In our statement today, ACLA would like to present an overview of
the testing process. We would then like to review particular areas
where the lack of uniformity and increasing complexity create payment
and coverage issues for laboratory services. Finally, we discuss some
specific ways that the system could be improved. In addition, we are
attaching a summary of legislative issues affecting laboratories that
we hope this Congress will address.
I. Overview of Reference Laboratory Testing
Clinical laboratory testing is an important, cost-effective and
life saving health care tool, which provides physicians objective
information about a patient's medical condition. It permits the early
detection, treatment and monitoring of a variety of diseases and
conditions. Appropriate testing ultimately enhances health, saves lives
and reduces health care costs. Independent clinical laboratories are an
important participant in that process.
For independent laboratories, the testing process usually begins in
the physician's office or at a hospital, when a physician examines a
patient and determines what laboratory testing is necessary. The
specimens for this testing may be obtained by the physician or by a
nurse in the physician's office, or the patient may sometimes take the
test requisition to a ``Patient Service Center'' operated by the
laboratory, where a laboratory employee obtains the specimen. In the
vast majority of cases, however, the blood for testing is drawn in the
physician's office. Thus, laboratory testing is unique among medical
procedures, in that the entity furnishing the service often does not
see, or have any direct contact with, the actual patient.
Most clinical laboratories have extensive courier networks that are
designed to quickly and efficiently transport the specimen from the
physician's office to the laboratory. The laboratory courier will
usually go the physician's office in the late afternoon or early
evening to pick up the specimens that the physician has left for
testing. The courier may take the specimens directly back to the
laboratory, or he may transport them to a central processing facility,
where they are packaged for further shipment, by air or ground, to the
laboratory. The laboratory may be hundreds or thousands of miles away
from the physician and the patient, and often is located in a different
state.
Test specimens usually arrive at the laboratory late at night or
early in the morning, at which time they are entered into the
laboratory's computer system and the testing begins. It is not unusual
for an independent laboratory to receive 10,000 specimens a night, on
which 30,000 to 40,000 tests may be run during the night and early
evening. For most routine specimens, the laboratory completes the
testing overnight and reports the results back to the physician by the
next morning. Often, some tests are performed at the facility that
initially received the specimens, but then the specimen is sent to
another facility for additional testing. Thus, laboratory testing takes
place in a national marketplace, but the payment and coverage system is
still linked to the specific location where the testing occurs. As a
result, differences in payment and coverage decisions arise, a
situation that creates inefficiencies, duplication, and increased
costs.
II. Issues Arising Under the Clinical Lab Fee Schedule
Laboratory services are reimbursed based on the lesser of the
laboratory's actual charge, the fee schedule amount applicable to the
location of the testing laboratory, or the national limitation amount
(``NLA''). CMS has established fee schedules on a carrier by carrier
basis; therefore, in most instances, each state has its own fee
schedule for clinical laboratory testing. Some states have more than
one carrier and in those areas there may also be more than one fee
schedule for the state. The NLA, which is set at 74% of the fee
schedule medians for each test, acts as a ceiling on reimbursement and
limits the amount that each carrier can pay under its fee schedule.
Thus, there are actually 56 different laboratory fee schedules--one
for each carrier jurisdiction. However, because of consistent
reductions in the NLA, today it is the NLA, rather than the carrier fee
schedule, that usually governs payment. This has created a de facto
national fee schedule, although there continue to be some outliers in
particular jurisdictions, where the test is paid at slightly less than
the NLA amount. However, in those cases, the difference is usually very
small, and is often no more than a few cents. Thus, although we almost
have a national fee schedule, Medicare continues to operate as if it
has 56 different fee schedules, a circumstance that creates unnecessary
complexity and leads to operational difficulties.
For example, laboratories routinely refer testing from one
laboratory to another, usually because the initial laboratory does not
perform a particular test. Under the Medicare statute, the referring
laboratory is permitted to bill its carrier for all of the testing
furnished, even what it referred to another laboratory for analysis;
however, the carrier processing the claim is to pay for the testing
based on the fee schedule applicable to the testing laboratory. This
means that for claims involving lab-to-lab referrals, two different fee
schedules may apply to different tests on the same claim. Because the
carrier processing the claim may not maintain the other carrier's
information in its computer files, the laboratory may actually be
required to resubmit the claim to the second carrier, the one with
jurisdiction over the laboratory that performed the referred tests.
This solution requires laboratories to ``split'' their claims and
to bill tests that were all part of the same patient encounter to
multiple carriers. This is confusing to the laboratories and to
carriers because the same laboratory may be required to enroll with
several different carriers, a situation that the carriers themselves
often object to because it creates additional paperwork for them. Even
if the laboratory is able to enroll with, and forward claims to, the
different carriers, the Program incurs the cost of processing multiple
claims, and the beneficiary may receive Explanation of Medicare Benefit
(``EOMB'') forms from multiple carriers for the same specimen, which
can be very confusing. The wastefulness of this process is especially
apparent because under current payment rules, there may be little or no
difference between the actual amounts paid by each carrier.
The recently completed study of the laboratory industry by the
Institute of Medicine (``IOM''), Medicare Laboratory Payment Policy:
Now and in the Future--a study mandated by Congress in BBA '97--
concluded that the Medicare laboratory payment system, incorporating 56
different fee schedules, is unnecessarily complex and inefficient. The
IOM found that for a sample of 20 high-volume Medicare services,
payment was set at the NLA in at least 80% of carriers; for three other
services, all payments were at the NLA.
As a result, the IOM urged Congress to adopt a single, national,
rational fee schedule for clinical laboratory services based, at least
initially, on the NLAs. H.R. 1798, the ``Medicare Patient Access to
Prevention and Diagnostic Tests Act,'' includes a provision
implementing the IOM recommendation. ACLA supports this proposal and
believes that the development of a single national fee schedule for
laboratory services should be a top priority that will greatly
streamline the payment of laboratory claims.
III. Issues Related to Medical Documentation Rules
In 1994, many carriers began to implement new medical necessity
requirements applicable to clinical laboratory testing. These
requirements took the form of Local Medical Review Policies (``LMRP''),
which often specified particular ICD-9 diagnosis codes that the carrier
believed would demonstrate the medical necessity of a particular test.
If the laboratory did not submit a diagnosis code that the carrier
deemed acceptable, then the laboratory would not be paid for the
testing. In some instances, the policy would also limit how frequently
the carrier would pay for the testing for an individual beneficiary.
The growth in these carrier policies for laboratory testing had a
direct impact on the cost of laboratory testing. Because the ICD-9 code
had to be supplied by the physician--it is a violation of fraud and
abuse laws for the laboratory to supply the code itself--laboratories
had to put more resources into educating physicians about the need to
supply diagnosis coding information and into obtaining the information
from physicians when they failed to supply it. As a result,
laboratories were forced to invest large amounts in billing system
refinements and added personnel, just so they could bill and be paid
for the testing that they performed. However, in many instances,
laboratories still do not obtain the necessary information from the
physicians ordering the tests, and thus are forced to write off the
costs of testing that they have performed.
The growth of these policies also led to confusion concerning
payment policies. Each carrier developed its own LMRPs for the
laboratories within its jurisdiction. However, carriers did not usually
agree on the particular tests that were subject to LMRPs. Thus, the
list of tests for which a laboratory had to submit diagnosis codes
would differ depending on where the laboratory was located. In
instances where two carriers had LMRPs for the same test, they often
did not agree on the particular diagnosis codes that they found
acceptable as demonstrating the medical necessity of the testing. This
led to confusion, because physicians could not easily determine which
tests required diagnosis coding information or which diagnosis codes
were considered acceptable.
These differences in policy also led to differences in coverage.
For example, if a physician used a laboratory in one state, he might
know that the laboratory's carrier had certain LMRPs, which required
him to submit ICD-9 codes for specified tests. If he complied with
those requirements, and sent in acceptable diagnosis codes, the
patient's testing would usually be paid for. If the patient went to a
physician across the hall, who used a laboratory in another state, the
physician could order the same tests and submit all the same
information to the laboratory. However, the patient could find that the
testing was not paid for, because the carrier with jurisdiction over
the second laboratory did not accept the same diagnosis codes as the
other carrier. These differences have real implications for patients
because, if it is clear that the testing is going to be denied as not
medically necessary, the patient might be asked to sign an Advance
Beneficiary Notice, which permits the laboratory to bill the patient
for denied testing. Thus, Medicare might pay for one patient's testing,
while the other patient would have to pay for it himself. The result is
that Medicare beneficiaries inadvertently have different coverage for
laboratory testing services.
As a result of concerns about these issues, Congress directed CMS,
in BBA '97, to convene a negotiated rulemaking committee whose purpose
was to develop uniform payment policies for clinical laboratory
testing. The negotiated rulemaking, in which ACLA participated, began
meeting in July 1998 and completed its deliberations in August 1999.
The Committee developed over 23 uniform documentation policies and
recommended additional payment policies. A proposed rule was issued in
March 2000, 65 Fed. Reg. 13082 (Mar. 10, 2000); however, a final rule
is not expected to be issued until the fall of this year, at the
earliest.
To further reduce differences among carriers, as part of BBA '97,
Congress also directed CMS to designate a maximum of five regional
carriers that would be responsible for paying for clinical laboratory
testing. In its recent study, the IOM also concluded that regional
carriers should be established to process clinical laboratory claims in
order to reduce inefficiency and waste. However, up to now, CMS has
taken no action to implement the regional carrier system, which was to
be in place by July 1, 1999.
ACLA strongly urges the adoption and implementation of the
negotiated rulemaking policies, which were mandated by BBA '97, and
which, by statute, were to be in place by January 1, 1999. In addition,
we urge the implementation of the regional carrier requirements that
were also mandated by BBA '97. Both the regional carrier and negotiated
rulemaking provisions of the BBA were designed to achieve greater
uniformity in the process of clinical laboratory testing--a goal that
would ultimately be to the benefit of laboratories, physicians and most
of all, beneficiaries. Such a result would reduce the costs of claims
processing, increase predictability concerning what tests would be paid
for, and eliminate unnecessary regulatory burdens.\1\
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\1\ ACLA also believes a single, separate carrier for laboratory
services furnished to End Stage Renal Disease (``ESRD'') beneficiaries
would introduce additional cost savings for the Medicare program and
support overall claims processing simplification. Because ESRD testing
is usually a small part of each carrier's claims, carriers do not
usually develop the expertise necessary to apply the very complex set
of rules that pertain to ESRD testing. As a result, laboratories
performing this testing often encounter great difficulty with claims
processing issues. Therefore, we also believe it is reasonable to
ensure that a single carrier handles all the claims processing for
laboratory services dedicated to performing ESRD testing.
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IV. Issues Created by New Laboratory Testing
Because the laboratory fee schedule was originally developed almost
20 years ago, based on 1983 pricing data, it does not address the
tremendous technological advances that have taken place since that
time. The law establishing the payment methodology did not specify a
process for dealing with new technologies so CMS has had to create one.
For new tests that are not already covered by the fee schedule, CMS
uses two different methodologies to arrive at a price. For some tests,
CMS directs carriers to develop their own prices, based on ``gap
filling.'' Presumably, carriers are to determine the price that is
applicable in their individual area, but CMS has provided little
guidance to carriers concerning what information they are to review to
develop the new gap-filled prices. As a result, ``gap filling'' often
results in widely divergent pricing levels for the same test.
In other instances, CMS ``cross-walks'' a new CPT code to an
existing code, and prices the new code at the same level as the old
code. However, there may be little relationship between the test
represented by the new CPT code and the test represented by the old
one; therefore the decision to price them at the same level may result
in a payment level that is inappropriate.
Further, when CMS issues a proposal concerning how it will pay for
other types of services, the agency usually issues a notice in the
Federal Register for comment, and subsequently responds to these
comments when issuing a final rule. Thus, interested parties have an
opportunity to present their views on how particular services will be
paid for. For the laboratory fee schedule, this process is not
followed. CMS makes a unilateral determination concerning how new
technologies will be handled; whether they will be gap filled or cross-
walked; and what fee will be set--without any opportunity for public
comment. CMS's determinations are not known until the agency issues a
Program Memorandum late in the year, which specifies how the new codes
will be treated.
Again, the IOM recognized the difficulty in obtaining coverage for
new tests and technology. ACLA agrees with the IOM's conclusion that
new tests and technologies must be incorporated into the fee schedules
in an open, timely and accessible manner that is subject to challenge.
The current coverage process, according to the IOM, is lengthy, costly
and not open to meaningful challenge.
ACLA believes that it is vital to address the problem of payment
for new technologies. CMS needs to develop a process, in consultation
with the industry, that sets reimbursement levels for new technologies
that reflect their fair market value. CMS should develop clearer
standards concerning how carriers develop payment levels in their
jurisdictions, so that carriers have direction in how to set these
prices. Congress solved one, albeit small, part of this problem last
year in the Benefits Improvement and Protection Act (``BIPA'') by
ensuring that the NLA, for new tests that were gap filled, would be set
at 100% of the median price, rather than at 74% as is done for other
services. However, the other problems discussed above, related to
disparity in pricing, and the lack of input into the process, remain.
The aforementioned H.R. 1798, the ``Medicare Patient Access to
Prevention and Diagnostic Tests Act,'' addresses this concern by
establishing specific procedures for determining payment amounts for
new clinical laboratory tests.
ACLA is pleased to have the opportunity to testify on these
matters. We believe greater uniformity and simplicity in lab payment
policies will lead to greater benefits for labs, Medicare and patients.
We look forward to working with the Committee in its deliberations.
Statement of the American Medical Association, Chicago, Illinois
The American Medical Association (AMA) would like to thank the Ways
and Means Health Subcommittee, Chairwoman Johnson, and Ranking Member
Stark for holding this hearing on H.R. 2768, the ``Medicare Regulatory
and Contracting Reform Act of 2001.''
We also appreciate Chairwoman Johnson and Ranking Member Stark's
substantial efforts to work with the Centers for Medicare and Medicaid
Services (CMS) in its efforts to accomplish additional reforms on an
administrative level.
The AMA believes that H.R. 2768 is a solid, first step in
addressing many of physicians' concerns regarding CMS contractors'
activities for the following reasons:
We laud the legislation's commitment to and funding of education
programs for physicians, providers of services, and suppliers. Although
we have some technical suggestions in these sections, we believe that
the education provisions in the bill would vastly improve the resources
available to physicians, providers of services, and suppliers. In
particular, the section requiring contractors to work with
organizations representing physicians, providers of services, and
suppliers when a widespread billing problem exists would be extremely
helpful in ensuring that the problem is explained to the larger
community sooner rather than later. This broad dissemination of
information would lead to a quicker and better resolution of the issues
involved.
The AMA is generally pleased with H.R. 2768's provisions related to
repayment plans. This provision, if clarified to ensure that repayment
plans would be for a minimum of three years, would permit physicians,
providers of services, and suppliers to enter into reasonable repayment
plans with their CMS contractors if the alleged overpayments exceed a
certain proportion of their Medicare revenues. Currently, CMS
contractors require repayment of alleged overpayments within 30-60
days. When alleged overpayments represent a high proportion of practice
revenues, this requirement can present a major economic hardship to the
practice. Carrier overpayment demands for almost immediate repayment
can also restrict the financial ability of physicians to provide an
adequate level of service to their patients and can make physicians
less eager to care for Medicare patients in the future.
The AMA greatly appreciates that the legislation would establish
pilot projects to test the viability of proposed evaluation and
management documentation guidelines. Although CMS has recently
withdrawn proposed documentation requirements, as this process
progresses, it is clear that any new proposed guidelines must be tested
to ensure their accuracy prior to national implementation. H.R. 2768
would also ensure that a sufficient number of physicians participate in
the pilot projects by prohibiting audits for documentation that
occurred as part of the pilot project.
The legislation's proposed standardization of random prepayment
audits is a very positive development that would ensure that the
Secretary would establish standards for random prepayment audits.
Contractors would no longer have unlimited discretion as to the
circumstances that would trigger random prepayment audits. Another
serious problem with prepayment audits is that they often have no
defined endpoints. This places an enormous strain on practices' cash
flow as claims are held up for payment while audit continue. H.R. 2768
would ensure that procedures are put in place to remove physicians from
prepayment review once their billing practices are sufficiently
compliant with Medicare policies.
The AMA also appreciates the additional resources that this bill
would direct towards administrative law judges. This funding would
increase the number of administrative law judges and improve education
and training opportunities for the judges and their staffs.
The AMA is also gratified that the Committee has recognized that
contractors' use of ``extrapolation'' is a serious problem, and that it
has acknowledged the inequity of demanding that overpayments be repaid
before appeals are heard. These and several other provisions of the
bill must be strengthened, however, if they are to remedy the problems
they are intended to address. In particular:
Contractors use ``extrapolation'' to magnify the alleged
overpayments found in a very small probe sample of claims to all of
these type of claims submitted by a physician or provider of services
over a one-to-two year period. This technique lacks any semblance of
statistical validity, but it can lead to overpayment demands in the
hundreds of thousands of dollars. Even more egregious, the letter
demanding repayment of these huge sums is often the first indication a
physician has that there is a problem with his/her billing practices.
For this reason, the provision of H.R. 2768 that would allow CMS
contractors to use extrapolation to project an overpayment in instances
where there is a high error rate OR where documented education efforts
have failed should be strengthened. For example, this extrapolation
provision would have a very limited impact on physician practices such
as the critical care practice that testified before the House Budget
Committee. This particular practice had a high error rate, but there
was no documented educational effort. Thus, the provisions in H.R. 2768
would still subject this and other physician practices to enormous
overpayment allegations, even if it were the first time the practice
had heard that it had a billing problem. The AMA strongly believes that
contractors should be prohibited from using extrapolation to calculate
overpayment amounts unless documented educational efforts have been
employed first and have failed to correct the billing problem.
Although the education provisions in H.R. 2768 are a vast
improvement over existing education efforts by CMS contractors, the AMA
is concerned that the legislation gives contractors discretion as to
whether they wish to supply physicians, providers of services, and
suppliers with written advice upon which they could rely. Under H.R.
2768, the aforementioned groups would not be entitled to any additional
information or guidance regarding complex and confusing carrier
policies and regulations to use if they are later audited by their
contractor.
The ability to rely on written guidance is especially important in
light of the recent report by the General Accounting Office (GAO),
which found that when GAO called contractors (callers identified
themselves as calling from the GAO), contractor employees gave
incorrect answers to questions 85% of the time. GAO further reported
that these questions had been identified by the contractors as
``frequently asked questions.'' The carriers will not give physicians
written answers to their billing and coding questions, and as the GAO
study shows, answers given via the telephone are often incorrect.
Physicians should be able to submit their written questions to
contractors, and in turn, receive correct and consistent written
responses from contractors upon which they can rely.
The consent settlement process, as detailed in H.R. 2768, would
still not permit physicians, providers of services, and suppliers to
contest the validity of a probe sample without being forced to submit
to a statistically valid random sample (SVRS) of 200-400 claims, which
is very disruptive to a physician practice. The AMA believes that a
physician should not be forced to agree to an SVRS in order to maintain
his or her appeal rights. Physicians should be permitted a 60-day time
period to decide whether to appeal the probe sample finding. If the
physician decides not to appeal the probe sample, then he or she would
either have to pay the alleged projected overpayment or agree to an
SVRS. This ability to appeal the probe sample is an essential due
process right that should be afforded to physicians, providers of
services, and suppliers--especially in light of the probe sample's use
in determining projected overpayments.
H.R. 2768 would permit physicians, providers of services, and
suppliers to repay an alleged overpayment after the first level of
internal appeal has occurred. This internal appeal usually occurs
within 45 days. Under H.R. 2768, repayment would be required at this
point. Physicians, providers of services, and suppliers who opt for
further administrative appeals would still be forced to repay alleged
overpayments while their appeals are pending. In contrast to the 45
days for internal appeals, administrative law judge (ALJ) decisions
took an average of 389 days in the first quarter of 2001 and
departmental appeals board decisions (DAB) took an average of 661 days
to complete. If the physician, provider of services, or supplier is
successful at the DAB level, it is likely that three years have elapsed
since the physician's payment of an alleged overpayment to the CMS
contractor. This is especially egregious since the most recent figures
from 2000 show that 60% of contractor decisions were reversed by an
ALJ. The provisions of H.R. 2768 would not assist physician practices
such as the West Coast practice that received its overpayment demand
letter in 1996, paid the alleged overpayment amount six weeks later and
received a favorable ALJ ruling in 1999. The carrier had held the
practice's funds (approaching $100,000) for nearly three years.
While the AMA greatly appreciates H.R. 2768's provision that would
require contractors to repay the funds held with interest, we agree
with Administrator Scully that physicians, providers of services, and
suppliers should have the same rights that taxpayers have when they are
audited by the IRS; that is, as long as interest accrues, taxpayers do
not have to repay alleged overpayments while administrative appeals are
pending.
We strongly urge the Subcommittee to amend the repayment provision
to mirror the ``Access to Judicial Review--Interest on Amounts in
Controversy'' provisions in Section 8 of H.R. 2768. This would ensure
that interest would begin to accrue 60 days after the date of the
contractor's determination. The overpayment amount plus any interest
would be payable when all administrative appeals are exhausted.
(Section 8 states that such amounts become payable when they are
awarded to the prevailing party).
The AMA is very concerned about the provisions in H.R. 2768 related
to a physician, provider of services, or supplier's right to appeal a
contractor's decision to deny or revoke a Medicare provider number. For
most health care practitioners, the denial or revocation of a provider
number is an extremely serious occurrence that prohibits them from
submitting any claims for reimbursement to the Medicare program.
Currently, physicians have very limited recourse if their provider
enrollment application has been denied. They can request that the
carrier reconsider their application, and then can request a hearing by
an entity or person appointed by the Secretary of the Department of
Health and Human Services. The provision in H.R. 2768 would not
establish any additional rights for physicians, providers of services,
and suppliers whose applications have been denied. In fact, the
legislative language appears to codify existing and proposed CMS
practices. We strongly urge the Subcommittee to consider a denial or
revocation as an initial determination and accord physicians full
administrative appeal rights under Section 1869 of the Social Security
Act.
The provision of H.R. 2768 addressing voluntary repayments also
should be strengthened. The legislation proposes that an ombudsman
would make recommendations to the Secretary about how to respond to
physicians and providers of services who identify overpayments
themselves that they have mistakenly received and voluntarily repay
Medicare. We note that CMS has previously issued instructions to its
contractors on handling these voluntary repayments and that the
contractors are instructed to investigate and consider auditing those
who make the repayments. These kinds of policies are more likely to
intimidate than encourage honest professionals to develop compliance
plans. H.R. 2768 should offer real protections, not leave the matter
for the Administration to resolve in the future.
Finally, the AMA is uncertain as to why H.R. 2768 seeks to limit
the ability to present additional information during the appeal
process. We are not aware of any indication that physicians, providers
of services, and suppliers are inundating the system with new evidence,
and creating a sizeable backlog. Many physicians may not hire attorneys
or experts immediately to contest a contractor's audit finding. When
these attorneys or experts are hired, they may suggest additional
evidence or information that the physician had not thought to disclose.
We believe that this section is not needed and urge its deletion.
In closing, the AMA has also been very interested in the issue of
contractor reform. A coalition letter signed by the AMA and other
leading national medical organizations and specialty societies, as well
as every state medical society, was sent to Chairman Johnson and
Ranking Member Stark on August 30, 2001, and is attached to this
statement. On the whole, the reforms to the contractor reform language
appear to be reasonably geared towards improving the efficiency of the
program and towards sharpening the responsiveness of contractors to
beneficiaries and physicians. As an overarching comment, the AMA does
believe that contractors should be required to maintain local carrier
advisory committees and local carrier medical directors. In addition, a
transparent contracting and budgeting process should be set forth in
the Federal Register for public notice and comment. We also have some
technical suggestions regarding these sections which we will be happy
to share with the Subcommittee at the earliest possible date.
We appreciate the Subcommittee's consideration of the AMA's
concerns. We value all of the Subcommittee's work on H.R. 2768, and we
believe that we can work together to ensure that physicians obtain more
complete due process rights and extremely effective education tools
that can be relied upon by the physician. We thank you for the time
that your Subcommittee, and particularly, the Subcommittee staff has
devoted to this issue, and are pleased that it is a high priority for
the Subcommittee.
August 30, 2001
Letter Sent to all members of the House Ways and Means Subcommittee on
Health
The Honorable Nancy Johnson
Committee on Ways Means
U.S. House of Representatives
1136 Longworth House Office Building
Washington, DC 20515
Dear Chairwoman Johnson:
As your Committee continues its work on the ``Medicare Regulatory
and Contracting Reform Act of 2001,'' H.R. 2768, please know that the
medical organizations listed below endorse the need for regulatory
relief in the administration of the Medicare program. For that reason
we strongly support the provisions of the ``Medicare Education and
Regulatory Fairness Act of 2001'' (MERFA), H.R. 868. One aspect of that
relief that is not addressed in MERFA is the need for contractor
reform. The Medicare program is a continual source of frustration,
complexity, and paperwork for virtually all physicians treating
Medicare patients. The contractor community plays a key role in
administering the program. We believe that Congress should incorporate
the following principles in any Medicare contractor reform efforts:
Physicians and other providers must have a single
point of contact who will be responsible and accountable for
program administration. Even if contractor services are
themselves fragmented (e.g., claims processing performed by one
contractor, medical review by another contractor, and
correspondence/appeals to another), physicians and providers
should not have to deal with a whole new contractor bureaucracy
where each contractor tries to shift responsibility to others.
There should be a single point of contact in each state that
can, if necessary, serve as a liaison between physicians/
providers and the various contractors.
Local carrier advisory committees (CACs) should be
continued in each state to assure that local medical review
policy reflects the consensus of the local physician community.
All changes in local coverage decisions (whether through a
change in contractor or through the consolidation of existing
contractors) should be subjected to the normal review and
comment process with the local CAC. It would be unacceptable
for a new contractor to simply transport a new policy from one
geographic region to another without subjecting that policy to
CAC review in the new geographic area.
Given the significant transition problems experienced
with establishing regional durable medical equipment carriers,
the medical community believes it is imperative that the Center
for Medicare and Medicaid Services (CMS) establish contingency
plans to assure that there are no delays in claims processing/
payment capabilities. Such contingencies should include
provisions for advanced payments for covered services based on
the previous year's submissions.
CMS should establish and enforce the highest possible
standards in determining which organizations are most qualified
to serve as contractors in the program. Formal physician/
provider feedback should be solicited regarding the
establishment of performance criteria for contractors and
whether the contractors' actions have actually met those
standards.
Physician/provider outreach, education, and service
should be considered a priority for each contractor in the
program.
We believe these basic principles should be incorporated into any
Medicare contractor reform legislation agreed to by the Congress.
Sincerely,
Alaska State Medical Association
Arizona Medical Association
Arkansas Medical Society
California Medical Association
Colorado Medical Society
Connecticut State Medical Society
Florida Medical Association
Hawaii Medical Association
Idaho Medical Association
Illinois State Medical Society
Indiana State Medical Association
Iowa Medical Society
Kansas Medical Society
Kentucky Medical Association
Louisiana State Medical Society
Maine Medical Association
Massachusetts Medical Society
MedChi, The Maryland State Medical Society
Medical Association of Georgia
Medical Association of the State of Alabama
Medical Society of Delaware
Medical Society of the District of Columbia
Medical Society of New Jersey
Medical Society of the State of New York
Medical Society of Virginia
Michigan State Medical Society
Minnesota Medical Association
Mississippi State Medical Association
Missouri State Medical Association
Montana Medical Association
Nebraska Medical Association
Nevada State Medical Association
New Hampshire Medical Society
New Mexico Medical Society
North Carolina Medical Society
North Dakota Medical Association
Ohio State Medical Association
Oklahoma State Medical Association
Oregon Medical Association
Pennsylvania Medical Society
Rhode Island Medical Society
South Carolina Medical Association
South Dakota State Medical Association
State Medical Society of Wisconsin
Tennessee Medical Association
Texas Medical Association
Utah Medical Association
Vermont Medical Society
Virgin Islands Medical Society
Washington State Medical Association
West Virginia State Medical Association
Wyoming Medical Society
American Academy of Allergy, Asthma and Immunology
American Academy of Dermatology Association
American Academy of Facial Plastic and
Reconstructive Surgery
American Academy of Family Physicians
American Academy of Neurology
American Academy of Ophthalmology
American Academy of Otolaryngic Allergy
American Academy of Otolaryngology--Head and Neck
Surgery
American Academy of Physical Medicine and
Rehabilitation
American Association of Clinical Endocrinologists
American Association of Neurological Surgeons
American Association of Orthopaedic Surgeons
American College of Allergy, Asthma and Immunology
American College of Cardiology
American College of Chest Physicians
American College of Emergency Physicians
American College of Obstetricians and Gynecologists
American College of Osteopathic Family Physicians
American College of Osteopathic Surgeons
American College of Physicians--American Society of
Internal Medicine
American College of Radiology
American College of Surgeons
American Gastroenterological Association
American Geriatrics Society
American Medical Association
American Osteopathic Association
American Psychiatric Association
American Society for Gastrointestinal Endoscopy
American Society for Therapeutic Radiology and
Oncology
American Society of Anesthesiologists
American Society of Cataract and Refractive Surgery
American Society of Clinical Pathologists
American Society of General Surgeons
American Society of Hematology
American Society of Plastic Surgeons
American Thoracic Society
American Urological Association
Association of American Medical Colleges
College of American Pathologists
Congress of Neurological Surgeons
Joint Council of Allergy, Asthma and Immunology
Medical Group Management Association
National Medical Association
North American Society of Pacing and
Electrophysiology
Renal Physicians Association
Society of Critical Care Medicine
Statement of the American Osteopathic Association, Chicago, Illinois
The American Osteopathic Association (AOA) thanks Chairwoman Nancy
Johnson and Ranking Member Fortney ``Pete'' Stark for introducing the
``Medicare Regulatory and Contracting Reform Act of 2001'' (H.R. 2768).
We appreciate your holding this timely hearing.
Our members increasingly are frustrated with the complexities of
Medicare policies and regulations. It is well documented that there are
now over 100,000 pages of Medicare rules, policies and regulations.
Physicians are forced to spend a growing amount of time completing
paperwork and meeting administrative requirements set forth by Medicare
and managed care organizations. Time spent completing these tasks is
time spent not doing what they were trained to do, providing care to
patients.
We thank you for making this issue a priority for the Committee and
for introducing legislation to reform the regulatory and contracting
process at the Centers for Medicare and Medicaid Services (CMS). Your
legislation addresses the major concerns that the AOA has raised and
establishes a system that will focus more on educating and assisting
physicians and not on punishing them. We especially support provisions
you included on provider education and technical assistance and the
inclusion of specific educational programs and technical assistance for
rural providers. As you know, rural practices often consist of less
than ten employees and simply do not have the manpower to dedicate an
individual(s) to Medicare compliance. Your proposal recognizes and
creates ways to assist these physicians.
We continue to be concerned about the use of extrapolation in post-
payment audits. It is our desire that the committee carefully evaluate
the use of this practice. Your legislation addresses this issue, but we
request that you consider requiring documented educational intervention
before extrapolation can be used. This supports our desire to move from
a system that assumes guilt to a system that offers compliance
assistance.
Our priorities for regulatory and contracting reform legislation
include:
Provider Education and Technical Assistance
The AOA strongly endorses a ``change in attitude'' at the CMS. The
AOA does not support fraud or those who defraud the government, but we
are convinced that an overwhelming majority of the mistakes made are
inadvertent. It is our opinion that CMS generally operates with an
assumption of guilt when dealing with providers. This attitude is
counterproductive and creates an environment of distrust between
providers and CMS. We believe that CMS should focus more effort on
educating providers, especially those in rural and frontier areas. One
of the most important services CMS can provide is timely and accurate
feedback on how to comply with policies and procedures.
The AOA believes that CMS and its Medicare contractors should:
Create a national standard for provider education.
Establish incentives for contractors who improve their
provider education programs.
Establish education programs exclusively for rural
providers.
Maintain a 24 hour toll-free phone line staffed by
individuals capable of answering questions regarding the
Medicare system.
Maintain a web page dedicated to compliance with
Medicare policies and procedures. We recognize that addressing
every potential question on the web page is impossible, but
material addressing the most frequently asked questions could
be maintained.
Medicare contractors should respond to all requests in
writing. This would provide a written record that providers and
contractors could rely upon if there is a future audit.
Create a system that accurately documents each
question or inquiry received, who handled the request and the
information provided. This will allow CMS and its contractors
to create a valid database of frequently asked questions and
points of confusions within the program. Additionally, it will
provide both the Medicare contractor and the provider with
documentation of the inquiry.
Provider Appeals
The AOA believes that every provider should have an equitable and
unbiased opportunity to appeal any decision handed down by CMS or a
Medicare contractor when facing a post-payment audit. Appeals should be
conducted in a timely manner and governed by legal experts independent
of both the provider and the Medicare contractor. It must be emphasized
that the purpose of the audit is to recover alleged overpayment, not to
proceed against suspected fraudulent behavior, and that physicians and
providers in these situations should not be ``presumed guilty.'' The
AOA supports the permanent inclusion of Administrative Law Judges
(ALJs) in the Department of Health and Human Services (HHS). We believe
that their existence within HHS will speed up the appeal process and
create consistency within the appeal process.
Recovery of Overpayments
Physicians/providers should not be forced to pay contractors for
alleged overpayments before they have exhausted their administrative
appeals. The time it takes to complete the appeals and the high
percentage of reversals of contractors' overpayment allegations
illustrate the inequity of these repayment demands. If a physician or
provider chooses to appeal and is unsuccessful in that effort, then the
provider should pay interest on the amount in question. We strongly
believe that physicians and providers should have the opportunity to
exercise their due process rights before assuming financial liability.
Physicians should be entitled to repayment plans if their
overpayments exceed a certain threshold that would severely impact the
financial well-being of their practice. Contractors currently give
physicians and providers 30 days to repay overpayments in full. We
understand that there is concern that some providers may file for
bankruptcy without repaying the overpayment amount. Unless there is
legitimate concern that this may occur or the provider has demonstrated
in some manner that he or she is not a reliable source of repayment,
all providers should be given flexibility in repaying overpayment
amounts.
The AOA is concerned about extrapolation from probe samples.
Medicare contractors conduct these samples on 15-20 claims over a one
to two year period and then use the alleged overpayment to extrapolate
to all claims submitted during that one to two year period.
Using 15-20 claims in a probe sample over such a long time period
is not a valid method to determine an alleged overpayment for the rest
of the claims. Contractor errors regarding payment in the probe sample,
which are often overturned through administrative appeal, can result in
enormous extrapolated overpayment allegations. Even more egregious,
often the first notice that physicians and providers receive regarding
alleged overpayments is a letter demanding this extrapolated
overpayment amount. We strongly urge the Committee to ensure that
extrapolation does not occur unless the contractor has provided prior,
documented education to the physician or provider. We would even go so
far as to suggest that extrapolation not be used in first time audits
against a provider.
Voluntary Repayment
Physicians and providers receiving mistaken overpayments should be
allowed to return the money voluntarily without fear that they will be
audited by contractors. These repayments, if they occur before they are
noticed by the contractors, should be encouraged. Physicians and
providers should not have to fear that they will be audited for acting
in good faith.
Pre-payment Reviews
We strongly urge the Committee to direct the Secretary to establish
uniform standards for random prepayment audits. Currently, contractors
have complete discretion regarding how to structure and implement
random audits. We believe that physicians and providers should be
provided guidelines with the general conditions under which these
audits may occur.
Issuance of New Regulations
The AOA supports the concept of establishing stricter and more
regimented time frames for the release of proposed, interim final and
final rules. Additionally, we believe failure to meet published
deadlines should require the Secretary to publish an explanation as to
why deadlines were not met and establish new deadlines. This will
prevent the Secretary from issuing continuations for interim final
rules and thus avoiding a final decision on a proposed rule.
Compliance With Changes in Regulations and Policies
Providers should be given, at minimum, 30 days to comply with new
regulations. The 30 days should begin upon receipt of direct
notification of policy changes from the Medicare contractors, not upon
finalization of the rule. Additionally, we believe that new policies
impacting providers should not be applied retroactively, unless it
benefits the provider or is necessary due to statutory requirements.
Contractor Accountability
CMS must address carrier fraud. The Office of the Inspector General
(OIG) released several reports concerning carrier misconduct in
Illinois, Connecticut, New Mexico, Colorado, Florida, Michigan,
Pennsylvania, Massachusetts and California. CMS must be just as
vigilant about preventing fraud and abuse among its contractors as it
is with its providers.
The General Accounting Office recently reviewed contractor
bulletins from 10 carriers. The GAO found that the bulletins contained
lengthy discussions with overly technical and legalistic language that
providers may find difficult to understand. The bulletins also omitted
important information about mandatory billing procedures.
The GAO found that in 85% of its phone calls, the answers were
incomplete or inaccurate. In addition, carrier Internet sites rarely
met all CMS requirements and lacked user-friendly features such as site
maps and search functions. We frequently hear of such complaints from
our membership. Our members also find that carriers at times are
unwilling to put their communications with physician practices in
writing. This behavior is unacceptable.
For contractor reform to succeed, physicians and other providers
must have a single point of contact who will be responsible and
accountable for program administration. Local carrier advisory
committees (CACs) should be continued in each state to assure that
local medical review policy reflects the consensus of the local
physician community.
CMS should establish the highest possible standards to determine
which organizations are most qualified to become new contractors in the
program. Formal physician/provider feedback should be solicited
regarding the establishment of performance criteria for contractors and
whether the contractors' actions have actually met those standards.
Physician/provider outreach, education, and service should be
considered a priority for each contractor in the program.
In addition, CMS regional offices must be well versed in Medicare
rules and regulations because their errors can have disastrous results.
A case in point:
In the mid 1990s, three osteopathic physicians in Oklahoma wanted
to establish rural health clinics in the towns of Morrison (population
900), Yale (population 1200), Pawnee (population 2500) and Fairfax
(population 1800). They contacted HCFA's regional office in Dallas,
which guided them in establishing the federally designated rural health
clinics. The regional office approved the clinics. Three years later,
HCFA headquarters in Baltimore contacted the doctors and told them they
were over paid. HCFA requested a repayment of $980,000 and in its
effort to recover the money, all Part A Medicare payments were stopped.
It was ultimately determined that the regional office provided the
wrong information. The rural health clinics were forced into
bankruptcy. One clinic was shut down and the others are open on a part
time basis--approximately one half to two half days a week.
The error caused by the Federal government's regional office has
had devastating effects in these rural low-income towns. Access to
medical care has been severely limited and the doctors and their
patients are paying the price.
Limited English Proficiency
The AOA supports H.R. 969 that would rescind Executive Order 13166
``Improving Access to Services for Persons with Limited English
Proficiency.'' The financial implications of compliance with this rule
potentially could be devastating to providers, especially those in
rural areas. Fees for a professional interpreter average $40 per hour
with a two hour minimum. At this rate, providers will be forced to pay
more for a mandated interpreter than they are reimbursed for the health
care they provided. Additionally, confusion still exists to whether
this rule applies to written materials. This rule, and the cost of
compliance, would have an adverse effect upon access to care.
Evaluation and Management (E&M) Documentation Guidelines
E&M documentation guidelines have an extremely broad impact on
physicians as they govern how physicians must document for office
visits in order to receive Medicare reimbursement. To date, CMS has
been unable to set forth E&M guidelines that accurately reflect the
services provided during a physician office visit. HHS Secretary Tommy
Thompson stopped work on the E&M guidelines in order to address the
many concerns within the physician community. We support efforts to
address physicians' concerns about burdens caused by documentation
requirements. The AOA asks that CMS not be allowed to implement any new
E&M guidelines prior to the completion of at least four pilot programs,
one of which should be focused on rural providers. Until documentation
guidelines are finalized, CMS should suspend all pre- and post-payment
audits of E&M services, since the agency has not arrived at the
requirements that ultimately will be used.
Emergency Medical Treatment and Labor Act (EMTALA)
The extension of EMTALA to cover ambulances, free standing clinics
and off campus facilities goes beyond the original intent of the law.
EMTALA requirements strain the ability of the medical profession to
provide the quality of care that patients deserve. Hospitals and
physicians face overcrowded emergency departments, a lack of access to
critical specialty emergency care, and the significant compliance costs
associated with EMTALA that provide little, if any, added value to
patient care. EMTALA discourages emergency departments from referring
non-urgent patients back to their primary care provider. The CMS should
not penalize or prevent hospitals from referring patients to continuity
care clinics on the hospital grounds. There are varying interpretations
of the EMTALA requirements among the regional carriers, making it all
the more difficult to comply. Regional carriers should have some degree
of uniformity in the interpretation and enforcement of EMTALA.
****
On behalf of the 47,000 osteopathic physicians (D.O.s) in the
United States, we thank you for the opportunity to submit a statement
on the important issue of Medicare reform. The AOA stands ready to
assist you in facilitating the enactment of H.R. 2768.
The American Osteopathic Association promotes public health,
encourages scientific research, serves as the certifying body for D.O.s
and is the accrediting agency for all osteopathic medical schools and
health care facilities.
Statement of Patricia L. Scheifler, Association for Ambulatory
Behavioral Healthcare, Alexandria, Virginia
I am Patricia L. Scheifler MSW, PIP, Board Member and Co-Chair of
the Public Policy Committee of the Association for Ambulatory
Behavioral Healthcare (AABH), and I am submitting this testimony for
the hearing record. AABH is a national behavioral healthcare trade and
professional association active in professional training, advocacy,
research, publishing, best practice development, and technical
assistance. Originally established in the early 1960s by clinicians
involved in the relatively new treatment approach of ``day
hospitalization,'' the association now embraces the full range of
behavioral health interventions with a powerful interdisciplinary
approach to ambulatory care and integrated medical and psychosocial
methods. We currently represent over 5,000 professionals and more than
70 systems of care, one of the largest interdisciplinary behavioral
healthcare associations.
We strongly commend Congresswoman Nancy L. Johnson (R-CT), Chair of
the Subcommittee on Health of the Committee on Ways and Means, and the
other members of the Subcommittee for holding this hearing. The topic
of this hearing, H.R. 2768, the ``Medicare Regulatory and Contracting
Reform Act of 2001'' and Medicare regulatory relief and modernization
are long overdue for action by Congress. Our members provide care for
some of the most vulnerable Medicare patients and we hear grave
concerns daily that providers and the patients they serve feel under
siege by a Medicare administrative operation that is too-often
unresponsive, insensitive and adversarial.
Overview of Our Medicare Concerns
To respond to behavioral health providers' very serious problems
with Medicare, AABH recently testified before MedPAC and presented a
strong case for fundamental change in Medicare payment policy. Some
problems in particular AABH would like to draw to the Committee's
attention in the administration of the current mental health benefit,
these include:
Variable Interpretation
Medicare Reviewers and Hearing Officers have enormous
latitude in interpreting and applying Local Medical Review
Policies. What they do is highly subjective except in the
unusual circumstance of missing documentation. Their
determinations are often inconsistent and frequently lack any
justification or clarification beyond use of the well-worn
phrase ``not medically necessary.''
Lack of Accountability
Reviewers and Hearing Officers can make obvious errors in
interpretation or erratically apply written rules without any
real accountability or possibility of effective redress. Even
when denials are overturned on appeal, Reviewers are under no
obligation to make future determinations comply with the
determination made on appeal. A comment heard from Fiscal
Intermediaries is: ``Denials are over turned because the
Hearing Officers and Administrative Law Judges don't understand
the rules.'' There is no precedent set by overturned denials.
The Fiscal Intermediary is under no obligation to alter their
review practices.
Protracted Appeal Process
It often takes a year or more to complete the appeal process
on even a single claim. This is an enormous problem because it
restricts providers' cash flow and because the Fiscal
Intermediary and Medicare expect providers to learn and change
their practices as a result of the review process. Often months
after services are delivered and documented, providers discover
their Fiscal Intermediary is denying claims based on an
idiosyncratic interpretation that challenges the validity of a
critical piece of documentation. This is far too late to solve
the problem. The Fiscal Intermediary can then (and some do)
reopen all paid claims a year or longer retroactively and
demand repayment because the provider ``knew or should have
known'' that the documentation did not meet requirements. If
the provider decides to appeal the denials, they must appeal
each claim individually over the course of the next year (or
longer). Often providers can't sustain program operation due to
restricted cash flow, the enormous investment of time and
resources needed to sustain the appeal process and the very
real risk that the Fiscal Intermediary will reopen paid claims
and render a large payback determination. If they continue to
bill Medicare, even when the provider is right and the decision
to deny the claims was wrong, it is very costly to dig out of
intensive review once it has started.
Switch to Prior Approval
Prior approval is the industry standard practice long
employed effectively by private insurance and managed care, its
adoption by Medicare would greatly simplify the burdens of
behavioral health providers. Under this well-established
process, a provider knows up front if treatment will be
covered, and if not, why not. If key documents are determined
to be unacceptable, they can be immediately revised to satisfy
requirements and future documentation can be written to comply
with the payer's expectations. If a patient does not, in the
payer's opinion, require that level of care, alternate
treatment arrangements can be made at that time. Even more
importantly, if coverage is denied up front, it eliminates a
substantial portion the Medicare Program's risk of fraud and
abuse. CMS would not be put in the position of paying millions
of dollars for non-covered services and then trying to recoup
the payments. Providers would not be put in the position of
providing treatment in good faith and then being denied payment
after the fact, or worse, having paid claims reopened and being
told to pay back a million dollars for services that were
rendered.
H.R. 2768_A Good Start, but More Should Be Done
Madame Chairman and members of the Subcommittee, the issues
addressed by your legislation may seem technical in nature, but they
will make a substantial difference in the day-to-day operations of all
types of Medicare providers. Members of our association are gratified
that the Committee is considering the impact of current regulatory
procedures and burdens on providers. We particularly appreciate the
opportunity to comment on this bill and hope that you will act to
address the concerns we have raised in this testimony so that an even
better bill will emerge from your deliberations. Following are our
recommendations on what we view as the key provisions of the bill.
1. No Retroactive Application of Substantive Changes
AABH supports this provision because it would prohibit the unfair
practice of publishing changes in rules and regulations and then
applying those rules/regulations to services that have already been
rendered and documented.
2. Reliance on Guidance
This is a very important provision because it would mean that
providers could rely on written clarification from Carriers and Fiscal
Intermediaries. This is especially critical when there is a change in
Carrier or Fiscal Intermediary and this provision should be broadened
to specifically address Fiscal Intermediary transitions. Medicare
coverage policy for psychiatric services is complex and ambiguous and
Fiscal Intermediaries often develop highly unique interpretations of
payment policies. In a number of instances, our provider members have
experienced a very high level of erroneous denials when a Fiscal
Intermediary transition occurs. That is, where one Fiscal Intermediary
takes over for another and the second holds providers to its standards
rather than the ones in effect during the tenure of the first.
Broadening this provision to cover such transitions will help alleviate
these problems.
3. Methodology to Measure Contractor Error Rates
AABH finds this a potentially helpful provision. If the intent is
to correlate good provider education & outreach with low claims denial
rates, this would be extremely helpful. It would give Carriers and
Fiscal Intermediaries some incentive to bring denial rates down and to
ensure that provider education is both available and effective.
4. Response to Inquiries: (1) Contractor Responsibility & (2)
Evaluation
These are important provisions that AABH supports. Some Fiscal
Intermediaries and Carriers are less responsive to provider questions
than others. These provisions hold the Medicare administrative
contractor accountable for responding to provider questions. AABH
recommends one important change: that CMS be required to respond in a
timely manner to specific billing and cost reporting questions of
providers of services and suppliers. CMS responses that are not timely
are of little help to providers.
5. Encouragement of Participation in Education Program
AABH supports this provision because to benefit from education,
providers must be shielded from being targeted with review simply
because of attending or asking questions during an educational program.
Without this provision, providers are likely to avoid asking specific
questions out of fear that such questions might reveal problems that
could put them at risk for review and repayment.
6. Avoidance of Recovery Action for Problems Identified as Corrected
AABH supports this provision because it is critical if any type of
technical assistance is going to be offered. Few if any providers would
open their system to technical assistance if there is a potential for
recovery action as a result of problems identified during the technical
assistance process.
7. Financial Participation by Providers
Since the technical assistance envisioned in this section is
specifically designed for small providers, it will be important for the
section to specify that the cost must be stated in advance, in writing,
and can't be exceeded without the prior written agreement of the
provider.
8. Medicare Provider Ombusdman
AABH finds this a helpful provision, especially since it includes
``resolution of unclear or conflicting guidance.''
9. Medicare Administrative Law Judges
AABH members sometimes wait up to a year to get an ALJ Hearing plus
a written decision; this provision will be a helpful if it speeds up
the process.
10. Requiring Full and Early Presentation of Evidence by Providers
AABH takes strong exception to this provision and urges that it be
deleted. Under this section, a provider of services or supplier would
not be permitted to introduce evidence in any appeal that was not
presented at the first external hearing or appeal at which it could be
introduced. Although there is an exception for a good cause, this
provision is extremely problematic.
Each level of the appeal process allows Reviewers, Hearing
Officers, and Administrative Law Judges to conduct a ``new and
independent review'' of the claims. This means that they can (and often
do) give new reasons for denial at each point in the appeal process.
Thus, if a provider successfully defends the claim against one reason
for denial, a new reason for denial is given at the next level of
appeal. This can be (and typically is) repeated over and over up
through each level of appeal. Responding to a moving target of changing
reasons for denial often necessitates submission of new evidence to
address the new reasons for denial. The clause ``unless there is good
cause which precluded the introduction of such evidence at a previous
hearing or appeal'' is extremely inadequate and too subjective to
protect providers. This whole provision must be stricken in its
entirety or providers will be tremendously and unfairly disadvantaged
in defending their claims against ever shifting reasons for denial.
11. Limitation on Recoupment Until Reconsideration Exercised
AABH recommends a change in this provision for the case of a
provider of services, physician, practitioner, or supplier that is
alleged to have received an overpayment under this title and that seeks
a reconsideration of that determination. As proposed, the provision
could be interpreted to mean that the provider can be required to pay a
recoupment after the first level of appeal is completed. Providers
should not be required to begin repayment until all levels of appeal
have been exhausted, not just after the first level of appeal. AABH
urges that providers should not be required to payback alleged
overpayments until such time as it has been clearly established that an
overpayment has in fact been made.
12. Limitation on Use of Extrapolation
AABH members have received intensive claims and audit reviews
inspired by criticism of Medicare mental health claims from the Office
of the Inspector General. Therefore, our experience with extrapolation
is much greater than other provider groups. We recommend that Medicare
contractors be prohibited from using extrapolation to determine
overpayment amounts to be recovered by recoupment, offset, or otherwise
unless there is a sustained and high level of payment error. Since many
Fiscal Intermediaries have a propensity for high rates of denials,
simply having a ``high payment error rate'' should not justify
extrapolation unless it is sustained in spite of documented efforts to
educate the provider. This section should read ``sustained high level
of payment error'' not ``sustained or high level of payment error.''
In addition, the payment error rate should (1) exclude denials that
are currently under appeal and (2) be adjusted to reflect denied claims
that have already been overturned on appeal. Unfortunately, Fiscal
Intermediaries calculate error rates based on initial denials
regardless of the number of claims (or dollar amount of claims) that
are being appealed or have already been over turned on appeal. Thus, a
provider could have 100% of reviewed claims denied during the first
review, appeal the denials, win all the appeals, and still be accused
of having a 100% payment error rate! This can and does happen. Error
rates should be calculated based solely on claims that have been
denied, which are not pending in appeal and have not been overturned on
appeal.
Furthermore, CMS must be required to show documented evidence that
educational interventions, over and above the Review process itself,
have been provided and failed. This will protect providers from
receiving denials for a short period of time and then having those
denials used to extrapolate to the universe of claims without any
attempt to educate the provider. The provider should have a genuine and
valid opportunity to identify problems and make required changes. Since
the Review process itself is considered an educational intervention,
additional educational interventions should be required before
extrapolation is permitted. This is important because the reasons given
for denial are often vague (e.g., ``not medically necessary'') and do
not provide sufficient information to allow the provider to identify
specific problems and make required changes.
13. Limitations on Non-Random Prepayment Review
AABH recommends a change so that a Medicare contractor cannot
initiate non-random prepayment review of a provider or supplier based
on the initial identification of that provider for improper billing
practice unless there is both a sustained and high level of payment
error.
Lastly, we strongly recommend the legislation include a tight
timeline for CMS promulgation of regulations that would implement these
provisions. Many do not appear to be self-implementing and providers
therefore will not be protected under these reforms until CMS
promulgates regulations--particularly with respect to appeals.
Conclusion
AABH is pleased that the Subcommittee is addressing the serious
problems of the Medicare regulatory burden on behavioral health and
other providers. We strongly urge the Subcommittee to report H.R. 2768
to the full Ways and Means Committee with the enhancements we have
presented. Lastly, on behalf of our members, I cannot thank you enough,
Madame Chairman, for your long-standing efforts on behalf of consumers
of behavioral health services, their family members, and the providers
that serve them. I would be happy to respond to any questions that
members of the panel may have.
Statement of the Blue Cross and Blue Shield Association
The Blue Cross and Blue Shield Association (BCBSA), which
represents 44 independent, locally operated Blue Cross and Blue Shield
Plans throughout the nation, is pleased to submit written testimony to
the subcommittee on H.R. 2678, the Medicare Regulatory and Contracting
Reform Act of 2001.
Blue Cross and Blue Shield Plans play a leading role in
administering the Medicare program. Many Plans contract with the
federal government to handle much of the day-to-day work of paying
Medicare claims accurately and in a timely manner. Blue Cross and Blue
Shield Plans serve as Part A Fiscal Intermediaries (FIs) and/or Part B
carriers and collectively process most Medicare claims.
Blue Cross and Blue Shield Medicare contractors are proud of their
role as Medicare administrators. While workloads have soared, operating
costs--on a unit cost basis--have declined about two-thirds from 1975
to 2001. In fact, contractors' administrative costs represent less than
1 percent of total Medicare benefits. Few government expenditures
produce the documented, tangible savings of taxpayers' dollars
generated by Medicare anti-fraud and abuse activities. For every $1
spent fighting fraud and abuse, Medicare contractors save the
government $16.
Blue Cross and Blue Shield Medicare contractors are committed to
achieving outstanding performance. We support efforts to improve the
ability of both contractors and the Centers for Medicare and Medicaid
Services (CMS), formerly known as the Health Care Financing
Administration, to cost-effectively provide the highest service levels
to Medicare beneficiaries and providers.
This testimony focuses on three areas:
I. Background, including a description of Medicare contractor
functions;
II. Current challenges facing Medicare contractors; and
III. BCBSA recommendations for improving contractor operations and
comments on contractor reform provisions included in H.R. 2678
I. Background
Medicare contractors have four major areas of responsibility:
1. Paying Claims: Medicare contractors process all the bills for
the traditional Medicare fee-for-service program. In FY 2001, it is
estimated that contractors will process over 900 million claims, more
than 3.5 million every working day.
2. Providing Beneficiary and Provider Customer Services:
Contractors are the main points of routine contact with Medicare for
both beneficiaries and providers. Contractors educate beneficiaries and
providers about Medicare and respond to approximately 40 million
inquiries annually.
3. Handling Hearings and Appeals: Beneficiaries and providers are
entitled by law to appeal the initial payment determination made by
carriers and FIs. These contractors handle over 7.4 million annual
hearings and appeals.
4. Special Initiatives to Fight Medicare Fraud, Waste, and Abuse:
All contractors have separate fraud and abuse departments dedicated to
assuring that Medicare payments are made properly. According to the
Department of Health and Human Services (HHS), these activities saved
the government $9 billion in 1998.
Medicare contractors operate under detailed instructions from CMS.
As government contractors, Medicare contractors must comply with
numerous federal statutes, regulations, and Executive Orders. In
addition, contractors must follow extensive CMS-issued program
guidelines and manual instructions. To monitor compliance with these
guidelines, contractors are visited several times each year by their
local CMS regional office staff for an assessment of their performance
against CMS' requirements. These reviews, termed Contractor Performance
Evaluations, are conducted across all aspects of contractor
operations--claims processing timeliness and accuracy, customer
service, fraud and abuse detection efforts--and culminate in a formal
annual report called the Report of Contractor Performance. Also, CMS
routinely contracts with private companies to review various critical
aspects of contractors operations.
II. Challenges Facing Contractors
There are four key challenges currently facing Medicare
contractors:
1. Inadequate funding levels with rising workloads;
2. Increased complexity of Medicare rules;
3. Frequent changes in program direction; and
4. Legislative mandates not accompanied by additional funding.
Inadequate funding levels: Of utmost importance to attaining
outstanding performance is an adequate budget.
However, Medicare contractors have been severely underfunded since
the early 1990's and are facing poor prospects of receiving adequate
funding next year. During the early to mid-1990's, reductions in
funding concurrent with increases in workload seriously eroded
contractors' ability to fight fraud and abuse. Between 1989 and 2000,
the number of Medicare claims climbed almost 70 percent to over 800
million, while payment review resources grew less than 11 percent. As a
result, the amount allocated to contractors to review claims shrank
from 74 cents to 48 cents per claim. Because of the significant cost of
reviewing claims, this decline in funding resulted in CMS directing
contractors to reduce the percentage of claims that were scrutinized
and investigated. Similarly, the percentage of cost reports audited
declined--between 1991 and 1996, the chances that any institutional
provider's cost report would be reviewed in detail fell from about 1 in
6 to about 1 in 13.
Throughout this period, contractors identified to CMS additional
anti-fraud efforts they could undertake if awarded additional
resources. BCBSA and Blue Plans urged both Congress and the
Administration to allocate significantly more funds for critical anti-
fraud and abuse efforts. Finally, in 1996, Congress created the
Medicare Integrity Program (MIP) in the Health Insurance Portability
and Accountability Act (HIPAA). MIP provided a permanent, stable
funding authority for the portion of the Medicare contractor budget
that is explicitly designated as fraud and abuse detection activities.
MIP funding was set at $500 million in 1998 and is authorized to rise
to $720 million in 2002. After 2002, the permanent authorization is
capped at $720 million despite continuing projected increases in claims
volume.
Thanks to this new funding mechanism, Medicare contractors have
been able to improve their efforts to reduce the amount of fraud,
waste, and abuse in the Medicare program. Contractors' enhanced anti-
fraud and abuse efforts due to MIP funding contributed to the
significant decline in improper claims and documentation submission by
providers. The OIG audit of FY 2000 claims estimated that improper
Medicare payments had dropped to $11.9 billion, or about 6.8 percent of
the $173.6 billion in Medicare payments. The improper payment rate
declined by over 50 percent or $11 billion in five years.
But, the creation of MIP did not solve the budget problems for the
remainder of the contractor budget. The largest portion of the
contractor budget-- program management--is subject to the annual
appropriations process and continues to face severe funding pressures.
Program management activities include claims processing, beneficiary
and provider communications, and hearings and appeals of claims
initially denied. Under the appropriations process, contractors must
compete for funding with high priority programs such as the National
Institutes of Health and education.
For example, between 1989 and 1998, funding for program management
activities (adjusted for inflation) declined by 18 percent. During this
period, the volume of Medicare claims increased by 84 percent; Medicare
outlays (in real dollars), by 65 percent. Whenever possible,
contractors responded to reduced funding by achieving significant
efficiencies in claims processing, lowering program management costs
per claim by 56 percent in real dollars over this period. But even
these efficiencies have not been enough to keep pace with rising
Medicare claims volume and diminishing funding levels. For example,
this year, contractors have been instructed to cut back on customer
service plans, responding to inquiries, provider training and other
provider services in order to live within the 2001 budget. It should be
noted that Medicare contractors have had to cut back on these important
provider and beneficiary services in past years as well due to funding
shortfalls, even though these services were critically important and
contractors had wanted to enhance these programs.
Inadequate budgets for program management also impact Medicare's
fight against fraud and abuse. While many think of program management
activities as simply paying claims, these activities are Medicare's
first line of defense against fraud and abuse and are critically linked
to MIP activities. As an example, many of the front-end computer edits
(e.g., preventing duplicate payments and detecting suspicious claims)
are funded through program management. Inadequate funding impacts
different functions at different times, but always disrupts the
integration of all the functional components needed to ``get things
right the first time.'' It thus results in inefficiency and higher
costs.
We are pleased that Secretary Thompson and many Members of this
subcommittee have recognized the need for additional administrative
resources at CMS. We are concerned the Administration's FY 2002 budget
relies on a proposal for $115 million in new user fees from providers.
Congress has consistently rejected user fees and BCBSA recommends they
be rejected again. We also strongly recommend Medicare contractor
funding be increased to $1.567 billion in FY 2002 to ensure adequate
resources are available to provide the high quality services
beneficiaries and providers deserve. If funding for the Departments of
Labor, Health and Human Services (HHS) and Education are subject to a
Continuing Resolution (CR) at the start of FY 2002, BCBSA would
recommend the CR include an increase in appropriations for Medicare
contractor program management based upon the expected increase in
claims volume. This will prevent any disruptions in paying claims and
providing beneficiary and provider services while the final budget is
being negotiated.
Increased Coomplexity of Medicare Rules: The Medicare program
continues to grow more and more complex. It takes a great deal of time
and resources to educate providers and beneficiaries about new laws and
rules as well as answer questions and without appropriate time and
resources, it is difficult for the contractors to do an adequate job.
Contractors have been challenged over the years with enormous program
changes such as:
New payment mechanisms for outpatient departments,
home health agencies, and skilled nursing facilities.
Changes to Medicare coverage rules: Balanced Budget
Act (BBA), Balanced Budget Refinement Act (BBRA), and the
Beneficiary Improvement and Protection Act (BIPA).
Implementation of the HIPAA administrative
simplification provisions.
Just as Members of Congress are hearing from providers about the
program's complexities, so too are contractors who must answer their
questions and concerns.
Frequent Changes in Direction: Medicare contractors are challenged
by the very nature of the business. At last count, Medicare
contractors, received on average a new instruction from CMS every five
hours of every day of the year. This constant state of change requires
contractors to be extremely flexible--both in terms of operations and
budget. It has not been uncommon in the past for contractors to be
forced to abandon projects or reallocate staff mid-year in order to
adapt to CMS' suddenly revised priorities or modified funding levels.
Medicare contractors operate under cost contracts, and CMS places
budget caps, or limits, on the unit costs paid to contractors to
process claims. By law, Medicare contractors are not allowed any
profit. Under these contracts, Medicare contractors essentially do
whatever work CMS requests, without ``change orders.'' There is not a
clear statement of work at the beginning of the year, and contractors
generally must comply with constant change orders from CMS without
additional reimbursement. These demands make the Medicare contractor
business extremely challenging.
Legislative Mandates Without Funding: Legislative changes to
Medicare are rarely accompanied by administrative funding or
appropriate transition time for proper implementation. For example,
Medicare contractors had to implement the new prospective payment
systems and the many changes stemming from the BBA, BBRA and BIPA
without new funding. This is extremely cumbersome for contractors that
are already strapped for resources.
III. BCBSA Recommendations to Improve Medicare Contractors and Comments
on Contractor Reforms included in H.R. 2678
BCBSA agrees that revisions to the Medicare contractor program
would strengthen contractors' ability to effectively and efficiently
handle day-to-day administration of the Medicare program. Blue Cross
and Blue Shield Medicare contractors are committed to achieving
outstanding performance levels and providing superior service to
Medicare beneficiaries and providers. We want to work with this
subcommittee, the Congress and CMS to attain this objective.
BCBSA supports many of the reforms proposed in H.R. 2678, including
contracting with any entity, not just health insurers; modernizing the
way contractors are paid; adopting a more business-like environment;
enhancing competition; and restoring critical provider education
activities. We do, however, have two key concerns. First, while BCBSA
supports increased competition in the program, requiring CMS to
competitively bid all contractors every four years would likely be
extremely problematic for beneficiaries, providers and CMS--as well as
both potential new and existing contractors. Second, while we applaud
the committee for mandating enhanced provider education, which has been
severely cut back in recent years because of funding shortfalls, the
ability to conduct these activities must depend on the appropriation of
additional funding. Our specific comments follow.
Competitive Contracting: BCBSA supports introducing more
competitive bidding into the program in an orderly manner to minimize
the risk of disruptions to beneficiaries and providers. To ensure
stability of the Medicare program, BCBSA recommends that--rather than
requiring bidding every four years for all contracts--CMS only put to
competitive bid poor performing contractors and contracts from entities
voluntarily exiting the program. This would allow the government to
maintain those contractors that are providing quality services and
meeting CMS' performance expectations, while encouraging new entities
to compete for a stable program.
BCBSA also supports provisions of H.R. 2678 that would enhance
competition by giving HHS the authority to contract with any entity,
not just health insurers, that are able to provide the full range of
Medicare administrative services.
BCBSA believes the provision in H.R. 2678 to require CMS to
competitively bid all Medicare contracts every four years would:
1. Reduce Flexibility for CMS: CMS would have less flexibility in
managing competitive bids than other government agencies. Other
agencies generally bid contracts on a five to seven year basis, and are
able to provide longer terms. It is important to note that there is a
trend to provide longer-term government contracts because of the cost
and complexity of frequent competitions.
2. Divert Already Scarce CMS Resources: Given the consensus that
CMS is already underfunded, mandated competition every four years would
divert resources away from other important CMS responsibilities.
A four-year competitive bid process would place an enormous
financial burden on CMS and require additional resources, including a
new cadre of staff to manage what is likely to be a continuous process.
Procurement for each contract could take up to three years; it can take
up to a year to prepare the request for proposals, a year to run the
competition, and another year to resolve any protests regarding the
award of a contract (which are common in contracts of this size). Staff
needs would be considerable as CMS would be taking on significant new
duties:
With respect to bidding, assuring all contractors are qualified and
have the capacity to perform all assigned functions, assure all bidders
address all functions with realistic and adequate resources, overseeing
the competition and protests.
With respect to the transition, managing change orders, assuring
implementation matches what was provided in the bid, assuring
problems--for beneficiaries and providers--are averted, responding to
and addressing the inevitable problems that will arise.
In addition, CMS administrative budgets will also have to take into
account the increased contractor funds necessary to cover the very
considerable costs of bidding for these contracts.
3. Likely to Result in Beneficiary and Provider Service
Disruptions: Providers would be faced with potential upheaval every
four years. Past experience shows that transitions to new contractors
are very challenging. They must be carefully managed to prevent service
problems which has plagued previous transitions: incorrect payments, a
backlog in claims processing, and lack of responsiveness to beneficiary
and provider inquiries. Mandating CMS to competitively bid all
contracts every four years--a massive undertaking--would be extremely
high risk for providers and beneficiaries.
4. Deter the Most Qualified Medicare Contractors: Current
contractors, as well as potential new entities, would face significant
disincentives to bid, knowing their investment is at risk every four
years. Both current and new contractors are likely to be concerned
about the huge business risk of losing the contract after four years
and the subsequent loss of hundreds and even thousands of local jobs.
In particular, potential new Medicare contractors must make significant
investments in buildings, sophisticated computer systems and large
numbers of trained staff. Many of the best contractors may decide that
a 4-year contract is too high risk and not bid.
5. Require an Increase in Overall Medicare Contractor Funds:
Medicare contractor funds would have to be increased to cover the
additional costs of competitive bidding. Currently, contractors live
with CMS-set caps on costs per claim basis. When funding is
inadequate--because of lower than requested appropriations or increased
workloads (such as when new Medicare legislation is passed or
unexpected increase in claims volumes)--contractors must still perform
their functions, often without corresponding decreases in performance
expectations.
Under a mandated competitive bidding process, there is a
significant potential for a mismatch between competitive bids and
available funding. If the competitive bids exceed the total funding
available, CMS would be required to scale back the proposed scope of
work and recompete the contracts. This would be extremely time
consuming and even more costly and could result in an inadequate
coverage of important functions.
Unlike most other government contracting, Medicare is an
entitlement program and the function of paying claims must continue. An
entire contract just cannot be cancelled or postponed, like most other
government contracts in the event of funding cutbacks.
For these reasons, BCBSA believes that competitive contracting
should be expanded in the Medicare contractor program carefully, with
considerable planning. In our view, the best way to accomplish this is
by focusing competitive contracting on poor performers and exiting
contractors.
Additional Funding is Necessary to Restore and Enhance Provider
Education: Blue Cross and Blue Shield Medicare contractors agree that
provider education services should be restored and expanded. One of our
primary messages to appropriators in recent years is that adequate
funding is critical to support provider and beneficiary services. Since
paying claims is the program's highest priority, provider and
beneficiary services often fall victim to insufficient funding levels.
BCBSA supports the provider education and technical assistance
provisions included in H.R. 2678; however, implementation of these
provisions should be dependent upon adequate funding.
In the past, Medicare contractors provided many more services to
beneficiaries and providers than are offered today, as budget pressures
forced CMS to curtail these activities. Blue Cross and Blue Shield
Medicare contractors are committed to providing the highest level of
services to beneficiaries and providers. However, the services cannot
be provided unless adequate funding is available. Therefore, we would
ask that the provider education and technical assistance provisions be
made contingent upon funding.
CMS authority to award other than cost reimbursement contracts:
BCBSA agrees with the provisions in H.R. 2678 to modernize the current
cost-based contracting system. Currently, most contractors are paid
costs up to a cap set by CMS; there is virtually no opportunity for
profit. We believe CMS should be allowed to use other payment options,
such as cost plus contracts.
Funding recommendations: We have two specific recommendations that
are not included in HR 2678:
First, we urge Congress and the Administration to
assure Medicare administrative funds keep pace with workload
increases and new legislative/regulatory requirements.
Second, we urge the Committee to increase the
permanent MIP appropriation, which is currently capped at $720
million in 2002 and beyond. If fraud and abuse efforts are to
be effective, MIP funding must keep pace with workload
increases. Therefore, BCBSA recommends indexing the MIP
authorization by the projected increase in workloads and
medical inflation.
BCBSA would like to work with this subcommittee to assure adequate
funding is available each year for paying claims promptly and providing
high quality provider and beneficiary services.
CONCLUSION
Blue Cross and Blue Shield Medicare contractors are committed to
achieving outstanding performance. We believe more can and should be
done to improve Medicare contractor operations. Success in Medicare
claims administration requires that CMS and the contractors work
together toward their mutual goal of providing high quality services to
beneficiaries and providers, including accurate and timely claims
payment.
BCBSA look forward to working with this subcommittee and CMS to
make these needed improvements.
Statement of the Medicare Administration Committee, Silver Spring,
Maryland
CIGNA Health Insurance Corporation. Cooperativa de Seguros de Vida de
Puerto Rico Group Health Incorporated. Mutual of Omaha Insurance
Company National Heritage Insurance Company. Nationwide Mutual
Insurance Company Wisconsin Physicians Service Insurance Corporation
The member companies of the Medicare Administration Committee are
substantially involved in the administration of the Medicare program as
carriers and intermediaries. During Fiscal Year 2001, we processed 256
million Part B claims and 16 million Part A claims. We appreciate this
opportunity to comment on the Medicare contracting reform provisions of
H.R. 2768, the proposed ``Medicare Regulatory and Contracting Reform
Act of 2001''
For several years, the Administration has been recommending that
Congress enact its ``contractor reform'' proposal, which would allow
the Center for Medicare and Medicaid Services (CMS) to restructure its
contracting process and drastically reconfigure the administrative
structure of the Medicare program. The General Accounting Office and
the Office of Inspector General of the Department of Health and Human
Services have endorsed the concepts put forth by the Administration.
H.R. 2768 is aimed in part at modernizing Medicare's contracting
for the processing and payment of Medicare claims as well as education
and services provided to providers of care and beneficiaries. Section 4
of the bill embodies many of the contracting changes being sought by
the Administration. It would:
Create a new class of contracting entities, ``Medicare
Administrative Contractors'', (MACs) replacing the current
Medicare Part A intermediaries and Part B carriers.
Eliminate the current law requirement for cost-
reimbursement contracts, allow contracting in any manner
allowed by the Federal Acquisition Regulation (FAR), and
require that contractors be provided with financial incentives
for quality and efficiency.
Eliminate the current Part A right of hospitals to
select their fiscal intermediaries and the Part B requirement
that carriers be insurance companies.
Allow CMS to contract for specified Program Management
functions individually or in any combination it wishes with any
entity it deems qualified.
Require competition in the procurement of MAC
services, with some exceptions.
Eliminate current law provisions that protect carriers
and intermediaries when their contracts are terminated by
either the government or themselves.
Increase the liabilities that contractors may incur in
the performance of their responsibilities.
CMS believes that revisions in its contracting authority will
enable it to reduce overall Medicare program management costs through
price competition and by reducing the number of Medicare fee-for-
service contractors, to achieve further economies of scale. It also
hopes to achieve greater efficiency through the use of specialized,
``functional'' contractors. However, the agency has not indicated with
any degree of specificity how it would employ the broader contracting
authority it seeks.
COMMENTS
We believe that appropriate changes should be made in the way the
government contracts for the services provided by carriers and
intermediaries. For example, our companies would welcome the
opportunity to earn a reasonable profit as MACs. Nor do we oppose
competitive contracting--provided the entities involved are clearly
qualified to perform the complex operations involved in processing
Medicare fee-for-service claims and related activities. But, we doubt
that the mandatory 4-year competitive procurement cycle envisioned by
H.R. 2768 would be the best way to implement competition--given the
immense scale and complexity of the Medicare program. The cost and
disruption of conducting four or five major competitive procurements
each year would be a major expense and disruption for CMS and
contractors to deal with and would probably not yield the results that
could be achieved by a more targeted approach.
Functional Contracting--We are also concerned about the feasibility
of ``functional contracting.'' Dividing the activities that go into
processing a single Medicare claim among several specialized
contractors may have theoretical benefits, but the potential problems
involved in coordinating all of these functions deserve careful
analysis. Thorough planning, extensive pilot testing and cautious
implementation will be needed to make functional contracting effective.
Funding of Medicare Contractor Operations--During the past decade
the annual funding of Medicare contractor operations has eroded to the
point where it is inadequate to meet the demands of an efficiently run,
high output program. The workload of claims to be processed has
increased more than 70 percent, while the funding of contractor
operations has risen less than 15 percent. In addition, Congress has
enacted literally hundreds of substantive changes in the program
without providing CMS or Medicare contractors the resources for the
complex processes involved in implementing them.
While contracting reform may produce some further economies of
scale, they may not be sufficient to keep up with the growth in claims
workload or general inflation in the economy. As the General Accounting
Office has frequently pointed out, Medicare administrative costs are
extremely low in comparison to similar government programs or private
health insurance.
Further, in reconfiguring contractor operations, CMS will incur
substantial additional transition costs. Unless the funding of
contractor operations is increased by 10 percent or more it will be
impossible to maintain the current levels of quality and efficiency in
the ongoing processing of 900 million annual Medicare claims while, at
the same time, implementing contracting reform.
CMS Capacity to Manage a FAR Contracting Environment--The current
form of Medicare ``cost-reimbursement'' contracting has been in place
for over three decades. It is an environment in which contractors are
assigned tight annual budgets with no discretion to address shifting
requirements by transferring resources among the various budget
categories dictated by CMS. There is no detailed statement of work in
the contracts. Instead, contractors receive hundreds of instructions
from CMS, many of which are vague and subject to definition or change
throughout the year. The majority of these instructions require
operational changes to be carried out ``within existing resources.''
Under the current ``cost-reimbursement'' business environment, all
contractors have experienced situations in which CMS orders additional
work to be done and then fails to make funds available to pay for it.
Contractors also are frustrated by performance evaluations that judge
their work on a fiscal year basis yet fail to take into account the
fact that funding for new or revised work was not provided until
several months after the year had begun, if it was provided at all.
Contracting in accordance with the FAR is a sound concept. However,
its implementation will probably require more change by CMS itself than
by its contractors. In the FAR contracting environment, CMS will be
required to negotiate a highly detailed and specific statement of work
with each contractor. Any new work or significant changes in the
ongoing work to be performed will have to be negotiated with each
contractor and price adjustments agreed upon. Further, CMS will have to
develop precise, objective measurements of contractors performance. The
GAO has commented that CMS already has experience with FAR contracting
under the MIP program. But that experience may not prove particularly
useful in dealing with the high-output and immense scale of ongoing
carrier and intermediary operations.
The immense workload imposed by hundreds of legislative changes,
coupled with appropriations that have been inadequate for the work
required of the agency, have greatly hampered CMS in the performance of
its mission. Under contracting reform, CMS will need to be funded,
staffed and reorganized to deal with the transition to a very different
contracting environment. It will need to improve its planning, funding
and policy implementation processes as they affect Medicare
administrative contractors. The FAR contracting process will not
accommodate constantly shifting agency strategies and goals, or
imprecise, untimely definitions of the work that contractors are to
perform.
Contractor Liability--The financial risk of being a Medicare
contractor is a factor that must be carefully considered by any entity
interested in this business. The weighing of potential risk against
potential financial reward is an important factor in making the
decision to compete for Medicare administrative business. The revised
standards for liability and indemnification of Medicare Administrative
Contractors proposed in H.R. 2768 are inadequate for the levels of risk
to which carriers and intermediaries are exposed. They would greatly
increase the business risk of being a contractor. Insuring for the
added risk would also increase contractors' operating costs and thus
the government's cost of administering the program.
We urge that the liability and indemnification provisions of H.R.
2768 be reexamined. The liability provisions that CMS has incorporated
in the contracts that it has awarded under the Medicare Integrity
Program contracting authority are not appropriate for the program
management work performed for Medicare by carriers and intermediaries.
We believe that, when CMS moves beyond the limited projects that have
been awarded thus far under MIP, it will find itself pressured by MIP
contractors to adopt contract liability language comparable to that in
current intermediary and carrier contracts.
Contractor Termination Costs--Under their current contracts,
carriers and intermediaries do not make a profit. They have many career
employees with 20 or more years of service that must be provided
severance pay if a contractor leaves the Medicare program.
At the beginning of the Medicare program, the government agreed
that, under the long-term cost-reimbursement relationships envisioned,
carriers and intermediaries would be entitled to recover their
termination costs regardless of whether the government or a contractor
decided to end the relationship. In view of this agreement, carriers
and intermediaries have not been allowed to include any charge for
funding termination costs as an ongoing operating cost to be reimbursed
by the government. We believe that CMS intends to end this longstanding
commitment when it enters into new FAR contracts with existing carriers
and intermediaries. Termination costs would be allowed only if the
government cancels a contract. This would be extremely unfair to
existing contractors--especially so in view of the fact that, since
1965, more than 40 contractors have left the program subject to the
existing termination rights.
If the Medicare program continues to contract on a cost-
reimbursement or cost plus incentive fee basis, the traditional
termination provisions should be retained in new contracts. If,
instead, it changes from cost-reimbursement to fixed price contracting
and forces contractors to give up their traditional right to
termination costs, it is critically important that the change be
applied prospectively.
Unless current contractors are assured that the potential severance
pay and lease termination expenses accrued up to this point will
continue to be covered should they decide to leave Medicare, many may
quickly drop out of the program under their existing contracts, in
order not to lose their right to recover termination costs.
Importantly, if the accrued termination costs of existing contractors
are recognized under new contracts, the potential cost to the
government will eventually disappear as the contractors' current
employees leave or retire and are replaced by personnel not covered by
the traditional contract language. Moving forward all bidders will
simply include their prospective termination costs in the prices they
bid for Medicare contracts.
Statement of the Power Mobility Coalition
The following statement is respectfully submitted to the U.S. House
of Representatives Committee on Ways and Means on behalf of the Power
Mobility Coalition (''PMC''). The PMC is a coalition of suppliers and
manufacturers who provide power mobility equipment and services, such
as motorized wheelchairs and scooters, to Medicare beneficiaries
nationwide. PMC members represent well over half of the nation's power
mobility market and our members are located in all regions of the
country.
The members of the PMC would like to thank the Subcommittee on
Health of the Committee on Ways and Means for its work on Medicare
reform and for holding their recent hearing concerning H.R. 2768, the
``Johnson-Stark Medicare Regulatory and Contracting Reform Act of
2001.'' We are grateful that the Subcommittee is addressing legitimate
concerns raised by suppliers and providing regarding regulatory and
administrative issues in the Medicare program.
Suppliers of power mobility equipment and services spend much of
their time and effort interpreting and complying with Medicare's
complex regulatory and procedural requirements. In addition to dealing
with Medicare laws and regulations, PMC members must also deal directly
with the Durable Medical Equipment Regional Carriers (``DMERCs''), the
entities that are charged with administering payment on behalf of CMS.
While CMS has overall responsibility for program management, many of
the responsibilities related to reimbursement and medical policy have
been delegated by the agency to the DMERCs. Unfortunately, the DMERCs
have used this authority to create new policies, often in direct
contrast to existing policy published by CMS. For example, the DMERCs
often conduct random audits of suppliers of so-called ``high
utilization'' items without adhering to published standards governing
such audits, and use ``overpayment'' calculation methods such as
extrapolation to recoup funds that have already been appropriately paid
out by the Medicare program.
These actions have led to an erosion of the due process afforded to
those who choose to provide items and services to program
beneficiaries. In this context, we offer the following comments.
A. CMS/CARRIERS SHOULD BE PROHIBITED FROM RECOVERING PAST OVERPAYMENTS
IF AN APPEAL IS PENDING
The PMC supports legislation that prohibits recovery of
overpayments until the Administrative Law Judge (''ALJ'') level of
appeal is completed.
The current system requires suppliers and providers to repay the
government and then undergo a lengthy appeals process to win back
monies to which they are entitled. It is not unusual for a supplier/
provider to wait one or two years for a claim to be completely
adjudicated.
During the appeals process, a supplier continues to provide the
equipment and service to the beneficiary--to do otherwise would force
the supplier to forfeit its right to appeal. The appeals process
typically results in payment to the supplier who provided equipment and
service.
Pursuant to the order certified by the physicians in compliance
with Medicare rules. According to statistics cited in the September
1999 Report issued by the Office of Inspector General of the Department
of Health and Human Services, entitled ``Medicare Administrative
Appeals--ALJ Hearing Process,'' 78 percent of DME appeals studied were
``reversed at the ALJ level'' and 81 percent of home health appeals
studied ``were reversed at the ALJ level.''
With a reversal rate of roughly 80 percent, it does not seem fair
that a company would have to forfeit the right to reimbursement without
having the ability to adjudicate these disputed claims prior to
repayment. Further, the supplier who wins a case is, under the current
law, not entitled to interest on reversed claims even though there has
been no break in service, or removal of equipment from, the Medicare
patient.
B. EXTRAPOLATION CREATES UNDUE HARDSHIP ON POWER MOBILITY SUPPLIERS
The current arbitrary use of the technique of extrapolation to
calculate so called overpayments creates an undue hardship on suppliers
and providers participating in the Medicare program. The PMC supports
legislation that limits the use of extrapolation and would recommend
that extrapolation not apply to customized items of equipment such as
power mobility equipment.
Extrapolation works in the following manner: a carrier draws a
``sample'' of claims (often as few as thirty) from a universe of claims
for that supplier a defined period of time. If, for example, the
carrier reviewer determines that 50% of the claims should not have been
paid (even though the treating physician has certified the need for the
equipment), that non-payment amount is then ``extrapolated'' to the
universe of claims. If there are a hundred claims in the universe, the
company will owe repayment for 50 electric wheelchairs ($250,000)
rather than 15 wheelchairs ($75,000). The overpayment amount is due
within thirty days of the DMERC reviewer's determination. Even though,
typically, the supplier wins most, if not all, of the overpayment back
on appeal, the business is severely damaged.
The indiscriminate use of extrapolation for costly, customized
items of medical equipment such as electric wheelchairs, is creating
hardships for dealers and has forced many businesses to face
bankruptcy. Although CMS has the discretion to allow the supplier to
pay back a large overpayment in installments, such payment arrangements
are usually granted only for a twelve-month period, with interest of
around 14% is assessed on all outstanding ``overpayments'' even while
they are being appealed.
The use of extrapolation saddles the supplier, who is trying to
provide a service in his/her community, with a large overpayment
assessment, as well as additional costs including, fees for
representation and interest on any assessed ``overpayment.'' In
addition, the supplier is required to pay back the government within
thirty days. The company who finds itself in this position will take
little comfort in the fact that the ultimate reversal rate for these
cases is, according to CMS's own figures, roughly 80 percent. That is
because the business may very well not survive the next year or two of
working through this CMS/DMERC controlled process. An appeal for relief
to federal court is not possible until administrative remedies are
exhausted.
C. AUDIT PROCESS
Medical Review and Audits Should Be Conducted Based on Good Cause
Medicare audits and medical reviews should be conducted based on
good cause and should adhere to established standards and guidelines.
Toward that end, CMS developed standards for the audit process in an
August 7, 2000 Program Memorandum entitled the Medicare Review
Progressive Corrective Action plan. These standards require that
intermediaries/carriers should ``subject providers only to the amount
of medical review necessary to address the nature and extent of the
identified problem.''
Many of the audits conducted upon suppliers are not based on an
``identified problem'' but rather are triggered on the use of a code
for equipment for which utilization has increased. For example, the
Region D DMERC, the Medicare Part B carrier overseeing 17 states
spanning the entire Western part of the country, has developed a series
of pie charts highlighting the top suppliers of power wheelchairs for 3
month periods. Each of the suppliers cited on these pie charts are
subsequently targeted for an audit based solely on the ``high
utilization'' of this equipment.
What is troubling is the fact that the Region D DMERC's own pie
charts demonstrate that the targeted suppliers are providing only
between six and eight wheelchairs a month to Medicare beneficiaries.
Providing less than ten wheelchairs a month does not constitute high
utilization in a Region spanning 17 states. Further, the information
provided to industry by the Region D DMERC appears to be inconsistent.
One chart used by the Region D DMERC cited the top supplier for the
first quarter of 2000 as providing 32 wheelchairs while another chart
used by the same DMERC for the same quarter of 2000 cited a company as
providing 39 wheelchairs.
The Region D DMERC audit process is consistent with CMS/carrier
policy of targeting companies that may specialize in a particular area
and/or companies that have developed a reputation for providing quality
service and care to Medicare beneficiaries. CMS's policy of targeting
suppliers of a particular product creates a chilling effect on the
ability of Medicare suppliers to provide equipment and services to
patients who qualify for such equipment and services.
The Current Audit Process Should Not Penalize the Utilization of New
Technology in the Marketplace
The current process by which companies are being audited raises a
broader issue concerning CMS's inability or unwillingness to
acknowledge or recognize the importance of technological advancements
in the health care field. The development of new technology in the
power mobility industry has made this equipment available to a larger
number of disabled people. It is now possible for beneficiaries to
obtain smaller, more lightweight and maneuverable motorized wheelchairs
for use inside a patient's home. This new technology allows people to
move about in small places (e.g., hallways, kitchens, and bathrooms)
and complete their activities of daily living without being bed-bound
or sent to nursing homes.
CMS's targeting of companies based strictly on utilization fails to
recognize the evolving health care marketplace or changing consumer
needs and fails to appreciate the rationale for a particular product or
service being provided to patients throughout our country.
Carrier Audit Determinations Should Be Consistent With Medical
Necessity Standards Established By Congress and CMS
The CMS Medical Review Progressive Corrective Action plan states
that ``after validating that claims are being billed in error, target
medical review activities at providers or services that place the
Medicare trust funds at the greatest risk while ensuring the level of
review remains within the scope of the budget for medical review.''
Unfortunately, the criteria the carriers use to determine that
``claims are being billed in error'' are inconsistent with criteria
already established by Congress and CMS. Current Medicare policy
governing the use of power mobility equipment requires that a supplier
submit, on behalf of a beneficiary, a certificate of medical necessity
(``CMN'') form signed and completed by the patient's treating
physician, with each power mobility claim. Congress passed legislation
in 1994 defining a CMN in the following manner:
A form or other document containing information required by
the carrier to be submitted to show that an item is reasonable
and necessary for the diagnosis or treatment of illness or
injury to improve the functioning of a malformed body member.
CMS worked with the medical community on the development of the CMN
for power mobility equipment (as well as CMNs for other DME items) and
received approval from the Office of Management and Budget for these
forms pursuant to the Paperwork Reduction Act. When submitting the CMN
forms to OMB for approval, CMS explicitly declared that the CMN forms
are ``needed to correctly process claims and ensure that claims are
properly paid'' and that ``these forms contain medical information
necessary to make an appropriate claims determination.'' In fact, the
treating physician (or clinician familiar with the patient's condition)
is required to complete the detailed medical necessity information on
the CMN and certifies that such information is true and accurate.
The CMN process has been quite effective. The PMC sampled roughly
20,000 power mobility CMNs and discovered that over 75% of the patients
failed to qualify based on responses to medical necessity questions
established on the CMN form. Only the 25% of patients who have met the
medical necessity requirements established on the CMN form were
provided with power mobility equipment that was billed to the Medicare
program.
Despite the legal/medical necessity significance of the CMN form as
envisioned by Congress, CMS and the OMB, the DMERCs have often
disregarded the information contained on the forms, particularly when
conducting audits, to determine the validity of claims. On numerous
occasions, power mobility suppliers have been assessed overpayments
even though the equipment was provided pursuant to a properly completed
CMN form signed and certified by the patients treating physician.
One power mobility supplier, a company with revenues between 1 and
2 million a year, was assessed an overpayment of nearly $500,000. Upon
making this overpayment assessment, the carrier informed the supplier
in writing that the ``CMN represents nothing more than a Medicare pre-
payment tool which has been abbreviated as much as possible to reduce
physician paperwork.'' Another small power mobility supplier was
assessed an overpayment of over $600,000 and informed by the carrier in
writing that ``the CMN itself does not provide sufficient documentation
of medical necessity. . . . Suppliers are not required, nor should
they, sell equipment to unqualified beneficiaries merely because they
have a physician's written order and a CMN.''
In these cases, and in other similar cases throughout the country,
the supplier had fully complied with the rules established by the
Medicare program and yet were penalized based on new and arbitrary
criteria developed by the carrier after the equipment had been
delivered to the patient and after the claim had originally been paid.
While these companies will most likely be vindicated during the appeal
process, the damage to the company has taken place and the company's
ability to survive has been impacted. As set forth above, the inability
of CMS to effectively monitor the performance of the Part B carriers
results in an unfair burden and cost to suppliers and providers who
serve beneficiaries.