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



 
                 CMS REGULATION OF HEALTHCARE SERVICES
=======================================================================

                                HEARING

                               before the

                      COMMITTEE ON SMALL BUSINESS
                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED SEVENTH CONGRESS

                             SECOND SESSION

                               __________

                             WASHINGTON, DC

                               __________

                            OCTOBER 3, 2002

                               __________

                           Serial No. 107-72

                               __________

         Printed for the use of the Committee on Small Business









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                      COMMITTEE ON SMALL BUSINESS

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












                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on October 3, 2002..................................    01

                               Witnesses

Scully, Hon. Thomas, Administrator, Centers for Medicare & 
  Medicaid Services..............................................    04
Harroun, Mary, President, Merry Walker Corp......................    10
Probst, Dr. Edward, Columbus, IN.................................    15
Davey, Dr. Patrick, Lexington, KY, for the American Academy of 
  Dermatology....................................................    17

                                Appendix

Opening statements:
    Manzullo, Hon. Donald........................................    37
Prepared statements:
    Scully, Hon. Thomas..........................................    39
    Harroun, Mary................................................    58
    Probst, Dr. Edward...........................................   111
    Davey, Dr. Patrick...........................................   116
Additional Information:
    Letter to Chairman Manzullo from Nancy Taylor, Greenberg 
      Traurig, LLP...............................................   122













                 CMS REGULATION OF HEALTHCARE SERVICES

                              ----------                              


                       THURSDAY, OCTOBER 3, 2002

                          House of Representatives,
                               Committee on Small Business,
                                                    Washington, DC.
    The Committee met, pursuant to call, at 2:10 p.m., in Room 
2360, Rayburn House Office Building, Hon. Donald A. Manzullo 
[chair of the Committee] presiding.
    Chairman Manzullo. Good afternoon. We have an interesting 
scenario going on over on the floor, but what else is new in 
life? Let me get through the opening statement here and then we 
will have to adjourn and come back for the remainder of the 
hearing.
    And I thought it would be a good idea, just before the 
Congress ends to try to tie up as many loose ends as possible. 
And perhaps Mr. Scully could help us on that.
    This hearing really is in three parts. The first part is an 
update on the administrative process of exactly how to deal 
with Mary Harroun's combination of a walker and seat known as a 
Merry Walker.
    I am going to be asking Leslie Norwalk to sit at the table 
and give us an update on the administrative process. Leslie, I 
know when you were in my office, we asked it be concluded 
within 60 days. We were subsequently advised that you wanted to 
do a lot more research and investigation into that.
    The second issue deals with the portable x-ray provider 
reimbursement that apparently has reached a stalemate. We want 
to get that taken care of have asked a couple of people from 
CMS staff to join us.
    The third issue deals with CLIA, and people from CMS, along 
with Mr. Scully will help us through it.
    The purpose here is to have this as informal as possible, 
to have an exchange going on among the parties. We are looking 
towards guidelines and a resolution.
    I know with regard to the Merry Walker, I think we had 
three issues in there, and one or two of them have been 
resolved, and the third one may or may not be resolved to the 
likings of my constituent, but at least will be on the road to 
getting that resolved and to go on to working with Mary on 
further applications and guidelines for the applications that 
have already been approved by CMS.
    We are also going to be joined later on by Dr. David 
Weldon, M.D. He has asked to address the Committee and talk 
briefly about the status of the portable x-ray issue. The fact 
that the rates are so low, that the portable x-ray people are 
going out of business, and CMS is actually paying more to do 
the same services at a great disadvantage to the seniors who 
are involved.
    And my mother was one of those who had the benefits of 
using the portable x-ray. And then when that was ended in 
Rockford, Illinois, because of low reimbursement rates, she had 
to be carted to the hospital, sat in the emergency room, and 4 
hours later carted back to the nursing home, all at a cost of 
several times more than the portable x-ray. We are quite 
disappointed that that issue has not been resolved. So that is 
going to be the purpose of the hearing.
    [Mr. Manzullo's statement may be found in the appendix.]
    Chairman Manzullo. And Dr. Christensen, did you have an 
opening statement?
    Mrs. Christian-Christensen. I do, Mr. Chairman. Did you 
want me to go ahead and do it now?
    Chairman Manzullo. Did you want to do it now or wait until 
we get back?
    Mrs. Christian-Christensen. I will wait. I will make an 
informal statement.
    Chairman Manzullo. As a Member of Congress and also as a 
medical doctor, I want to give you some time.
    Mrs. Christian-Christensen. Thank you.
    Chairman Manzullo. We are adjourned here for a few minutes.
    [Recess.]
    Chairman Manzullo. Dr. Christensen.
    Mrs. Christian-Christensen. Thank you, Mr. Chairman. I want 
to thank you for having this hearing. I appreciate any time 
that we have the opportunity to have Mr. Scully with us to 
address the issues that are affecting our health care providers 
and the patients that they serve.
    I am glad that we are going to revisit the Merry Walker 
issue again. I think it is a very appropriate example of how 
the implementation of CMS regulations sometimes just don't 
serve the patients or the provider well. I hope that we will be 
able to resolve that issue today.
    And beyond that, even make a start at seeing how we can 
best fix the problem more systematically. I had the great 
experience of being with my local doctors last weekend as they 
were meeting with the representatives of our carrier in Puerto 
Rico, Triple S. I applaud the effort that they are making to 
try to address the concerns of the physicians, but I really 
think we still need to fix the contracting system.
    Even you, Mr. Scully, said that it was flawed. I don't 
think we are going to be able to address a lot of the concerns 
unless that is fixed. So I just wanted to say that on the 
record again.
    As we meet, the issue of restoring cuts to provider 
payments, has not been resolved. There was an attempt today 
here. The Senate was to have marked up a bill this week, they 
have not marked it up yet. And I still hold that CMS can do it 
administratively. I want to get it on the record. We are 
forcing providers out of business. In doing so, we are denying 
many people in this country access to health care.
    I also want to underscore that just doing a Medicare give-
back bill wouldn't necessarily either get to the heart of the 
problem. We really need to look at how the fees are set and 
what are the parameters used. We said it before that the GDP 
was not a good way to determine what our Medicare fees should 
be. The issue, one of the issues I wanted to mention also is 
HIPPA. As that is looming very imminently ahead, small 
hospitals and other providers need funding and technical 
assistance, I think to make the changes that are necessary to 
become compliant, and I hope that we can begin to identify 
where such help can be found.
    And with the history of audits and the investigations, 
which I have, at least on two occasions, asked for a moratorium 
on, it causes us to be concerned over what will happen as these 
new regulations are put into effect, because we know that the 
costs of time and money for review or reconsideration process 
is usually something that most of our small health care 
providers can't afford. And it turns out that many of those 
investigations don't find anything except innocent mistakes. So 
I would like some reassurance from CMS that there will be some 
flexibility and more help and technical assistance rather than 
punitive measures imposed as we begin this very complex 
process.
    One more issue I would like to add, and otherwise I will 
submit my entire opening statement for the record. And this is 
not in order of importance. I still have a problem with the 
prescription drug card that the administration is proposing. 
The card--I think given the fact--it is a poor substitute for a 
comprehensive Medicare prescription drug benefit. It not only 
will not provide substantive help to seniors, but it has the 
potential of hurting our pharmacies and our chain drug stores. 
This is, I believe, the third reincarnation of the program. I 
would like to know what is different about this program? How 
will this program help more than the others? How is it 
different than it will pass muster with the courts?
    With that, I would like to thank all of you who are here to 
testify this afternoon. Thank you for giving me the opportunity 
to make an opening statement and welcome again.
    Chairman Manzullo. Thank you, Doctor. What I would like to 
do is do the testimony in thirds. Mr. Pence do you have an 
opening statement?
    Mr. Pence. I do very briefly, Mr. Chairman. I want to thank 
you, Chairman Manzullo, for calling what I think is a very 
important hearing at a very busy time on the legislative 
calendar.
    As the chairman of the Subcommittee on Regulatory Reform 
and Oversight of this Committee, I regularly hear from small 
business people who are struggling under the heavy hand of 
government regulation. Often it is a small entrepreneur with a 
new idea for making a product or a family business, like yours, 
Mr. Chairman, passed down over generations that finds itself 
unable to stay in business because of the cost and the burden 
of onerous government regulations.
    But I must say, in keeping with today's hearing, I think it 
is particularly troubling when I hear from physicians in my 
district, and even in my home town, which is represented here 
on our panel today. People who oftentimes hold life and death 
in their hands, the very well being of the citizens that we 
serve, who tell me that they are unable to give their patients 
the best care possible, in part because of government 
regulations.
    The Clinical Laboratory Improvement Amendments Act of 1988 
or CLIA, is the issue that I have been a part of bringing to 
the committee's attention today. CLIA, as we all know, is 
administered primarily by the Centers for Medicare and Medicaid 
Services. So I am particularly grateful for Administrator 
Scully's participation today, and wish to thank you publicly 
for being here.
    CLIA's inception was in reaction, we all know, to poorly 
performed laboratory tests that resulted in missed diagnosis, 
particularly of cancer. It was absolutely a tragedy. CLIA's aim 
was to prevent errors in laboratory testing and reporting.
    In certain respects, these efforts have been commendable, 
and in some ways quite successful. The difficulties however, 
began in treating a single physician the same way we would 
treat a 1,000-person laboratory. In other areas of government 
we have been convinced that the one-size-fits-all regulation 
isn't the answer. In the field of health care, I simply believe 
the same rule should apply.
    The Secretary of HHS, Tommy Thompson's Advisory Committee 
on Regulatory Reform, has put together some important ideas on 
changes to CLIA. We hope there are opportunities to work with 
CMS on other changes and hopefully here some today. I think we 
will hear in this hearing today, Mr. Chairman, reasons for 
reform on the burden that physicians face.
    And hopefully in this hearing, we will begin to hear the 
beginnings of some very needful reforms under this new 
administration. I look forward to hearing from all of our 
witnesses. I would echo the chairman's appreciation for your 
willingness to travel here many miles and endure the scrutiny 
of a Congressional panel.
    And again, we thank you, Mr. Chairman, for your leadership 
in this area.
    Chairman Manzullo. Well, thank you.
    I want to do these in triplets, or in three parts, to keep 
the testimony as tight as possible, and first talk about the 
issue with the Merry Walker. Mr. Scully, if you wanted to 
comment on that, or if you wanted to defer to Leslie on that, 
on the status, however, you know, since you are the lead 
witness, one of the lead witnesses on it, however you would 
feel comfortable.
    Mr. Scully. It depends on what Leslie says.
    Chairman Manzullo. We are looking at the administrative 
status on that. It is up to you.
    Mr. Scully. I would be happy to talk about it.

STATEMENT OF THE HON. THOMAS SCULLY, ADMINISTRATOR, CENTERS FOR 
                 MEDICARE AND MEDICAID SERVICES

    Mr. Scully. If you wouldn't mind first, so I don't forget 
to just quickly run through the Congresswoman's issues, could I 
jump to those and then go straight back? Because a lot of 
them--they are all important issues.
    Let me start with the drug card, as you know this is 
something that came out of our career staff. And I talked to 
you before about it. We clearly don't look at that as a 
substitute for a Medicare drug benefit. We really wanted to get 
a drug benefit this year. We spent a lot of time supporting the 
House bill.
    We showed great willingness to work on any kind of variable 
with the Senate. And I am personally very disappointed, it 
doesn't look like we are going to get one this year.
    We believe that the drug card, as I said before, I 
represent 40 million seniors and disabled, we believe they walk 
into a pharmacy and pay the highest prices. We all have, or I 
have Blue Cross of Virginia. I probably pay 15 to 20 percent 
less because of their use of a PBM than a senior does, and we 
are basically trying to organize the seniors to have the same 
kind of purchasing power people under 65 have in the interim.
    In the long run, seniors want an insurance plan where they 
are going to pay $10 a prescription like I do. In the short 
term, we want to give them some hope by coordinating their 
market power. We have spent a lot of time with the drug makers, 
the retail pharmacists and the chain drug stores. We understand 
their concerns. I think the new reg is much tighter, and 
answered a lot of their concerns. They have not actually sued 
us yet.
    Ms. Norwalk. They filed Friday.
    Mr. Scully. We spent a lot of time talking to them. I 
understand their concerns. They have a lot of legitimate 
concerns. They are concerned that we organize 40 million 
seniors, and seniors pay the highest cost in a retail pharmacy, 
they are concerned more that we are going to go to mail order, 
which I don't think will happen, we are concerned about that.
    They are also concerned that if seniors pay lower prices, 
they are going to get stuck in the squeeze and their margins, 
where there are high costs on seniors will be lower.
    We have every expectation that people under 65 may pay 
more, but we don't believe people over 65 should be paying the 
highest prices, which is what happens right now. So that--we 
are trying to work with the pharmacists as much as we can. The 
drug card is clearly a short term--I think it is a little more 
than a band aid, but we believe it is a help. We also think it 
is a first step.
    We have had a lot of bipartisan support. You may have 
noticed that in the Senate, one of the few things that got 
through the Senate in the drug bill was that both sides on a 
bipartisan basis, said the drug discount card is a good idea. 
But we have never held it out as a substitute or even a short 
term fix. Almost all of the bills, Democratic and Republican on 
both sides, envision usorganizing 40 million seniors into 
purchasing co-ops. That is all we are trying to do. We are very 
sensitive to the pharmacists' concerns. I never expected them to like 
it, but I do think we have bent over backwards to find ways to address 
their concerns, purely because of the lawsuit, because there is a 
question about our existing legal authority or ability and our rules to 
answer all of their concerns, we are kind of in a catch-22.
    The more we tighten up our rule, the more people--there is 
a legal question about our authority to do it. So, but we are 
committed to working with them. I spent a lot of time talking 
to them. I went and spoke at their annual meetings. I have 
talked to the chain drug stores, and you know we think they 
have a lot of legislate concerns we would like to address. We 
also think that we have 40 million seniors that aren't 
organized, and we have a responsibility to organize them.
    I am glad to hear you have a good relationship with your 
contractor. As you know, we want to do contracting reform. I 
think there is a pretty good chance, if we do get a bill in the 
next couple of weeks that we are going to get contracting 
reform. SSS is part of Empire. My guess is they will probably 
be involved no matter what. But they tend to be one of our 
better contractors. We think that we can do a lot to improve 
that system.
    On physician payment reform. Chairman Thomas and many other 
people hope that I can fix that on my own. I can tell you I 
have spent many hours with every lawyer in the government. We 
can't fix it. Unfortunately, there is a negative 4.4 percent 
update coming on top of last year's negative 5.4 percent, and 
we are very strongly trying to fix that this year.
    And as I think you would ask, I have been the number 1 
advocate of fixing it. And the administration does not look at 
that as a give-back. We look at it as a technical fix. The 
formula is screwed up, and we are determined to fix that. We 
are not great fans of a big give-back bill, as you know. But we 
do believe that Congress absolutely has to fix the physician 
payment formula before we leave or we are going to have a 
significant access problem.
    So we are completely in support of that. And the two other 
quick things, I will mention HIPAA. I agree with a lot of your 
concerns about HIPAA. We have a lot of work to do on HIPAA, but 
I do think in the long run, all of the doctors' offices, all of 
the hospitals, and I used to represent 2,000 of them, you know 
they now get billed by 25 different insurance companies with 25 
different sets of forms. It is going to be difficult and 
intimidating to go to one common set of forms.
    It may be difficult a year from now when we flip the switch 
and use a common data set. But people have been talking about 
this for 15 years as the right thing to do. I think 2 or 3 
years from now when you go into a lot or a physician's office, 
they are going to have a lot lower need for clerical staff, 
hopefully, because they will have one set of forms for every 
insurance company, and for Medicare and for Medicaid. It is an 
intimidating task, and we are responsible for the education. It 
is going to be tough.
    But I do think that we need, at some point, to close our 
eyes and take the leap of faith and have every provider use one 
set of common codes. In the long run, it will do a lot to 
debureaucratize the billing system. And we are hoping to do the 
best we can to work with your providers to educate them on 
that.
    The last thing I have tried, maybe I will just use this as 
my introduction to the other issues we are going to get into. 
We tried the best we can to debureaucratize CMS in the last 
year and to deal with people, even this morning at our staff 
meeting, I was in North Carolina, rural North Carolina touring 
five hospitals on Friday. I came back and gave the example of 
one that had a minor investigation 5 years ago. It turned out 
after 5 years of investigation, that they had no violation, but 
they spent $1 million dollars on legal fees on a 60-bed 
hospital. And that is the kind of thing that drives people 
crazy.
    We are doing the best we can to avoid that kind of thing. 
On the other hand, we are spending $560 billion of taxpayer 
money every year in Medicare and Medicare and S-CHIP and you 
have to have some reasonable guidelines to make sure the 
programs don't get defrauded.
    But I think we have made a lot of gains. We are here to 
talk about the issues that came up 4 or 5 months ago. And I 
think we have spent a lot of staff time and made a lot of 
effort. We haven't resolved all your issues, but we spent a lot 
of time on them. And I will just jump in by talking about Merry 
Walker.
    If you would like, stop there and go on one by one?
    Chairman Manzullo. Yes.
    Mr. Scully. On the Merry Walker issue, we almost resolved 
it during the break on the vote. But we are very sensitive to 
Mary's concerns. We spent a lot of time on it. Leslie spent a 
lot of time on it. The bottom line is, it is pretty clear that 
she obviously come up with a creative product that makes a lot 
of sense.
    I am sure in many cases, her ambulatory device makes a lot 
of sense and would help in a lot of nursing homes. I spent a 
lot of yesterday in a nursing home in Arkansas. And there is no 
question that you can pretty much look at it from the 
perspective of many seniors, that the device makes a lot of 
sense.
    In my written testimony, we laid out a lot of examples of 
why we have concerns about the Merry Walker. It is a great 
product. I think we are making a lot of changes in our 
regulatory basis to make sure it is not automatically coded as 
a restraint. In most cases it is not going to be a restraint.
    Out of about 3,100 I think cases of restraint--6,100, filed 
complaints about restraints this year, about 30 of them came 
from Merry Walker. There is no doubt the company, that Mary had 
no intention of having it be designed as a restraint, but we 
have a statutory requirement that if anything, whether it is a 
wheelchair with a belt, whether it is bed with a brace on it, 
whether it is a walker that is intended to be helpful for 
rehab, which this one is; if a patient who is physically or 
mentally limited has trouble getting out of it by themselves, 
we have to code it as a restraint.
    I think Mary's major concern, and I think we have had some 
gains with your staff's help in the last few months, is that 
nursing homes haven't been buying them because they thought 
they always had to code it as a restraint.
    And so if they are going to have to report it as a 
restraint and fill out pages and pages of forms they weren't 
going to buy it and use it. We have made a big effort in the 
last 4 or 5 months. We have sent out a guide to almost every 
nursing home in the country saying this should not 
automatically be coded as a restraint. We are about to send out 
to all of the State surveyors guidance that says that it should 
not be coded as a restraint.
    In talking to Mary during the break, I think she--
apparently didn't know it--we are coming up with a new code 
that takes it out of a category that apparently more 
automatically throws in that problem area.
    But it is clear we spent a lot of time looking, probably 
more time looking at this device than any device in the world, 
I would guess the last 6 months. There are some cases where 
clearly, and yet I think you can see it by looking at it, an 
elderly patient who maybe much better off in this than a 
wheelchair, and in some cases, can't get outside of the 
railing, and can't get out of the thing, and it is not intended 
to be used as a restraint, but it might be.
    And in these cases where we have tried to set up a 
situation where if nursing homes essentiallycertify, they would 
not be consider it automatically as a restraint, which is Mary's number 
one concern. But a nursing home would have to say, we don't believe for 
this patient it is a restraint. But for other patients, there are a 
subset of patients where it could be a restraint, we have at least 30 
examples where patients have had significant problems getting out of 
it, or have fallen. That is not the intent. Clearly having been in a 
lot of rehab hospitals over the years, it is a great device, and 
probably could be very helpful to a lot of patients.
    But clearly you can see in some cases could be difficult 
for some patients to get out of. So that is the problem. Your 
original request, or Mary's was that we never classify it as a 
device. I think we have gone to every length--sorry, as a 
restraint, every length we can to educate the provider that it 
should not be used as a restraint.
    But that they--if they basically find that for that patient 
it is not a problem, then it is not a restraint. Because the 
issue for her, if it is ever classified as a restraint in the 
MDS system, the nursing home then has to fill out lots of forms 
and must have greater oversight, which is clearly not the case.
    And, I think for many patients this is probably a far 
better device than a wheelchair. That is pretty obvious. I 
think it is also obvious that for the agency to say this could 
never be a restraint for any senior in a nursing home also is 
inaccurate.
    So that is--I skipped over my testimony. But that is a 
quick summary on that subject. We spent a lot of time talking.
    [Mr. Scully's statement may be found in the appendix.]
    Chairman Manzullo. I would like to go to Leslie Norwalk, 
who is the policy director and counselor to the Administrator 
at CMS. And I just want to take you back to our office. When 
was that, in June?
    Ms. Norwalk. In June.
    Chairman Manzullo. Our goal was to try to get the 
resolution in 60 days, and that time has come and passed. But, 
there have been reasons for that, because I know you have been 
doing a lot of research on it. If you could bring us up to 
date, give us the legals, where we are exactly on it, and then, 
Mary may have a question or a comment and we can take it from 
there.
    Ms. Norwalk. As Tom alluded we--Barry and I, actually 
spent, your fabulous regulatory counsel spent----
    Chairman Manzullo. I will note that for the record.
    Mr. Pence. Move to Strike.
    Ms. Norwalk. But of course. We spent a significant amount 
of time after that meeting, and I think it was July 10th when 
Barry and I actually came to some understanding that the 
resident assessment instrument, which is the guidance that goes 
along with our Minimum Data Set that nursing homes are required 
to fill out, those instructions to the nursing homes, we 
altered those and amended those, so it was clear, as Tom 
mentioned, that it was not always classified or categorized as 
a restraint and tried to make clear to the nursing homes that 
they needed to do an individualized assessment to see whether 
or not the effect of the particular device had the effect of 
being a restraint.
    And if it did, then they would need to code on the MDS as a 
restraint. And then, follow the statutory requirements of when 
it is a restraint. When something is a restraint, the statute 
requires--that it has to be used to treat medical symptoms, and 
it cannot be done purely for staff convenience.
    And the concern is, that while most of the nursing homes 
are terrific, but every once in a while you get a bad egg and 
they might put someone in Merry Walker's fabulous device who 
wants to get out of it, can't get out of it for whatever 
reason, and either falls over or they are stuck in here. And 
Mary totally understands that this should be used, in most 
instances, with supervision.
    Sometimes nursing homes don't have that supervision. So I 
think--what we did was, we went as far as we could go in terms 
of making--everything except for saying that it is not 
classified as--it is never classified as a restraint, but yet 
trying to be clear that it didn't always have to be one, 
either, so that middle ground. And we did a lot in terms of 
educating the nursing homes, getting on calls and talking to 
the associations, getting this out so that the actual guidance, 
when someone is looking at, gee, how do I code the restraint in 
the MDS, they actually read that it is not always a restraint, 
and they have to do an individual assessment.
    So that is where we are. That happened after our meeting. 
So that is the first step. Now, actually there was a step prior 
to that. I know that there was a trademark concern that came up 
probably at the last hearing. I think we did resolve that 
issue. So those are the two issues in terms of resolution, we 
have come to resolution in terms of that.
    If you think, Mary, after looking at this that you might 
define something differently, we have put it out in draft form 
to make sure that nursing homes understand the clarifications. 
If they don't understand, we will go ahead and revise it.
    The third step that we did, or that is in the works, is we 
are putting out a new version of the MDS. The Secretary 's 
Advisory Committee on Regulatory Reform that Mr. Pence referred 
to earlier, we spent a lot of time on that committee as well. 
So one of things that came up was that the MDS itself was 
simply too burdensome. So with Tom 's help, we reduced the 
actual burden on that by 20 to 30 percent, we reduced the 
questions so the nursing homes would be able to answer it more 
quickly.
    Now, the new version of the MDS should roll out about 2004. 
And in that new version, the way that we currently code the 
Merry Walker is in one of five categories. The five categories 
are bed rails--two different types of bed rails, a trunk 
restraint, a limb restraint and chair prevents rising.
    Now the Merry Walker does not intelligently fall in any of 
those five categories, admittedly so. So we have put in our new 
instructions that even though we understand it shouldn't be a 
chair prevents rising, we would like to code it there until 
2004 when we will have a new category. We will probably have an 
``other'' category, because there may be other things that 
don't fall into those five. And we would like to make it as 
easy as possible for nursing homes to pick one that is the most 
appropriate.
    That won't happen until 2004. But that is in the works to 
also be resolved. Of course, if it is not a restraint, you 
would never code it there. Elsewhere within the MDS, there is a 
section--it is an ambulatory device, a walker or a cane or a 
crutch. You may code it in both places.
    I think what I--and Mary, you can help me with this. I 
think where we are now, is that Mary would like us to do 
something more to get people out of wheelchairs and into the 
Merry Walker. I think that that might be--there may be some of 
that that is part of a restraint discussion, but I think the 
rest of it is really beyond the what is a restraint discussion 
and something that steps farther, that we haven't really done 
brain storming on. That is certainly something that we could do 
with her, without your brilliant regulatory counsel in the 
room.
    But, at this point in time, I think that we have done, 
about as far as we think we can, given our concerns with the 
complaints that State surveyors have had as to restraints.
    Mr. Scully. Talking to Mary during the break, the vote, one 
of Mary's concerns is, I was at a 95-bed nursing home yesterday 
in Little Rock. There are a lot of people in wheelchairs that 
could and should be in a more appropriate device, that they are 
not going to sit in a wheelchairall day. That may well be 
correct. And we have a lot of problems with nursing homes, both with 
payment and level of care and level of staffing.
    But I think that goes beyond how we someday incentivize 
facilities to use better devices, as different than a 
restraint. You can probably fall out of a wheelchair as well, 
but the issue is, as a statutory matter, anything that a person 
cannot get out of easily, has to be classified as a restraint. 
I think we have gone as far as--very far in clarifying that in 
most cases, it will be--I think Mary's number 1 problem is it 
is hard to market it. It is a restraint. We have to fill out 
lots of paperwork. We have gone to great extents to make it 
clear to nursing homes and to our contractors and to the State 
surveyors that unless they say for this patient, it may be a 
restraint, and won't be classified as such.
    Chairman Manzullo. Okay.

 STATEMENT OF MARY HARROUN, M.S., LNHA PRESIDENT, MERRY WALKER 
                          CORPORATION

    Ms. Harroun. I am Mary Harroun, the inventor of the Merry 
Walker. I am a geriatric psychologist, licensed nursing home 
administrator. I invented the Merry Walker 12 years ago.
    I discovered this about a year and a half ago when I was at 
an Alzheimer's conference and had not kept up with on the MDS 
because I am not in clinical practice any more. Leslie did give 
to Barry a copy of all of the deficiencies. I believe we came 
up with 30 deficiencies on the Merry Walker. I read through 
them extremely carefully and found out, gleaning through them, 
that there were 32 documentations required in order to use a 
Merry Walker in a nursing home if it is considered a restraint.
    I talked to a number of nursing homes that had actually 
used the Merry Walker and were cited as--that it was cited as a 
restraint when, in fact, they were not using it as a 
restraining device. I do have some problems with that.
    [Ms. Harroun's statement may be found in the appendix.]
    Chairman Manzullo. Let me take you forward. Based upon what 
Ms. Norwalk said on since the meeting we had in our office in 
July, okay, would you comment on what she said?
    Ms. Harroun. I have not seen a copy of that, so I cannot--I 
have no knowledge of that.
    Chairman Manzullo. Is this in draft form?
    Mr. Scully. She only has one copy.
    Ms. Harroun. No, I did not receive this from you.
    Chairman Manzullo. Our efficient Regulatory Counsel sent it 
to you.
    Ms. Harroun. I did not receive it. So this is the first 
time that I have actually seen this.
    Chairman Manzullo. Ms. Norwalk, the purpose of that is to 
advise nursing home administrators that this is not 
automatically a restraint?
    Ms. Norwalk. That is correct.
    Chairman Manzullo. All right. Mary.
    Ms. Harroun. That would be fine.
    Chairman Manzullo. That was one of your goals in there. Go 
ahead.
    Ms. Harroun. What we need to do is make sure the resident, 
of course, is appropriate to use the Merry Walker, which I have 
always advocated they need the assistance of one.
    Chairman Manzullo. Okay.
    Ms. Harroun. Or stand-by assist, whatever you want to call 
it.
    Chairman Manzullo. Let me stop you right there at that 
point. Ms. Norwalk, what Mary said, that this device cannot be 
used by a senior alone, there has to be some person to assist 
them. Is that part of your guidance in the letter that went 
out?
    Ms. Norwalk. The guidance that went out purely addresses 
how it is that a nursing home fill out paperwork. So how it is 
that they code it, so that we can do a full care plan and 
assessment. It is part of the care assessment that the nursing 
home has to do for every single patient.
    Chairman Manzullo. How many pages is this form?
    Mr. Scully. Well, in fairness because the nursing homes 
actually look at this, but we went through major nursing home 
reform a couple of years ago. We now have prospective payment 
for nursing homes. The way we both track quality, I note that 
we are going to have a public outcomes rating in every 
newspaper in the country November 12th of every nursing home, 
all this comes from the MDS data, but they also get paid on it. 
So when you are in a nursing home, there is a fairly thorough 
evaluation that is done on a regular basis to decide how you 
get paid.
    So depending on how sick, how old they are, what 
complications they have. We pay about $12 billion a year, 
$13\1/2\ billion a year this year in payments for Medicare 
payments to nursing homes.
    It is always done based on the patient evaluation. So the 
forms that they fill out are not for regulations, they also 
determine the payment that they get.
    Chairman Manzullo. Okay.
    Ms. Harroun. I have a question. Since I have not been 
educated in the MDS because I have been out of the clinical 
area for 12 years. The RUG, is that--those are based on 
payment. And from what I understand, and please correct me if 
I'm wrong, if a resident needs higher intervention in care, 
more nursing, they have decubitus ulcers, they can no longer 
walk, they are incontinent, they need assistance with ADLs, 
does the nursing home in fact get paid more money for that 
resident care or do they get paid----
    Mr. Scully. Yes. Much like we went to DRG's, which are 
diagnosis related groups in 1985 for hospitals, and a few years 
ago went to ambulatory payment codes for outpatients, RUGS are 
resource utilization groups. There are 88 of them. I may be 
wrong. And there are 88 categories. As a nursing home patient, 
they fill out a form about how mobile are you, do you have 
Alzheimer's? What your various illness problems are. How many 
activities of daily living do you need help? It is done 
periodically during the nursing home stay.
    And basically that determines what we use to track quality, 
but it is also used for payment. So if a nursing home 
identifies the patient as having higher acuity and more 
illnesses and more trouble with various activities of daily 
living, they get paid more--there are 45 RUGS payments.
    Ms. Harroun. If I were owner of a nursing home, God forbid, 
I would not be in there, wouldn't it behoove me to run my 
residents right on the edge to receive higher payment for 
Medicare, or poorer care? If I have a resident sitting 
immobile, either in bed or a wheelchair, and they are probably 
going to develop a level 1, let's start with a decubitus ulcer, 
it then goes up to level 4, I would receive more payment for 
that patient's ulcer than if I kept them ambulatory in the 
first place and not ever allowed them to have a decubitus 
ulcer?
    Mr. Scully. Well, you can say the same thing about any 
prospective payment system, whether it is hospital inpatient or 
outpatient. We track them pretty closely. I think we measure 
quality very closely. I think you are going to see it--I forget 
where you live, Mary, Chicago. You are going to see a full-page 
ad in the Chicago Tribune on November 12th, comparing on a 
number of quality measures, including bed sores, how every 
nursing home in the Chicago area compares.
    So those that aren't doing a good job, may theoretically 
get paid more for having sicker patients, but you are not going 
to look very good and you are going to have a hard time the 
next time a family tries to find a nursing home if you have the 
worst outcomes in Chicago. You are going to lose business.
    So you do, in fact, get paid for higher acuity, but it also 
shows up in your quality measurements.
    Ms. Harroun. Now, the quality measures I also have a 
problem with, in that you are measuring in one section of that, 
under the long-term care section you have acute care and then 
long-term care. One section is measuring the amount of 
restraints used in that nursing home.
    If, in fact, Merry Walker is being considered a restraint, 
that will then take away the thrust of wanting to use the Merry 
Walker, even though--when they have to regard it as a 
restraint, because that is going to knock them down in the 
quality measures and show them that they are, in fact, a worse 
nursing home.
    Mr. Scully. If they are defined as a restraint, as we said 
earlier, we have gone to great lengths to make sure nursing 
homes know if there was a mistaken problem in the past where 
they thought that they would use a restraint, in the future 
that is not going to be the case.
    One of the measures of quality is number of patients in 
restraints, because that is one of major patient concerns over 
the years, is nursing homes that restrain patients for 
convenience and nothing else. And I think we have made it 
pretty clear that except for patients where this could be a 
problem, it is not a restraint.
    Chairman Manzullo. At this point, the Merry Walker is no 
longer automatically considered a restraint?
    Mr. Scully. That is right.
    Chairman Manzullo. And then, Mary, would your situation, 
you are going to have to--I think you are looking at a 
marketing aspect, as to which HCFA cannot get involved in, 
because everybody knows it is common knowledge in your 
statement that the fact that people are better off in the Merry 
Walker than they are in a wheelchair. Okay.
    Ms. Norwalk, at this point then, is there any more that CMS 
is planning on doing with the Merry Walker besides that 
advisory that you are putting out to the nursing homes?
    Ms. Norwalk. Just when we revise the MDS system when it 
comes out in 2004, we will have an additional category so that 
it is put in a more appropriate category than ``chair prevents 
rising'', so that it is coded more appropriately, so that 
people aren't confused as to where it should go.
    Because clearly this is not a chair that prevents rising.
    Mr. Scully. That only kicks in if the nursing home itself 
determines for that patient it may be a restraint. Our goal 
here is to make it abundantly clear to every nursing home and 
every State surveyor for a patient who can, in fact, use this 
and get out of it themselves, which the vast bulk of patients 
can, it is not a restraint and they will never even get to the 
second category.
    Chairman Manzullo. My question would be, when the term 
Merry Walker it will have the TM on there.
    Ms. Harroun. R.
    Chairman Manzullo. Are your questions answered?
    Ms. Harroun. Yes.
    Chairman Manzullo. Mr. Pence, did you have any question 
involving the Merry Walker?
    Mr. Pence. No, Mr. Chairman. Thank you.
    Chairman Manzullo. All right. I am going to excuse, Mary 
Harroun and Leslie Norwalk on this one-third of the hearing. 
Thank you so much.
    Mr. Scully, thank you for the hours you spent. Ms. Norwalk 
thank you also for the great job you have done on this. I am 
going to excuse Ms. Norwalk and Mary Harroun. And then let's go 
on with the testimony. And, Congressman Pence, maybe you would 
like to introduce your constituents. This is on the CLIA. As 
soon as you introduce them, then I want to jump back to Mr. 
Scully if that is okay with you, Mr. Scully, to bring out the 
CLIA portion of your testimony.
    Mr. Scully. Sure.
    Mr. Pence. Thank you, Mr. Chairman. Our next witness is a 
constituent of mine and a friend, and a professional with whom 
my family has enjoyed a warm relationship for over 25 years.
    Dr. Edward Probst hails from Columbus, Indiana. He is the 
immediate past president of the Indiana State Medical 
Association. He is a practicing dermatologist in my home town 
of Columbus, Indiana, and if I may say for the record, is more 
than any other physician in my home State most responsible for 
calling the particular changes which CLIA imposed on small 
practitioners to this Congressman's, attention and therefore to 
this Committee's attention. It is my privilege to recognize Dr. 
Edward Probst for an opening statement. And thank you for being 
here.
    Dr. Probst. Was Mr. Scully going to speak at this point?
    Mr. Pence. I think it was the chairman's intention, from 
counsel, to recognize Mr. Scully immediately after my 
introduction, which I didn't previously understand. So Dr. 
Probst, if you would hold your powder, Mr. Scully, you are 
recognized.
    Mr. Scully. I will be quick. I have a long history with 
CLIA. Just guessing from looking at this thick briefing book 
that the doctor does as well.
    I was involved in the first Bush Administration in the CLIA 
regulations. They were passed in 1988. There were some changes 
and the regulations were written when I was overseeing that HHS 
portion at OMB in 1992.
    So I got very involved with those, and a lot of the changes 
and I followed CLIA pretty closely since. I was also in the 
interim, when I was expelled from government for 8 years, I was 
on the board of SmithKline, which is now out of existence, a 
clinical lab company, their domestic U.S. Advisory board. So I 
learned a lot about CLIA and clinical lab oversight, some of 
which has changed in recent years.
    So there is no question that CLIA is complex. There is no 
question that CLIA can sometimes be difficult. But there is 
also no question that when CLIA was put in, it was because 
there was a significant problem with quality in clinical labs.
    Much of which has improved in the last 10 years, even from 
our own evaluations in the last couple of years, I can tell you 
our belief is that the quality of services in clinical labs has 
improved dramatically.
    Congress created a number of different thresholds. Most 
physician office labs are waived, they are on the waived 
services, physician lab services are waived from CLIA. That is 
generally a regular cycle of kind of self-certification. The 
dermatology issues and others, when you get into higher acuity, 
higher difficulty types of clinical labs, most of the--that is 
really when the clinical lab guidance, that is more difficult, 
kicks in.
    In some cases for dermatologist and others for things like 
melanomas, there is a much more thorough requirement. I am just 
guessing that the Doctor's concern is, when you get to things 
like the melanomas or higher-acuity types of lab tests, it is 
more difficult lab tests.
    There are much more thorough requirements from CLIA in the 
statute. And my guess wouldbe, most physicians would say why do 
I have to hire a highly-trained clinician or a highly-trained nurse to 
do these, I am a doctor I can do these myself. That was a lot of the 
concern in the late 1980s when this happened is if physicians did it 
themselves that would be the case. But in most cases it turned up 
going, for pure volume, it evolved over the years in to nonphysicians 
doing those labs and doing evaluations, there was a huge level of 
errors, which is why CLIA was passed for a variety of reasons.
    So your concern is, as you state in your opening statement, 
about a giant lab like SmithKline no longer exists, but there 
are three or four large clinical lab companies that do the vast 
bulk of clinical lab services for hospitals and physicians' 
office should be treated differently from the average 
physician's office. Generally they are. It is only for the 
really much more difficult and much more sensitive tests that 
are done, a lot of them are in dermatologist offices, that the 
higher threshold for regulatory oversight for CLIA kicks in.
    So I would say, I haven't spent as much time as I did 10 
years ago, so when you get to the details of this I might even, 
with the chairman's approval, call upon my staffers who do this 
every day, to get into the more detailed questions about the 
regulations.
    Chairman Manzullo. Dr. Probst, you are up.

     STATEMENT OF EDWARD L. PROBST, M.D., COLUMBUS, INDIANA

    Dr. Probst. Good afternoon Mr. Chairman, Committee members, 
thank you for hearing testimony on CLIA, and a special thanks 
to Representative Pence for responding to my concerns.
    I am Edward L. Probst, a dermatologic physician from 
Columbus, Indiana and immediate past President of the Indiana 
State Medical Association.
    There are many results from the CLIA Act that Congress did 
not intend. That also have adverse effects on patients, 
physicians and care. These include physicians no longer 
offering crucial office testing, physicians limiting tests 
offered and physicians being overwhelmed by the paperwork of 
the Act.
    I will comment mainly on the latter, but the others are in 
the written testimony and the attachments.
    All physicians want accurate testing. This is not the 
issue.
    The attachment on page 1 is our office calendar of 46 
requirement activities in addition to the daily requirements, 
which are in the attachments, and the additional paperwork for 
each test done. These binders that I brought show the results 
of these requirements in our office. Each requirement takes 
time.
    The few tests that I perform relate to the immediate direct 
care of the patient. Diagnosis of fungus tests, scabies, lice, 
etc, and are in the area of my training.
    Consider the paperwork for a microscopic test done by me in 
my office while the patient remains in the exam room waiting 
for the results.
    Before CLIA, I would examine the patient, take a scraping, 
label the slide, carry the slide myself to the microscope, read 
the slide, return to the patient, record the results in the 
patient's chart, in red, so we would know it is a laboratory 
test, explain the results to the patient and outline the 
treatment recommendations.
    What more could be required that would improve this service 
or the efficiency of its delivery? This was pre-CLIA.
    After CLIA--Note the CLIA laboratory requisition form which 
is on page 31 of the attachments requiring 14 entries, all of 
which are already in the chart. This is a requisition from me 
to me. It is a requisition to the laboratory, and that is still 
me. So it is a requisition from me to me required by the CLIA 
inspector.
    On page 32 of the attachment is the CLIA laboratory test 
requisition and report log, which is required to be at the 
microscope, with 10 entries that are already in the chart, and 
also on the requisition form.
    Then, I have to record my findings on each of those forms. 
Then I go to the exam room and record it in the patients 
record, which is where I think it belongs in the first place. 
What added value is this redundant and time consuming 
paperwork? In my opinion, none.
    Time for extra paperwork removes time from patient care. 
But, in addition to that, each of those pieces of paper has to 
be reviewed by a quality assurance person to be sure that the 
data is correct, which can only be correct if it were taken 
from the chart in the first place, because that is where the 
data originated. This must also be approved by the laboratory 
director, who must be a M.D., who would rather be seeing 
patients.
    And then, the M.D. laboratory director must create a 
summary that gets placed in the CLIA book. All of this is for 
the CLIA inspector. All of this is time away from the patients.
    Let me share two examples about time. Mrs. X, an older lady 
usually with multiple complaint was in my office. She did not 
require microscopic testing, and most people don't. After 
evaluating and giving recommendations, I had time to ask her 
``Is there anything else you would like to talk about?''
    She said, ``yes, I plan to kill myself today.'' She was not 
kidding. I was the only person she was willing to tell that to. 
If I had been burdened with a lab test requisition, I might not 
have had time for concern, and Mrs. X would have died that day.
    Mr. Nathan S, and he said I can use his name, a farmer, was 
in my office for a skin cancer follow. No laboratory test was 
needed. I had time to inquire about him and his family as we 
finished. He said ``no problems.'' His wife, Joanne, said, 
``Nate can't see well today.''
    He had an acute vessel occlusion. I made arrangements for 
immediate intervention, and his vision was spared. And it would 
have been lost otherwise. Time for needy patience, versus time 
for needless reduplicating paper. That is the question.
    The CLIA regulations prevent us from being the caring, 
compassionate physicians that we are. Please, remove the 
unnecessary red tape of CLIA, OSHA, HIPA, Medicare, et cetera, 
so we can do what we have been called to do, be caring, 
compassionate physicians.
    Thank you all for caring. I welcome any questions on my 
written or verbal testimony.
    Chairman Manzullo. Thank you, Doctor.
    [Dr. Probst's statement may be found in the appendix.]
    Chairman Manzullo. Congressman Pence, did you want to 
introduce Dr. Davey?
    Mr. Pence. Yes, Mr. Chairman.
    The Committee will now hear from the Dr. Patrick Davey. He 
is also a dermatologist with a practice in Lexington, Kentucky. 
Currently serves as chairman of the American Academy of 
Dermatology's Association Quality of Care Task Force.
    He is a distinguished physician, well qualified to speak to 
the practical implications of the issues we are addressing 
today. Dr. Davey is an assistant clinical professor as well as 
of dermatology at the University of Kentucky. Where, in 
addition to top flight health care, I understand that they have 
a basketball program, although I have no proof of that.
    Dr. Davey. Well, Indiana used to have a basketball program.
    Mr. Pence. I left that one open, Mr. Chairman. And I yield 
back to the chairman.
    Chairman Manzullo. We look forward to your testimony. The 
goofy-looking clock is notpart of CLIA. It is part of our time 
system here. When it gets to yellow, that means you have 1 minute. When 
it gets to red, that means you have no time left.
    Dr. Davey. I assumed that it was part of HIPAA.
    Chairman Manzullo. Isn't Indiana red also?

 STATEMENT OF PATRICK DAVEY, M.D., LEXINGTON, KENTUCKY FOR THE 
                AMERICAN ACADEMY OF DERMATOLOGY

    Dr. Davey. Good afternoon, Mr. Chairman and Committee 
members. I want to thank you for inviting me to discuss CLIA 
for dermatologists and give you a national perspective on the 
issue, because I travel around the country a lot, and look at 
individual practices as part of what I do.
    I am a practicing dermatologist in Lexington, Kentucky. And 
in my practice, we have a nine-physician practice. We have a 
high complexity lab under the CLIA regulations which performs 
about 15,000 biopsies a year, about 2,000 frozen section 
margins a year. So it is a little bit different than the 
perspective that we just got.
    So what I am going to tell you is what I see when I go 
around the country and look at dermatologists' offices. I am 
also the chairman of the American Academy of Dermatology's 
Quality of Care Task Force, and deal with this issue on a 
weekly basis, where we see mostly people who are confused about 
what goes under the CLIA regulations and what doesn't go under 
the CLIA regulations.
    And finally, the other thing I do is I survey organizations 
for the Accreditation Association for Ambulatory Health Care, 
and I also teach new surveyors, so I am well aware of going in 
and doing surveys and accrediting facilities.
    I have a long-standing personal interest in quality 
improvement and management, and most of the papers that I have 
written, and also the talks that I give, deal with, how do you 
set up a quality improvement program in your office. In order 
to try to bring dermatologists up to speed on this issue.
    Most dermatologists are actually in a solo or small 
practice, about 46 percent. I am the exception in being in a 
large practice. The CLIA Act, of course, was passed in 1988, 
and was really a reaction to larger laboratories where there 
was a problem with pap smear testing, as Mr. Scully alluded to 
earlier.
    And the American Academy of Dermatology initially opposed 
the CLIA Act, and we advocated passage of legislation to exempt 
the physician office laboratories from CLIA. And really, since 
these exemptions, this has really failed. What we would like to 
do is to have some regulatory relief from the CLIA regulations.
    Now, what this really does, what CLIA is really doing is, 
it is impeding the ability of dermatologists to provide these 
services in their office to the patients as we heard from my 
colleague here. That is a problem.
    Most dermatologist's office really have limited resource 
for the CLIA compliance. They don't have the staff to be able 
to jump through all of those hoops that we are required to do 
with the CLIA, and we really are very patient oriented, we 
really want to spend our time with patients rather than spend 
our time trying to meet the regulatory requirements. The 
American Academy of Dermatology in 1993 developed a CLIA manual 
which I have here to show you. It is there for our members. 
Every time I lift this thing I get a hernia. You can see it is 
a fill-in-the-blank type of manual so that people can meet the 
CLIA regulations by filling in a blank.
    Since it has been passed, about 75 percent of 
dermatologists have stopped doing these tests in their office 
when you will look at our surveys. We are trained to do the 
tests in our training programs. It is something we are very 
good at, but it is something that we just can't do because of 
the CLIA regulations. We can't afford the cost and we can't 
afford the paperwork that has happened because of CLIA.
    What we would like to see happen is that some of these 
basic dermatologic tests moved from a medium complexity level 
down to a waived or a physician performed type of testing. And 
we feel that this could be done without really endangering the 
quality of care. If you look, for example, the fungal culture 
that we saw here, that is a very simply test to perform.
    You go ahead and do a scraping on a patient, or you do 
clipping from toenails, you put it in there and you look at it. 
It is a color change that is going to happen. So you can do it 
is very easily to see if it is positive or negative based on 
that color change. It is also something that we had to learn 
for our board certification. We did that every day in our 
residency programs and for our board certifications, so we are 
very well aware of these types of tests.
    In my statement, I gave a number of other tests that we 
would like to see moved from these medium complexity down to a 
lower complexity.
    And hopefully, that is one of things that this Committee 
will be able to do for us. We would also like to have the 
Committee weigh in in support of Secretary Thompson's 
Regulatory Reform Committee. We talked about that a little bit 
earlier. What this will do, it will give us this information 
from CLIA in plain English, and we do speak English in 
Kentucky.
    It also would increase the involvement of physicians in 
these regulations. That is one of the reasons I am here, 
because I am interested in the process, I wanted to be involved 
in it. And it would improve really the providers and also the 
people that are going to be going out and doing the 
inspections. It would improve their education with respect to 
CLIA.
    So that is why I am here. I would like to have the 
Committee look at giving us regulatory relief. Thank you very 
much for your time, and I would be pleased to answer any 
questions.
    [Dr. Davey's statement may be found in the appendix.]
    Chairman Manzullo. Thank you. Mr. Scully, you have a member 
from CMS at the table.
    Mr. Scully. Yes, Mr. Chairman. Judy Yost is the director of 
the CLIA division and certification.
    Chairman Manzullo. What I would like to do is to give your 
response, or Mrs. Yost's response, I guess, to the problems 
and/or suggestions of each of the physicians.
    Mr. Scully. If you don't mind I will give mine quickly, and 
then let Judy answer appropriate questions. Certainly they 
raised some reasonable concerns. The Secretary's Regulatory 
Relief Task Force, I think most of the staff from the 
organization has come from CMS. We are trying to simplify CLIA.
    We are trying to come up with clear education. We would be 
happy to get the doctor more involved, both of them much more 
involved. I think, for the most part, a lot of--I think in 
talking to Judy here, probably the biggest problem we have had 
is with dermatologists. Maybe we should spend more time with 
dermatologist trying to find out the deal with their specific 
problems, because the other major group that I think encounters 
CLIA the most, the pathologists, are generally pretty 
supportive and have been happy with the changes we have made.
    So maybe we haven't spent enough time focusing on the 
specific issues with dermatologists, because most 
dermatologists, from what Judy has told me, and from other 
places today, dermatologists tend to do the more complex 
treatments, complex tests to get them under the scrutiny of 
more CLIA oversight, and they tend to fall into that category 
more than other doctorsseeing patients on a regular physician 
practice.
    Pathologists generally don't have that type of practice. So 
part of this may be specific to dermatologists, and there maybe 
other practice groups who have had problems with CLIA, but they 
seem to have specific and somewhat unique problems with CLIA. I 
am totally committed to spending more time to deal with some of 
unique challenges that we present for dermatologists.
    Ms. Yost. Just briefly. Thank you. I don't think----
    Chairman Manzullo. What is your position at CMS?
    Ms. Yost. I am director of the division of laboratory 
services at CMS. But just to echo Tom Scully's comments, I also 
want to say that we very much want to work with the 
dermatologists, because their issues are important. They are 
serious. They are unique.
    Chairman Manzullo. Let me stop you at that point right 
there. Drs. Davey and Probst, have you had a relationship with, 
or the Academy had a relationship with CMS, it is not as tight 
as you would like it? Give us some concrete suggestions here so 
we can be able to follow the thread here on the suggestions. 
What would you like to see done?
    Dr. Davey. When you look at our practice, it really runs 
the gamut. We certainly have things that should fall under the 
high complexity, like biopsies, skin biopsies. My office, we--
if you came into my office, we would biopsy you, and then we 
would process that, and we have our own dermatopathologists 
that would look at it under a microscope.
    My lab would meet the CAP, College of American Pathology 
standards in terms of what we are shooting for in that office. 
If you have a solo physician that is doing a scraping like this 
that is going to be scraping----
    Chairman Manzullo. Is that where the problem is?
    Dr. Davey. We have some tests that we feel should not be at 
the level of complexity that they are at.
    Chairman Manzullo. Ms. Yost, your comment on that?
    Ms. Yost. Just I agree partly with the comment about the 
pathology. In regard to the--like the KOH and the fungus test 
from the DTM and so forth that are routinely done by 
dermatologists we--these tests were actually taken to the 
Clinical Laboratory Improvement Advisory Committee, which is a 
technical secretary's advisory committee to the CLIA program, 
it is an ongoing program.
    Chairman Manzullo. Do physicians sit on it? Dermatologists 
sit on that?
    Ms. Yost. There is not a dermatologist, but there are 
physicians represented on the committee as well as obviously 
laboratory experts and consumers.
    Chairman Manzullo. So there is no dermatologist on CLIA?
    How many physicians sit on that committee?
    Ms. Yost. Well----
    Chairman Manzullo. How many people?
    Ms. Yost. There are about 20 people on the committee. And 
probably 4 or 5 of them are physicians or Ph.Ds.--and the rest 
are probably Ph.Ds in laboratory science.
    Chairman Manzullo. Do you think it would help you if a 
dermatologist sat on that committee?
    Ms. Yost. They are certainly welcome to be invited to the 
committee. Obviously it is one of those cases where you have to 
have a balance between all areas of expertise.
    Chairman Manzullo. I think it is obvious here that they are 
not represented at all. There is agreement that they should be.
    Mr. Scully, what would be the process to appoint somebody?
    Mr. Scully. I don't know. But I assume I can probably take 
care of it.
    Chairman Manzullo. Could you do that? Do you understand 
what he is offering here?
    Dr. Davey. I am very happy that he has offered that.
    Chairman Manzullo. You bet. All right. So--I didn't mean to 
interrupt you on it.
    Mr. Scully. My guess is that technically the Secretary, a 
lot of these, we have many advisory committees. The Secretary 
appoints them.
    I am sure I could talk to the Secretary, unless there is a 
statutory limit, if there is, when the next person comes off, 
we would be happy to appoint a dermatologist.
    Chairman Manzullo. There you are.
    Dr. Davey. Thank you.
    Ms. Yost. Just to let you know, that the issues have been 
brought up before to the CLIA committee over the years, because 
of the concerns that have been expressed today, some of the 
same. And it was the committee's opinion on several occasions, 
not just one time, that these tests still were of a complexity 
because of the complexity, the training and the quality control 
needed to do these particular tests, that they could not--the 
type of complexity that they were categorized in under CLIA 
could really not be reduced. Those things that could be have 
already been done like the KOH prep. That is being done for 
fungal elements. So it has been done. That doesn't mean that we 
can't evaluate that again, and obviously if there is a 
representative member on the CLIA, then obviously various 
arguments can be made.
    But there was a lot of testimony presented to that group, 
just so that you know that we have not ignored the whole issue 
over time. I think this is important to know.
    In regard to the very simple tests that you are doing, the 
more simple tests that you are doing outside of the tissues, I 
believe that we could probably work with you to reduce your 
paperwork. We really don't prescribe that you have special 
forms to order tests, or to report results or to keep a log. 
You do need to document if you do quality control. But you can 
actually use the patient's chart to order the test, and to 
report the result. You don't need to have a separate piece of 
paper to do that. We have no requirements for that.
    So we will work with you to try and simplify that process. 
I will contact our State folks and get back with you. We would 
very much like to help you, because you don't need to have 
those stacks of paper to do those routine types of tests, 
because you do them every day.
    You do need to do, periodically you need to check, a couple 
of times a year, to make sure that the test is working and 
document that. But you certainly don't have to have ongoing 
paperwork on a daily basis for each patient.
    Mr. Scully. We would be happy to work to simplify this, in 
many areas of CMS and OSHA, which applies to them in many cases 
too, regulation. Sometimes the regulations we put out are 
significantly enhanced by consultants who make people generate 
50 times as much paperwork as they need.
    So we will do our best to clarify it and make sure that we 
put the minimum demands on them.
    Dr. Davey. Mr. Chairman, one of the other problems that we 
have is that there is not only CMS, there is two other Federal 
agencies involved in this, in the CLIA Act also. It is one of 
those cases where we get some piece of information from one 
part of that Federal agency, and another piece of information 
somewhere else.
    Chairman Manzullo. Does that Committee try to coordinate, 
Ms. Yost, does that Committee try to coordinate CLIA with the 
other two agencies?
    Ms. Yost. Yes. All three agencies are represented. I, too, 
am on that committee as well.
    Chairman Manzullo. Okay.
    Dr. Davey. There is also a problem with interpretation of 
the regulations, which I understand completely, because 
tomorrow I am going to Greenville, South Carolina, to interpret 
regulations in an office.
    Mrs. Christian-Christensen. I was looking at the faces of 
the doctors. And, Dr. Probst, you seemed to be surprised to 
find out that you didn't have to do all of that paperwork. So 
who is it that regulates that where you are?
    Dr. Probst. The CLIA inspector said we must do it, these 
are the forms that we must use. We had no choice in that. It 
was not flexible. And when I persisted and ask why is this any 
better than what I am doing, I was told we need this so the 
inspector will have the information.
    We were given no choice. And this has been year after year 
after year. I am glad to hear that it doesn't have to be that 
way. But how does that funnel down to us?
    Mrs. Christian-Christensen. This is the problem that I 
found with the carriers. I don't know if the carrier has a role 
in setting those regulations in this particular instance. But 
they are interpreted differently. That has to be fixed. Because 
we have doctors that have moved from one area to the other. And 
they are just, you know, confounded by the--the difference in 
how the interpretations are done, and therefore, what they are 
required to do. It needs to be clear.
    Mr. Scully. These are slightly different. One is the 
surveyors generally, you can correct me if I am wrong, but for 
hospitals, nursing homes, home health agencies, and I am sure 
for CLIA, tend to be done, we pay for them and the surveys are 
done by State surveyors under contract to us.
    I can tell you that there are standards, paperwork 
requirements on how they interpret our guidelines do vary 
significantly State to State, and we can sometimes clarify. But 
the State is essentially our contractor, so it is an Indiana 
State employee, working essentially under contract to both the 
State of Indiana and Medicare, Medicaid for both. And they do 
the surveys under contract for us.
    On the carrier side, we discussed briefly before, we have 
51 carriers, FIs, for part A and part B. We are trying to get 
that down to about 20 to 25.
    Mrs. Christian-Christensen. What can you do to make it 
uniform?
    Mr. Scully. To be fair, we are trying to make it more 
uniform. We just went through this with outpatient drugs where 
different parts cover and pay for things. We want to make it 
more uniform, but when it is too uniform then you get 
complaints that you are not sensitive to the practice patterns 
in Indiana versus Seattle. The carriers do have some 
flexibility and I think should, to either cover and pay for, 
reimburse or allow differences between Indianapolis and 
Seattle.
    On the other hand, we need to have a lot more consistency. 
I am trying. We have medical directors in each one of these 
plans. We now have monthly meetings with them. We try to get 
them to have more consistency.
    But we try to find the right level of Federal mandate to 
say you are consistent and also leave different practice 
patterns to physicians and hospitals that have different 
practice patterns in different regions. But nobody is ever 
happy. But we are trying to do the best that we can.
    Ms. Yost. As part of the regulatory reform issue, since 
that was brought up earlier, I wanted to mention also we are in 
the throes of publishing final CLIA regulations, which actually 
are more balanced and more fair than the ones that we have now.
    But, as part of that, we are going to be doing extensive 
training and education of not only the laboratories but our 
surveyors as well. So I understand your concern. And we will 
certainly continue to work to kind of mediate that a little 
bit.
    You also have to be aware that some States have their own 
laboratory licensure programs which may be more stringent than 
CLIA, in which case we can't interfere with that.
    Chairman Manzullo. Mr. Pence.
    Mr. Pence. Thank you, Mr. Chairman. I have only been in 
Congress for 21 months. And I have probably found this hearing 
more fascinating than any hearing I have been involved in since 
being in Congress, which is not saying much.
    But, this has really been fascinating. I can't help but 
feel that we have opened some lines of communication here that 
are very valuable and very helpful.
    That being said, in your written testimony, Mr. Scully, you 
pointed out that you have worked hard to streamline procedures, 
improve flexibility, all of things we have been talking about 
in an ad hoc way today, reducing the burdens.
    You also wrote that we are working to take into 
consideration the tremendous amounts of feedback we have 
received on the 1992 rule, so that we can publish a streamlined 
final rule in the near future, the focus being especially 
helpful for small business labs that many Medicare 
beneficiaries rely on.
    I think it is very helpful that the Chairman, in his style, 
kind of getting to a core issue here. Obviously there is, it 
seems as though the panel lacks an important perspective, from 
the dermatology profession, and would add my urgent 
encouragement that a seat be found very quickly for this 
particular part of the medical profession, that as you point 
out, Mr. Scully, seems most beleaguered by CLIA in your 
experience.
    But, I wanted to give you an opportunity also to speak, to 
elaborate on your written remarks. What is the status of that 
streamlined final rule? What might be the time line for that? 
And is there still time for, whether it is one of our two 
witnesses today or someone else representing dermatology, to 
participate in helping to develop that new streamlined final 
rule?
    Mr. Scully. I believe I shouldn't put this heat on my 
former agency, OMB, but I signed the final rule I think last 
week. It is in the process of going through the administration. 
I don't think it is particularly controversial. Well, maybe it 
is, I don't know. But I haven't had a fight with anybody about 
it so far. I think it is probably going to be pretty well 
received and was strongly supported by most of clinical lab 
groups. The pathologists, I didn't personally talk to the 
dermatologists. But if there are subsequent problems, we are 
happy to go back. This is a fairly major rule. But we can go 
back, we have--it is a huge agency, my budget is about $560 
billion.
    We have many rules going through. We can make technical 
changes in lots of areas when we need to do it. So if there are 
other things to do it, that make sense we will do it. But the 
rule, I believe, should be out in next couple of weeks in 
final.
    Mr. Pence. We will look forward to going over that and 
getting feedback from not only our witnesses but other folks 
affected by it.
    I guess my last comment is more of an encouragement. I will 
yield back to the chairman that I think the--and I am not 
speaking on behalf of the witnesses, but I think that the 
attitude that you reflected, Mr. Scully, and Ms. Yost, is very 
admirable and very much appreciated.
    Although I will comment that from my vantage point, our 
witnesses were reacting with, if I can say a degree of 
incredulity, as Mrs. Yost described what actually was required 
and what is not required. It suggests to me that not only are 
we dealing with the fact that there are other arms of the 
government involved at the table here, but that I--it seems to 
me, and we are still early in an administration, but I guess I 
would encourage Ms. Cost and others charged in administering 
the CLIA law to--I am picking up a philosophy here that is one 
that as you make other comments of trying to accommodate small 
operators and create rules that make sense, and allow people to 
useexisting systems, it is entirely possible that there may be 
a philosophy in the Washington CLIA shop that has not yet invaded the 
culture of the State offices.
    I guess, that is what I would like to most encourage you to 
do, not just in Kentucky and Indiana, but to communicate to the 
State offices, what may, in fact, and probably is, in fact, a 
different governing philosophy that should animate at the State 
operations that administer CLIA. And I would encourage that.
    Mr. Scully. One of the problems which having such a program 
of Medicare and Medicaid is that things fall through the 
cracks. When I first took the job last year, I met with the 
heads of all of major clinical lab companies in New York for an 
emergency meeting for a rule they really wanted out. And they 
met with me and they told me this rule had been sitting around 
for 3 years. And their argument sounded reasonable. I went back 
to Washington and said, what is the deal with this reg?
    And everybody said, well, nothing. I said, well, nobody--it 
had been sitting around for 2 years and hadn't gone out. So 
sometimes there is a lack of communication. We put that rule 
out last year, and it was very helpful to clinical labs. For 
some reason, in the Medicare program, clinical labs is a very 
small piece.
    And to Judy's credit, this probably doesn't get as much 
attention from me or other people who are administrators. And 
so it is good to have these focused on occasionally where we 
are missing things to get these issues raised up and we can cut 
through them.
    But we are clearly committed to doing that. And when you 
see the final CLIA rule that comes out, it will be helpful. If 
it is not, we will go back to work and try to make it better.
    Chairman Manzullo. Thank you. We appreciate that, Dr. 
Probst and Dr. Davey. And did you want to say something?
    Dr. Probst. If I may, sir. I am here as the past president 
of Indiana State Medical Association representing all 
physicians. I happen to be a dermatologist, and I think because 
of that, the response was that only dermatologists have 
problems with CLAI. This is not true in Indiana.
    My testimony related only to requisition because I only had 
a short time. My written comments and attachments reflect that 
all physicians have problems. Wet mounts, microscopic 
urinalysis, various stains for bacteria, the whiff test for 
bacterial vaginosis, are several tests mentioned by physicians 
who have added their letters to my testimony.
    I am not coming from a dermatologic position. Indiana 
physicians in all practices are not doing tests that should be 
done in the office to better serve patients and save them time 
and inconvenience.
    I am not reflecting the position of dermatologists. I am 
reflecting the position of all physicians in Indiana and the 
patients there who are not allowed to have the tests in the 
office, for tests that are best done there.
    Thank you for allowing the additional comments.
    Chairman Manzullo. The record will note that. Okay.
    Dr. Davey, Dr. Probst, and Mrs. Yost, you are excused. 
Thank you for your testimony.
    Then I would like to have Mr. Tim Tryslit, and Mr. Terry 
Kay have a seat. Well, we are two for two.
    This third issue here has been with us for some time. 
Several months ago when we had a hearing involving the portable 
x-ray providers, Mr. Scully at that time said that he would 
like to have this matter resolved within 90 days.
    There have been a lot of discussions going on with the 
industry. But I would--before I turn this over to Dr. Weldon 
who has got some base questions to ask with regard to the 
portable x-rays, Mr. Tryslit, could you please, spell your last 
name, for the record and give your position.

    STATEMENT OF TIM TRYSLA, POLICY ADVISOR, OFFICE OF THE 
                         ADMINISTRATOR

    Mr. Trysla. T-R-Y-S-L-A. I am a policy advisor, like 
Leslie, in the office of the administrator.
    Chairman Manzullo. And Mr. Kay.

  STATEMENT OF TERRY KAY, DIRECTOR, DIVISION OF PRACTITIONER 
                            SERVICES

    Mr. Kay. K-A-Y. I am a director of the Division of 
Practitioner Services.
    Chairman Manzullo. Okay. Dr. Weldon.
    Dr. Weldon. Mr. Chairman, I want to again thank you for 
indulging me and giving me the opportunity to be here. I 
certainly want to also extend my thanks to the ranking member 
in supporting me, having the opportunity to be here, joining 
with the panel in asking questions.
    And I certainly appreciate the hard work of the President 
of the United States and Secretary Thompson and Mr. Scully in 
terms of doing everything that they can to make sure that 
America's seniors get quality health care.
    Before I get onto the portable x-ray issue, which I had 
some questions about, I just want to say as a clinician, I 
still see patients once a month at the Veterans Clinic in my 
district, to bring the tried and true bedside diagnostic 
techniques of doing scrapings of fungal lesions of scabies and 
lice lesions.
    Every doctor has a microscope in their office. To try to 
bring all of that stuff under the regulatory burden of a 
bureaucracy to me is absolutely insane. Any physician who is 
licensed and accredited to practice in their given specialty, 
in my opinion they shouldn't have to justify it to a 
bureaucracy that they are doing it correctly.
    But, moving on to the issue of the portable x-ray. As you 
know I have mentioned this previously at the previous hearing, 
that, I practiced internal medicine for 15 years before I was 
elected to the House. I was one of a small group of physicians 
in the community of Melbourne, Florida, that continued to track 
their patients once they were admitted to a nursing home.
    And I found the use of portable x-ray to be a tremendous 
time saver, a cost saver and a suffering saver in that patients 
would fall, patients would have a cough, I would be concerned 
about a fracture, I would be concerned about pneumonia. Rather 
than transporting them to my office and having them to go 
through that ordeal in an ambulance; or worse, having to 
transport them to the emergency room with a tremendously 
increased burden of cost associated with that, I found the 
portable x-ray to be, I thought, just a win-win all around, 
good for the patients, good for me.
    The quality of the response I would get from the portable 
x-ray providers was superior to what I got at the hospital, and 
compared very nicely to what I had--we had a large medical 
group, so we had radiologist rights in the building we were in. 
So if I brought the patient to my office, I could get an x-ray 
report over the phone from the radiologist in my building.
    But if I brought the patient to the emergency room, it was 
hours and hours. And frequently I would have to go down to the 
hospital radiology department and thumb through x-rays to 
findthe x-ray on my patient, whereas with the portable x-ray at the 
nursing home, I got a phone call from the radiologist.
    But, I have some concern about the set-up code. It is my 
understanding that the set up code which is the Q code for the 
portable x-ray industry, was established in 1992. And the law 
required that the set up code be reviewed every 5 years. And 
according to what I have been told, under the previous 
administration, and so far under this administration there has 
not been a review. There has not been a review in 10 years. And 
the requirements of the law have not been fulfilled.
    Is that correct? Has there been a review of the set-up 
code, cost and reimbursement?
    Mr. Scully. Maybe I will ask Terry to answer that.
    Mr. Kay. All right. At this point it has not. We have been 
working over the last--since the last hearing with 
representatives from the portable x-ray industry to, you know, 
get this review. Kind of in a nutshell, the way our review 
works is that we work with an outside sort of privately 
established Committee, which has been formed by the American 
Medical Association, of about 30 specialty groups and some 
others, some nonphysician groups, and they review requests.
    You know, they look at what staff is needed to do a 
service, what equipment, what supplies and sort of what 
resources are required to do these services.
    Mr. Weldon. So it has not been done?
    Mr. Scully. Because I am sure you know, Congressman, Dr. 
Weldon, we have about $66 billion of physician payments we make 
every year for physician and related services. And every year 
we go through the resource utilization committee, to figure out 
how these codes move around.
    As we have tried to explain, the portable x-ray providers 
get paid from that pot. So we have, in fact, if the new 
physician fee schedule, which is something we didn't mention, 
their rate, is in direct response to your interest, they, in 
their new fee schedule, the draft anyway which is going to go 
final for January 1st, they are the single biggest increase in 
the pot. Their rates go up about 8 percent before you do the 
pro rata cut that we have been talking about.
    Dr. Weldon. The physician reimbursement?
    Mr. Scully. For the overall portion of the portable x-ray 
supplier, I believe is the largest percent increase in the 
physician pot, it is about 8 percent. But the underlying 
expense code of that, which is the part that is just the set-up 
fee, which is about $11 or something, the idea when they bring 
the machine up to the nursing home, they bring it inside to set 
it up, they get paid roughly $30 for the x-ray, varies by area, 
but roughly $100 for transporting the x-ray machine, and then 
the set-up fee, which is about $11.
    That particular subcomponent, what they get paid for, is 
reviewed under a practice expense advisory committee. So we 
have reviewed the rate and changed the rate for next year, as a 
direct result of your input.
    But the set up fee, the $11 out of the $150, is still under 
review.
    Dr. Weldon. I was told that the it was under review and 
that it was had been determined to be appropriate. Is that 
true?
    Mr. Kay. No.
    Chairman Manzullo. Doctor, would you yield a second?
    Dr. Weldon. You are the chairman. I yield.
    Chairman Manzullo. Is anybody here from the industry that 
would like to put some input into the statements that were just 
made by CMS? Any correction or anything?
    Mr. Halsey. This just came up yesterday. I am Steven Halsey 
representing the National Association of Portable X-ray 
Providers.
    Chairman Manzullo. Do you want to have a seat here? It is 
up to you. If you want to refute something that was said or add 
to it, or perhaps Mr. Kay was in the process of saying 
something and I cut him off.
    Mr. Halsey. It is not a prepared statement. I think that 
there is some clarity issues that are important, if I can make 
a brief statement.
    We have been working with the people at the table, and I 
want to say for the record that since your last hearing in May, 
Mr. Chairman, which I think brought about the meetings that we 
have undertaken, meetings face to face, conference calls, and 
individual telephone conversations, I do want to state that on 
behalf of Mr. Scully and Mr. Tryslit and Mr. Kay, they have 
worked in good faith to try and get a clearer understanding of 
the problems in the industry, and how we might go about 
positively affecting what is simply a disastrous spiral in in 
the bottom line of the companies.
    So while I don't think it is appropriate, or not at this 
time with the preparation that I have, to talk about some of 
the very specific items such as the Q code, the review to our 
understanding, it has not been reviewed, it is required by law.
    But, I do want to state that these people have been working 
for a number of months in good faith on this issue. But, the 
reality is, we have absolutely zero effect after 5 months.
    And I know for a fact that during these 5 months, there are 
a number of companies who have gone out of business. There are 
more that are going out of business. There was a witness who 
testified before this Committee in May. I spoke to him 
yesterday, he is laying two people off tomorrow.
    Chairman Manzullo. We are also joined by?

  STATEMENT OF NANCY TAYLOR, OUTSIDE COUNSEL TO THE NATIONAL 
         ASSOCIATION FOR THE SUPPORT OF LONG TERM CARE

    Ms. Taylor. Nancy Taylor. T-A-Y-L-O-R.
    Chairman Manzullo. What is your position?
    Ms. Taylor. I am outside counsel to the National 
Association for the Support of Long Term Care, which also 
represents many portable x-ray providers.
    Chairman Manzullo. Did you have a comment on the statement 
that some of the CMS people made?
    Ms. Taylor. Yes. We have a letter for the Committee as 
well, which recognizes that this is a complex issue, and the 
National Association for Portable X-ray has done a great job. 
We have worked with them at CMS.
    There two parts of the code that provides transportation 
money to portable x-ray providers. One is the transportation 
code, we have been working very closely with CMS to update the 
fee. The second part, which is the set-up code, requires 
providers to get adjustments from the Physician Advisory Coding 
Committee. We could not get on the schedule to seek air 
increase for September. We have now asked that we be on the 
schedule in January.
    I wish that the CMS administrator could do something about 
that but he can't.
    Dr. Weldon. Well, if I can reclaim my time, Mr. Chairman. 
That was actually the question I was leading up to, to Mr. 
Scully. Can you have the Physician Advisory Committee put the 
set-up fee on their agenda when they meet again?
    Mr. Trysla. Congressman, we have actually have that feed up 
for January. They haveasked us to look at our top priority of 
codes, and this is going to be one of those priorities.
    Mr. Scully. As you can tell, I actually don't do any work 
myself. I am just the front man.
    Mr. Kay. Could I just elaborate on that? The Practice 
Expense Advisory Committee that we have been working with has 
been very busy over the last few years revising all of the 
services and the fee schedules. There are over 7,000 services 
that we pay. This year alone, we just reviewed 1,100. They, in 
the last meeting that occurred in September, said that they 
would, you know, look at the next 50 that we asked them to do.
    So, Mr. Scully, you know, certainly has the authority at 
this point, you know to put this on the top list of priorities 
for review. So it is a private, independent group. But, they--
--
    Mr. Scully. The way it works, Doctor, as you probably know, 
is they--a lot of these committees, we basically take all of 
the affected parties, put them in a room. And if we are going 
to increase payments for portable x-ray, then theoretically it 
comes out of the pot of somebody else.
    So all of the providers get in the room and we discuss and 
debate what the relative priority of various payments for 
physicians, labs, other things are. And usually in 95 percent 
of the cases we take those recommendations. But they are in 
fact recommendations to me and the secretary, and we can change 
them if we like, and we do occasionally.
    But we would be happy to put this on the top of the list, 
and I will certainly do so.
    Dr. Weldon. I appreciate the dilemma that you face. My 
primary concern, just so you understand, is if this industry 
goes away, you are going to pay more money. And your quality of 
service is going to be worse.
    You may not be able to tell that is happening, because the 
figures are so gigantic. If emergency room services are $20 
billions next year, to pick a figure out of thin air, if they 
are $20.02 billion, you are not going to notice that that 
increase is due to the fact that you put a much smaller 
industry that was costing you less out of business.
    And the concern I have, just so you understand, is just 
what this gentleman was talking about. I have got portable x-
ray providers telling me that based on the reimbursement 
schedule, they are not going to be able to stay in the 
business. And my perspective as a clinician utilizing the 
service, was that it was very, very good for seniors, and it 
was good for clinicians, and it was also good for you, in terms 
of providing better quality at reduced costs.
    Let me just get back to the issue. I just want to make sure 
that I understand this correctly. You have not determined that 
the set-up fee at this point is adequate? You do not have a 
position on that?
    Mr. Scully. Correct me if I'm wrong. We have not reviewed a 
change in the set-up fee alone.
    Dr. Weldon. So in front of this Committee, you are not 
saying it is inadequate or adequate?
    Mr. Scully. I don't think we have come to that conclusion 
yet. I think, in looking at the other two components which are 
transportation, and the overall fee for doing the x-ray, where 
we have made--I don't think, the final rule should be out on 
November 1st, but the draft rule is pretty clear, that we have 
made some substantial increases in those areas. I think it was 
the biggest single increase in the physician fee schedule, but 
it probably isn't going to take care of all of their concerns.
    Obviously, I am particularly concerned about making any 
additional changes up or down on the fee schedule that are 
really dramatic in the context of a negative 4.4 percent 
update. If we manage to fix that in the next 2 or 3 weeks, it 
will be a lot easier--I can tell you the anesthesiologists, the 
oncologists, many of the people think their practice expenses 
are off and they need higher payment. In the context, everybody 
is going down negative 4.4 percent, and everything is a zero 
sum game, it is difficult to make changes.
    They are going to go up next year. It is not due to the 
set-up component. But the set-up component is $11, the 
transportation component varies, but it is about $100, and $30 
is the x-ray. Roughly.
    Mr. Kay. Roughly.
    Mr. Scully. We will keep looking at the set-up component.
    Dr. Weldon. Just so you understand. I am one of the people 
in this body who is trying to get you a better top line to deal 
with.
    Mr. Scully. I would hope so.
    Dr. Weldon. To help you in all of those areas. I do want to 
just cover the transportation issue. There is some regional 
issues associated with that. They vary by carrier. And I 
believe you delegate that issue to the carriers to make a 
decision; is that correct?
    Mr. Scully. Yes.
    Dr. Weldon. In the southeast, as I understand it, there is 
quite a bit of variability. And I have some serious concern the 
Florida carrier is under reimbursing this. And I would like you 
to look into this for me in the near future and get back to me 
about this. It is not unique, I believe, to Florida. There are 
some other States. It is one of the concerns I have. When you 
do delegate some of those reimbursement decisions to carriers, 
that sometimes they make good decisions and sometimes they make 
bad decisions.
    So if you could please get back to me on that I would very 
much appreciate that.
    Mr. Scully. I will tell you what I have done. I was 
traveling in Arkansas yesterday, but my crack staff, Dr. 
Trystla told me that you were concerned about Florida.
    Dr. Weldon. How did he guess?
    Mr. Scully. I think he heard from your staff. And, 
apparently one of the concerns--when this came up 2 years ago 
before I got to HCFA, now CMS, I believe that we actually 
discussed with the industry coming up with national rates for 
transportation. The ideas may vary among the industry, they 
decided that they didn't want to do that, they wanted to keep 
regional rates, which are set by the carriers.
    I heard from Tim yesterday, that our carrier, which is 
First Coast in Florida, had not been, for whatever reason, 
particularly helpful in arranging a meeting with the portable 
x-ray suppliers. I called the CEO of First Coast last night. He 
didn't know anything about this. And I asked him to 
specifically meet with him and have his staff meet with them, 
and tell me what--they would decide what the appropriate rate 
is with First Coast, which is the Florida carrier.
    But I will get back to him, and as soon as he meets with 
them and the industry will--it is for the industry to go in and 
make the argument about having a higher rate.
    Dr. Weldon. Great. Mr. Chairman, I want to thank you so 
much for giving me the opportunity to be here. And I want to 
thank all of the witnesses, including, the impromptu witnesses 
for the input that they have helped us with.
    I just want to, before I yield back, I would be very happy 
to linger. I just want to underscore, that I think this is a 
valuable service for seniors. I am determined to do everything 
I can to make sure that it remains a viable service for senior 
citizens.
    Chairman Manzullo. Thank you. The problem is that as what 
happened in Rockford, Illinois, the carriers went out of 
business. And it is costing the taxpayers a tremendous amount 
of money to do the same service that the portable x-ray people 
did, that--the portable x-ray people charge a fraction, by the 
time you figure when Ma had to go to the hospital, and one 
ofthose Caravans picked her up, it wasn't an ambulance, a special 
vehicle, and she was gone 4 hours. And that--that was the guy's only 
run. She was the only one in the van. She sat in the emergency room. I 
mean, the cost to the taxpayers is horrendous. And it continues. And my 
question, and Mr. Halsey, I am sorry to really put you on the spot. 
Forgive me for putting you at the table.
    Mrs. Taylor, I don't apologize for that, you raised your 
hand, you came up here on your own. We run this Committee a 
little bit differently than some committees, but the purpose is 
to resolve issues. And that is why we are here.
    Is there anything that we can do between now and January to 
prevent the further closing of these extremely important home 
x-ray businesses? I mean, is there--my understanding of the 
statute, Mr. Scully, is that you can have an interim payment 
system, that would at least keep these home x-ray providers 
alive, fulfilling that purpose, because they can get the finest 
ruling in January, but if they are all out of business, it 
wouldn't do much good at that point.
    Mr. Scully. Well, Mr. Chairman, the suggestion----
    Chairman Manzullo. I am sorry. Interim rate adjustment.
    Mr. Scully. Tim and Terry can jump in. The biggest 
variable, which is carrier priced, and varies by region, as you 
mentioned, is transportation. What we are planning to do is 
send out, I think it is just about to go out, a memorandum to 
all of the carriers, asking them to review this.
    I think the message they will get from that is not to 
review it down.
    Chairman Manzullo. If they are like Wisconsin's Physician 
Service they * * *
    Mr. Scully. Well, not all of them are like that. We have 
been--I have been trying, as you know, and I hope again in the 
next couple of weeks that we will. And there is bipartisan and 
bicameral support for carrier and contractor reform. We are 
trying to come up with the 20 best contractors.
    Chairman Manzullo. So are you going to ask them----
    Mr. Scully. To go back in and review the transportation 
payment.
    Chairman Manzullo. Are you going to ask them to mark it up 
higher?
    Mr. Scully. Well, we ask them to go back and review its 
appropriateness. That is probably 75 percent of the actual fee 
is the transportation cost. So if we send out a program 
memorandum saying we think there is a problem here, please go 
back and review it, cull this criteria, tell us why you set it 
at the rates you did, review that rate, get back to us, the 
general--they generally follow our guidance and go back and 
look at it.
    Chairman Manzullo. Mr. Halsey, would that satisfy your 
inquiry?
    Mr. Halsey. Mr. Chairman, I want to applaud the effort and 
point out that the program memorandum that is being discussed 
came about through these organizations working with CMS. I know 
we all bash an agency such as CMS with vigor and frequency.
    We applaud that. That will, over a period of time, impact 
individual providers that are dealing with individual carriers. 
And we think that is outstanding. But we still would love to 
see the--when we talk about the highest rate, which this is 
statistically true of the overall update, we are talking 
pennies for patient. We might be talking 7 or 12 cents per 
patient. While that is appreciated, it isn't going to make any 
difference. These companies are going out of business. Our one 
request statutorily, and this is in response to the questions 
that the Committee put before Mr. Scully----
    Mr. Scully. If we can get into the weeds a little bit on 
this. There are three--I am rounding off. Three basic 
components. The $11 set-up fee, which is a practice expense and 
has to go through a formal--there is a Federal rate for that. 
That has to go through a formal panel, which varies the rates 
relatively to other practice expenses and other doctors.
    There is a $30 x-ray fee, which is the update, again a 
relatively small piece we are talking about. Then there is the 
roughly $100 transportation fee.
    There is only one set locally, the transportation fee. It 
is by far the biggest component. If the carriers change that 
that will have--the other two pieces which are smaller are a 
part of a much more structured developmental national rates.
    Chairman Manzullo. Would you agree with that?
    Ms. Halsey. I am still stuck with the fact, and it was 
answered formally to Dr. Weldon's question. The statute clearly 
states that these are to be reviewed every 5 years. The answer 
is it has not. We are asking for an interim adjustment in 
recognition of the fact that this $11 rate was set 10 to 12 
years ago.
    I think it is reasonable to say.
    Chairman Manzullo. Which figure are you looking for?
    Mr. Halsey. The data we provided to the Agency places it 
between normal hours and after hours in the high twenties to 
low $30 rates, and that is in cost. And I understand it is not 
strictly cost-based now and that is appropriate. But certainly 
if we--what we are looking at is something over 100 percent 
increase is appropriate on the only data that exists, and that 
is the date that was compiled by our industry.
    So what we are saying is in the absence of the legally 
mandated 5-year review and any data that has been put forward 
by CMS, it doesn't seem reasonable to set an interim adjustment 
until--and if in January they can get this going and everything 
else--let us be clear; in January it doesn't mean it is over, 
but an interim adjustment which is legally possible from the 
Secretary's office would give these small businesses the hope 
to say--because that is what we are talking about. They need a 
sign from this Agency that says I need to stay around.
    Chairman Manzullo. Did you want to respond to that, Mr. Kay 
or Mr. Scully?
    Mr. Scully. I guess the way I have looked at it, as he 
said, the only evidence out there so far is industry data. And 
it is a relatively small amount of money, in all candor. But on 
the other hand, it comes from a $66 billion pot of money that 
every time one goes up, others come down. In the context of 
making adjustments in that budget-neutral pot the physicians 
are very angry about right now, I have been hesitant to make 
any radical changes, even though this is a small amount of 
money.
    The much bigger variable is transportation and it doesn't 
really count against that pot. So if a local carrier decided to 
go out and say we were going to pay $120 for transportation 
instead of $100, they just do that and it doesn't come out of 
the rest of the pot. So it looked to me as a more workable 
solution. We are happy to keep looking at the $11 but we have 
to come up with independent data other than what the industry 
gave us.
    Chairman Manzullo. The only reason, going to Dr. Weldon, 
that I would suggest that you increase it is the fact that it 
is obvious by any test whatsoever that you would be saving 
millions of dollars instantly by not sending these seniors in 
these caravans, tying up drivers for 4 hours. This is so 
simple; that if they get a modest adjustment on the cost of the 
x-ray, you won't--you will save immediately millions of 
dollars.
    I use my mother as an example, because that is exactly what 
happened there. I would suggest--I mean, I can't force you. It 
does two things. We need to save this profession so they are 
around here in January; otherwise they are going to be gone. 
And the second thing it does is it automatically saves money.
    Mr. Scully. We will aggressively keep looking at it. I 
think we have made a lot of changesin the policy. I think there 
is a strong likelihood the biggest component will go up. And to be 
honest with you, Mr. Chairman, there are very few things out of that 
$265 billion pot that I wouldn't structure differently if I could. 
There are a lot of crazy things in the budget.
    Mr. Weldon. Mr. Chairman, I would ask you to yield to me 
for a minute. Are you saying, Mr. Scully, for you to provide an 
interim rate adjustment upward now for the setup fee for the 
portable x-ray providers, that you have to adjust somebody else 
down to find the revenue for that?
    Mr. Scully. It depends. My belief is that that is correct 
because basically within the physician payment pot for anything 
we set rates for, which includes the general physician payments 
and the national--anything on the RBRVS scale--the physician 
gets 36 bucks for an office visit. If we decide to raise 
anesthesiologists' practice expenses or raise oncology 
payments, it comes out of the pot someplace else. And that is 
what this $11 setup fee is in the $66 billion pot that is in 
the national rate schedule.
    On the other hand, when you leave something to carrier 
discretion and they make the changes during the course of the 
year, they can raise the rates temporarily it doesn't have an 
impact on anybody else. So the transportation fee can be raised 
locally without any impact on any rates; is that correct?
    Mr. Weldon. Just so I understand, you know the reason I am 
bringing up this setup fee is it has been frozen at a 1992 
level. And, you know, we have had some inflation since then. 
And are there other fees in that same pot that have been frozen 
at the same level for the last 10 years?
    Mr. Kay. There are some that have actually gone down in the 
last 10 years. I was going to say basically this service--
because you know, to date anyway, we haven't had data that sort 
of met the criteria that we use to establish these rates. 
Essentially the payment rate is--carried over from the previous 
charge based system. It used to be the reasonable charge 
system. And the new fee schedule was implemented in 1992, so we 
sort of used the average rate that was being paid at that time. 
And since then we have applied the updates over the years. So 
the various adjustments that have been made to the fee schedule 
have been applied to that rate.
    Mr. Scully. So it has gone up a little bit but not that 
much.
    Mr. Weldon. Before yielding back, I just want to say I am 
very concerned about the fact that the input I am getting from 
industry is the setup fee on this, the cost to the carriers, 
and I understand they can make it up on transportation perhaps, 
but I think there should be a basis in fact and a basis in 
logic and a basis in reality for the reimbursement schedule. 
And if the setup costs associated with these small businesses 
are 100 or 200 percent higher than the current Medicare 
reimbursement schedule, then I think it is very, very timely 
that we review this. And if at all possible, I would like you 
to provide an interim update for this service in the weeks and 
months ahead, and I would highly encourage you to do that.
    I am happy to yield back.
    Chairman Manzullo. Mr. Kay, are you saying there is 
something flawed with the data that has been given to you by 
the industry?
    Mr. Scully. I have gone through this now with the $17 
billion outpatient rule which has moved payments for drugs in 
the country up and down. As a matter of course, we generally 
try to come up with independent third-party independent data.
    Chairman Manzullo. You don't have any other data; is that 
correct?
    Mr. Kay. Right.
    Chairman Manzullo. So I mean, there has been no review in 5 
years. You have no independent data on your own, and you could 
take the data of using my mother as an example. I mean, this is 
so simple. I mean, this is so simple. We are going into the flu 
season. And if my mother were still alive, I think I would lock 
that door there and post a guard and instruct you, Mr. Scully, 
to increase that schedule right away so she doesn't--so she 
wouldn't have to get into one of those ambulances, go out where 
it is cold, and sit in a waiting room with a bunch of sick 
people at a hospital. I mean, you could prevent that. It is so 
simple.
    And these people are knocking on your doors. You have 
physicians all over the place saying, this is not an issue of 
money, this is an issue of safety and health of these patients. 
And people in nursing homes have no business being carted to a 
hospital and set in a waiting room with all types of germs and 
things when the reason they are there is perhaps probably 
because their doctor thinks they have pneumonia in the first 
place. I mean, we really need an answer on this thing.
    I mean, can't you just--what does it take? I mean, you 
could make it an administrative rule, Mr. Scully, to say that 
at least until January, which is only, you know, 2\1/2\ months 
from now, 2\3/4\ months from now, we are going to increase that 
x-ray component just so these guys can stay alive. I would 
implore you to do that.
    Mr. Scully. Mr. Chairman, I think this thing has gotten a 
lot of attention in the Agency. I think there is a high 
likelihood that certainly with some carriers and some regions, 
the payment is set by region, which is the biggest piece. My 
biggest concern, to be honest with you, and a lot of physicians 
don't put two and two together, that if you ask Congressman 
Weldon, Dr. Weldon--I think he is an internist--can we increase 
any other fee in the pot? And by the way, we are going to cut 
your office visit for your next doctor's office visit by 50 
cents--.
    Chairman Manzullo. So you would have to cut another? So the 
result of this hearing today is you are going to encourage the 
State providers to up the transportation fee to help these guys 
out in the interim.
    Mr. Scully. We are going to tell them to do the right 
thing, but hopefully they will understand that they are 
supposed to review this thoroughly and, like I did with the CEO 
of the Florida health plan, when we find problems where we are 
not getting any satisfactory communication with our carriers 
from the industry, we will call them up and make sure they get 
a thorough hearing.
    Chairman Manzullo. Anybody else have anything they want to 
add?
    Ms. Taylor. We are just very anxious for this program 
memorandum to get out. So hopefully it will get out very soon.
    Chairman Manzullo. Is there anything they can do?
    Mr. Scully. I think the program memorandum is just about 
out the door. And if it isn't, it will be after this hearing.
    Chairman Manzullo. We are 3 for 3 today. Thank you so much, 
Mr. Scully. This is the sixth hearing we have had on CMS.
    Mr. Scully. First on CMS.
Chairman Manzullo. First one on CMS. But I don't think--let me 
put it this way. To the physicians out there and the providers, 
I can't tell you how much they appreciate your sitting down at 
a table like this with the people that make the decisions and 
the policy people. The dermatologists were actually shocked 
that they sat at the table with the person that said, come, be 
a part of this group.
    I am shocked, pleasantly, pleasantly surprised, amazed it 
could be--I don't want to say this easy--but this is a process 
that we use to try to resolve things. You know one of our goals 
on the Small Business Committee is to bring down the cost of 
health care insurance and one of the ways we do that is to try 
to help you make CMS more efficient.
    Mr. Scully. I will tell you, because I share your goal. As 
I told you before, we created 11 open-door policy groups with 
the same intent. I think we have had over 3,000 people on these 
calls. And once a month with every one of these groups--the 
hospitals, rural hospitals, nursing homes, home health 
agencies--last week I had one with pharmacists, last week I had 
one with three health providers, and we had about 40 people in 
Washington and something like 1,200 on the phone, and we go 
through all these issues and people bring up gripes and 
complaints and we try to fix them.
    So maybe we should invite you to come co-chair one with me 
at some point.
    Chairman Manzullo. I would look forward to that after the 
election. Thank you again so much and this meeting is 
adjourned.
    [Whereupon, at 4:25 p.m., the Committee was adjourned.]



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